The Birmingham age-herald., 1913-03-10
THE OLEOMARGAR|NE
CASE DEFENDED BY
FRANKLIN M'VEAGH
Explains Governments Ac-
ceptance Of Compromise
of Alleged Frauds
WERE NOT REALLY
CASES OF FRAUD
Gives Outline of Cases-Fraud Was
Not Compromised Because No
Fraud Was Committed,
He Declares

Chicago, March s.-Frankln Macyeagh.
former Secretary of the Treasury today
issued a statement in which he defended
his ruling ON the oleomargarine prosecu-
tions which resulted in the governments
acceptance of $4,000 in settlement Of
alleged frauds through which the govern
ment it is claimed, was defrauded Of
sl.2oo.ooo.
tional fraud existed in the cases and that
the settlement was on recommendation
of the bureau of internal revenue.
"As the oleomargarine compromise
cases have been more or less misunder
stood" he said, Il am quite willing to
state the facts:
Not Fraud Cases
These were not fraud cases. No fraud
was charged by the government. No
fraud was committed and no fraud there
fore was compromised. There are oleo-
margarine cases and oleomargarine cases.
Those of which the public has heard
most are fraud cases-cases In which the
oleomargarine law was fraudulently
evaded The cases in question, however.
are not in that category.
THE outline story of these cases is
this: -IIhe manufacture of two kinds of
oeomargarine is permitted by law. One
kind may be artificially colored. as but
ter and cheeses may. This kind must
pay a tax of 10 cents pound. The
other and usual kind is taxed at quar-
ter of cent pound and must not be
artiflcialy colored. 1t may be naturally
colored by the colors naturally in its
permitted ingredients. There is constant
effort to obtain natural coors in the
permitted Ingredients. This effort is of
course an entirely legitimate enterprise
and within the law.
Oil Is Colored
cit happens that cotton seed oil is one
OF lie chicf ingredients o. olcumar garine
and that this oil in its crude state IL
coiored. In the process of refining cot
ton seed OIL, however, for use in oleo-
margarine the color has been lost, at
least in any process not too expensive
to be commercially available. Thus the
manufacturers are searching for a pro-
cess of refining cotton seed oil by an
economical process without losing its
color.
Now, an Ohio chemist claims to have
invented a method that solves the prob
lem and an oil company In Louisville
not an oleomargarine company--used this
invention and in 1911 produced oil with
some color that was claimed to be natur-
al. This oil was offered to oleomargarine
manufacturers.
The oleomargariie people brought the
oil to the attention of the bureau of In
terna1 revenue. The oil then was tested
throughout many weeks by the chemical
laboratory of the bureau by the labora-
tories of the oleomargarine manufac-
turers and by private laboratories 1t
also was tested for sulphur continuously
by the bureau Of animal industry. No
one could find any artificial color.
Finally the manufacturers of oleomar-
garine connected with these cases be-
came apparently so certain of the legal
ity of this oil that they began to use
1t with the knowledge of the bureau of
internal revenue but without the bu-
reaus final decision.
Quit Using Oil
The bureau meant still to keep It's
mind open, but was at the end of its re-
sources at the time. The oil had thus
been openly used in larger or smaller
quantities for some months when the bu-
reau by new chemical inquiries became
satisfied that the oil, after all, was ar
was announced, all manufacturers of
oleomargarine quit using the oil.
ut must be understood that manufac-
turers of oleomargarine were not manu-
facturers OF oil. They were merely pur-
chasers of 1t and knew nothing about it
which the government did not know It
also should be understood that the gov
ernment's contention that the oil is arti-
ficially colored is disputed.
1.-THE question between the oleomar-
garine manufacturer and the bureau of
internal revenue was npt one of fraud.
1t was a question of technical liability
''rhe amounts of these compromises.
totalling $4,000, were proposed by the
parties after the bureau had decided that
they could not be released from tax LA
bllity and it was found that these
amounts We're all the governments evil
dence would enable It to enforce and
probably more. The offers were for that
reason accepted.
THE reference to much larger sum-
say a million dollars--as an amount these
parties might have been compelled to
pay. grew probably out of the pro forma
claims. There never was a real million
dollars in the bureaus mind. Pro forrna
claims are like figures in suits Tor dam-
ages
'One other mistaken impression is tha.
the action was an eleventh hour one.
Continues N Page Two)