OUR REVENUE SYSTEM.
HISTORY OF THE PROCEEDINGS
IN THE CASE OF
Phelps, Dodge & Co.
OF NEW YORK.








OUR REVENUE SYSTEM.
HISTORY OF THE PROCEEDINGS
IN THE CASE OF
PHELPS, DODGE & CO.
OF NEW YORK,
AND
VINDICATION OF THE FIRM.
stw torh 
MARTIN'S STEAM PRINTING HOUSE, 111 JOHN STREET.
1S73.








INTRODUCTION.
FREQUENT requests for the details of the controversy between the
United States Customs authorities and the house of Phelps, Dodge
& Co., have induced their collection in the following pages.
The original and full statement made by the firm was subsequently
strengthened, it will be found, by the official publication from the
Treasury Department of the voluminous correspondence in the case.
To these have been added extracts from leading newspapers and a
summary of the action of the Chamber of Commerce.
The Press has reviewed all the questions in dispute with care and
impartial justice, and has pronounced the honor and integrity of the
parties, who have suffered so deeply, to be free from stain.  This
has to a large extent compensated for the wide and indiscriminating
publication, by interested persons, of the charges originally made.
Among the numerous editorials bearing upon this affair, to present
which would require volumes instead of pages, the exceptions to the
general verdict are but few.  Some of the more thoughtful and
judicial articles have been selected from daily and weekly journals,
and are here given without note or comment, beyond what is strictly
necessary to explain their connection with the progress of the case.
NEW YORK CITY, June 1, 1873.




CONTENTS.
Page.
INTRODUCTION................................................    3
STATEMENT   OF  THE  FIRM......................................  5
COMMENTS OF THE PRESS AT LARGE........................... 16
"(     "    " TRADE AND FINANCIAL PRESS.............. 29
"      "    " RELIGIOUS PRESS.......................... 35
A REJOINDER FROM WASHINGTON.............................. 45
THE OFFICIAL CORRESPONDENCE................................ 53
ACTION OF NEW YORK CHAMBER OF COMMERCE................ 63
CONCLUDING   ARTICLES........................................   73
APPENDIX......................................................  79




The Case of Phelps, Dodge & Co.
STATEMENT OF THE FIRM.
To OUR FRIENDS AND THE PrUnLIC:
For a period of iearly four months our firm has been made the subject of
accusation and criticism, so harsh and unjust that it has seemed to us as if the
generally accepted rule, which assumes " all accused innocent until proved to be
guilty," had been, at least in our case, set aside in favor of that othlr principle
"that all accused shall be held guilty until they establish their innocence."
During nearly all tllis period, by reason of various circumstances, such as the
fact that the matters involved were still the subject of controversy between our
firm and the Government; and above all, that by the taking and retention of
our books and papers by tlhe authorities we were not in full possession of all the
evidence relied on by the Government to sustain the charges preferred against
us, it has not been considered expedient to say anything in the way of public
explanation; but tlle time has now come when an explanation is proper.
In the extensive importing business in which we are engaged, tin plate constitutes the chief article subject to an ad valorem duty; and we are associated
with the house of Plelps, James & Co., of Liverpool, which is largely occupied
with its procurement and shipment. As the trade which we do in this article is
very large, and as it is entirely impossible to purchase at any time any very
large quantity from accumulated stocks, it has been long the custom of our
Liverpool house to arrange for the manufacture of supplies through contracts
extending over lengthened periods; and also, in many instances, to advance to
manufacturers the various constituents of their business, and even capital, and
receive in return the finished product at prices conditional upon tlIe fluctuating
values of the raw materials, and through settlements effected at very considerable intervals.
The complicated tariff question now arises: In what manner are tin plates
and similar products manufactured and purchased under such conditions to be
invoiced?




i:;}    ~     THE CASE OF PHELPS, DODGE & CO.
IREQUIREMENTS 01 TIlE LAW.
The fundamental tariff law provides that duties on mechandise shall be assessed
ol " the actual market value or wholesale price thereof at the period of exportation, in the principal markets of the country from which the same shall have
been imported;" but another provision of another act further requires that although the duties assessed must be on " market value," the invoice accompany.
ing it in case of purchase must declare the actual cost-a statement which in
some cases, as above explained, is often a matter very difficult of exact determination at the precise date of shipment.
To add still further to the complication of legal requirement, the ruling of the
United States'I'reasury; according to which the law is administered, is to this
effect: That all purchased goods must be entered at the Custom House at actual
cost when that is higher than the market value at the time of shipment; but at
market value when that is higher than actual cost. With a business largely
done, as ours is, on contracts for future delivery, it therefore often happens that,
on an advancing market, the contract price paid by us may be considerably less
than the market value at the time of shipment, in which case, if we invoice at
Liverpool at the price paid, tie authorities in New York may advance the value,
or, under certain circumstances, demand a penalty or complete forfeiture on tlhe
ground of undervaluation. On the other hand, on a falling market, an invoice
rate representing actual cost may be greatly in excess of market value at the
time of shipment; but in such cases no allowance whatever is made to the importer. And thus it has actually happened that during the past year-which
has been characterized by the most remarkable and violent fluctuations in the
prices of metals (tin plate selling for 28s. per box in January, 44s. in July, and
35s. in December)-we have paid, on aggregate overvaluations, a very large increase of duties over and above what would have been required had the goods
been purchased at the date of shipment.
Again, the very form of consular oath, to which, as citizens of the United
States interested in a house in Liverpool, we are required to subscribe, is not
necessarily equivalent to the declaration which the Consul himself is required to
make and attach to the invoice; inasmucl as the first declares that the actual
cost, while the second, which immediately follows, and is upon the same page, is
to the effect that the Consul believes the merchant's declaration, and that the invoice exhibits the actual market valuation, which last the invoice cannot, unless
" actual cost " and "market value" are held to be equivalent.
With this brief explanation of the letter of the law under which our goods
are required to be invoiced, and its method of administration, we will next endeavor to make clear wherein, through its supposed infraction, we have offended
and been made subject to penalties.




STATEMENT OF TIHE FIRM.                         7
CAUSES OF TIlE DIFFICULTY.
As has been already stated, tie articles before mentioned, inmported by our
firm, are purcihased in large quantitics of many different makers, sometiimes outright, sometimes under conditional and long-continued contracts. They arrive at
Liverpool inl mary different lots every day, and are selnt directly to the steamer,
which often sails the same day.  Triplicate invoices, one of which must go by
the steamer with tie goods, are required to be made out and taken to the Consul's office for ccrtification before one o'clock.
Under such circumstances small errors in the invoices received from the many
different makers, or disagreements between the Liverpool house and the makers
in respect to the qualities or prices to be paid for particular goods, are almost unvoidable; but at the same time it was not charged by the Governunent that any
of our goods had been passed through the Custom House except at their fair
market value. It has, however, happened that on the receipt from time to time
of sundry small quantities of special goods-mostly extra and unusual sizes-due
on old orders or contracted for months in advance of delivery, our Liverpool
correspondents liave been at a loss to know how to invoice them.
The market value, in the first place, was different from contract cost. The
requirement of law next was that they should swear before the Consul as to actual cost, and that the Consul sllould certify as to market value, which, according
to the practice of the Consul's office, is treated as the same. Then, as tile goods
in question were mainly remnants of contracts delivered long after the time
agreed on, and as tllere was a possibility of some deduction in the periodic settlements for non-fulfilment of contract, the matter of cost itself, within certain
linitations, was not fixed, but contingent.  Under such circumstances, as the
quantity and value of the goods in question-as will be shown hereafter-were
very small as compared with our regular and accompanying shipments, our
friends in Liverpool, without, perhaps, sufficient consideration, met the practical
difficulty of the law by marking up these small items in the invoice where
market value had advanced over cost, and making a reduction where market
value had declined below cost.
In such instances, and in the way of explanation, the Liverpool house sometimes sent small memoranda by the same or the following steamer, and in a few
cases letter-press copies of the bills of the manufacturers to tlemn, the precise
object of which bills and memoranda were to explain that such and such numbers of an invoice were remnants of an old order in respect to which the contract
prices varied to a small extent, more or less than the invoiced (but intended
to be) true market value at the time of shipment; the exact truth, as investigation
subsequently showed, being, that the changes in question, on the side of over



S                  TIE CASE OF PHELPS, DODGE & CO.
valuation and in favor of the Government, were very largely in excess of those
in the direction of under-valuation and in our favor.
These bills and memoranda we, carelessly, did not examine personally, not re
garding them in any sense as invoices or as of the slightest importance as respects the Custom House; and, under these impressions, they were, on arrival,
handed over to the assistant clerk who copied invoices into our foreign invoice
book, to be pinned, without concealment, to its pages.
ORIGIN AND PROGRESS OF THE SUIT.
It is foreign to this explanation to dwell on the origin of the suit instituted
against us by the Government, but it is sufficient to say that this clerk, who some
years since was taken into our employment in destitute circumstances, and who
was dismissed for complicity in allowing dishonest persons to enter our store
secretly and at night, in order to inspect our letter-books and papers, did carefillly examine the bills and memoranda in question. And, after surmisilg that
they were not in accordance with the letter of the law, and, in place of acquaintilg us with the fact, as  as his duity, removed them from the invoice book to
which they had been attached, and, after suppressing those showing instances
where the Government had been benefited, but collecting and carefully preserving the few where a small benefit had accrued to the firm, put himself in communication with the Treasury agents.
What followed was an invitation for two members of the firm to visit the
Custom House, where they were informed that evidence had been obtained by
the Government implicating in extensive frauds the house which they represented.
They at once denied any purpose or intent to defraud the Government, as well
as any knowledge whatever of any irregularities in our business in connection
with the Custom House; and, as a further earnest of good faith and conscious
integrity, they at once waived the service of a warrant wlichl had been prepared
against our books and papers, and voluntarily and immediately placed the same
at the disposal of the authorities.  AVe also, at the same time, gave our word
tlat, if the Government had any just claims against us by reason of the infraction
of any law, we would pay the same to the uttermost farthing, without causing
legal delays or expenses; and subsequently, at the suggestion of the United
States District Attorney, Hon. Noah Davis, now Justice of the Supreme Court
of New York, that the matter should be adjusted on the basis of our paying an
amount equal to the whole value of the itens, in our different invoices, against
which any charge of irregularity had been preferred, we accepted tile same as a
basis of settlement.  This amount was subsequently approximately ascertained
to be $260,000, which sum was deposited to await the action of the Treasury




STATEMENT OF THE FIRM.                        9
Department in a pro forma suit which was then agreed upon between the District Attorney and oar counsel.
With this understanding, in perfect good faith on our part, and, as we feel
bound to acknowledge, with an absence of anything like a spirit of vindictiveness on the part of the authorities, the investigation commenced in December,
the Government being in full possession of our books and papers, and also aided
by our dismissed clerk, who by becoming an informer would be entitled to a
large share of all forfeitures which, through his instrumentality, might be established. The result was that, to our surprise and astonishment, the slips and
memoranda of the special goods referred to were regarded by the special agent
of the Treasury as constituting in themselves " duplicate " invoices and evidences
of illegal entry, and as such subjecting us to the full penalty of the statute which,
in substance, provides that when any part of an invoice is made in violation of
the law, the whole invoice or its value becomes liable to forfeiture, but that the
Secretary of the Treasury may accept a compromise of its full penalty when upon
the certificates of the Treasury Agent, the District Attorney, and Solicitor of the
Treasury, he believes it proper and for the interest of the Government to do so.
THE ALLEGED ERRORS.
Having come to this final conclusion, the Government examined all our invoices for a' period of five years, and from the whole number, representing an
importation of at least forty millions, and on which duties to the extent of upwards of eight millions had been paid, selected about fifty, which by reason of
the memorandum slips were held to be vitiated. The aggregate value of all the
goods included under this number of invoices was estimated to be about one
million dollars, and as it was claimed that the Government had the right, after
establishing illegality in the smallest particular, to confiscate every item of such
invoices, a pro forma suit for the above sum was instituted against us. The
aggregate value, on the other lhand, of the several items in the fifty invoices
alleged to be vitiated, amounted, when taken separately, to $271,017.23; and
by the payment of this sum the suit and all claims of the Government were
subsequently settled.
But it should not at the same time escape attention that the amount of alleged
errors of these several items, whose aggregate value was $271,000, was in itself
a comparatively small sum, not exceeding ten to fifteen thousand dollars if estimated at the maximum, and that of this sum the duties which could have
possibly accrued to the Government constituted but a fraction. In short, if they
had been assessed at the maximum rate imposed since 1863, the amount would
have been less than four thousand dollars, but in fact we are given to understand




1 (               TI   CAE ASE (OF PlIELPS, )DODGE & CO.
that the whole amount of loss which, after a careful examination of our books,
it can be claimed that the Government has sustained by reason of the above
irregularities whereof we have been accused, (not taking into consideration the
cases where we had' paid on over-valuations), is not in excess of two thousand
dollars; or, to put the matter still differently, if the case had been one between two
merchants, covering a space of five years and involving transactions to the extent
of $40,000,000, (and considering only the invoices in question), the supposed
discrepancies of account could have been satisfactorily settled by the payment on
our part of from two to four thousand dollars; but in the case of the Government and the merchant the former can only be satisfied under existing laws by the
payment of $271,000, and can further claim to have acted generously inasmuch
as it did not take from us a million.
AN EXAMPLE.
As further proof and illustration of our statements we give the following example of one of the memoranda returned to us by the authorities after settlement,
and regarded by them as fully conclusive against us: In July, 1871, we received
per steamer Algeria an invoice of 2,194 boxes tin plates, included under which
was a lot of 174 boxes of odd sizes, 24x24 XXXX, and 24x131 XX, (marks
which the trade will understand), the remnant of an old and special contract.
All these goods, it is admitted by the Government, were invoiced' at their true
market value at the time of shipment, were so certified by the Consul at Liverpool, and so passed after examination by the appraiser in New York. But there
was, in addition, a memorandum transmitted apprising us that 174 boxes, in virtue of an old contract, would be charged to the Liverpool house at a price which
differed from the then actual market value to the extent of about a sixpence per
box. The total value of the whole invoice was ~3,237: 14s. The total value
of the 174 boxes was ~293: 4s.: 2d., and the difference between the actual
market value of these last and their contract cost was ~4: 7s., on which difference
the duty of 25 per cent. would have amonnted to ~1: Is.: 9d., or a little more
than five dollars. And yet, on account of this small difference in the general settlement, as a penalty we paid the full value of 174 boxes, namely, ~293: 4s.: 2d.,
or upwards of fourteen hundred dollars. And thus the delinquencies ran throughout the whole extraordinary transaction.
But in admitting these irregularities, we do not admit that the Government
by reason of the same has really sustained even the trifling loss that has been
estimated; for the very principle which caused a few items to be irregularly invoiced led to errors against us and in favor of the Government of many times
the amount claimed to have been lost by the customs; one single contract during




STATEMENT OF TIE FIRM.                       11
the past year, for special brands and sizes which cost net, ~42,889: 6s., having
been invoiced to us at ~54,655: 17s., and passed for the payment of duties at the
Custom House at such later valuation.
In view of these facts, it is also proper for us to state why we were induced to
yield to rather than contest the demands of the Government when we found they
were resolved upon.
And first and foremost, we regarded it as a question for the Government to
determine, whether the enormous forfeitures incurred by us, without design or
motive of fraud, misstatement, or concealment, were to be exacted because it was
so written in the law, or were to be adjusted rather to the actual quality of the
transaction.  But when the measure of forfeiture finally exacted was insisted
upon, and its legality was treated as equivalent to its justice, our own sense of
its injustice and oppression could not relieve us from the necessity, in which we
had before placed ourselves, of accepting the Government measure of its rights
and our obligations.  It may be true that in our confidence in our rectitude, and
in the justice of the Government, we had not given due attention to the disturbing element introduced into the dealings of the Government with its citizens, by
the immense private interests of revenue officers and informers which our system
has created and tolerates.
A second and subordinate consideration, but one of much weight, especially
with the senior members of the firm, confirmed us in disposing of the case by
settlement rather than by controversy.  In the whole long course of our business
it has been at once our fortune and our pride to have had no serious litigations;
and that this enviable record should not be interrupted by long and bitter controversy with the Government seemed but justly within our choice, provided the
sacrifice made to secure it was, as it has been, wholly our own. And if there
are any who may be inclined to judge us harshly for such a decision, we would
ask them to recall to mind the peculiar rigor of our present tariff law; the enormous confiscations which it is allowed to the Government to make under it, and
furthermore, that during the whole continuance of the suit our books and papers
would be under the control of the authorities, and our business be liable to be
interrupted and our credit affected by rumors and misrepresentations, which it
would be exceedingly difficult, if not wholly impossible, to at once refute or
answer.
CONCLUSION.
In view, then, of this statement, the correctness of which we believe the
officers of the Government will affirm in every essential particular, and in support
of which we append letters from the special agent of the Treasury Department,
the Consul at Liverpool, who for twelve years certified to the correctness of our




