Sprinkle v. United States

• Decision Date: 09 November 1905
• Docket Number: 606.
• Parties: SPRINKLE et al. v. UNITED STATES.
• Court: U.S. Court of Appeals — Fourth Circuit

141 F. 811

SPRINKLE et al. v. UNITED STATES.

No. 606.

United States Court of Appeals, Fourth Circuit.

November 9, 1905

Reuben D. Reid, E. J. Justice, S. B. Adams, and William P. Bynum Jr., for plaintiffs in error.

A. E Holton, U.S. Atty., and A. H. Price, Asst. U.S. Atty.

The plaintiffs in error were indicted jointly with H. C. Sprinkle and J. T. Sprinkle for violation of the internal revenue laws. The indictment contains ten counts. The first count charges that the five persons named carried on the business of rectifiers of spirituous liquors, with intent to defraud the United States of the tax on the spirits rectified by them. The third, fifth, seventh, and eighth counts charge the said five defendants with engaging in and carrying on the business of rectifiers of distilled spirits in the names respectively, of the Oak Grove Liquor Company, the Milton Liquor Company, the Reidsville Liquor Company, and in the name of William Young, with intent to defraud the United States of the tax on the spirits so rectified by them. The second, fourth, and sixth counts charge the said five defendants in the names, respectively, of the Oak Grove Liquor Company, the Milton Liquor Company, and the Reidsville Liquor Company, with knowingly making the false entries in certain books required by law to be kept in the rectifying business carried on in the names of said three companies. The ninth count charges that said five defendants did unlawfully and willfully remove, and aid and abet in removing, one cask of distilled spirits, on which the tax had not been paid as required by law, to a place other than a distillery warehouse provided by law; and the tenth count charges that said five persons did unlawfully and willfully conceal one cask of distilled spirits, on which the tax had not been paid, which had been removed to a place other than a distillery warehouse required by law-- all contrary to the form of the statute in such case made and provided. The sections of the revised statutes violated are, for carrying on the business as rectifiers of distilled spirits, section 3317, Rev. St. (as amended by Act March 1, 1879, c. 125, 20 Stat. 339); for making false entries, section 3318, Rev. St. (as amended 20 Stat. 339 (U.S.Comp.St. 1901, p.2164)); and the removal and concealment, section 3296, Rev.St. (U.S.Comp.St. 1901, p. 2136).

The plaintiffs in error, in the absence of the defendants H. C. and J. T. Sprinkle, who were fugitives from justice, on the 26th day of April, 1904, appeared in person and by counsel, and upon being arraigned pleaded not guilty; and a jury was impaneled for their trial, which lasted from thence to the 4th day of May, 1904, a great mass of evidence having been introduced in behalf of the government, at the conclusion of which none was offered by the defense. Thereupon, after full argument had, and an appropriate charge by the court, a verdict was returned on the 4th day of May, 1904, finding the three defendants named guilty as charged in the first nine counts of the indictment. A motion for a new trial was entered and overruled. The plaintiff in error B. F. Sprinkle was sentenced to two years in the penitentiary and to pay a fine of $5,000; the plaintiff in error T. M. Angle, to a term of one year in the penitentiary, and to pay a fine of $1,000; and the defendant William Young to a term of six months in jail in said district and to pay a fine of $1,000. Sundry exceptions were regularly taken pending the trial, and assignments of error properly presented, and this writ or error allowed.

