The watchman and southron. [volume] (Sumter, S.C.) 1881-1930, 1913-03-12
NO FRAUD CHARGED.
FORMER SECRETARY MVEAGU
EXPLAINS OLEOMARGARINE
CASES.
says That Intentional Fraud Was not
charged and That Compromised
cases Have Been Misunderstood.


Veagh, former secvretary Of the treas
ury' TO-DAY issued statement in which
he defended his ruling in the oleo-
margarine prosecutions, which re-
suited in the governments acceptance
or $l23,OOO in settlements of alleged
, fraud, through which the government
1t is claimed, was defrauded Of
$1,2OO,OOO.
MI. MacNeagh asserted that no in
tentional fraud existed in the cases
and that the settlement was on rec
ommendation Of the bureau of in
ternal revenue
AS the oleomargarine compromise
cases nave been more or less misun-
derstood,' he said, Il am quite willing
to state the facts:
Ihese were not fraud cases. No
fraud was charged by the govern
ment. No fraud was committed and
no fraud therefore was compromised
mere are Oleomargarine cases and
oleomargarine cases. Those Of which
the public has heard most are fraud
cases-cases in which the oleomar-
garine law was fraudulently evaded
Inc cases in question, however, are
not in that category
The outline story Of these cases is
TINS: The manufacture OF two kinds
OF oleomargarine Is permitted by law
one kind may be artifically colored
as butter and cheese may be. This kind
must pay a tax of 10 cents a pound.
The other and usual kind is taxed a
quarter of cent a pound and must
not be artiiicially colored. 1t may be
naturally colored by the colors nat
urally in its permitted ingredients.
Ihere is constant effort to obtain nat
uarl color in the permitted ingred-
tents. This effort is of course an en-
tirely legitimate enterprise and with
in the law.
II happens that cOttOnSeed oil is
one of the chief ingredients of oeleo-
margarine and also that this oil in its
crude state is colored. In the process
OF refining cottOnseed oil, however,
for use in OleOmargarine, the color
has been lost, at least in any process
not too expensive to be commercial
ly available. Thus the manufacturers
are searching for q process of refining
cottonseed oil by an economical pro-
cess without losing it's color.
NOW, an Ohio chemist claims to
have invented a method that solves
the problem and an oil company in
LouisNille-not an OleOmargarine
company--uSed this invention, and in
1911 produced oil with some color
that was claimed to be natural. This
oil was offered to Oleomargarine man.
ufacturerS.
The OleOmargarine people brought
the oil to the attention of the bureau
of internal revenue. The oil then was
tested throughout many weeks by the
chemical laboratory Of the bureau, by
the laboratories Of the oleomargarinc
manufacturers and by private labOra-
tories. 1t also was tested for sulphur
continuously by the bureau of animal
industry. No one could find any ar
tficial color.
FINALLY the manufacturers of oleo-
margarine connected with the cases
became apparently SO certain of the
legality of this oil that they began
to use it with the knowledge of the
bureau of internal revenue but with
out the bureaus final decision
The bureau meantime still kept it's
mind open but was at the end Of its
resources at this time. The oil had
thus openly been used in larger or
smaller quantities for some months
when the bureau, by new chemical in
quiries, became satisfied that the oil
was artificially colOred by sulphur.
When this was announced all manu-
facturerS of oleomargarine quit using
the oil.
1T must be understood that manu-
facturers of oleomargarine were not
manufacturers of OIL They were
purchasers Of it and knew moth
ing about it which the government
did not know 1t also should be un-
derstoOd that the gotcrnment's con-
tCEtion that the oil is artiiically COL
orcd is disputed.
The question between the oleo-
margarine manufacturers and the bu-
rcau of internal revenue was not one
OF fraud. 1t was question of tech
meal liability.
The amounts of these comprom-
ises, totalling $123,000, were proposed
by the Parties after the bureau had
decided that they could not ne re-
leased from tax liability and it was
found that these amounts were all the
governments evidence would enable
it to enforce and probably moro. The
offers were for that reason accepted.
THE reference to a much larger
sum-say $1,000, ,000-as an amount
the parties might have been COM
PEELED to pay, grew probably out of
the pro forma claims. There never
was a real $1,000,000 in the bureaus
mind. Pro fOrma claims are like fig
urcs in suits for damages.
"One other mistaken impression is
that the action was an fith hour one
The case had been before the depart
mcnt for number of months. II
reached me ready for approval in
November. In December. when ! was
about to approve the settlements, |
suddenly learned that Judge LandaS,
in the federal court in Chicago, pro-
posed to take CognZanCc of cases and
refer them to Il grand jury. | with
held my signature purely in formal
Difference to the court, could have
approved the scttl 'mcnts at any time
and ended the matter, for these cases
are administrative and rest with the
treasury department.
II waited. however, Il considerable
time ana held the matter open still
lnngcr to enable Il committee of con-
grcsS to max" an inquiry and report.
| did not finally act until it was CVi-
dent that congress would not consider
the report.