12it    ~     THE CASE OF PHELPS, DODGE & CO.
invoices, and the gentleman who at the inception of the suit against us filled the
office of the United States District Attorney, we will ask the Press, we will
appeal to the great masses who know us and who do not know us, whether it is
probable that a firm which pays annually to the Government hundreds of
thousands of dollars in duties, whose total business transactions are measured
annually by millions, would knowingly, willfully, and systematically defraud the
revenue by short-paid duties to the extent of a few thousand dollars extended
over a period of five years? And we further respectfully ask the Press, and
the Community, which may have prejudged us, whether, after so many years of
honorable life and unsullied reputation, such a calumny against us can be believed
and accepted?
And on this statement, and asking attention to the letters which we annex, we
submit our case to the just judgment of our friends and the public.
April 15, 1S73.                         PTIELPS, DODGE & CO.
No. 1.
Letter from, HON. NOAH       DAVIS, late U. S. District Attorney,
and now Judge of the Supreme Court of the State of New      York:
NEW YORK, April 11, 1873.
MESSRS. PHELPS, DODGE & Co.:
GENTLEMEN:
I have received yours of the 9th instant, asking me, now that the proceeding
recently taken against you by the Government has resulted in a final settlement,
to give you a statement in relation to the claim made against you, and the
manner in which it was met and adjusted by you, an(l snch other matters in connection therewith as I may feel at liberty to communicate. As an act of justice
toward you I think it my duty to comply with the request.
Information in the case was first given to B. G. Jayne, Esq., special agent of
the Treasury Department. At this time I was the United States Attorney for
this District-the officer charged with the duty of conducting legal proceedings
in such cases. After Mr. Jayne had partially investigated thle case, he laid the
facts and papers then in his possession before me. I examined them, and came
to the conclusion that they were sufficient to justify a more thorough investigation. I requested that some of the leading members of your house should be
invited to come to the Custom House, that I might Lave a personal interview




STATEMENT OF THE FIRM.                      13
wtth them. Mr. William E. Dodge and Mr. James came in response to the
Collector's message, and evidently without the slightest idea of its object.  I
stated to them the charges that had been made, the grounds on which they were
based, and the steps that had been taken, and my conclusion that a full investigation ought to be had. Those gentlemen took the matter in a spirit of most
perfect fairness and frankness, inviting the closest scrutiny, and offering, without
reserve, to place at once in the hands of myself or the other officers of the
Government all the books and papers of the firm that might be desired, and to
afford every facility in their power to an inquiry into all their dealings with the
Custom House, asserting that if any irregularity existed in the dealings of your
house with the Government it was unknown to them and wholly unintentional.
They also expressed themselves, on behalf of their firm, ready and willing, if
there had been any irregularity, to pay not only what the Government might
have lost by reason thereof, but any penalty to which they had inadvertently
subjected themselves. I suggested that Mr. Jayne, with such assistance as he
might need, should go with them to their place of business and receive whatever
books and papers he should desire. To this they promptly acceded, and Mr.
Jayne did accompany them and was put into possession of the books and papers,
and the process for books and papers which had been obtained was withheld by
me from service. A full and careful examination was then made by and under
the supervision of Mr. Jayne, he having access to all your books and papers and
possession of all that were deemed necessary to enable him to ascertain the facts.
I was advised from time to time of the progress of the investigation, and when
it was concluded I examined the papers and documents presented to me, containing the case of the Government. From this examination I became satisfied that
there had been during the past five years a considerable number of violations of
the customs revenue laws by your house, all alike in their character; but that
those violations had occurred without any actual intent on your part to defraud
the revenue. The infractions of the statute were, however, of such a character
as left exposed to forfeiture invoices of goods to the amount of about one million
of dollars. On conferring with your counsel I found you still desirous to meet
and adjust the matter on any basis that would cover any fair claim for duties
or penalties that the Government thought proper to enforce. I myself suggested,
without knowing what the amount would be, that the value of the articles in the
several invoices actually affected by the alleged undervaluation should be ascertained, and that the amount so found should be taken as the basis of the settlement. The suggestion was accepted, and the amount was approximately ascertained at about $260,000. It was then arranged between youir counsel and
myself that a suit should be commenced, and that the sum arrived at should be
at once paid into court as a settlement of the claims. At that stage of the trans



14                THE CASE OF PIIELPS, DODGE & CO.
action my term of office expired; but I understood that a suit was commenced
by my successor, which has been compromised on the basis arranged with me at
the value of the articles mentioned, as afterwards ascertained.
If I had come to the conclusion that you had acted with an actual design to
defraud the Government I should have insisted upon the forfeiture, not only of
the value of the articles above referred to, but of the entire invoices of which
they formed a part, amounting to fully one million of dollars; but my examination, with the explanations made to me by you. showed clearly, as I thought
and still think, that the idea of defrauding the Government of its lawful duties
had never entered your minds, while doing a portion of your business in a manner which the courts would declare to be in conflict with the statutes. I was
confirmed in this by the very meagre amount of duties lost to the Government.
In a business with you of many millions of dollars, during the period of five
years in which the alleged irregularities occurred, and during which you had paid
to the Government several millions of dollars in duties, the whole amount lost
by the alleged fraud fell short of three thousand dollars.
I have since learned (a fact which I did not know at the time) that by applying the same rule of valuation adopted by you, and which in tlhe instances covered
by the settlement resulted in an undervaluation of the same goods in other invoices imported during the same period, the result has in those cases been an
overvaluation, upon which the Government received duties beyond what would
have been payable under the correct rule of valuation to an amount very considerably in excess of the duties lost. This fact has cofirmed my conviction of
your entire innocence in the whole lusiness of any actual intent to defraud.
In conclusion, I beg leave to add that during my connection with the office of
United States Attorney I knew of no case in which such a prompt and earnest
desire to court and aid investigation, to correct any error, and right every wrong
that might appear to have been done to the Government or its revenues, was
manifested, as that constantly shown in yours.
I am, very respectfully, yours,
NOAH DAVIS.
No. 2.
OFFICE OF B. G. JAYNE, SPECIAL AGENT U. S. TREASURY DEP'T,
CUSTOM HOUSE, NEw YORK, March 31, 1873.
HON. WM. ]. [)ODGE:
DEAR SIR:
The suit brought against your firm for one million dollars was not for duties
but for tle value of certain invoices.




S PATEMENT OF THE FIRM.                      15
In these invoices the price of a portion of the merchandise was stated below
the purchase price.
The value of that portion of the invoices upon which the value was understated amounted, when taken separately, to $271,017.23, the sum paid by your
firm. The duties lost by the Government by the undervaluation were but a
fraction of the sum paid.
Many charges made ill the public prints against your firm had no foundation
in truth.
Very respectfully, your ob't servant,
[Signed]                                     3. G. JAYNII.
No. 3.
CAMDEN, N. J., April 3, 1873.
(GENTLEMEN:
In reply to yours of yesterday, I lhave to say that during the time I was Consul at Liverpool there was every disposition shown by the house of Phelps,
James & Co. to comply with the Revenue Laws in making out their invoices.
In fact, no house there seemed more solicitous and scrupulous in this particular
than did this house. Mr. James, the senior member of this firm, used frequently
to consult with me as to the mode of making them out, and the prices or values
to be stated.
There were very often difficulties experienced on the part of exporters as to
the sums or prices to be inserted when there were long running contracts for the
delivery of goods, and this house always had contracts running.
I never saw any disposition on their part to violate the law in any particular,
and I do not think they ever did so intentionally.
Very truly yours, etc.,
THOMAS IH. DUDLEY.
PUHELPS, DODGE & Co.




16                    THE CASE OF PHELPS, DODGE & CO.
COMMENTS OF THE PRESS.
[From THE NEW YORK TIMES, April 16, 1S73.]  the difficulty of the law by a proceeding which
M  PE & CO.    seems perfectly fair and just. They marked
MESSRS. PHELPS,                       up the small items in the invoice where market
The statement which   we publish this   value had advanced over cost, and they made
morning from Messrs. Phelps, Dodge & Co.,  a reduction where market value had declined
in regard to their case with the Government,  below cost. That this was perfectly fair to
must strike every impartial mind as candid,  the Government is evident from the fact that
clear, and convincing. It forms a sad evidence  Messrs. Phelps, Dodge & Co., during the past
of how ready a certain class of our people are five years, have overpaid to the Government
to join in a cry of calumny against honored  much more than they have underpaid. In
names, and it ought to show to a portion of  one instance, during the past year, they imthe Press of the country what a cruel wrong  ported one lot on a single contract of certain
they have done to this respected firm, by  special brands, and invoiced them for duties
accusations where " the other side " was never  at ~54,655, while the actual cost was only
heard.   Messrs. Phelps, Dodge & Co., it  ~42,889, thus overpaying the Government on
must be remembered, have the largest business  that importation alone some $60,000. Judge
in metals probably of any mercantile house in  DAVIS rightly says, in a letter published in
the world. During the past five years they  another column, that this fact alone confirms
have imported over $40,000,000 worth of   his conviction of their " entire innocence, in
these products, on which they have paid du- the whole business, of any actual intent.to
ties of over $8,000,000. The whole amount  defraud."
of irregularities charged against them during  Unfortunately for the house, the small
this period by the Government is only about  memoranda and copies of the bills of the
$2,000, and this without any suspicion of fraud  actual cost were sent out by the Liverpool firm,
or intention to evade the law on their part.  their object being merely to give information
Their difficulties arose from the complicated  as to what the original contracts were. They
nature of the Revenue laws, and from  the  were not treated as in any way confidential or
enormous range of their transactions.  This important communications, but were pinned
house imports largely of tin plate. The tariff  by an ordinary assistant clerk, without conprovides that the duties on this article shall  cealmcnt, in one of their foreign invoice-books.
be assessed on its " actual market value " in  This man had been rescued by a member of
foreign countries at the period of exportation;  the firm from poverty and starvation, and had
but another act requires that the invoice must  been placed, as an act of charity, in this
also declare its "actual cost."  There is no  position of clerk. As a return for their kinddifficulty, of course, in ascertaining the market  ness, stimulated by the enormous bribes
value, and it was never charged against this  offered by the Revenue laws, he secretly refirm that they had ever passed any goods  moved these memoranda from   the invoicethrough the Custom-Iouse, except at their  book, destroying those which showed where
fair market value. The only question was, as  the Government lhad been benefited, and
to the " actual cost" of the tin plate imported.  preserving those where a small advantage had
This was not easy to ascertain. In cases of accrued to the firm. These memoranda he
irregular or extra lots, the goods were often  took to the detective officers.
remnants of contracts delivered long after the  It is these memoranda which the Revenue
time agreed upon, when a deduction was    officials choose to consider as " duplicate
probable from nonfulfillment of contract, and, invoices," and on which the whole charge of
therefore, where cost itself could not be fixed  fraud is )lased. How unjustly the facts which
till after a considerable time.  These goods  they give tell against tie Ilouse may be judged
came into Liverpool, consigned to the firm, in  from the following instance: In July, 1871,
many different lots every day, fiom various  they imported a lot of' 2,194 boxes of till
makers, andl under collditional and long-con-  plates, among which was a lot of 174 boxes
tiinned contracts. They ad(l all to be invoiced  of odd sizes. All these goods were admitted
and their actual cost determnined, often on the  to be invoiced at their true market value, but
very day of the steamer's sailing. Under tlcese  among the memoranda mentioned above there
circumstances of uncertainty land haste, the  was one stating tlhat the 174 boxes would, on
Liverpool hlouse wTas in tile practice of nleeting  account of an old contract, be charged to the




COMMENTS OF THE PRESS.                              17
Liverpool house at about sixpence per box less  chants' counting-rooms and the Custom-House,
than the market value. The difference between  and watch and study how they may detect and
the market value and the cost amounted to about  make use of some omission or unintentional
$22, on which the duty would have been about  violation of the often contradictory and com$5. Yet for this small difference the Govern-  plicated revenue laws. These degraded informment inflicted on the firm the penalty of the  ers are in constant consultation with those
full value of the 174 boxes, or about $1,400.  lawyers who are always ready to make money
In like manner all their other invoices were  out of these wretched cases, and who know how
vitiated where there were these small irregu-  to frighten the honorable merchant into some
larities, so that under the interpretation of the  settlement or compromise, whose fruits must
law made by the Revenue officers they could  go largely into their pockets.
have been fined $1,000,000, though the losses*                *      *      *
suffered by the Government only amounted to  We are informed that this villainous pro$2,000. The officials, however, compromised,  fession, stimulated by the plunder won in
on $271,000.                              the Dodge case, are very busy now around the
The only mistake made by the firm in this  Custom-House and in many a counting-room.
matter was in compromising at all. They   They bribe weak clerks and pay unprincipled
should have suffered the case to go to the  subordinates. Every merchant in large affairs
courts, where they would undoubtedly have  is surrounded now by a network of miserable
been mulcted only to the amount of the direct  conspiracy. Of course, the first and safest
losses to the Government, which, as we have  way is to have every dealing with the Governsaid before, were only some $2,000. Their  ment so clear and upright that the whole world
reasons for compromising will be easily appre-  might see it. But if, beyond this, there are
ciated by the mercantile community. Their  provisions so difficult and contradictory that
books and papers, during the whole suit, would  no human foresight could avoid mistakes in
have been under the control of the authorities.  them, then, when such errors are picked out
Their business would have been interrupted,  by the informers and detectives, let them go
their credit injured, and thus enormous losses  to the courts.
caused to them.  They were surrounded by
spies and informers. The Tariff laws are ex-  [Fom the N.Y. JOURNAL oF COMMERCE, April
ceedingly complicated and oppressive, and it               16, 87.]
might well be possible that other mistakes had
been made by them which could be taken      We present below a full and complete stateadvantage of by officials who were seeking  mcnt, by the parties most deeply interested, of
their ruin. They had, too, the feeling natural the celebrated case which recently attracted
to honorable merchants, that in dealing with  so much attention. It is impossible, we think,
the Government they were dealing with a gen- for any candid reader to believe that the firm
erous master, who would not take advantage  in question had any intention to defraud the
of a legal technicality to do injustice. Tlat  Revenue. The whole system of confiscations
they committed the error of undue confidence  for alleged under-valuations is wrong, and
in the Government is, after all, more to theiradroitly administered is one of the most powcredit than to their dishonor. Whatever pe-  erful black-mailing agencies in existence.
cuniary losses this house may have suffered in  There is a frankness about the annexed
this transaction, the general unprejudiced  communication which will commend it to all
public will acquit them of all intention to  who are interested.
defraud the Government or to evade the law.
Their character stands as pure and unsullied
as it has always done during the past.     [rom fhe N. Y. EVENING POST, April, 1873.]
THE CASE OF PHELPS, DODGE & CO.
THE INFORMER'S TRADE.                 Messrs. Phelps, Dodge & Co. have to-day
given to the public a statement of the matter
[From an Editorial in TIJE NEW YORKE TIMIS,  in controversy between them and the GovernApril 21   73.]      ment, wherein they were charged with deApril 27, z1873.]        frauding the Revenue, and in settlement of
The most profitable employment now in   which they have paid into the Treasury of the
New-York is that of informer. A business  United States about $271,000. The case is a
whose success was one of the worst signs of peculiar one and worth comprehending, and
the decay of imperial Rome is now extremely  they ask that the circumstances surrounding
thriving in this City.  A numerous band of  it may have a candid and unprejudiced conunprincipled vagabonds hang about our mer- sideration. To this they are entitled, not only




iS                     TIlE CASE OF PHELPS, DODGE & CO.
in colmmon justice, but because of the     In cases where there was doubt as to the
comlmercial reputation and character which  actual cost of the goods, the habit of the
have always belonged to their house.       Liverpool house was, therefore, to invoice at
There are two questions involved: first, the market value of tin plate, that is, the value
Was there any intentional fraud on the part  on which duties are calculated, and we are
of Phelps, Dodge & Co.? and, second, Is there  assured in the statement now given to the pubanything in the wording and possible construe-  lie that this valuation was more often over than
tion of the Tariff laws which might lead them  under actual cost, so that the duties paid have
into error and unintentional violation of the  been, on the whole, in favor of and not against
law? If the latter shall prove to be the case  the government. The actual loss to the revit follows, of course, that the house must be  enue, it is stated, for the whole five years, and
acquitted of the charge contained in the former.  on the whole importation of forty millions of
That difficulties may arise in complying  dollars, is only from two to four thousand dolwith the law in the making of invoices seems  lars, while the excess of duty paid on overplain enough. Thus, the invoice must declare  valuation is a much larger sum.
the actual cost of the goods exported, though  It so happened, however, that where shipthe duty assessed upon them is according to  ments were made of these goods of doubtful
their actual market value at the time and place  cost, a memorandum  or manufacturer's bill
of shipment. But the certificate of the consul accompanied or followed the invoices to show
at the port of shipment is to the cffect that he  that they were remnants of old contracts. It
believes the declaration of the shipper, and  would unquestionably have been better if the
that the invoice also gives the actual market goods had been invoiced at the assumed cost
value of the goods, although the merchant is  of these memoranda or bills, but as they were
required to give the cost, which may be a very  not considered as showing the actual cost, the
different thing from the value to which the  other course was pursued, as we have just
consul certifies! That mistakes should arise  shown, in invoicing, with the consul's assent,
under this stupid complication is not singular. their supposed market value. No doubt it was
It is quite possible that the merchant, who is  a mistake to thus venture to attempt to comply
receiving goods manufactured on a long-stand-  with the spirit of the law by disregarding the
ing contract, depending on the changing cost  technicality of the letter, however absurd.
from time to time of the raw material, may  But as it was a mistake made in good faith,
not know the actual cost of the manufactured  and with the purpose of scrupulous obedience
article, and honestly estimates it, therefore,  to the law, it should not be assumed to be of
with the assent of the consul, at the market  fraudulent intent. It is impossible to believe
value, which is the thing to which the consul  it to be so when not only was nothing to be
is required to certify. That such a system  made by it, but the system  was actually a
opens the way to fraud seems plain enough;  losing one.
but that it may also give rise to mistakes is  It was not only a losing one, but it put
equally plain, even where there is the best  Phelps, Dodge & Co. into the power of any
intention to comply with the law.          one who could show it to be constructive fraud
The importations of Phelps, Dodge & Co. under the unjust and oppressive laws made for
during the five years over which it is alleged  the benefit of spies and informers. The memotheir frauds extended, amounted to about forty  randa which the house thought were of no
millions of dollars. It sometimes happened  value, so far as the Custom House was conthat their invoices included articles-tin-plate  cerned, were stolen by a dishonest and dis-of an exceptional character in size and shape,  carded clerk and made the basis of a charge of
made on long-existing contracts, the actual cheating the government by false invoices for
cost of which might not be known to the    a period of five years.  These memoranda
Liverpool house, but which must be invoiced  were accepted by the Treasury Department as
and shipped immediately on their receipt from  duplicate invoices, although they referred to
the manufacturers. The late consul at Liver-  single items among many, and according to the
pool, Mr. Dudley, testifies that this house was  law, the whole amount of the invoices in which
always more than usually "solicitous and   such items appeared, making a total of a milscrupulous " in its disposition to comply with  lion of dollars, was forfeited.
the laws; that the senior member of the firm  Now, if there is any justice or reason in such
often consulted with him as to the prices or  a law, Messrs. Phelps, Dodge & Co. should have
values to be stated in the invoices; that ex-  been made to pay the whole sum. But as
porters were often at a loss to know what  there was evidently no intention of fraud-and
valuation should be put upon goods made by  on this point the testimony of Judge Davis,
running contracts; and that PHELPS, JAMES &  the late District Attorney, is conclusive-a
Co., of Liverpool, always had such contracts.  compromise was permitted. Had the Treasury