The government's contention, briefly, is that these several defendants were acting in concert, and in so doing used the names of the Oak Grove Liquor Company, the Milton Liquor Company, and the Reidsville Liquor Company, and William Young, in order more effectively to accomplish their object and defraud the government; that said companies and William Young were in fact one and all the same; that in order to carry out their unlawful purpose they caused to be started what was known as the Jones Company, of Louisville, Ky., the Diamond Distillery Company, of Louisville, Ky., the Merchants' Liquor Company, of Indianapolis, Ind., and the Danville Distributing Company, of Danville, Ill.; that the fraud upon the government was principally committed by these last-named companies, at their respective places of business, purchasing what was known as wholesale liquor dealers' stamps at low proof, and sending them to the companies in North Carolina, more particularly to the Oak Grove and Milton Companies, and the proof raised so as to put out on the market, under the color of these stamps, large quantities of distilled spirits that had not in fact paid taxes to the United States; that said stamps were not sent into North Carolina upon packages of spirits at all, but by a more rapid transit than ordinary freight, and there utilized by one or more of the North Carolina companies upon packages of distilled spirits which had not therefore paid the tax; that the stubs of the stamps so issued from Louisville, Indianapolis, and Springfield, and the serial number of the same stamps, as shown by the rectifiers' reports and the gaugers' reports at the Oak Grove Liquor Company, the Milton Liquor Company and the Reidsville Liquor Company, showed that the stamps which were issued at 9 and 10 proof at Louisville, Indianapolis, and Springfield aforesaid, had b-en brought into North Carolina, and raised to 188 and 190 proof; and that the said defendants had been credited by the collector of internal revenue in North Carolina, upon this fraudulent change in these stamps, whereby the government was defrauded of taxes amounting to over $100,000. The government further contends that the defendants, by one or more of their rectifying companies, bought distilled spirits from Fleischman and others, in Cincinnati, Ohio, at low proof of 50 or 60 per cent.; that the stamps attached to the packages of spirits thus bought, were sent to one or more of their companies; that there the basis of the rectifier's credit was so changed as to show a proof of 188 to 190, this affording another opportunity for putting upon the market distilled spirits on which the tax had not been paid; and also that the defendants, particularly Angle and Young, made false entries in their rectifiers' books used in their business.

The plaintiffs in error insist on the other hand, briefly, that they knew nothing of the conduct of the business of the companies in Louisville, Indianapolis, and Danville, and the Oak Grove, Milton, and Reidsville Companies, and that there was no evidence to connect them with these transactions and insist, further, that the Reidsville Company was owned and operated by the defendant J. T. Sprinkle, and the Oak Grove and Milton Liquor Companies were owned and operated by the defendant H. C. Sprinkle; that the business of the plaintiff in error Young, as a rectifier and wholesale liquor dealer, was entirely separate and distinct from their business; that they had no interest in it, and that, as to those other companies, the transaction in regard to checks, orders for sale of liquor, and soliciting sales of liquor, and the order to one company, and the sale by another company, were nothing more than ordinary transactions of business, carried on by persons engaged in similar undertakings. The following extract from the charge of Judge Boyd, of the lower court, who by reason of his ability and long official experience in revenue matters, is particularly well qualified to speak, is here inserted with the view of making clear just how distilled spirits are stamped and put upon the market, and the business of rectifiers of distilled spirits conducted:

'It may be well that I should call to your attention the method by which distilled spirits are stamped and put upon the market. All taxes are paid upon distilled spirits in the bonded warehouse. Every registered distiller is required to have what is known as a bonded warehouse, and the product of his distillery, when it is produced, is carried from his cistern room to this bonded warehouse, and there it is reported to the collector-- the number of wine gallons, and the number of proof gallons in each package, the date of its production and the date on which it was put in the warehouse, and the package numbered by the storekeeper and gauger. When the distiller desires to put that spirits upon the market, he sends up to the collector what is known as withdrawal papers, in which, he describes the spirits, and if the spirits is 100 proof or upwards, he pays $1.10 upon every proof gallon. The stamps are affixed and canceled by the storekeeper and gauger, and that pays the tax upon a gallon of distilled spirits. No further tax is ever collected upon that spirits. That is the payment of the tax, and is what the government requires. Rectifying establishments change distilled spirits from its original character in the tax but they take them in the original packages, in stamped packages, and they change their proof and character without the payment of any further tax. They simply pay the license for the purpose of carrying on the business of rectifiers. To illustrate: If one is a rectifier of distilled spirits, he buys a 50-gallon barrel of 100 proof spirits. 100 proof is the standard. That spirits has paid $1.10 per gallon on 50 gallons, and the stamp is upon it to indicate that the tax has been paid, and the stamp is canceled upon the head of the barrel and the bung staves are marked so as to identify and describe the package. The rectifier takes the 50-gallon package, and says to the collector: 'I wish to dump this package for rectification; that is, I wish to pour it out of this package and change its proof and character, and put it

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