Evening star., 1934-09-16
TAX SUIT ROUSES
IRE OF MELLON
Ex-Secretary Says Move Is
Intended to Save Treas.
ury's Face.
fContinued From First Page)

ti0ner devised ana began LHe eAeCuIiou
of a scheme to evade his Federal in
come taxes which contemplated the
utilization of certain corporations
under his domination as instrument
talities in fictitious transactions de-
signed to present the appearance OF
sales of securities so that he might
claim losses and thus reduce his re-
ported income for Federal income tax
purposes"
Alleged Fictitious Sales.
Sales of 1882 shares of Pitts
burgh Coal Co. common stock, $4,000
shares of Western Public Service
Corp. and various other trans
actions on which Mellon claimed
losses were alleged by the Govern
ment to be fictitious.
"such reported sales" 1t said, were
not sales made in good faltn, r'iV
the transactions aforesaid were nctl,
tious and entered into and carrieu
out by petitioner as steps IN mort
comprehensive scheme of tax evasion
and avoidance, which contempiaVeo
~, the transmission of large por-
tion of petitioners estate to his cnh-
dren either directly or through con-
trolled family corporations, at time
when he would escape Federal GIT
taxes and in a manner designed 10
avoid the later imposition of Federal
estate taxes, and (2) the utilization
of corporations under the domination
and control of A. w. Melon afio
members of his family as instrumen-
talities in fictitious TRANSACTIONS oe-
signed to evade the provisions OF the
internal revenue laws and to estao-
lish alleged losses for Federal income
tax purposes"
q In the case of the transfer Of Pitts
burgh Coal Co. stock to the Union
Trust Co. of Pittsburgh, a Melon IN
stitution. a deductible loss OF $5,677,-
p56 was claimed. The Government
charged the sale was fraudulent in
asnuch as the stock fve months
later was in turn transferred to cor
poration owned by Melon and his two
children at the purchase price Plus
expenses and interest.
It was also charged that Mellon
reported a deductible loss of $402, 900
on the Western Public Service stock
sale. although the shares later were
returned to him. The Treasury cited
also various other transactions.
Melons statement, issued through
his attorney, follows:
"The Treasury Department, at the
direction of Secretary Morgenthau. in
its answer to my appeal to the Board
OF Tax Appeals, takes the astounding
position that it intends to try out in
q civil tribunal the very same issue
of tax evasion settled by the Federal
grand Jury at Pittsburgh last May.
Indictment Is Refused.
eat that time the grand jury re-
fused to return an indictment against
me. Yet the Treasury, in its answer
(filed today after nearly four months)
continues to question the regularity
of my return. It is obvious that these
reiterated allegations of tax evasion
are made solely for the purpose OF
distorting the issues in my case, in
order to save the Treasury's face and
10 give some semblance Of justiflca-
tion for its participation in the inept
political maneuver of Attorney Gen.
eral Cummings last Spring. At that
time, at the Attorney Generals in
stance, the Treasury arbitrarily and
capriciously set up additional income
taxes as being due from me for the
year 1881.
The Treasury's answer Is full OF
fn1 .tro w m tho
facts, as it well knows. 1t repeats the
charges thrown out by the Pittsburgh
grand jury, with the addition of one
further charge, both trivial and flc-
tious in nature. and inserted merely
, as an excuse to retry the old issues
and to make the public believe that
some new matter is to be considered.
It even accuses me of sales of stock
to avoid gift taxes, that law not then
being in existence, and to avoid estate
taxes, ignoring the fact apparently
that I am still very much alive.
THE facts set forth in my appeal
were sworn to by me, but I note the
Treasury did not make its answer
i-,der oath. 1t seems almost unbeliev-
sule that a responsible Government
department should lend itself to such
a proceeding.
THE Treasury's persistence in rails
ing the question of tax evasion is not
only in defiance of the verdict of the
Pittsburgh grand jury, but contrary to
its own new policy of collecting rev.
enue, as announced by the White
House on March IA, three days after
the Attorney General had sent my
case to the grand jury in an attempt
to get an Indictment against me. At
that time it was stated that there
after the innocence or guilt of tax
payers in cases of alleged income tax
evasion would be determined in the
first instance by Federal grand juries
Statement BY Cummings.
''In my case. after the grand jury
had determined that the charges
against me were unfounded and un-
true, Attorney General Cummings
said: Evidently they (the grand jury
reached the conclusion that there was
not sufficient evidence of improper
motive to warrant an indictment, and
added, this was a function entirely
within their province and there is no
disposition to challenge the result.
This should have put an end to
the matter, but Notwithstanding all
this, the Treasury persists in its at
tempt to question the regularity of
my return, which is a very different
matter from merely trying to collect
additional taxes, about which disputes
are constantly arising between tax
payers and the Government 1t is
quite clear that in my case the Treas
ury is not so much interested in the
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