COMMENTS OF TlHE PRESS.                              19
Department not agreed with Judge Davis it is one of peculiar hardship. The difflrence
could not have honorably consented to any  between the amount of duties they ought to
such arrangement, for that would have been to  have paid and that they did pay was not more
compound a felony. There was then really no  than four thousand dollars in a period of five
crime that called for the enforcement of the  years, while to offset this there had been an
law, and the loss of the government, even if it actual payment to the government of a larger
had gained nothing by over-valuation under  sum in duties from  an over-valuation in the
the system, was trifling. But although a mil- invoices of the goods in question. In equity
lion of dollars was not exacted, it was necessary  they not only owed the government nothing,
to squeeze out of the unfortunate merchants  but the government was strictly in their debt.
enough to satisfy the informer and the half-  Why then, is it asked, should they have subdozen government officers, to whom whatever  mitted to be mulcted in so large a sum as
was extorted-the government itself getting  $271,000?
little or nothing-was to go. Messrs. Phelps,  The answer is obvious if the question is
Dodge & Co. were therefore, mulcted in the  asked seriously: Because, according to the
sum of the value of the goods invoiced below  letter of the law, they were liable not only to
cost, amounting to $271,000, and of this sum  the value of the particular goods which had
the discarded clerk and spy received $60,000,  been erroneously invoiced, but to the whole
and the larger part of the remainder was divi-  amount of the invoices in which the items
ded among those federal officers whose interest  occurred, and had the law been strictly enforced
it is to insist upon the enforcement of a pen-  they might have been compelled to pay a milalty-not on the government's, but on their lion of dollars. Rather, therefore, than to
own behalf. Of course, the compromise is trust to the uncertainty of a lawsuit where it
really theirs; the Treasury Department must  was doubtful if the equity of the case would
submit to their dictation, and the merchant, if be permitted to rule in their favor; rather than
he has committed, however innocently, any  remain for an indefinite period under the
technical infringement of the law, must accept  stigma of a charge of intentional fraud; and
such mercy as he can get.                  rather than submit to the inconvenience of
Such are the results of our Revenue laws. being deprived, so long as the suit continued,
By their blind stupidity, an old commercial  of their books and papers, they accepted a
house of the highest standing is inveigled into  compromise which, though a costly settlement,
a blunder of three or four thousand dollars, in  enabled them at once to make an appeal to the
importations amounting to forty millions dur-  sense of justice in the public, and leave their
ing a period of five years, and is compelled to  commercial reputation without a blemish. That
save itself the loss of a million by the payment  reputation they valued more than they did a
of $271,000 for the benefit of an informer and  quarter of a million of dollars, and fortunately
several government officers. The tariff has  they are able to pay the price.
already driven our commerce from the seas; it  Merchants, better than any other class of the
is in a fair way of making it impossible for an  community, know the intricacy and uncertainty
honest man to engage in any trade where he is  of the laws under which spies and informers
at the mercy of laws which pretend to regulate  are enabled to work such wrong as this, both
the duties on importations. The possible pecu- pecuniarily and morally, upon persons who are
niary loss and the sacrifice of reputation to  guiltless of any intentional fraud. The acts
honorable men, under regulations which it is regulating the tariff upon importations are of
exceedingly difficult to understand and almost many dates within a period of half a century
impossible to obey, are so great that the chan- and more, and they were framed, in many
ces are that trade will at length fall into the  intances, perhaps in almost all, by men innohands of unscrupulous men who are willing to  cent of any knowledge of the subject about
take the risk because they have no characters  which they undertook to legislate. To put a
to lose, and who will take good care never to  duty of ten per cent. upon fiaxseed and admit
have any pecuniary responsibility.         linseed free, as was done by one Congress, is
probably by no means a solitary instance of
similar blunders; and practical men are often
[From the N. Y. EVENING PosT, April 1S, 1873.]  called upon to deal with cases where it is
OBLIQUITIES OF THE TARIFF.            quite as difficult to reconcile the fact with the
law.
Every merchant of this city, we presume, is  The particular case of Phelps, Dodge & Co.,
satisfied that the statement made two or three  we are confident, is a much more common one
days ago by Messrs. Phelps, Dodge & Co. is than is generally supposed. *  *  It is for
not only a complete answer to the charge of  such cases as these that spies and informers,
fraud brought against them, but that their case  prompted by the tariff laws, are continually on




20                    THE CASE OF PHELPS, DODGE & CO.
the search and on which they fatten. A mer-  the government was in debt to them for an
chant, however scrupulous he may be, and   excess of duties paid, rather than they in debt
however desirous he may be to comply with  to the government for a deficiency. Had the
the very letter of the act, may come to grief transaction been one between two merchants,
by an erroneous interpretation of the law as to  three or four thousand dollars would have setcost and market values, or by an interpretation  tied the difference. But as there was a techniwhich should bring him into conflict with laws  cal evasion of the law the house was compelled
which may be twisted into having more than  to pay $271,000.
one meaning. He knows that he is dogged by   We hold such a result to be simply an abuse
men, even if they are not of his own counting-  of the law, or, to speak strictly, an abuse which
house, who are experts in detecting technical  the law permits. Mr. Boutwell's explanation,
violations of the tariff regulations, and who  so far from putting any better aspect upon the
will prove him to have been a rogue in spite of  question for the government, makes it worse,
the best intentions. If he is a timid man he  and is only a new illustration of how the law
may submit to the exaction of blackmail; if is used as an instrument of torture. If innothe case is one difficult of explanation, he pays  cence of intention was worthy of weight, then
any sum demanded rather than suffer an expo- the Secretary of the Treasury should, in a
sure which may damage his reputation; at best,  decent regard for justice, have simply reqnired
however disposed to take his stand upon an  Phelps, Dodge & Co. to pay to the government
unblemished character and his rights, he may,  only the actual deficiency of duties charged
by the technicalities of a law, which are a trap against them. To compel them to pay the
alike to the unwary and the careful, be com- penalty which the greedy expectants were waitpelled to make the best terms he can with  ing here to divide, while the innocence of the
those into whose power he has unhappily fallen. accused was acknowledged, was too great an
The inevitable result must be, in the long run,  outrage to be ventured upon. The way was
to drive honorable men out of business, who  smooth enough if a confession could be extortwill not take such chances of ruin both in  ed. A threat of a lawsuit, with all its certain
reputation and purse, and put it into the hands  vexations and expenses, and the possible verof unscrupulous agents of foreign houses, who  diet against the house of an enforced payment
will keep no books and cultivate short memo- of a million of dollars, with a stigma of guilt
ries.                                     affixed by a legal decision, was held over them
_ — -~on the one hand; on the other was an imme[ e N. Y.   diate escape from the difficulty by the payment
[Fro  h N. Y. E   P, Ail 21,.  of a much smaller sum  than the law might
WHAT SrHALL WA   E DO ABOUT ITT         enforce, on the condition of acknowledging
WHAT SHALL WE DO ABOUT IT?                                   hi
that the fault charged had been committed.
The acts regulating the imposition of duties  Technically, according to the official construcupon imports are scattered through the statute  tion of the law and the official assumption that
books for nearly three-quarters of a century, certain memoranda were duplicate invoices,
and those most familiar with them assert that there had been a breach of the law. They
so intricate and sometimes contradictory are  could not deny constructive fraud, but whether
they, that it is not only difficult to reconcile,  they were wise to acknowledge this without
but not easy to comprehend them. *  *  *  insisting at the same time upon innocence of
The evil is become so manifest in the wrong  intention, that they might escape the heavier
which a prominent commercial house has been  penalty, is a question about which men will
made to suffer, that we hope men of both par- differ. But that they were put in so tight a
ties will give to the subject the consideration it place by the Department, only shows the tredeserves. We do not believe that any candid  mendous pressure that can be brought upon a
man can doubt that the statement of Phelps,  merchant who falls into any of the numberless
Dodge & Co. is strictly true-that there was traps that the law lays for him.
not on their part the slightest intention to de-  The evil is that the law may be so easily
fraud the government, and that though techni-  misunderstood on the one hand, and admits of
cally in fault in the method they adopted to  such enormous abuses on the other. We cited
invoice certain goods, they adopted that method  a day or two ago a case where, had it fallen inin the belief that they were thereby obeying  to the hands of an informer, or Treasury agent,
the spirit of the law in cases where they could  a forced constitution of the law might have
not keep to the letter. Practically the method  mulcted the merchant in a penalty of the
was so far from defrauding the government whole amount of the invoice. The goods were
that the cases wherein the goods were at an  deliverable on contract, and were invoiced at
over-valuation exceeded those wherein they  cost. But, according to the law, they were
were at an under-valuation, so that In equity  dutiable at the market price. Market price is




COMMENTS OF THE PRESS.                              21
the price at which goods can be bought. Be- base a charge against them of defrauding the
fore this contract expired, the price at which revenue.
these goods could have been bought under a  We repeat what we have said before-that
fresh order had enhanced. When the contract the law is capable of these abuses; and the
was about to expire and the merchant ordered conspicuous case of Phelps, Dodge & Co.
more goods, he was told that he could have no should be made use of for a positive and pubmore at that rate as the cost of manufacturing lic demonstration against them.  The merthem had increased. He had been innocently chants are at the mercy of informers and dereceiving goods for some time at less than tectives, and the laws are so intricate and capatheir market value, and paying duty accord- ble of such construction, that the most innoingly. Does anybody suppose that he would cent and most honorable men may become the
have been let up by a government detective on victims of private or public and legal extortion.
the plea of non-intention?                The timid may submit to be blackmailed;
We have no doubt there are plenty of such those of more firmness may consent to official
cases in the knowledge of importers. Another compromises, which, however, are sure to be of
of a similar sort has been told us within a day such a character as to be what is officially calor two. A merchant ordered of a manufac- led "a good thing" for the class of revenue
turer in England all that he could make of a officers for whose enrichment the law seems
certain class of goods-made by nobody else designed.
for the time being-for a year. He invoiced  We know of no subject which just now
them at cost, and there were no others in mar- better demands the attention of the Chamber
ket to fix any other price upon them. It hap- of Commerce. What the merchants cannot
pened that in a railroad accident some of these and dare not do individually they may do as a
goods were damaged and afterward sold at auc- body. We doubt if Cooper Institute would be
tion. They brought a much higher than the large enough to hold a meeting called to concontract price-as would propably have been sider a revision of the laws relating to the
the fact with the goods in the other case re- tariff, and such a meeting would show a public
ferred to under similar circumstances-thus feeling on this subject and bring out a mass of
fixing a market value above cost price. No evidence which would be the first step and a
detective or treasury agent happened to learn long one toward reform. One of the most
the fact, though the merchant was in great eminent lawyers of this city, and a hearty suptrepidation lest one should do so, and bring a porter of the Republican party, has said that
charge against him of undervaluing his impor- no ministry in England would remain in office
tations. In both these cases the merchants a week that undertook to withstand a parliawere perfectly innocent of any intention of mentary inquiry in such a case as this of Phelps,
fraud, because they were not aware of any Dodge & Company. We cannot turn out a
difference between the cost price and market ministry, but public opinion among us can
value of their goods. But in both cases spies compel the dominant party in an administra.
and detectives would have found enough to tion to correct oppressive and obnoxious laws.
A COMPLETE ANALYSIS OF THE CASE.
[From THE NATION, N. Y., lay 1, 1873.]  which the firm has recently published, is a
THE  EXTRAORDINARY  ELEMENT    document so remarkable, that were it not for
HE  EXTRAORDINARY  ELEMENT     the accompanying confirmatory letters of the
THE CASE OF PHELPS, DODGE & CO.         late United States District Attorney, Hon.
Noah Davis, and the Special Treasury Agent,
The case of Phelps, Dodge & Co. is cer- Mr. Jayne, the alleged facts would seem altainly destined to become a cause celebre in most incredible; and yet the concurrent cirour mercantile history; and, if we are not cumstances of the case which have not been
much mistaken, will, by awakening public at- publicly related, and the deductions which a
tention to the character of the laws and the review of the whole affai legitimately warfiscal policy under which the business of the rants are, if anything, still more extraordinary.
country is transacted, exert an important influ-  During the past summer a contract was
ence also upon our political future. The state- being negotiated by the house of Phelps,
ment of their difficulties witI tle Government, Dodge & Co. with certain manufacturers in




22                     THE CASE OF PHELPS, DODGE & CO.
Europe for the purchase of the entire annual who, by the way, it should be stated, had
product of a specialty of metal fabrication;gained admission to the store at night under
and as the project, from the amount of capital the pica of serving his employers by bringing
involved, was one of no little risk and of great up his arrears of copying-foreseeing as the
importance, the entire discussion and.corre- result of the legal investigation that his own
spondence relative to it were made in the dismissal from employment would be one cerhighest degree confidential, and a member of tain issue, took immediate steps to secure himthe firm ultimately sent abroad to perfect and self against any contingent detriment by ascomplete the arrangements. But the steamer suming the role of an informer; and having,
which bore him had hardly taken its departure in his capacity as assistant clerk, become
when the firm was waited upon by a competi- acquainted with certain invoice irregularities,
tor in business, who, after making known his in place, as was his duty, of informing his emacquaintance with the proposed contract and ploycrs, he stole the documents in question,
its conditions, as well as the sailing of the and put himself in communication with the
partner referred to, preferred a demand for Custom House officials.
participation for himself and others in the  As to the manner in which he operated to
enterprise, accompanying it at the same time make his stolen capital available, it is sufficient
with a threat that unless the terms were ac- to say that men of high standing in the legal
cepted " he would burst the whole business."  profession were only too ready to engage, for
It is only necessary to say that the demand was a share in the spoils, in the work of hunting
at once resented, and its author treated as he down an old and leadinfg firm of New York
deserved. But the revelation that what were merchants, and by such the case was worked
supposed to be business secrets in the firm  up and placed in the hands of the Custom
had become known, and the further fact that House detectives.
an attempt was subsequently made in Europe to  Now, whether the firm of Phelps, Dodge &
make good the threat wttered, led to an investi- Co. were or were not engaged in an attempt to
gation, when it was ascertained that for some defraud the revenue, is a question which we do
time previous it had been the practice of not here propose to discuss. But we simply
several reputed respectable New York metal- draw a picture of the events that preceded
brokers and merchants to visit the store of their accusation and arraignment, and ask our
Phelps, Dodge & Co., secretly and at night, readers and the public to take a good look at
for the purpose of inspecting their letter-books it, and then ask themselves how long a comand invoices-admission being given them by munity which tolerates such a dry-rot of all
dishonest clerks and watchmen, who had been manliness can legitimately profess to be moral
bribed to betray their employers' interests,  or even civilized?  Or, in the face of such
An arrest and prosecution of at least one of Iprecedents, what probability is there of New
the principals concerned in this disgraceful York City speedily becoming the commercial
transaction immediately followed; but as it centre of the world's exchanges, the continued
was shown that admission to the store was recipient of foreign capital, or an entrepot
allowed by the agents of the firm, and as it of the commerce of all nations?
could not be proved that any article had been  But if the relation of private parties to this
feloniously removed from  the premises, no case has been most extraordinary, the position
specific criminal offence, for which punishment of the Government, both in respect to the
might be awarded, could be established. But law and its administration, in this same matin the course of the trial it came to light that ter, has been no less singular. And in saying
among the employees who had been guilty, this we by no means intend to reflect on the
from  mercenary motives, of betraying the course of the minor officers of the revenue,
trust confided to them, was a clerk who, to the who play the part of prosecutors and detectives.
sin of dishonesty, added the deeper one of in- The law under which they act is permissive,
gratitude. This man, a creole Frenchman or if not mandatory; and when the end in view
Spaniard, of supposed Westi ndia origin, had is pecuniary gain, human nature is pretty cerbeen given employment in the outset, when tain to run in similar channels, whether it be
not needed, by a member of the firm, simply enthroned in the Custom House, presides over
out of compassion for his utter poverty and a Chatham street "loan office," or rides on a
friendlessness; and had subsequently been  red cart in the person of aYankee tin-peddler.
educated, promoted on a liberal salary to the  But when we come to deal with Washington
position of assistant invoice clerk, and even  and the higher officials who preside over the
retained in position when ill-health had almost destinies of the nation, we have a right to cxentirely incapacitated him for any useful and  pect something better. We have a right to
efficient service. This rascal, for such is the  expect that they, at least, shall fully recognize
only pr)per term- that cmll be applied to him-  the principle that the primary object of all gov



