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(H. Rept. No. 1952, 77th Cong., 1st sess.) The firm of Grommes & Ullrich, Inc., wholesale liquor dealers, at a special meeting of its board of directors, on March 9, 1923, elected Harry S. Tansey president and director, and by a special resolution of stockholders, it was voted that the company be dissolved by the distribution of the fiscal assets of the corporation to stockholders, assets consisting of cases of merchandise (beverage, liquor) at the rate of 1 case to each share of stock issued and outstanding. On April 23, 1923, a resolution was adopted to surrender the charter and dissolve the corporation, the assets of the corporation having been distributed among 138 stockholders.
The above procedure of liquidation was identical to the procedure used by the Bicardi Rum Co. of New York in dissolving the assets of that corporation; that in the Bicardi Rum case there was no criminal or equity proceedings against any of its stockholders.
On or about April 23, Roscoe Andrews, prohibition director for the State of Illinois, was suspended for the reason of having issued permits for the dissolution of the assets of Grommes & Ullrich Co. to the various stockholders. About a week later, Mr. Andrews, Claimant Tansey, and some eight other individuals, were indicted by Federal grand jury on a charge of conspiring to violate the National Prohibition Act. In November the same year the case went to trial before a jury. On December 1, after all arguments and all witnesses of the Government had testified, and after the counsel for the defense had been fully heard, the jury returned a verdict of not guilty; that on the same day, the Government seized certain liquors held by Robert Mulcahy, stored in an old barn located at 2419 West Monroe Street, Chicago. On January 5, 1925, in the case of United States of America v. Robert Mulcahy and Romaine Blakesly, Harry Tansey intervened with the claim that the liquor seized from Robert Mulcahy belonged to him, and asked that same be returned to him. His appeal was denied, and on October 18, 1926, the liquor was destroyed.
The Treasury Department and the Department of Justice submitted reports to the committee in opposition to the enactment of the legislation. On March 10, 1942, a special subcommittee of the full Committee on Claims was appointed to investigate the above matter. Present before the committee to give testimony were Harry Tansey, claimant; Hon. Alexander Holtzoff, special assistant to the Attorney General, Department of Justice; Stephen J. Spingarn, Esq., special assistant to the general counsel, Treasury Department; and Norman Forrest, Esq., Alcohol Tax Section, Office of Chief Counsel, Bureau of Internal Revenue; that testimony was taken at great length; that the claimant and counsel for the Departments were cross-examined; Mr. Tansey informed subcommittee that Judge Wilkerson, who was the presiding judge at Chicago in the equity proceedings, was evidently biased against him and informed the committee that Judge Wilkerson said, “No party would be had by that crowd (referring to Harry Tansey and others found not guilty in the criminal proceedings) from liquor distributed to the stockholders." It is known by your committee that 'Judge Wilkerson had a reputation of being a rather strict judge. The committee could not find out why that out of 138 permits granted, Tansey was the only individual against whom any civil proceedings were instituted; also, why the liquor seize in December 1923 was held until October 1926 before being disposed of; that, although the Departments contend that the liquor was destroyed by order of court, your committee has been unable to get any copies of an order or decree to destroy same. Your committee is of the opinion that, in fairness to Tansey and others, this case should have been handled in a manner identical to that accorded the Bicardi Rum Company case, which was a precedent, and that the liquor seized from Tansey should have been returned, as was the liquor in the Bicardi Rum Company case. As far as your committee has been able to ascertain, there are only two cases of this kind in the United States, that of the Bicardi Rum Co. and the Grommes & Ulrich Co., and due to the fact that the Bicardi Rum Company case was allowed by the Departments to be precedent for this case, your committee cannot ascertain why relief in this case should be denied. It is uncontradicted that, from the time Tansey took over the company, that he expended approximately $45,000 to the Pinkerton Detective Agency, to guard said liquor and to make certain that the National Prohibition Act was not violated. Counsel for the Treasury Department submitted the case of Murphy v. United States (272 U. S. 630) for the committee's consideration, and your committee admits that the law therein is sound but it is the opinion of the committee that the facts in the Tansey case are in great variance with those in the Murphy case, supra, because there is not one scintilla of evidence in the Tansey case to show any kind of. violation on the part of Tansey on which any equitable proceeding could be maintained, or upon which a criminal verdict of guilty would be sustained, and the jury so determined. In the case of Murphy v. United States, it was the opinion of the court that a criminal case would be a bar in equity proceedings, if the equity case would act as an additional penalty against the claimant. It was contended in that case that the equity decision did not act as a penalty, and therefore, the criminal case did not act as a bar. Your committee believe that the equity case in this instant matter did act as a penalty for the reason that merchandise in the sum of $81,000 was destroyed.
