Evening star., 1928-12-26
TEXT OF MILLS PLAN
Inquiry Into Reliability of Corporations and individuals
Asking Alcohol Permits Given
Particular Stress.

correctness and the accomplishments
OF the enforcing agencies.
III. Political
Lincoln said, Let reverence for the
laws become the political religion of
| the Nation Let the President pro-
claim himself on the subject and in
form his Subordinates, the prohibition
| administrators, that patronage and po-
| litical interference tending to influence
| the acts of the administrator In con-
trolling the permissive phase must not
! be tolerated. Such political inter-
| ference is one of serious handicaps to
| the effective control Of the permisSive
phase.
Nv. Detailed Method Of Controlling
Diversion Of Industrial Alcohol.
To more clearly define the above
plan and to bring out its effectiveness,
1 will be concrete. The second Federal
prohibition district comprises the south
ern and eastern judicial districts of
New York State. The sources for this
| district clearly are defined as follows:
Alcohol, whisky, wine, beer, stills.
With respect to alcohol, We have to
distilleries and denatured at the dis
tillery, (2) alcohol denatured at inde-
pendent denaturing plants, for de-
natured alcohol diverted by organiza-
tionS holding permits to use 1t for man
ufacture.
Diversions under the first class are
comparatively small. The large distil-
leries which manufacture alcohol are
in the main responsible corporations,
highly financed and owning large guam
titles of valuable real estate. Their
L. Gk~k 1l1 1o,,n,, H.
fined. Their loss in case they are de-
tected violating the law is so tre-
mendous that 1t is a great deterrent
and nearly insures legitimacy. Strict
supervision should be kept of their
manufacture and distribution Of the
manufactured product. ...-
The independent denaturing plant has
no economic place in business, and here
there may be necessity for legislative
change in the VolStead act. If Treas
ury Department regulation cannot elm
mate the independent denaturing plant,
then this result should be secured by
legislative action.
The independent denaturing plant can
secure gain alcohol from one source
only. and that Is the distilleries au-
thoriZed to manufacture grain alcohol.
The independent denaturing plant has
only two outlets for itc manufactured
products.
Completely denatured alcohol that it
manufacture may be sold without per-
init, but is incapable Of redistillation
and absolutely unfit for human con-
sumption The present laws requiring
this product to be labeled as poison"
are drastic enough to practically insure
its legitimate use. The second outlet of
the independent plants is supplying per-
nit holders manufacturers of perfume,
etc. with specially denatured alcohol.
In both outlets the independent de-
maturing plant comes into direct COM
it purchases its initial supply of grain
alcohol. These distilleries are required
to maintain denaturing plants. 1t is a
fact that the diStillerieS will not, as a
rule, sell grain alcohol to a competitor
at a price that will enable the COM
petitor (the independent denaturing
denaturing plant) to manufacture and
compete with them. The independent
denaturing plant has no economic rea-
son for existence. Since the independ-
ent plant cannot usually compete for
legitimate business it is often driven to
make a living by delivering unlawful
supplies to the bootlegger.
Diversion Via "Cover Houses"
We now come to the very serious evil
of diversion under cover of permits au-
thorizing firms to manufacture from
specially denatured alcohol.
The principal method of diversion
may be Illustrated by an example. A
perfume manufacturer, as permit
holder, receives specially denatured al
cohol, for whose use he must account
to the Government in records of per-
fume manufactured and on hand or
shipped out.
The crooked permit holder pretends
to ship his manufacturer product to
wholesaler known as "cover house."
The wholesaler receipts for perfume,
but actually receives or diverts specially
denatured alcohol for the bootlegger.
To disguise the transaction the "cover
house" receives from the permit holder
invoices and in many cases bills ofg
lading. 1t acknowledges these invoices
and even pays for them, as well as ac-
knowledging the bills of lading.
If the courts will not sustain the Gov
ernment in requiring manufacturers
who use industrial alcohol to show such
disposition of their products as to en-
able the local administrator to trace
these products to legitimate dealer,
then we need another legislative change.
However. I believe that strict super
vision of the manufacturing activities
of these permit holders (manufac-
turers using industrial alcohoD and
the requirement that they notify the
local administrator in sufficient time
to enable him to supervise the man
ufacture, will practically eliminate
their opportunities to divert specially
denatured alcohol to the bootlegger.
The finished manufactured product
perfume, etc. Is nearly incapable of
rediStillation and is not extensively
used by the bootlegger.
In March, 1926, the Withdrawals by
such permit holders in the second Fed
eral district were 100000 gallons of
specially denatured alcohol a month.
BY unceasing vigilance and supervision
of the activities of these permitees
their number was materially de-
creased, and this volume was reduced
within a year to approximately $751;
600 gallons a month, reduction of
309, 900 gallons a month, representing
alcohol previously diverted into illegal
channels The remaining 351, 900
gallons a month does not represent
the legitimate use OF this class Of
alcohol for the district, but it does
systematic supervision.
In March, 1926, the cost of this
specially denatured alcohol To the boot
logger was approximately $l.10 a gal
Ion. BY June, 1927. the cost of this
same class of alcohol to the bootlegger
had risen to approximately $500 a gal
| lon. AS the source was suppressed, the
cost of the product to the bootlegger
rose.
It is not unwarranted to state that