COMMENTS OF THE PRESS.                              23
ernment is to remove obstructions; and of a free duties, as a preventive against undervaluations,
government, to promote the interests of the have not been more generally substituted in
people and prevent wrong and injustice. But the frequent readjustments of our tariff laws,
axiomatic as are these principles, they are the is undoubtedly to be found in the circumstance
very ones which appear to have obtained the that the essence of protection is obstruction,
least recognition in the determination and ad- and every protectionist, when called upon to
ministration of our recent revenue policy; and legislate, instinctively feels, even if he cannot
in the place of them we have had interference give a reason, that the removal of any obstrucand obstruction as the characteristic feature of tion in the way of importationss is in itself a
Congressional legislation; and in the Depart- movement in the direction of greater freedom
ments, a proclamation by works that Govern- in exchanges; and that, in comparison with
ment exists primarily for itself, and that its such a result, temptations, snares, frauds, and
interests per se are first, and those of the in- national demoralization are evils of minor condustry, trade, and commerce of the country, sideration.
secondary and subordinate, or, as the late  But although the substitution of specific for
Secretary of the Treasury substantially ex- ad valorem duties would effectually prevent
pressed it, in an official conversation during frauds in importation, except through the direct
the past winter, " that he regarded the inter- complicity of the agents whom the Government
ests of the Government and the interests of appoints to enumerate, weigh, and measure, it
the merchants as diametrically opposite."  would still seem as if the law in other respects
In the light of such precedents and senti- had been purposely disregarded to make the
ments, and as bearing upon the industry, com- business of importing as difficult and personmerce, and morality of the country, it is inter- ally hazardous as possible. Thus, for example,
esting next to trace the influence and action instead of one concise code, we have statute
of the Government in the Phelps, Dodge & Co. running back to 1799 piled upon statute, until
difficulty, from its remote inception to its full the law has become so complicated that it is
fruition and culmination. In the first place, within bounds to say that there are not ten men
the attempt to collect a revenue from duties to-day, in all the United States, who have any
on tin and tin plate (the articles in respect to clear comprehension of all its requirements,
which undervaluation is alleged) is something provisions, limitations, and interpretations.
economically indefensible.  Neither of these Again, the law requires invoices, oaths, certificommodities is produced in the United States, cates, and declarations, not once, but in tripliand no infant manufacture, or citizen in such cate, of shippers, consuls, owners, and cona state of pauperism as warrants him in asking signees, in respect to the most minute particuthe Government to impose a tax for his bene- lars of cost, market value, freights, charges and
fit, seeks or demands it. But, at the same commissions; and yet, in actual practice, and
time, tin and tin plates are so indispensable in when it is to the advantage of the Government
our social economy, and enter into so many to do so, all these forms may be set aside, and
forms of domestic industry, that it is not too the duties assessed on the judgment of certain
much to say that, for every dollar tax by which persons, supposed to be competent, sitting as
their cost is primarily enhanced by the Gov- appraisers. And when these appraisers, whose
eminent, the consumer pays, in the way of functions and office would seem to be judicial,
profits, interest, and commission on the sue- have once given their judgment, and the same
cessive sales and transformations that precede has been accepted alike by the Government and
their final use, at least from fifty to seventy- the merchant, the duties paid, and the merchanfive cents additional.                    dise delivered, sold, and consumed, it is held
The tax, then, in place of being specific, or to be right, as it is the practice of the Governby the pound, as it might be-thus obviating ment, to go back at any time within a period
any possibility of fraud on the part of the im- of five years and reopen the whole matter for
porter-is made ad valorem; and when Com- further adjudication; and, as in the case of
missioner Wells, some years since, with the Phelps, Dodge & Co., exact fines, amounting
general concurrence of importers and apprais- to confiscation, for technical infractions of the
ers, and with a view of simplifying the law  law, which, by the admission of the Governand its administration, made a special recom- ment agents themselves, have resulted in
mendation to Congress in favor of converting practically no loss to the revenue. And as
the existing ad valorem on tin plates into an illustrating still further the arbitrary character
equivalent specific, the recommendation re- of the law regulating foreign commerce, it
ceived no more attention than if he had pro- may be stated, that even in cases where the
posed some standard by which the length of duty is so much per pound, per yard, or per
dogs' tails should be equalized and adjnsted. dozen, and where value is of no consequence,
And the reason, furthermore, why specific if it so happens that the invoice does not cor



24                   THE CASE OF PHELPS, DODGE & CO.
rectly state the value, the goods are liable to compromising, acknowledged to have been unconfiscation, and in at least one instance during accompanied by fraudulent intent; and exacted
the past year, of this exact character, have, in it furthermore with the full knowledge that the
fact, been seized for forfeiture, and the con- diversion of one-fourth of the whole amount
signee threatened with imprisonment. And in paid into the pockets of a scoundrel of a clerk,
the case of goods imported, where the duty is who for lucre had sold out his employers,
ad valoremn, but the value indefinite or difficult would in itself constitute such a premium and
of determination, and when for such very incentive to rascality as to substitute an atmosreasons-as in a recent importation of South phere of suspicion and concealment, in place of
African diamonds-the goods are forwarded to confidence and good feeling, throughout the
the care of the Collector for appraisement, entire mercantile community. There is no
and not to the owner or consignee, the absence necessity, in forming an opinion about this
of an invoice, giving details which cannot be part of Phelps, Dodge & Co.'s case, to consult
known to any one, has not only been held to Brightley's Digest, or to trouble our heads
render the importation liable to forfeiture, but about actual costs, market values, or what has
on such flimsy basis proceedings for forfeiture or has not been the practice of the Treasury.
have actually been instituted.           If the facts in respect to the inception of the
But the law, harsh, arbitrary, and barbarous difficulty, the procurement of evidence, the
as it is, is not wholly unmerciful, inasmuch as absence of intent, the amount of loss to the
it allows the head of the Treasury Department revenue, the penalty exacted, and the dis" to mitigate or remit any penalty or forfeiture," position of the penalty, are as representedwhen the same, "in his opinion, shall have and it is difficult to see how the above statebeen incurred without any intention of fraud." ments can be questioned-the action of the
Now, in the case of Phelps, Dodge & Co., an Government has been simply infamous, and in
infraction of the law was, without reserve, ad- almost any other constitutional country would
mitted, and, as Mr. Boutwell has stated, the have not only driven the ministry from power,
practice of the Treasury undoubtedly warranted but would have compelled national atonement
the Secretary in assuming an admission of not only for the money paid but for damages
illegal action, and an offer to settle, as equiva- incurred to the uttermost farthing. Legislation,
lent to a confession of anything which the form  we all know, has driven our commerce from
of procedure might stipulate; but the fact, the seas; but administration seems now to
nevertheless, remains, that we have the assertion supplement legislation by driving American
of the firm and the certificate of the District merchants out of existence, and substituting
Attorney, first, that the offence was not in- in their place men of no nationality, who will
tentional, and, second, that the total loss to the say to the Government as their prototype Shyrevenue during an extended period, and as the lock said to his persecutors: "The villainy you
result of Custom House transactions and pay- teach me I will execute, and it shall go hard
ments representing millions, was a sum com- but I will better the instruction."
paratively insignificant. Under such circumstances it would seem to have been the part of
our great Government, whose revenue laws are  A PRACTICAL CONFISCATION.
acknowledged to be a bundle of inconsistencies,
to have fallen back on the old maxim, "De
minimis non curat lex;" and even on the assumption that the utmost that could be charged [From TuE N. Y.EVENING EXPRESS, April 1, 183.]
was true, to have dealt tenderly with the  We publish the very elaborate statement of
reputation of one of the representative and Phelps, Dodge & Co., in another column, with
most enterprising commercial firms of the the important letters appended of B. G. Jayne,
country, the members of which, when it was a the United States Special Treasury Agent, the
question whether the Government itself would vindication of the late and long United States
have a continuance, had contributed of their Consul, Thomas II. Dudley, as to the practices
own number to the ranks of the army, and had of the firm in London, and of United States
given of their substance to the cause of the Judge Noah Davis, each of whom vindicate the
country what in old time would have sufficed New York firm of anything like intentional
for a' king's ransom "                  fraud. Messrs. Phelps, Dodge & Co. give their
But what did our great model and enlight- own concise reasons relative to the revenue
ened Government, acting through its official dispute, and show why they consented, in the
representatives, actually do?  It exacted a sum of $271,00, to get rid of a claim which
penalty of $271,023.17 for a detriment to the in equity amounted to but a few hundred. On
revenue which it has been certified was not in the subject of invoices they have shown that
excess of' I1,664, and which the Treasury, by owing to certain irregularities abroad, of which




COMMENTS OF THE PRESS.                              25
they had no knowledge, the Government had and Europe, a Christian character to lose, a
received far more in excess or overcharge of cherished family name to protect, an honorable
duties than it had lost from any advantages to citizenship and influence to be obtained and
the firm. Indeed, the act of the Government retained only by a life-time of honest and honproved to be a practical confiscation, and many orable dealings.  *  * 
friends of the firm, and some not friendly,  If the merchant feels it to be his duty to deblame the parties for not vindicating their case fend himself, it is at a great expense and upon
in court, rather than submit to the extortion of an extremely doubtful financial result. It is
the Government; but the reasons given for delayed until the delay is equivalent to a dethis course are, first, the proposal of the firm  nial of justice.
to submit their case to the decision of the  If, by reason of some technical misunderGovernment, and, secondly, the uniform desire standing of the value of the goods, an underand practice of the firm to avoid litigation. valuation  is made out —however slight,
This case is not peculiar, as it shows wherein though an eighth of one per cent.-technically
the letter of the law may become positive in- the merchant may be charged by the court as
justice to persons accused, but all these points guilty, and muleted in heavy damages for
are stated with so much clearness and frank- costs, besides a confiscation of all the goods,
ness that we leave them to the reader, and in though of the value of millions. If the'job"
the full conviction, after perusal, both that no is made out of " whole cloth " by perjury, yet
fraud was intended, and, secondly, that the if the court certifies to probable cause, the imexactions of the Government, for exposures, porter is without redress for damages susfirst inspired by informers and United States tained; and therefore, whichever way the case
agents, were altogether beyond the offence ends, the merchant must suffer irreparable loss
committed. The good intentions and fair mer- in his own good name both in America and
cantile credit of a long life ought to outweigh Europe. Rival houses will easily circulate the
the criticisms and injustice caused by a failure prejudiced report, newspapers will spread it
of agents to do their duty. Where the firm of broadcast, and the only remedy seems to be to
Phelps, Dodge & Co. in a period of five years " deliver up " what is asked, regardless of law,
paid to the Government many millions in cus- justice, or decency.
toms, the loss to the Government from the   If the Government officials did not, with
irregularity of their agents was less than their informer, share in the ill-gotten gains,
$3,000, and this from those who gave yearly doubtless a "probable case" would be required
many times this sum in charity.           to be made out, before the Collector would
allow the honorable name of responsible importing houses to be blasted by a publication
HOW   IT IS DONE.              of slanderous statements of alleged guilt of
fraud upon the revenue of the Government.
As it is, the more unspotted the credit of the
[Fromn IE N. Y. EVENING EXPRESS, April t6, 1S3.] importing house, the greater the facility to
The affidavit of "information and belief," blacken them through "an informer," knowwithout the slightest hint or statement of the ing full well that such a house will have a lifegrounds or facts upon which that " information time reputation to lose, a world-wide financial
and belief" is founded-upon which, if perjury credit at stake, an honorable family to defend.
could be conclusively proved, an indictment       *     *     *    *     *     *
would lie-of the lowest and most worthless  Is it not time the finger of scorn was pointculprit unhung or out of jail, without character ed to all those who indirectly aid and abet the
or faith on which an oath is founded, who will oppressive breaking down of a well-known
sell himself for a pittance, upon such complex mercantile reputation and financial credit so
questions, about which the most intelligent often assailed at the instance of officials for
experts of the day may honestly differ in gain, and that the power of the press of the
opinion of valuation of from five to ten per nation was also brought to bear to break down
cent., will outweigh in the opinion of the Attor- this oppression upon honorable merchants
ney of the Government, who gets two per cent. under the false name of law?
on all confiscations; in the opinion of the Collector, Naval Officer and Surveyor, who get
one-quarter, (while one-fourth goes to induce
informers to disregard truth, without thought       Fror the same Nepper.
of consequence) a life-time of honesty, char-  While we have no sympathy for Phelps,
acter unspotted, a world-wide reputation for Dodge & Co., and shall not soon forget that
honor and integrity, a financial responsibility one of our editors was put out of Congress
of almost inestimable value, both in America by the senior of the firm, in as partisan and




26                     THE CASE OF PHELPS, DODGE & CO.
unjust a decision as ever was made by party attempting to defraud the revenue. During
men in party times, we nevertheless like to see the last five years the firm have imported over
fair play and plain justice. But for the pri- $40,000,000 worth of metal, on which they
vate plunder in this case, we believe that, under paid duties to the amount of' $8,000,000. The
the old law of Congress and the equities of the total of irregularities charged against them
case, Phelps, Dodge & Co. would have escaped during this time was only $2,)00, yet, under
by paying $2,500 in deficient duties. Every the construction of the law  made by our
merchant is liable to this injustice, and may revenue officers, they were subject to a fine of
therefore fairly protest against it.      one million dollars. Sooner than have their
books seized and held by Government, and
their business broken up, Phelps, Dodge &
AMPLE EXONERATION.                Co. compromised on $271,000. Then they
waited for time to do them justice, and prepared the exonerating statement which thev
[PFrom TIHLE NEW YORK COMMERCIAL LADVERnRISEI,1 now publish, and which is so strong as to call
April 16, 1813.]            forth the opinion from Judge Noah Davis that
PHELPS, DODGE & CO.              it is a proof of their " entire innocence, in the
whole business, of any attempts at fraud."
A long explanation by this firm is published The fine has been paid. Part of it has been
on our first page.  They take pains to show  handed to the informer, an ingrate clerk in the
how the errors charged against them were pos- employ of the firm; a moiety has gone into
sible, and claim that they resulted from inad- the pockets of the Collector, Surveyor, and
vertence, and from the intricacies of the revc- Naval Officer of the Port, and the Governnue laws. Errors have crept into invoices re- ment has received only a portion of it. Unceived from many different makers, and disa- fortunately our revenue laws are so crude and
greements between the Liverpool house and the old-fashioned that the Government was readily
makers in respect to the qualities or prices to made a party to a prosecution that from first
be paid for particular goods have been un- to last wasa blackmailing operation. But this
avoidable. The firm show that the actual loss is not the only lesson the affair impressscs.
to the Government on transactions running It reflects no credit on American journalism to
over many years, and involving many millions find editors and newspapers howling down a
of dollars, was not more than two or three house that has been an honor to the city for
thousand dollars. Ex-District Attorney Davis seventy years, on the strength of a spy's oath
and Special Agent Jayne, who conducted the and the stories of revenue officials eager for a
examination and prosecution, certify to this division of the spoils. Just men will always
fact, and Judge Davis remarks that Phelps, wait to hear the other side. They find their
Dodge & Co. manifested a prompt and earnest reward, as in this case, in the more patient indesire to court and aid investigation, to correct vestigation which leaves an old commercial
any error, and right every wrong that might house unspotted by the attack of the blackappear to have been done to the Government mailer.
or its revenues. The document in question
explains the reason for paying the Government
the demand the laws allowed to be made. It [rom TII N. Y. EVENINO MAIL, Apri 17,1878.
furnishes an ample exoneration of this long    A WELCOME VINDICATION.
established house, whose integrity is and has
been unquestioned. The possibility of wrong  It is with peculiar justice that the distinand injustice under our revenue laws is also guished firm, of whose explanation of the
shown-by no means a new fact. Its exposi- question in dispute between themselves and
tion now, however, may perhaps serve to call the revenue authorities we gave a summary
attention to a system under which such things yesterday, complain of tle treatment they
are possible, and suggest a remedy or a pre- have received from the public in this matter.
ventive.                                  The house of Phelps, Dodge & Co., by its long
_____ _~__ _and honorable record and its high standing
among the business community, not less than
UNSPOTTED BY THE ATTACK.             by the eminence of the individual members in
"doing good among men," was entitled to the
fullest confidence from the public at large. If
Fromz TurE NEW YORK GRIPlIC, Aprl Ii, 18173.] there was to be any pre-judgment of a disA long statement has been published by puted matter, fair play demanded that the
Phelps, Dodge & Co., which fully clears that leaning should be in favor of so honorable a
old and honored house from all suspicion of house. But coming as it did when the public