After considering all the facts and circumstances in this case, it is the opinion of your committee that there is a moral, if not a legal, obligation on the part of the United States to reimburse Harry Tansey in the sum of $49,105 (although this amount is approximately only 55 percent of the amount asked in the original bill, less interest; it is felt that this award will cost the Federal Government nothing, for the reason that a sum greatly in excess of the amount here awarded was received by the Government in taxes on liquors held by the Grommes & Ullrich Co., on March 9, 1923).
The hearing above referred to is on file in your committee and was not printed' as a public document because of the interest of your committee in eliminating unnecessary expenditures.
Washington, February 27, 1941. Hon. Dan R. McGEHEE, Chairman, Committee on Claims,
House of Representatives, Washington, D. C. MY DEAR MR. CHAIRMAN: Further reference is made to your letter of February 6, 1941, enclosing copies of H. R. 1540, for the relief of Harry Tansey, and requesting a statement of this Department's views on the proposed legislation.
On March 25, 1937, Mr. McAndrews introduced a bill, No. H. R. 5954 (75th Cong., 1st sess.), which was referred to the Committee on Claims. On April 1, 1937, the Honorable Ambrose J. Kennedy, chairman of the committee, requeste this Department to furnish for the use of the committee all papers or copies of same on file in the Department relating to the claim, with our opinion as to the merits of the bill. By letter dated April 29, 1937, signed by the Honorable Roswell Magill, Acting Secretary of the Î'reasury, the following report was made to Mr. Kennedy.
"Reference is made to Department letter of April 3, 1937, relative to bill H. R. 5954, Seventy-fifth Congress, first session, for the relief of Harry Tansey.
"The bill provides for the payment of $81,000, plus interest, to cover tax alleged to have been paid on 1,800 cases of liquor, and for the value of the liquor, it being claimed that the liquor was illegally seized on December 1, 1923, and destroyed by Federal prohibition agents on October 18, 1926, at Chicago, Ill.
"The liquor in question was originally owned by Grommes & Ullrich, Inc., wholesale liquor dealers. After the eighteenth amendment became effective the company was gradually liquidated and in January 1923 its only asset was a stock of liquor. On March 9, 1923, at a special meeting of the board of directors of that company all of the directors resigned and new directors were elected. Harry S. Tansey was elected president and director. He immediately surrendered 16 certificates issued to 8 individuals for a total of 5,000 shares of the capital stock of the company, this being all of the outstanding stock, and directed the issuance of new stock certificates in various amounts to 57 individuals. A short time thereafter he directed additional certificates for a total of 85 individuals and reported the surrender for cancelation of certificates in the names of 13 persons. A resolution was adopted by the directors to the effect that Mr. Tansey had been authorized to divide the corporate property between the stockholders. Thereupon he reported that he had made division of the physical assets of the corporation and had allocated to the stockholders assets consisting of cases of merchandise (intoxicating liquor) at the rate of 1 case (3 gallons) to each share of stock issued and outstanding. On April 23, 1923, a resolution was adopted to surrender the charter and dissolve the corporation. These facts more fully appear in the attached enclosures.
"Investigation of this transaction by the Prohibition Unit, Bureau of Internal Revenue, resulted in the indictment of Harry S. Tansey jointly with certain other persons under section 37 of the Criminal Code for conspiracy to violate section 3, title II, of the National Prohibition Act. The latter section prohibited, among other things, the transportation, delivery, furnishing, or possessing of intoxicating liquor for beverage purposes. Upon the trial of this case, the jury found the defendants not guilty.
“A quantity of the above liquor, approximately 1,700 cases, was delivered and stored at No. 2419 West Monroe Street, occupied by Robert Mulcahy and Romain Blakesly. The Government filed a bill in the District Court of the United States, Northern District of Illinois, equity No. 3798, seeking to have said premises declared a nuisance under section 22, title II of the National Prohibition Act. Pending final hearing on bill, the court on December 1, 1923, ordered the United States marshal to seize the intoxicating liquor stored on the above premises. In compliance with this order, Chief Deputy Marshal Sam Howard immediately seized and took possession of the liquor.
"Harry S. Tansey filed an intervening petition. After numerous hearings, United States District Judge James H. Wilkerson issued a final decree on January 6, 1926, declaring that said premises were used in violation of the National Prohibition Act and were a common nuisance. The decree permanently enjoined and restrained Robert J. Mulcahy and Romain Blakesly, defendants, and Harry 8. Tansey, intervenor, from using or maintaining said premises as a place where intoxicating liquor could be kept or disposed of, and confirmed the previous order under which the United States marshal had seized the intoxicating liquor. The court further ordered that the marshal destroy said liquor, with the assistance of the Federal Prohibition Administrator, and make written report to the court of said destruction. From this decree, Robert J. Mulcahy and Harry S. Tansey filed application for appeal April 3, 1926. On October 2, 1928, the United States Circuit Court of Appeals, upon motion of counsel for appellant, dismissed the appeal.