COMMENTS OF THE PRESS.                               27
mind, stirred by the Credit Mobilier disclosures,  [From the samen Newspaper.]
was disposed to believe the worst of the best,  I was a case of circumstantial evidence
the charge of Custom House irregularities was against them. Certain memoranda-used for
magnified at once-those who are always alert private and entirely honorable purposes, but at
to catch and loud-mouthed to proclaim  any the same time technically exhibiting a petty
imputatior  cast upon "Christian" business violation of the strict letter of the revenue
men, lending eager and efficient aid- into ai law, oftencr showing a driblet of irregularity in
absolute charge of little less than wholesale v  of the Governmcnt than otherwisesmuggling.  The vindication which the firm  were cunninglybrought to bearagint themby
were cunningly brought to bear against them by
make is thorough and satisfactory, and should  clerk they had well trained in business and
put these careless slander mongers to the with a malice that was sleepless. Ile sought
blush. We rejoice in it the more because it to destroy at one blow their reputtion for
puts to confusion the dangerous snecr that commercial integrity and enrich himself with
honesty, that surest foundation of commerical   fruits of their iteded dishonor. He h
as of individual or national success, is no long- miserably failed in the one, and in the other
er to be found in our business circles. New  has earned an infamy from which he cannot
York can point proudly to hundreds of shining over
examples to prove the contrary, and with the
more confidence now that the innocence of
Phelps, Dodge & Co. is so fully proven.          [From the same, April 2S, 1873.]
*     *     *    X *   *     *    *
We confess that we were at first thought          REVENUE SHAVING.
inclined to blame the house for the seeming              *                *     *
weakness of compromising with the govern-   The result to importers is one of great perment. But they have now cleared up this plexity and embarrassment in those cases of
matter as well, and we are glad to congratulate frequent occurrence in which they are unable
the house and the commercial community in at the time of shipment, and making out their
general upon their complete vindication. It invoices, to determine precisely what is the acwould have been a blow to all New York corn- tual cost. If they should make a mistake they
merce had the imputations upon one of its are guilty of an irregularity, which, as shown
most honored leaders been sustained; it is an in the case of Phelps, Dodge & Co., subjects
honor to it that they have been so thoroughly them to the penalty of forfeiture. The pracdispelled.                                tice is a shaving practice upon its very face,
besides putting importers in constant peril;
and if it be the proper interpretation of the
[From TE BROOKLYN EAGLE, April 16, 1873.]  law, then it is legal shaving.  Such a law
Whatever may be the technical interpreta- ought to be repealed forthwith.
tion of the revenue law it is entirely obvious  The government ought to decide whether it
from the experience of Phelps, Dodge & Co., will take the cost value or the market value as
that the Government has coolly perpetrated a its standard, and then adhere to the one it serobbery of the firm, if the matter was to be lects, at least in all cases to which it is applitried on its merits in equity. It is utterly ab- cable. This dodging between two values acsurd to suppose that a large house, whose busi- cording as the one or the other is the highest,
ness annually covers millions of dollars, would while perplexing to importers, is a system of
stoop to such paltry dealing as to pick up a revenue shaving. This is the proper name for
five dollar note from a $1,400 transaction, and the thing.
other similar business exploits. If this firm,
the very friction of whose business yields an almost constant rivulet of uncounted cash to the  Fr  THE BOSTON A)VRTIsE,  pril 18, l173.]
revenue bureau, may be snapped up by some   We do not suppose that this result will perspy who watches eagerly for some obstruction manently affect the high character which the
that will make it appear that the surplus house of Phelps, Dodge & Company has algiven away is for a moment receding toward ways borne. But there is a moral in it which
the firm, what security is there for other busi- it becomes our lawmakers to seriously considness houses? The Government's system of er. The situation under our customs detectenormous " divides " and fees to informers and ive system is practically thus: Any import
their assistants and its remorseless interpreta- ing house may any day, upon false or garbled
tion of law as against the simplest forms of information, find itself visited by irresponsible
justice is a national shame. It is an open bid persons, who may seize their books and papers,
for blackmailing, dishonesty and rascality of and fix damages at whatever sum they please.
every degree.                             If the importer, in his indignation, resists, he




28                     THE CASE OF PHELPS, DODGE & CO.
may find himself, after an expensive and vex- the extremity of litigation, the Messrs. Phelps
atious suit, exactly where he was at first, minus Dodge & Co. say:
his expenses, and he may be much worse off  If there are any who may be inclined to judge us
than this. If, to avoid all this, he settles for a harshly for such a decision, we would ask them to
round sum, he is placed by one half the com- recall to mind the peculiar rigor of our present tariff
law; the enormous confiscations which it is allowed
munity in the category of thieves, while the to the Government to make under it; and furtherother half censure him for allowing himself to more, that during the whole continuance of the suit,
e bullied into a surrender.  The detectives our books and papers would be under the control of
the authorities, and our business would be liaLle to
and other interested officers meanwhile range be interrupted and our credit affected by rumors and
at will. If their forays are successful, they misrepresentations which it would be exceedingly
get a large part of the booty, and moreover difficult, if not wholly impossible, to at once refute
and answer.
an increase of importance and that keen sense
of power which a subordinate feels in bring-  Such revelations are a disgrace to the reving a wealthy merchant to his knees. If the enuc system of the country.
shot fails, the officer still has nothing to fear.
Ile can hunt for other game. We are shocked
at the state of society when the robber barons
of the Rhine used to sally from their castles [From THE LYCOAnING (Williamsport, Pa.,) GAZand carry off the trains of passing merchants;         ETTE, April 21, 1873.]
but with a slight difference of externals we
fancy that in the nineteenth century the in-  In this complete vindication fiom the asstitution is not quite extinct.            persions attempted to be cast upon   their
house, the firm has been greatly strengthened
in the public estimation, and will not longer
[Fromn THE NEW ORLEANS TIMS, April 25, 1873.] snffer at the hands of enemies who have been
so completely disarmed as to be powerless to
EXTORTION UNDER THIE TARIFF LAWS. inflict the most trifling damage.
The firm of Phelps, Dodge & Co. has
Messrs. Phelps, Dodge & Co., of New York, large interests in this city, and other portions
the largest metal importing firm in the coun- of the State, and from this fact we take more
try, have published a statement explaining the pleasure in laying their very full and conclucompromise which they recently made with   sive statement before our readers. When it
the United States Treasury Department. The is remembered that the house has been in exstatement is admitted on all hands to be cor- istence for a long series of years, and always
rect in all material particulars.  It shows enjoyed a reputation for honesty and integrity
that within the past five years Messrs. Phelps, that no one doubted for a moment, it were alDodge &   Co. imported over $40,000,000 most unnecessary to adduce any proof at this
worth of metal ware, on which they have juncture to squelch the reports that have been
paid over $8,000,000 in. duties; that the put in circulation, as scarcely an individual
whole amount of irregularities charged against could be found who fully believed them. In a
them did not exceed $2,000; and that these oc- business involving millions of dollars it is
curred without any intention of fraudulent eva- preposterous to suppose that such a firm
sion of the law, but from the utter impossibility, would hazard its reputation, and the social
under the complications and contradictions of standing of its individual members, by engagthe law itself, of avoiding occasional discrep- ing in petty transactions to defraud the govancies.                                    ernment; but when confronted by      such
And yet for the pitiful sum of $2,000, al- charges, rather than rest under suspicion for
leged to be lost by the Government by reason  a moment, the sum  alleged to be due was
of such inevitable discrepancies, the books promptly paid over. Very few firms of equal
and papers of these importers were seized, wealth and standing would have submitted to
their business was interrupted, and they were the demand for a moment, but resorting to
proceeded against for the forfeiture of $1,000,- law would have defended themselves in the
000 worth of goods, included in fifty invoices courts. This firm, however fully conscious of
alleged to contain errors in a number of its ability to show no intention of wrong, was
items to the value of 271,000.   The last prompt to yield to the government demands
named sum was offered by the firm in settle- and vindicate itself afterwards.  After a
ment, and was accepted by the Treasury De- searching investigation it stands fully exonerpartment, which claims in so doing to have ated. An equal amount of honor on the side
acted generously, inasmuch as it did not take  of the prosecution should prompt the immea million by confiscation.                 diate return of the money that has been unAs their justification for not contending to justly confiscated.




COMMENTS OF THE PRESS.                            29
[From, THE DETRIOIT TRIBUEX, April 21. 1878.]  he may be much worse off than this. If, to
avoid all this, he settles for a round sum, he is
This statement shows a serious defect in our placed by one-half the community in the catpresent laws for the protection of our customs egory of thieves, while the other half censure
revenue. The situation under the customs him for allowing himself to be bullied into a
detective system, is substantially this: Any surrender. The detectives and other interimporting house may any day, upon false or ested officers meanwhile have a free field.
garbled information, find itself visited by ir- Even if their charges are ungrounded, they have
responsible persons, who may seize their nothing to fear, and only wait with sharpened
books and papers and fix damages at what- appetite, for the next victim.  The whole imever sum they please. If the importer in his porting business of the country is thus placed
indignation, resists, he may find himself, after at the mercy of a gang of detectives, always
an expensive and vexatious suit, exactly  elfisl and frequently utterly unscrupulous
where he was at first, minus his expenses, and
COMMENTS OF THE TRADE AND
FINANCIAL PRESS.
[From THE SHIPPING AND COMMERCIAL LIST.]  editors accepting rumors as self-proven
truths, and wholly ignoring the old legal
VINDICATION      OF PHELPS, DODGE        maxim that one accused is to be held in& CO.                   nocent until proven guilty, pronounced the
firm culpable and amenable to severe punThe statement of Messrs. Phelps, Dodge ishment. The upshot of the matter is a
& Co., which we herewith print, must be severe rebuke to a class of people who are
admitted by every fair-minded reader to be prone to lend a willing ear when calumny
a complete vindication of any intent on finds a shining mark.
their part to defraud the Government. It
is made apparent that the actual loss to the
revenue through their transactions with [From THE U. S. MERCANTILE AND SHIPPING ADVERthe Government, running through several             TISER, April 25, 1873.]
years and involving forty millions, was not THE CASE OF PHELPS DODGE & CO.
more than two thousand dollars, and that this
insignificant loss resulted wholly through  The house of Phelps, Dodge & Co. has so
inadvertence and the intricacies of our rev- long been in New York a synonym for all
enue laws, which, comprising the iniqui- that is honorable, straightforward and hontous undervaluation  and   spy systems, est; has so long been an almost venerated
stand as constant impediments to legiti- name in this community throughout the
mate commerce. A perusal of their inge- United States; in fact, throughout the
nuous statement carries with it the convic- whole civilized world, held up to the rising
tion that this old and honorable firm have generation as an example worthy of imibeen the victims of gross injustice, and  tation; their character as men, as merchthe all but universal sentiment is that they  ants, as Christians, has stood so high, that
ought not to have made a compromise. when the foul breath of slander tarnished
They, however, offer cogent reasons for hav- for a brief period their fair fame by the
ing done so, and they emerge from the con- aspersions that have so lately been cast upon
test, as we never had a doubt they would, them, and out of which they have emerged
with an untarnished reputation. This vin- with so spotless a reputation, a feeling, a
dication, while showing plainly enough   deep feeling of surprise and sorrow, perthat there should be a prompt amendment vaded the entire city. Men wondered and
of statutes which harrass the legitimate whispered, scarcely daring to speak the almercantile interests, and subject them  to  most impossibility of such an occurrence.
the caprices and cupidity of informers, is As time rolled on the thing took shape. It
also a fitting commentary upon the course was said that this house, that had stood so
of a portion of the partisan press, whose high; this house that had withstood so




30                    THE CASE OF PHELPS, DODGE & CO.
many   revulsions - revulsions  that had Phelps, Dodge & Co's establishment. In his
caused so many to totter and still more to hearing the name of the house was'mentionfall-that this staunch old ship had at last ed. It would have warmed the heart of each
been wrecked; had defrauded, systemati- member of the firm   to hear the honest,
cally defrauded the United States Govern- warm-hearted expressions of this humble
ment. And how did the old house behave laborer. It showed the inner working of
under these trying circumstances? How? the house; the little matters apparently inWhy just as might have been expected significant in themselves, but after all the
from the high-toned character of the men true test of character.  "Ay," said this
who composed the firm. They at once in- warm-hearted Irishman, "I was not worth
vited a most rigid examination of their my salt for over three months, and my
books, their papers, and even their private wages went on; they never let me suffer;"
memoranda. Not only so, but they gave and this, he said, was the practice of the
their personal assistance to the parties de- house to all their employes, no matter what
puted by government for that purpose. their grade.     They practice what they
And the moment the technical (for the preach.     These remarks we have made
error was entirely technical) difference was from a sense of duty. We feel proud to
made apparent to them, they at once, think that the house-particularly the oldpromptly and of their own accord, paid er members-shall have the gratification
into the treasury every possible dollar that to know that the foul tongue of slander canby any stretch of calculation could be not blot out the work of a well-spent life, canclaimed by Government. Had they been not mar the beautiful edifice so carefully
less sensitive, had they, instead of obeying reared; and we feel proud that we, as inthe impulse of their high-strung sense of dependent journalists, can contribute our
honor, allowed the case to be brought be- share to replace them in their proud, wellfore the courts, no jury, no twelve men, earned position. Their immediate friends
would have decided against them. Having need no word of ours, but many an eye
thoroughly examined the whole matter for will scan these pages, with whom we hope
our own satisfaction as well as froma sense this little tribute to sincere worth may
of duty, to ascertain the real merits of the have its effect. The character and standcase, having read attentively the whole pro- ing of the house has so long been part and
ceedings, and made the most liberal calcula- parcel of our city-has been so long a proptions, we cannot see how the Government erty in which we each owned a share that
could possibly have been entitled to adollar. we could ill afford to lose it. We rejoice
But give the United States the benefit of a that they have shown themselves to be hondoubt, and a very strong doubt at that, we est men-the noblest works of God.
cannot see how they could claim more than
about ten thousand dollars. The fact is
the importer is so hedged in by technicali- [From TIIE N. Y. Con3. BULLETIN, April 16, 1873.]
ties that he should have at hand on all occasions a skillful lawyer. We regret that   N HONORABLE VINDICATION
the cloud should have arisen; but it has
passed, and the bright sun of perfect con-  The explanation by the firm of Phelps,
fidence in the integrity of the house has Dodge & Co., published in another part of
cleared the atmosphere of any possible doubt. to-day's Bulletin, relative to the charges of
The occurrence has rallied around them  alleged undervaluation of invoices, will be
hosts of friends of every grade, from the read with interest by the public, and more
merchant to the laborer. Men who feel a just especially by the mercantile community.
pride in the standing of such men and who This vindication from any willful intent to
feel a corresponding contempt for the cause defraud the government is full and comof this temporary unpleasantness; the man plete, a fact which gives this journal the
who could so far forget his manhood as to more satisfaction, as it has from the first
vent his spite upon those who had nour- refused to join in the general and unfoundished him; the man who in his own person ed imputations against a firm of fifty years'
has exemplified the truth of zEsop's fable honorable standing in this city. Character,
of the viper warmed to life in the kind even in these times of corruption, counts for
man's bosom. Fortunately all men are not something, and we believe that no fairblack-hearted.  Accidentally we met at a minded person, after an intelligent underlarge establishment in the upper part of the standing of the facts, will hesitate to accity, where he is now employed as common knowledge that Phelps, Dodge & Co. stand
working man, one who was formerly in    exonerated from all intentional fraud.




COMMENTS OF THE TRADE AND FfNANCIAL PRESS.                     31
Technically, no doubt, there was an in- are admitted by the Government to largely
fringement of the letter of the law, but over-balance this amount.  Such is the
this infringement was more the fault of the slender foundation for the gross attacks
law itself than of the firm. Our tariff that have been made upon the honor of
laws are so complicated and contradictory, this representative establishment of Amand are so loaded down with vexatious erica; attacks that had their origin, as now
Custom House regulations and Treasury appears, in the malice of an assistant clerk,
decisions, that it is almost impossible to who had been been previously discharged
avoid some mistakes, and particularly so by them for malversation in office of the
in the case of goods specially manufac- grossest possible character.
tured abroad by branches of American
firms. The only mistake of Phelps, Dodge
&  Co. consisted in their not bringing  [From TiE FINANCIAL CIIRONICLE, April 17,1873.]
their case before a jury of their countrymen. If this had been done, their inno- THE CASE OF PHELPS, DODGE & CO.
cence would have been fully established.  Since the ase of Messrs. Phelps, Dodge
But, jealous of their honor, the firm con- & Co. has been fully settled with the Govceded everything that was technically ad-ernment the firm has very properly pubvanced against them by interested inform-^^ h fr       h  v     p   pubvanced against them by interested inform- lished a letter giving to the public a hisers, with a temporary loss of reputation tory of the whole transaction  and vinthat is now somewhat tardily but effectu- icating their own reputation. The amount
ally restored by their straight and manly of m y involved was of small importance
vindicatiof money involved was of small importance
vindication.                            compared with the question of the honor
and high standing of one of the oldest and
most highly respected mercantile houses in
[From TIE U. S. TRADE REPORTER, April 26, 1873.] the city. We believe that to every candid
reader the letter of Messrs. Phelps, Dodge
VINDICATION OF MESSRS. PHELPS, & Co. will carry the conviction not only
that they had!no intention of defrauding
DODGE & CO.                 the Government, but that their whole transactions with the Custom House, involving
This eminent house have published with-   entry of some $40,000,000 of goods in
in a few days past, a complete vindication five years past, have been singularly free
of themselves from the charges heretofore from frauds or evasions of the law. * *
made against them, with reference to their  If the firm had seen fit to resist the
transactions, for several years past, with claim and brought it to trial, we believe
the revenue department of the General that no jury in the land would have been
Government. They were charged with ir-found against them.    But they entered
regularities and fraudulent operations, in upon the investigation with the utmost
the nature of undervaluations, to a vast confidence of their own innocence, and
amount; and the most extravagent and un-with the expectation of a speedy and amiwarrantable statements were made with cable adjustment of the matter.
regard to them. It is known to all our
readers that at the time these developments
were first made we expressed our entire       T  STOVE ND TIN JOURNL,       3.
disbelief in the charges, and our confidence 
in the honor of the house. Being ourselves     PHELPS, DODGE & CO.
old residents of the city, and familiar with
the reputation of the house, especially its  We print in another column a letter from
senior members, we have never for a mo- Phelps, Dodge & Co. concerning their rement doubted that when all the facts be- cent payment of $271,000 to the Treasury
came authoratively known, it would be of the United States. Under the present
found that not only had no frauds been condition of affairs they could do no better
committed, but no irregularities even, of than this. and it was cheaper for them to
any moment. Itisnow authoratatively as- pay than to continue their business with
certained that no frauds were committed; the danger of continual interference hangand that the irregularities which did occur, ing over their heads. With a few of the
and which in a business like theirs it would facts of the case the public has been conbe altogether impossible to avoid, amounted versant for some time, but the true signifito less than $3,000, and this without mak- cance of this prosecution has never before
ing allowance for over-valuations, which been authoritatively made known.  It is




32                   THE CASE OF PHELPS, DODGE & CO.
simply a suit carried on by the officials of pressed it before the arbitrators at Geneva,
the Treasury for their own ends, and not but the sum allowed did not even equal a
for the advantage of the Government or twentieth of that asked. It is now thought
for the promotion of the cause of justice. and justly, that our Government did wrong
The firm strengthen their position by let- by pressing for exorbitant damages when
ters from Hon. Noah Davis, who was Dis- the items which could be proved amounted
trict Attorney at the time the suits began, to so little. We had placed ourselves, in
from Mr. Dudley, late Consul at Liverpool, the opinion of the world, in the position of
and from Special Agent Jayne. Mr. Davis a quarrelsome litigant, claiming what was
and Mr. Dudley are agreed in opinion that not our own. What, then must be imagined
no wrong was intended, and Mr. Jayne when the United States, being their own
declares that stories against them have been arbitrators, and possessed with the authorgreatly exaggerated.                    ity to enforce their claims, have mulcted
Phelps, Dodge & Co. are the largest metal one of their oldest and most respectable
importers in the city and one of the largest mercantile firms for a purely technical ofmercantile houses in the United States. fence in a quarter of a million dollars,
Their business extends over the whole of where the Government has received more
Europe, as well as America. In England than its just dues, where the United States
they are obliged to keep up a branch house, Consul at Liverpool declares that the diswhich buys for them, frequently on long crepancies were not discrepancies according
time, and under peculiar conditions, and to the usages of his office, and where the
almost every steamer brings goods to them  District Attorney was constrained to say
at New York. They purchase sheet iron that no wrong was intended?
in Russia, tin from the Dutch Government  A careful examination of the books reand from various parties in England, and veal the fact that the Government has been
other metals from those who have them to overpaid, rather than underpaid. It would
sell, wherever the commodity may be. Of seem, therefore, that the Secretary of the
such goods as they receive at Liverpool they  Treasury has been using his power far
have frequently but little time to make a otherwise than in its true and just intent. If
choice. The New York house wishes a upon a full and careful examination of the
certain quality of sheet tin sent over im- matter it appears that the money due for
mediately. The goods are in the ware- customs has been paid and more than paid,
house, but the proper bills have not been it looks like an exhibition of spite or of
settled. There is an allowance for damage, cupidity on the part of the officials in infor demurrage, or for interest to be deduct- sisting upon the pound of flesh.  However
ed, and the proper charges are not to be disgraceful this may be, these seem to be
found on the books. But the tin is carted the real facts in the case. Phelps, Dodge
down to the ships, where an invoice ac- & Co. have nothing to be ashamed of.
companies it, placing it at the Liverpool Their books have been under examination
valuation. There will frequently be a dis- for four months, and the Treasury has been
crepancy, sometimes in favor of one and able to find nothing but the trifling dissometimes in favor of another.  But our crepancies of which we have spoken. Their
Government is of a frugal turn of mind. business extends to many millions a year,
When the cost price is the highest, it esti- and the errors claimed by the officials
mates by cost; and when the market value amount to less than one dollar in twenty
is highest it estimates by market value. It thousand. How many merchants are prealways takes the choice. It has discovered pared to say that their books would not
among some fifty thousand bills rendered show errors as great as that?
in five years, discrepancies in fifty in which  The informer has made some money, if
the merchant has received an advantage, his lawyers have not absorbed the whole of.
while it takes no notice of the bills, ten it; the Custom House officials have reaped
times as numerous, in which the Govern- a harvest; but the United States have
ment has received more than its due.    taken a quarter of a million of dollars from
We all recollect two or three years ago a mercantile firm on a strict construction of
when Mr. Sumner delivered his speech ask- law, where no money was rightfully owing.
ing for consequential damages against Recollecting, however, the constant interGreat Britain. Two, three, and four hun- ferences made in many branches of trade by
dred million dollars were the sums named revenue officials, and notably in that of an
by persons who were conversant with the eminent metal house a couple of years ago,
subject as necessary to fill the demand. as was given in evidence before a CommitOur Government adopted his theory, and tee of Congress, they thought it best to




COMMENTS OF THE TRADE AND FINANCIAL PRESS.                     33
settle any demands rather than have their stantial advantage in the long run, and had
business interfered with. They are prob- the case been brought to trial, there can be
ably right.                             no doubt that the demand of the Treasury
for penalties would have been set aside. It
is not to be wondered at, however, that the
[From THE RAILROAD JOURNAL.]    firm decided that to compromise the case
was the cheapest and easiest method of disMessrs. Phelps, Dodge & Co., the oldest posing of it; but it is a stinging satire upon
as it is the foremost firm in the metal trade our lawsfor the prtection of the Treasury
in this city, has made a frank, clear and that our merchants find it to their advantage
self-evidently truthful statement of its busi- to compromise unjust claims rather than deness relations to and with the revenue de-fend their rights in the courts. Probably
partment of the Government, in an exhibit twice the amount voluntarily paid would
which has been quite extensively published. not have compensated the firm for the
For many months the house had been as- losses and inconvenience resulting from the
sailed by the harpies of the revenue ser- surrender of their books and papers, and
vice, and their political backers, in one line the defence of their case when the Governor another and charged with intentional de- ment should be ready to prosecute it; and
ception and fraud in the entry of goods at while it is to be reretted that they did not
this port, at undervaluations. Much of the make the sacrifice on principle, they are not
detraction has also been due to trade rival- to he saifice considerin their interest in the
ry and jealousy.   The house was thus to blame for considering their interest in the
ry and jealousy.   The house Twras thusr matter of first importance. As it is they
forced into conflict with the Treasury De- lay their case fraikly and fully before the
partment. its business embarrassed, and its public, and wherever their statements are
honorable record impeached. All this, too, accepted as truthful their character for upwhile the respected partners in the concernright and honorable dealing will be fully
in this city, and theirrepresentatives abroad, vindicated.
admittedly made every possible effort to enable the customs officials to ascertain the
real facts of the case, and stood ready at, A                        l 2, 
all times and under all circumstances, to rn TH N     ST,     22, 18.
render to the Government all its just dues,  CUSTOM  HOUSE CONFUSION.
even to the last cent. Threatened with
what promised to become protracted litiga-  The recent celebrated case of Phelps,
tion, and persistent annoyance in the pros- Dode  Co. which has been settled to the
ecution of its legitimate business, though manifestcredit of the house, illustrates
unconscious of any intentional wrongs, it                    rer to te 
what we copy below in regard to the conmade an offer of compromise as the lesser f     itcacy  rowing oto the vast
fusing  intricacy growing out~of the vast
of two evils, which was accepted by the and voluminous syster, or rather want of
Secretary of the Treasury, and the firm  system, of laws and regulations in respect
prmiedexmpiofomfuthr c —-~system, of laws and regulations in  respect
promised exemption from further prosecu- to business at the Custom House.  * *
tion. In the published statement, this em-  It is satisfactory to know from the full
inently trustworthy house makes a plain  statement  tt acom  nies the setlem
exhibit of the whole case, in the confident sttement that a opanie s the settlement
belief that the public will receive its expo- seeking to defratd the  ovenent, eado
sition as a vindication of the course it ad- seein to  efr   te  oe
opted to put a summary end to its troubles.  ctually in the period named, overpaid the
customs dues on the goods which they have
imported. How it has happened that in
some instances they have been subjected to
COMPLETELY VINDICATED.              penalties for under-payment under the tariff laws (Congress has passed forty-five different tariff laws) and the innumerable
[From TIF. IRON AGE, April 17, 1878.]  Custom  House regulations, affords some
curious manifestations and tendencies in
Accepting the statements of Messrs. our polity. The history of these transacPhelps, Dodge & Co., as a true showing of tions out of which this eminent firm will
the facts of the case, we consider that they come into unscathed reputation, the result
have completely vindicated their reputation, redounding to their honor rather than to
although admitting a violation of the letter their discredit, is of interest not only in
of the law. It was a violation, however, mercantile circles, but cannot fail to atfrom which the government derived sub- I tract the attention of the general reader.




34                  TTIE CASE OF PHELPS, DODGE & CO.
[From TIIE MANUFACTURERS' AND MERECIANT,' 1E- [From TIIF WALL STREET JOURNAL, April 17, 18783.
VIEW, April 26, 1873.]
THE FALSE ACCUSATION
PHELPS, DODGE & CO.
AGAINST THE OLD FIRM OF PIIELPS, DODGE
In another part of our paper will be         & CO., OF NEW YORK CITY.
found a communication from Phelps, Dodge
& Co. containing a full and complete ex-  For some weeks past the columns of cerplanation of the charges that have been tain journals in this city have been dismade against them. When these attacks graced by accusations against this old and
were first commenced we, in our issue of respected firm, of deliberate intention to
January 18th, expressed our opinion in defraud the United States revenue.
these words: " No one who knows the man-  Under the present system of confiscations
ner in which the eminent firm of metal im- for alleged undervaluations in Custom
porters, Phelps, Dodge & Co. conduct their House imports, every respectable firm is at
business, can doubtthat the chargesbrought the mercy of adroit and  unscrupulous
against them are malicious and unfounded." black-mailers, and as a shining mark the
Although the members of the firm have powerful firm of Phelps, Dodge & Co. has
been made the object of many inuendoes not escaped.
and reproaches, they have wisely remained  Had these importers taken a stand in
silent until their difficulties with the Cus- open court, they could have laughed to
tom House officials were finally adjusted. scorn their assailants; but, comprising a
No one who will attentively read the ex- house whose business cannot be stopped,
planation which we publish can for a mo- they submitted to a compromise, the folment doubt that the charges of intentional lowing candid and convincing statement of
fraud were entirely unfounded. What er- which, clearly shows, to every impartial
rors have been made are due to the unsat- mind, that they never had the slightest inisfactory and conflicting nature of our vari- tention, in any shape or way, of defraudous tariff laws.                       ing the revenue.
We feel sure that the many friends of the  As, however, the whole case has been
firm and the public generally, will rejoice finally settled by the arrangement between
at the complete vindication of the honor the United States Government and Phelps,
and integrity of Phelps, Dodge & Co., Dodge & Co., the firm could not have done
whose great reputation has been so justly better than to have presented all the folearned by many years of commercial pro- lowing facts to the public,' the frankness
bity and enterprise, and whose partners and openness of which, must secure for
have individually and collectively always them a complete acquittal of all charges of
borne the highest moral and social charac- corruption or intentional fraud.
ter.




COMMENTS OF TIIE RELIGIOUS PRESS.                       35
COMMENTS OF THE RELIG1OUS PRESS.
[Fromn Tim NEW YoRK EVAIGEIST, April 24,1873.]  [ From THE BAPTIST WEEKLY, April 24, 1873.1
OUTRAGE     OF THE     GOVERNMENT              PHELPS, DODGE & CO.
ON PHELPS, DODGE & CO.
We think that all right-minded and esThere is not in this city, nor in this pecially all Christian men will rejoice in the
country, a firm which stands higher than complete and satisfactory manner in which
that of Phelps, Dodge & Co. Possessed of these princely merchants have vindicated
enormous wealth, its leading members have themselves from the charges of having debeen noted for a character equal to their frauded the government in the matter of
fortune. Men of public spirit, leaders in duties.  The statement which they have
every good enterprise, the most liberal con- submitted, accompanied as it is with doctributors to our charitable and religious umentary proofs, is at once eminently clear,
associations, their names have been justly candid and convincing. To any one at all
honored not only in this country, but acquainted with the gentlemen who comabroad.                                 pose this firm, the very idea would seem to
What then was the surprise of the pub- be preposterous that for the paltry sum of
lie to learn, some four months ago, that a less than $3,000 of government duties, runcharge had been made against this firm for ning over a period of five years and involvdefrauding the revenue. The matter has ing transactions in the aggregateof $40,000,been a long time in negotiation with the 000, they should perpetrate or connive at a
Government, and has at last been settled by series of premeditated frauds.
the payment of $271,000. This would at    The only mystery which we have confirst seem to imply an acknowledgement of fessed in this whole affair has been that
intentional wrong, but the explanation just these gentlemen have compromised with
made relieves the matter so completely as the government for $271,000. But this is
to be a source of great satisfaction to all very clearly explained in their published
their friends.  They have recently pub- statement and shows them to have suffered
lished a letter, which is a perfect vindica- great injustice. The laws of revenue seem
tion. From this it appears that the errors very peculiar and complicated. They proof valuation in the importing of goods vide that in case a single item of any inwere of the most trifling character; that voices of goods coming through the Custhe Government lost, at most, but two or tom House shall have been undervalued, it
three thousand dollars, and as quite as often forfeits the entire invoice. For example;
mistakes were made in over-valuation, by if in an invoice of tin-plate, amounting to
which they paid more than they ought, the $5,000, a lot whose cost is only $5 shall have
Government really lost not a penny. Yet been undervalued, then the whole $5,000 is
by a few trifling errors large invoices of forfeited to the Government. In the present
goods were rendered liable to seizure and case, while the loss of duties claimed was
confiscation, amounting to something like a less than $3,000, the amount legally forfeita million of dollars, and they submitted to ed was $1,000,000. It also appears that the
pay over a quarter of a million rather than alleged "irregularities " were of the most
encounter the vexation and annoyance of trifling and unimportant nature, necessarily
a long litigation, which might interrupt beyond the knowledge or prevision of the
and injure their immense business.  Of firm and were exposed by a confidential
course they were technically wrong, but clerk who shares in the spoils to the
not morally nor intentionally so. That in amount of $70,000. One of the features of
such a case the Government should have the case which has more than any other
taken advantage of such slight errors to in- aroused our feelings of indignation is this,
fliet so large a penalty, seems to be dis- that in the government search for frauds
graceful to all the officials concerned.  they have found that the system which had