"Between the dates of October 7 and 16, 1926, the United States marshal, pursuant to the above final decree of the court, destroyed 970 cases and 482 3-gallon jugs of assorted liquors which had been seized and stored in the Government warehouse at Thirty-ninth and Wood Streets, Chicago, Ill. The marshal's return of the destruction of this liquor was approved by court order entered November 18, 1926. The amount destroyed was approximately 4,209 gallons. A number of the cases destroyed contained less than 3 gallons each. A representative of the Federal Prohibition Administrator witnessed the destruction and reported that the brands on these liquors indicated that they came originally from Grommes & Ullrich and had been seized from R. J. Mulcahy at 2410 West Monroe Street.
“Available reports and files do not show when or from whom the liquor was purchased by Grommes & Ullrich, or what, if any, commodity tax thereon was paid by the company or by Mr. Tansey. The basic commodity tax on distilled spirits is imposed by the taxing statute upon the distiller who is required to pay same at the time the spirits are withdrawn. Nor do the reports and files show the value of the liquor destroyed in this case.
"It appears that whatever right or interest Harry Tansey may have had in the liquors in question were fully litigated, and determined adversely to him more than 10 years ago by a court of competent jurisdiction. The fact that he and other defendants were found not guilty in the criminal case did not give him the right to recover the liquor illegally possessed and held to be contraband under the law in force at the time. There have been numerous seizures and destruction of contraband liquor pursuant to the National Prohibition Act. Reimbursement for all such forfeitures would be impracticable and unwarranted. Compensating a particular claimant for such a loss would appear to be discriminatory.
“Photostat copies of Judge Wilkerson's decree and the United States attorney's brief are enclosed.
"It is recommended that the bill be not passed.”
It is assumed that the enclosures referred to in and transmitted with the Department's report to your committee, dated March 25, 1937, on H. R. 5954, Seventy-fifth Congress, first session, which report is quoted in full above, are available to you in connection with the consideration of H. R. 1540. The Department does not possess any other facts or documents in respect of the claim or the acts which gave rise to the claim. This Department renews its recommendation that the bill be not passed. Very truly yours,
John L. SULLIVAN, Acting Secretary of the Treasury.
COMMITTEE ON CLAIMS, Houst or RDPRDSENTATIVES,
February 10, 1948. CLERK, UNITED STATES DISTRICT COURT, NORTHERN DISTRICT OF ILLINOIS,
Chicago, IU. DEAR SIR: The Committee has pending before it for consideration a bill (H. R. 1540) for the relief of Harry Tansey. The purpose of the bill is to pay to Mr. Tansey the sum of $81,000, plus legal rate of Interest, representing tax paid on 1,800 cases of liquor, including value
of the liquor, liquor being illegally seized on December 1, 1923, and destroyed by Federal prohibition agents on October 18, 1926, at Chicago, Ill.
The District Court for the Northern District of Illinois considered the merits of two cases against Mr. Tansey, Equity No. 3798, heard in the year 1923, and a criminal case between Mr. Tansey and others, considered some time between 1921 and 1925, and it is my understanding that certain exhibits submitted for the consideration of the court would be very helpful to the committee, in considering the merits of the pending legislation. I therefore request that you furnish for the consideration of the committee a certified or photostatic copy of all exbibits and testimony taken on the above-mentioned cases. It is my desire that the information and exhibits be forwarded to us as soon as possible, preferably not later than March 1. Thanking you for your consideration of this matter, I am Very truly yours,
Dan R. McGEHEE, Chairman.
UNITED STATES DISTRICT COURT,
Chicago, February 18, 1948. Hon. Dan R. McGEHBE,
Chairman Committee on Claims. MY DEAR CONGRESSMAN: In reference to your letter dated February 10, 1942, relative to exhibits and testimony filed and taken in the above cases, I am enclosing & certified copy in equity case No. 3798, which is a copy of an affidavit in support of a motion to vacate decrees and grant rehearing. I am informed by the equity department that this is the only filing as to exhibits or testimony.
Our records disclose, that Harry_Tansey, was indicted twice, namely, case No. 10979, which cause was dismissed December 17, 1923, and an order of destruction and sale October 6, 1924, and No. 11474, which went to trial on December 1, 1923, and the jury brought in a verdict of not guilty.