36                  THE CASE OF PHELPS, DODGE & CO.
been observed by Phelps, Dodge & Co. to  [From THE BAPTIST UNION, April 22, 183.]
average prices which could not with ex-         COUNTER FRAUD.
actness be arrived at, while in the instances                       m
called "irregular," the Government lost  Every loyal citizen must feel mortified
called  ireuat       Governmen    0s  and dishonored by the Custom   House
less than $3,000, on the whole it has placed, tand disonod by theps, Dode &  Co
transaction with Phelps, Dodge &   Co.
in the United States Treasury many times T    w                 f
that amount to which the Government had
Governmen     t of c ustoms duties, but it now
no right. This as clearly as the sunlight Gernenat th crime s duties, but it no
discovers the honorable intentions of thisd                         s.d
discovers the honorable intentions of this appears that the crime is on the other side,
Christian firm.  dWhile they have lost hthat the representatives of the Government
itn   While they have lost have defrauded them in the most cool and
money and suffered an outrageous injustice, delberate manner.
an t.oldeliberate manner.
they have preserved unsullied their pre-   *   *                  - -.  * *
vilous well-earned reputation.  rptin    We have regarded the charges of fraud
and villainy against customs officers as
partizan and unmerited, and our sympa[From THE NEW YORK OBSERVER, April 24, 1873.] thies have been decidedly with the accused;
but really, the very worst deeds laid to
Because the honor of religion is at stake, their account are unequal in turpitude to
as well as that of individuals charged with this robbery of Phelps, Dodge & Co. Men
intent to defraud the Government, we have who can be guilty of conduct so unjust and
spread out at great length in our paper to- destitute of every attribute of honor, fairday the statement by Phelps, Dodge & Co., ness or decency, will do anything, that
and the collateral testimony of the officers they dare do, however perfidious and mean.
of Government. The name of thismercan- We are shamed and offended, the whole
tile house has been of the highest repute in nation is disgraced by such conduct; the
this city for the last thirty or forty years, President and his Cabinet are involved; the
its credit unlimited, and its integrity with- party in power is implicated; every citizen
out stain. Its senior member is and has is injured by the deed. Must we believe
been for many years, President of the that the Custom House, at this great centre
Chamber of Commerce, a position which de- of commerce, with all its vast powers and
dares the confidence reposed in him by the opportunities, is a hive of conspirators,
merchants of the city. He is President of where cunning devices are invented to dethe Evangelical Alliance, Vice President of fraud the public?  Has it become an
the American Board of Foreign Missions, enemy to be dreaded, an instrument of opa leading member and officer of philan- pression and wrong? It is the focus of
thropic and charitable institutions of the national wealth and power, and should be
church.                                the seat of fidelity, honor, and fairness. If
That such a mercantile house should be there is integrity in the Government anycharged with fraud is in itself a calamity where, it should be manifest here; if offisecond only to that of being convicted of cials should so conduct, and laws be so
theft. If such men are not honest, the administered anywhere, as to inspire confaith of the community in human nature is fidence and friendship, it should be in the
shaken, and the shock pervades the entire public offices in Wall street. But all conbusiness world. More than this it brings fidence and respect must be destroyed by
into suspicion the professions of Christian such perfidious transactions as this with
men, and so damages in the esteem of man- Phelps, Dodge & Co. We were distressed
kind, that religion whose principles are the when insinuations hurtful to their fair
best safeguard of society.             fame were published, and now we are still
When the charge of fraud was first more distressed by the disgrace public
brought against this house, we refrained officers have brought upon the chief instifrom giving currency to the calumny, be- tution of the nation, and upon the nation
cause it was accompanied with no attempt itself. We hope that the authorities at
whatever of proof. We believed then, as Washington will take some measures to
it is now abundantly shown, that the charge correct the wrong done, and atone for the
is not only incapable of being substantiated, dishonor incurred.
but that the firm, in its transactions with
the Government, have always aimed at       [,orn TaIE METHODIST, Aril 26, 1873.]
doing that which is strictly in accordance
with the true intent and meaning of the      P-IELPS, DODGE & CO.
statutes so far as they are capable of being  When the charges of intentional fraud
understood.                           upon the Government were made against




COMMENTS OF THE RELIGIOUS PRESS.                             37
Messrs. Phelps, Dodge & Co., of this city,   Messrs. Phelps, Dodge & Co. state that
we kept in   mind two facts:    That the   the attention of the heads of the house was
transactions of importers with the Custom  not called to these slight differences; that
House, under our complicated tariff regu- when charged with them, they placed their
lations, make them   liable continually to  books immediately at the disposal of the
technical violations of the law, and that Government, and gave all assistance in
this eminent house had, a few months ago, promoting investigation.    They append,
detected and exposed a conspiracy to ruin  also, letters from the prosecuting officers of
their trade. Through the connivance of a the Government, acquitting them wholly
dishonest porter, their books had been sur- of intentional wrong.  The case as conreptitiously examined, and copies of their tained in the papers presented is so clear
private correspondence taken.   We were that the public verdict is unanimously in
not disposed, therefore, to join in the hue  their favor.
and cry raised when they were accused of     Here, then, is a technical violation of
dishonorable practices.                    revenue laws so complicated that it puzzles
In the city papers of April 16th, Messrs. an honest importer to comply with them in
Phelps, Dodge & Co. announce the settle- every    detail.  Between   two merchants
ment of the   claim  of the Government there would have been a settlement by the
against them, and state their case. In the  payment of actual differences.  But the
last five years their importations of metals Government has fined Phelps, Dodge & Co.
have amounted to forty millions of dollars. $271,000. We will not say that in this inIt is not claimed by the Government that stance the Government has done a great
there has been any irregularity in their injustice, but we think that if the case
important transactions.  These, therefore, could have gone to a jury, Phelps, Dodge
may be put out of the case. In estimating  & Co. would not have been mulcted in any
the values of odd lots of goods, the tailings such amount of money.
of long contracts, their Liverpool house had
adopted the practice of averaging cost, so [From THE CRISTIAN ADVOCATE AND JOURNAL.]
that the Government may have lost in
duties between $2,000 and $4,000. They       A few weeks ago the name of the wellclaim  that they have paid enough duties known firm of Phelps, Dodge & Company
on over-valuations of such lots of goods to was in all the  papers, coupled with the
leave a very large balance in their favor. most damaging allegations of fraud comAn example will show what this means. mitted by that house against the General
We quote from Phelps, Dodge & Co.:         Government. It was painfully interesting
to notice with what ill-concealed satisfac"As further proof and illustration of our statements tion the scandal was passed from paper to
we give the following example of one of the memo- paper and from  mouth to mouth, accomranda returned to us by the authorities after settle- panied with sneers at the religious reputament, and regarded by them as fully conclusive tions of some of the chief members of the
against us: In July, 1871, we received per steamerio  o some of the chief members of the
Algeria an invoice of 2194 boxes tin plates, included firm. We preferred to await in silence the
under which was a lot of 174 boxes of odd sizes, developments that time was sure to make
24x24XXXX, and e 24x134XX (narks which the than to attempt to reach a conclusion on
trade will understand), the remnant of an old and
special contract. All these goods, it is admitted by incomplete information.  Nor have we
the Government, were invoiced at their true market waited in vain; but time has fully justified
value at the time of shipment, were so certified by our best hopes in the matter. These points
the Consul at Liverpool, and so passed after exami-   hopes in the matter. These points
nation by the appraiser in New York. But there appear now to be pretty well established:
was, in addition, a memorandum transmitted appris-  1. That the damaging accusation origiing us that the 174 boxes, in virtue of an old contract, n   i  n the d amag   accusation o
would be charged to the Liverpool house at a price ated with one of the late clerks of the
which differed from the then actual market value to firm, who by presenting garbled extracts
the extent of about a sixpence per box. The total from their books made out a prima facie
value of the whole invoice was ~3237:14s. The total case against them.
value of the 174 boxes was ~293: 4s.: 2d., and the dif- e gainst tem.
ference between the actual market value of these  2. That had the case been as pretended
last and their contract cost was ~4: 7s.; on which there would have been no proof of intendifference the duty of twenty-five per cent. wouldce on account of the omhave amounted to ~1: ls.:9d., or a little more than
$5. And yet, on account of this small difference in plexity of the revenue laws one may with
the general settlement, as a penalty we paid the full the best intentions go contrary to their
value of the 174 boxes-namely, ~293:48.:2d., or demands.
upward of $1400. And thus the delinquencies ran       te w     e am     t o      er
throughout the whole of this extraordinary trans- 3. That th    e whole amount of underaction                                     valuations that can be made out is less




38                 THE CASE OF PHELPS, DODGE & CO.
than $4,000; while much larger over-valua- any of its subjects? This is an occurrence
tions by the Government during the same in which every American citizen is intime is shown on the other side.  Perhaps terested, and in which the honor of our
the firm may be made to suffer in the case, country is involved. No Government has
for in a conflict between the Treasury a right to inflict injury upon its own citiDepartment and an importing house the zens, any more than to commit outrages
advantage is all on one side.  Technical against other countries. The property and
irregularities, as judged by the officers of the reputation of the citizen are as sacred
the Customs, may possibly be made out, as the rights and the authority of the Govand their extremest penalties demanded; ernment.
but the defendants in this case will certainly save what is above all else valuable
to themselves-their good name.           [From THE CHRISTIAN UNION, May 7, 1873.]
THE CASE OF PHELPS, DODGE & CO.
If we have been too long silent in rela[From THE (Pittsburgh) PRESBYTERIAN BANNER, tion to the matters at issue between the
April 30,1873.]           Government and the well-known firm of
A FLAGRANT EXTORTION.             Phelps, Dodge & Co., it is only because we
wished to get at all the facts, and to hear
The well-known house of Phelps, Dodge all that either party had to say, before
& Co., of New York, has submitted a state- uttering an opinion.  And now, having
ment to the public, attested by Govern- waited until the pleadings are ended, it is
ment officials, which reveals a state of at once a duty and a pleasure to express
things anything but creditable to our rev- our conviction that the statements of the
enue system or to those entrusted with accused, not having been invalidated in
this department of our national Govern- any essential particular, ought to be acment.                                  cepted as a complete vindication of their
~*  *  *  *  *  *  *3+   integrity in the transactions which were
The result is, that this house, rather made the basis of an accusation or fraud.
than enter upon a long and harassing con- It seems clear that their infractions of the
test with the Government and trusting to revenue laws were the result of an misunits sense of equity, has been compelled to derstanding as to the proper construction
pay the sum of two hundred and seventy- of those laws, and that they lost even more
one thousand dollars, one-half of which by overcharges of the Government than
goes to the informer and three or four they gained by under-estimates of the
Federal office holders, while in equity not value of goods. The money exacted of
one dollar of unpaid duties was owing to them was an outrageous extortion; the
the Government. If there had been the Government had no right to it, and was
shadow of right in the claim, the forfeiture dishonored by receiving it. No one acought to have been one million of dollars, quainted with commercial affairs can doubt
and the members of the firm should have that the Custom House is so organized by
been held criminally liable for violating law as to hold out irresistible temptations
the revenue laws. Either the Government to roguery. The intricacies and discrepanhas been defrauded out of seven hundred cies of the tariff laws tend to bring officers
and twenty-nine thousand dollars, or two and dishonest merchants into collusion,
hundred and seventy-one thousand dollars regularly, while they often enable greedy
have been most unjustly extorted from  officials, as in this case, to persecute the inPhelps, Dodge & Co. The facts, fully ex- nocent, and put money in their own pockamined, prove that the latter is the case, ets. The charges against Phelps, Dodge &
and there is no use in mincing words about Co. undoubtedly had this origin and basis.
the matter.  Owing to clumsily framed Judge Noah Davis, who was United States
laws, a rascally informer and three or four District Attorney when this trouble began,
office holders have enriched themselves, by expressly acquits the firm of any intention
a most iniquitous proceeding against a to defraud the Government, and says that
great mercantile house whose fame is " in a business of many millions of dollars
known throughout the world. To cheat during the period of five years in which
the Government is universally conceded to these irregularities had occurred, and durbe a great crime; but how shall we proper- ing which they (the firm) had paid to the
ly designate the act of a Government which Government several millions of dollars in
allows such a wrong to be inflicted upon duties, the whole amount lost by the alleged




COMMENTS OF THE RELIGIOUS PRESS.                        39)
fraud fell short of the sum of $3,000." as to make a prima facie case against the
The great error of Phelps, Dodge & Co. firm.
was in consenting to a compromise, which    *    *    * -            *   *
looked like an admission of guilt, instead  One-half of the money paid goes to the
of allowing the matter to be investigated informer and some three or four Federal
in open court, where their vindication officers, whose private interests are served
would no doubt have been complete. The by just such shameless depredations upon
name of this house has so long been almost the mercantile community.  These officers
a' synonym  for commercial integrity and who are enriched by thousands of dollars,
public beneficence, that good citizens of all of course, like the compromise. Such comparties must rejoice that the attempt to promises are a very fine perquisite to their
fasten upon it a stigma of fraud has so salaries.  The President has recommended
signally failed.                        that the moiety system, which furnishes a
strong temptation to such fleecing operations, should be wholly abandoned. The
[From TnE INDEPENDENT, April 24, 1S73.]  case of Phelps, Dodge & Co. supplies a
GOVERNMENT FLEECING.               very forcible reason for following this
advice.
Phelps, Dodge & Co. have submitted a
statement to the public in reference to their
revenue difficulties with the Government, [From TIE EAMINER AND CIRONICLE, April 24,
accompanied by letters from Thomas H.                    183.
Dudley, consul at Liverpool; B. G. Jayne,   THE PHELPS, DODGE &        CO.
special revenue agent; and Judge Noah                SCANDAL
Davis, District Attorney of the United                       A.
States at the time the proceedings com-   Some months ago, when the testimony
menced against the firm. Assuming the before the Credit Mobilier Committee at
truth of the statement, which we have no Washington was daily making such havoc
reason to doubt, especially as it is con- with reputations previously unspotted, it
firmed in its most material points by the came to pass that calumnies were believed
letter of Judge Davis, whose official duty, by many in proportion to their blackness,
as District Attorney, made it necessary for and the estimation in which the accused
him carefully to investigate the case, we had previously been held.  The atmoscome to the following conclusions of fact: phere was full of doubt and suspicion. It
First, that, although the firm had techni- was not strange, therefore, that when
cally, by an unconscious mistake, mainly  Messrs. Phelps, Dodge & Co., of this city,
growing out of the complicated nature of were accused of defrauding the Governour revenue laws, rendered themselves ment in the matter of customs, by invoicing
liable under these laws, they stand com- goods at less than the actual cost, the accupletely exonerated of any actual intent to sation should have been believed.  The
defraud the Government by false invoices. most painful feature was that by so many
Secondly, that there were no false invoices, it was so eagerly credited; that so few were
the memoranda on which the proceedings willing to wait until all the facts were
were instituted not being invoices at all. known, before passing judgment; and last
Thirdly, that an examination of their of all, that the long and honorable career of
books, covering a period of five years, dur- the house, and the unblemished Christian
ing which their importations amounted to character and well-known generosity of its
forty millions of dollars, with the payment members, were allowed so little weight in
of about eight millions in duties to the the scale of probabilities. The firm have
Government, shows that the revenue loss just published a full statement of the case,
to the Government by under-valuations is substantiated by letters from the officers of
less than three thousand dollars, while the Government who investigated it, which
during the same period they have paid a shows how cruel are the suspicions, and
much larger sum to the Government, in how unjust the laws under which they
excess of its real revenue claims, as the have suffered.
consequence of over-valuations. Fourthly,   *    *    *    *   *    *    *
that the prosecution was instigated by a  The charges against this firm have been
spy in the character of a clerk who had circulated far and wide, and commented
been dismissed for good reasons, and who, upon all the more freely because the senior
from malignant and selfish motives, stole members are so well known as earnest,
some memoranda and destroyed others, so active and generous Christian men-fore