The preparation of the final orders in the two criminal cases are being arranged for future mailing. In case No. 11474 I find testimony filed November 10, 1923, consisting of 105 pages, being depositions of Maurice M. Duffy, Charles R. O'Connor, and John P. Ryan, of New York City, taken before Fred R. Funke, a notary public of the county of New York as commissioner in behalf of the defendants, Frank A. Rehm, Frederick Diehl, Arthur P. Christmann, and I. J. Goodreds, who were codefendants with Harry Tansey in case 11474.
In case you would like this filing mailed with other certified documents, I will have an order entered by the court granting me permission to mail same to you with the understanding It be returned to me as soon as you can release it.
This office is unable to furnish exhibits or testimony in these two cases as none has been filed in either case. I spoke to Mr. Morgan, the chief clerk in the United States attorney's office, regarding any exhibits or testimony which they may have, and he informed me that all records of all cases were destroyed in their office up to and including December 31, 1932, on order of the Attorney General's office. Yours very truly,
Hoyt King, Clerk.
AFFIDAVIT IN SUPPORT OF MOTION TO VACATE DECREE AND GRANT REHEARING In the District Court of the United States, Northern District of Illinois, Eastern
Division United States of America, complainant, v. Robert Mulcahy and Romain Blakesly,
defendants. In Equity No. 3798
AFFIDAVIT STATE OF ILLINOIS,
County of Cook, 88: Robert J. Mulcahy being first duly sworn, on oath says that he is one of the defendants in the above-entitled proceeding, and that he was and is the owner of the liquor referred to in the bill of complaint filed herein, subject to a lien thereon in favor of one Harry S. Tansey, as hereinafter set forth.
Affiant further states that about 3 weeks prior to January 5, 1925, he retained Mr. Frank J. Jones, a member of the Chicago bar, with office at 210 North La Salle Street, in Chicago, to represent him in this matter, but that he had not paid the said Jones any retainer; that previously he had been represented by Mr. Charles A. Williams, a member of the Chicago bar, who withdrew from the employment; that on January 4, 1925, affiant talked with said Jones in his office, and was advised that the above-entitled cause would be on Judge Wilkerson's trial call on the following day, but that affiant need not come to court for the reason that the case would not be tried on January 5, but would be continued to January 16, 1925.
Affiant further says that except on the occasion above mentioned, he was never at any time informed that the said case was set for trial, and was not informed of any continuances or applications for continuances.
And affiant further states that he was not present at the hearing before his honor, Judge Wilkerson, on January 5, 1925, for the reason hereinbefore stated.
Aftant further says that he had and has a complete and valid defense to the sa d bill of com, laint hereinbefore referred to, and that the nature of his defense was and is as follows:
(1) That on or about March 9, 1923, Harry S. Tansey was the owner of several thousand shares of the capital stock of Grommes & Ullrich, an Illinois corporation, theretofore engaged in the business of dealing in intoxicating liquors, etc., and then the owner and possessor of a large quantity of such intoxicating liquor and other merchandise; that on or about the date aforementioned, said Tansey sold to affiant to wit: 1,722 shares of said capital stock of said corporation, at the price of $95,000; that affiant gave in lieu of cash payment for said stock his note dated on or about March 9, 1923, for the principal sum of $95,000, payable to the order of said Tansey 60 days after date thereof, with the express understanding and agreement that in event of a dissolution of said corporation, and a distribution of its assets to its stockholders prior to the payment of said note, said Tansey should have a lien on such assets so distributed to affiant, as security for the payment of said note; a copy of which note, marked "Exhibit A” is attached hereto and made a part hereof; that shortly thereafter the said corporation of Grommes & Ullrich was, pursuant to vote of its stockholders, formally dissolved and its charter surrendered and that pursuant to the terms of dissolution the stock of liquors then on hand was distributed pro rata among the then stockholders; that pursuant to such arrangement there was distributed to affiant, so being the owner of said 1,722 shares of said stock, a corresponding number, or 1,722 packages of said liquor; that the affiant believed and represented that he would be able to obtain the necessary permits to enable him lawfully to sell the said liquor to drug stores, hospitals, or other parties having permits to purchase the same, and turn it into money; that pursuant to the agreement made at the time of the sale by said Tansey to affiant of said 1,722 shares of stock, to secure the payment of the said note to said Tansey, affiant agreed to and with said Tansey that from time to time, as he should be able lawfully to sell the said liquor he would turn over to said Tansey the moneys received from such sales, to be applied in partial payment of the said note; that said Tansey should have a lien on the said liquor to secure the payment of the said note, and that in the event that affiant should be unable lawfully to sell the said liquor that then he would turn the same over to said Tansey in satisfaction of the said note; and affiant denies that he purchased the said liquor from said Tansey or from said corporation of Grommes & Ullrich, but on the contrary avers that he acquired the same in the manner herein related.