40                   TIE CASE OF PHELPS, DODGE & CO.
most in every good work. We have pro- the present law, may have a decided effect
tested from  the beginning against con- in leading to a milder tariff altogether,
demning, without full proof, men whose making many articles free which are now
lives have been one long and eloquent pro- fettered with vexatious and comparatively
test against wrong, and we hope the press unproductive imposts, and diminishing and
generally will accord to the firm the gen- simplifying the duties on others.
erous exculpation  which they   deserve.  In view of its probably great results,
The gist of the whole matter is, they have therefore, importers may be very thankful
paid over a quarter of a million dollars for that this case of oppression has occurred. 
the technical violation of a law which it
was practically impossible to obey.
w paili____psl    [From TIiE (Chicago) ADVANCE, April 29, 1873.]
The long and explicit statement by
[From TIIE CHIRISTIAN INTELLIGENCER, May 8, 183.] Phelps, Dodge & Co., of the circumstances
PHELPS, DODGE & CO.              which led to their prosecution for violation
of the revenue laws, will be accepted as
We have withheld the expression of any good evidence that they were guilty neither
mere opinion concerning the integrity of of intentional nor of actual fraud. Probathis well-known firm, because every one bly they recognize quite as keenly as will
understands the relations of its members to any who read their statement that they
all Christian interests, and would give lit- were too careless-more careless than any
tie weight to any debatable conclusions one has any right to be. Technically they
which a religious paper might state in their violated the law. But it has cost them
favor. We now bring together, however, $271,000, and they will not be apt to be
such a summary of the facts in their recent caught nodding again.
case with the Government as will dispense
with any expression of our opinion or
feeling.                                  [From THE (Chicago) INTEEIOR, May 7, 1873.]
This seems to end this carefully culti-      HOW   ARE THE MIGHTY
vated scandal, except as concerns those 
who have made money out of it.     TheALL!
whole reputable press has decided that the  During the past few months, a large part
transaction leaves no stain on the moral of the press of the country has been teemcharacter of Phelps, Dodge & Co.        ing with statements emanating from Government officials, to the effect that one of
the most eminent mercantile houses of the
[From THE N. Y. DAILY WITNESS, April 24,1873.] country had, during a term  of years,
GOOD OUT OF EVIL.               intentionally committed frauds on the revenue. The high standing of the firm, the
In like manner Messrs. Phelps, Dodge &  gravity of the charge made against them,
Co. have suffered at the hands of the Cus- and the amount involved (near 92,000,000,)
tom House for the good of the trade.  To soon attracted the attention of the whole
gratify an infamous combination of deeply country, and expectation was on tip-toe for
interested parties (we would like to publish the denouement.  Bad men railed at Chrisan exact account of how the enormous tianity, and pointed to this case of supplunder was divided), the Secretary of the posed infamy as a stunning blow to the
Treasury, Boutwell, consented to virtually  Christian religion. Good men everywhere
black mail that house to the extent of exclaimed: "If Phelps, Dodge & Co. can$271,000; and the result is that his sue- not be trusted, whom shall we look to for
cessor is going to make a clean sweep of the honorable dealing?"
vexatious and contradictory regulations   The agony of suspense has been broken
which made that great piece of injustice by the settlement of the alleged frauds;
possible.                               an explanation by the firm; and a rejoinder
Especially, we doubt not, will the pro- by the Government, in the columns of the
visions of the present law be materially New York press, covering the facts of this
altered  with respect to the shares in most remarkable case. Now, in the verdict
seizures and fines of informers and Custom  of a discriminating public judgment, who
House officers.  Indeed, the necessarily has fallen?
oppressive character of all revenue laws,  With no evidence but that exhibited by
heightened by the unnecessary severity of the Government itself, every fair-minded




COMMENTS OF THE RELIGIOUS PRESS.                        41
man must conclude that this great Govern- ment should be abolished. Give us specific,
ment has fallen from the dignity belonging instead of ad valorem duties, and threeto a bulwark of defence, until it has be- fourths of the Custom House officials can
come the oppressor of the innocent.     be dispensed with; the possibility of fraud
We will quote but two facts, given by will be diminished tenfold, and the same
the United States District Attorney, as amount of importations will show a largely
sufficient to demonstrate the truth of this increased revenue.
statement beyond the possibility of a doubt:  The religious press of the country, espe*    *    *    *    *    *       *  cially, should make the Government feel
We cannot but conclude that the Govern- the consequences of its action in this case,
ment has greatly wronged some of its most in a pungent and merited condemnation of
valuable supporters in this case, and that its course towards representative men in
the law under which it has been possible to the Christian church, whose reputation and
perpetrate the outrage should receive the business have been assailed without cause,
attention of Congress at once. If the work and in a manner that affords not the least
of Government detectives in discovering excuse.
frauds upon the revenue shows no better  The sympathy of the whole country
scope for their energies than such cases as must go with Phelps, Dodge & Co., now
this, that bureau of the Treasury depart- i that the facts are made known.








REJOINDER FROM WASHINGTON.








A TELEGRAPHIC REJOINDER FROM
WASHINGTON.
Subsequently to the appearance of the succinct history of the case, with
which this pamphlet opens,-and seemingly called forth by the almost unanimous approval which the newspapers and the mercantile community bestowed
upon it,-the following telegram from Washington was sent over the wires of
the Associated Press:
WASHINGTON, April 22.-Senator Boutwell contradicts the statement of
Phelps, Dodge & Co., that they were innocent of the charges of fraudulent invoices, and that the sum of $271,000 was forced out of them by way of a compromise in their recent difficulty with the department. When the charges of
fraud were brought against that firm they filed a statement at the Treasury, asserting their innocence, and offering to pay the $271,000.  Mr. Boutwell, who
was then Secretary of the Treasury, declined to receive the money, and notified
the firm that the courts were open, and if they were innocent of the charges they
should go into court and prove their innocence.  Upon this notification they
withdrew the assertion of their innocence, and it was then that their offer to
compromise was entertained.  The Department in no case accepts money of any
party charged who claims to be innocent, being allowed by law to compromise
with offenders only after guilt is admitted; and it was on this distinct understanding that the compromise with Phelps, Dodge & Co. was made. Never
while Mr. Boutwell was at the head of the Treasury Department was any compromise made with persons who claimed to be innocent.
COMMENTS OF THE PRESS UPON THE FOREGOING.
[From THE FINANCIER, April 26, 1873.]  words, a person accused of attempted fraud
DISCOURAGEMENTS FOR MERCANTILE may get his case compromised and be allowed
BUSINESS.                to escape with less than the technical penalty,
provided that he admits that he is guilty and
Mr. Boutwell naturally objects to the im- that the custom-house is very merciful towards
putation indirectly cast upon his management him, but if he preserves a bold front and proby the published explanation of their famous tests his innocence he must stand a trial and
case by Phelps, Dodge & Co., and he declares all it involves. But Mr. Noah Davis, who as
that the treasury department during his official District Attorney, passed upon this case and
term never compromised with anybody except advised the acceptance of the $271,000, wrote
upon the either open or tacit admission of to Phelps, Dodge & Co. in these terms, which
guilt on the part of the latter; in other could not be stronger: " If I had come to the




46                    THE CASE OF PHELPS, DODGE & CO.
conclusion that you had acted with actual de- Department never compromises with parties
sign to defraud the Government, I should claiming to be innocent, and that the claim
have insisted upon the forfeiture not only of of innocence in this case was withdrawn bethe value of the articles above referred to, but fore terms of settlement would be entertained
of the entire invoices of which they formed a by the Treasury Department.  This the expart, amounting to fully $1,000,000; but my Secretary gives to the public as conclusive
examination, with the explanations made to proof of the falsity of the statement of Messrs.
me by you, showed clearly, as I thought and Phelps, Dodge & Company, in their recently
still think, that the idea of defrauding the published statement of the affair.
Government of its lawful duties had never  To this flimsy record we wish simply to
entered your minds."                     state the fact that in all cases of legal or illeThe question of veracity between Mr. Bout- gal seizure we admit that the Treasury Departwell and Mr. Davis is not raised, for there is ment demand such terms as they please, one of
no square contradiction; but taking the state- which is that the party whose goods are legally
ment, of the firm with that of Mr. Davis, there or illegally seized shall withdraw all claim of
seems to us no reasonable doubt that the innocence, as an indispensable pre-requisite to
exact truth has been told and that the Govern- any negotiation of settlement whatever. This
ment, founded and designed to protect indi- is done to protect United States officers from
vidual rights, has come down so low as to individual responsibility for damages, to which
pillage directly from  individuals.  It is a the law otherwise would make them amenable.
sound rule in law courts that good reputation The withdrawal of all claim as to innocence is
counts something in favor of an accused per- to protect the officers of the Government,
son, and that the absence of motive for doing without which the cases would be postponed
the thing charged is a strong presumption and litigated ad infinitum, to the great annoyagainst the truth of the charge. The firm in ance and, in this case, incalculable injury of
question assuredly have as high a reputation the claimants. The same rule is required in
as any commercial firm; they are too wealthy many of the other departments of the Governto be moved by temptation to so petty a ment. This but simply adds to the outrage.
fraud, even if not too sagacious to incur its  However innocent, the claimants must first
risk; moreover, they are old-fashioned New  withdraw all claims of innocence, upon which
Yorkers of the ante-Credit Mobilier times, future suits for damages could be based, before
when the general habit was not so much as the Treasury Department will entertain any
now, to walk near the perilous edge of dis- negotiations for settlement, and in all cases,
honesty, and the young members of the firm  whether the party is guilty or innocent. Unhave not been bred among loose notions of less this arbitrary and illegal demand is freely
morality; hence the improbability that such a complied with, it is useless to think of securfirm would knowingly deprive the revenue of ing any settlement, however extortionate the
a dollar is so great that nothing short of the demand may be. In this case the ex-Secretary
most positive and unequivocal evidence can does not deny, but virtually admits, the truth
establish the fact against them. Being able of the statement by the firm that the insignito lose $271,000 without weakening thereby, ficant sum of $2,000 or $3,000 would cover the
if their case so directs public attention to the whole claim against them, even upon their
subject of the tariff as to effect some reform in own showing, yet $27],000 was demanded and
it, the firm will probably not count their expe- paid to avoid the loss of two or three millions
rience entirely a loss.                  of goods arbitrarily and, as they show, illegally
seized; and because this old and responsible
house thought proper to give to their numer[From the N. Y. EXPRESS, April 22, 1873.]  ous friends and customers a plain statement of
the facts of this illegal seizure and wrong upon
PHELPS, DODGE & CO.              them, the ex-Secretary now comes out with
a card, not to deny the truth of the claim
We notice the recent carefully prepared made, but mislead the public, and set up the
and self-evidently truthful statement of the defence in behalf of the Treasury that the plea
above house, as to their innocence of any in- of innocence was withdrawn before settlement
tentional fraud or material wrong upon the was made. This, we repeat, but adds to the
Treasury of the United States, through an injury, and we feel it due that this subterfuge
under-valuation of dutiable goods imported by should be exposed.
them, is denied over the signature of ex-         *    *    *    *     *    *
Secretary Boutwell, late of the Treasury. The  In all our reading, excepting in the single
ex-Secretary states, as evidence of the ad- instance of the ex-Secretary of the Treasury,
mitted guilt of the house, that the Treasury  we have not found one person or journal to




COMMENTS ON THE REJOINDER.                              47
defend the plunder of $271,000 from Phelps, representations. The District-Attorney would
Dodge & Co., most of which has gone into the not have proposed a compromise unless the
hands of spies and informers.             firm had satisfied him that they were innocent;
the Secretary of the Treasury would not have
accepted it unless they had confessed themselves to be guilty.  Which is right?  So
[From the N. Y. TRIBUNE, April 22, 1873.]  far, the statement of the Secretary makes the
action of the Government more odious than
BOUTWELL AND DAVIS.                ever; for in addition to the wrong of squeezing
from honorable men more than a quarter of a
Mr. Boutwell's statement of' the case of million of dollars for a technical offence, which
Phelps, Dodge & Co. calls for further explana- the Government's own attorney reports to have
tions from somebody. It was made to appear, been unintentional, it imposes upon these unin the narrative published by the firm and con- fortunate merchants the cruel necessity of confirmed by the letter of Judge Noah Davis, that structively owning themselves to be swindlers.
the importers had been innocently betrayed
into a technical violation of the Revenue laws,
and that the Government took advantage of
their mistake to wring from them $271,000.       THE CASE NOT CHANGED.
The inference was that the Secretary of the
Treasury was unable to withstand the pressure
of the informer and Customs officers entitled
to share in whatever might be recovered, and   [From TIIE IRON AGE, April 24, 1873.]
consented to a "compromise" which was no
better than extortion. This would be a very  If all this be true, we fail to discover that it
serious charge to make, and we cannot wonder contradicts in any important particular the
that Mr. Boutwell hastens to repel the impu- statements of the firm of Phelps, Dodge & Co.,
tion.  He declares that "never, while Mr. published in our last issue. Those who have
Boutwell was at the head of the Treasury De- availed themselves of the gracious permission
partment, was any compromise made with of the Treasury Department to carry their
persons who claimed to be innocent," the cases to the courts, have derived but small satDepartment being allowed by law to compro- isfaction therefrom; and while it would have
mise with offenders only after guilt is admitted. been the proper course for the firm to pursue,
For this reason, Mr. Boutwell says he refused they probably concluded that the cheapest and
to entertain the proposal made on behalf of wisest thing to do was to withdraw  their
Phelps, Dodge & Co., until they withdrew the assertion of innocence and settle the claim of
assertion of their innocence. He does not say the Treasury first. The letter of Judge Davis
that he compelled them to confess guilt; but very fully discusses the legal aspects of the
he placed them  in the position of tacitly case, and on that the firm can safely rest their
acknowledging a fraud.                    disclaimer of fraudulent intent, whatever may
But Judge Davis, who in his capacity of be Mr. Boutwell's private opinion in the matUnited States District-Attorney passed upon ter. " If," says Judge Davis, "I had come to
the case and reported it to the Secretary with a the conclusion that you had acted with an
recommendation that the compromise be ac- actual design to defraud the Government, I
cepted, writes to Messrs. Phelps, Dodge & Co.: should have insisted upon the forfeiture not
"If I bad come to the conclusion that you had  only of the value of the articles above referred
acted with an actual design to defraud the to, but of the entire invoices of which they
Government, I should have insisted upon the formed a part, amounting to fully $1,000,000;
forfeiture not only of the value of the articles but my examination, with the explanations
above referred to, but of the entire invoices of made to me by you, showed clearly, as I
which they formed a part, amounting to fully thought and still think, that the idea of de$1,000,000; but my examination, with the ex- frauding the Government of its lawful duties
planations made to me by you, showed clearly, had never entered your minds."
as I thought and still think, that the idea of'  In the light which this statement throws
defrauding the Government of its lawful duties upon the official opinion of the prosecuting
had never entered your minds."  Of course, on officer of the Government, it is difficult to
Mr. Boutwell's theory, the Government had no believe that the firm made any confession of
right, either in law or morals, to accept the moral guilt. But Mr. Boutwell's statement
$271,000 if the case was as Mr. Davis repre- demands an explanation, which will probably
sented it.  The Secretary moreover had no be that what he said was very different from
right to act except upon the District-Attorney's what he is reported to have said.




48                     THE CASE OF PHELPS, DODGE & CO.
[From THI EVANGELIST, April 24, 1873.]  papers and goods in store, while the law's
As we have condemned severely the conduct delays intervene to prevent the recovery of
of Mr. Boutwell in this matter, it is but fair to name and trade. The bare knowledge of this
hear what he has to say in his defence. A  ability is believed to be sufficient to compel
despatch from Washington gives the following nine out of every ten business houses, who tall
explanation:    -        *under the suspicion of the officials, to settle on
*'.   -*    ~    X           the best terms obtainable, independent of the
This answer is far from being satisfactory, qestions of guilt and proof of guilt. The
for it is not sufficiently explicit. What does immediate concern of the Government officers
Mr. Boutwell mean by talking about "inno- is to realize immediately upon their respective
cence" and "guilt"?   That this firm were shares, of whatever sum is exacted; hence it
technically in error, and therefore legallyis necessary to obtain a po forna admission
liable, they do not deny; but that they were of culpability as a condition precedent to a
morally or intentionally "guilty " of any wrong  waiver by the accused of all rights of action for
whatever, they do deny utterly and indig-the recovery of the sum paid the  overnment.
nantly. If Mr. Boutwell means to insinuate In case of hesitancy to confess guilt the mere
any such thing, he not only contradicts them,formality of the transaction is first pointed out,
but Judge Davis also, who as District Attorney and that failing, the terrors of the arbitrary
of the United States had charge of the case, processes of seizure and detention, and those,
and who, after a full investigation, declares but preliminary though prolonged, are invoked
himself fully satisfied that "the idea of de- and seldom  in vain. The whole system is
frauding the Government never entered theirknown atthe Treasury to be demoralizing as
minds."  Where then was there any " guilt "?  was admitted of the same system in the interThe case remains as before-that the Govern-nal revenue service before its abolishment
ment took advantage of a technical error to Its practical illustration is found in the case of
inflict an enormous penalty on a commercial Judge Noah Davis, who, as United States Dishouse of the very highest standing and charac- trict Attorney, was stimulated by the expectatcr. The whole thing is utterly disgraceful. tion of his moiety to pursue the firm of Phelps,
If Mr. Boutwell has no better explanation thanDodge & Co. till the compromise money was
this to give, he had better keep silence and paid, and who now, upon his judicial conretire from public observation, knowing that science, acquits them of any intentional, and
his last official act was one to disgrace himselftherefore culpable offences against the revenue.
and his country.
[From THE (Phila.) PUBLIC RECORD, April 25,
OPINIONS OF OTHER TREASURY                               1873.]
OFFICIALS.                        THE INVOICE CASE AGAIN.
C Washington Despatch to the N. Y. tIERALD, April
23a 18s to te N. Y.         Technically, Mr. Boutwell has made a point
23, 1813.]              against the reputation of Phelps, Dodge & Co.;
The Treasury officers are not unanimous, but practically examined, the point vanishes
however, in sustaining the late assertion of into thin air. He shows that this firm, in
ex-Secretary Boutwell, that the compromise offering to pay $271,000 by way of compromise
itself, which the firm effected, was an evidence for the alleged fraudulent invoices, asserted
of guilt, because innocent violations of the law  their innocence of any intent to cheat the
were not compromised but forgiven. There Government, and that he refused the offer
are those in the Department who think that until this assertion should be withdrawn,
Mr. Boutwell may have been misled into ac- whereupon they withdrew it, and were allowed
cepting forms as facts. It is true that no to settle on these terms. The inference sought
compromise can be affected without confession to be conveyed, of course, is that Phelps,
of guilt; but if the Congressional investiga- Dodge & Co. tacitly admitted their guilt; and
tion, to which the matter is likely to lead, yet nothing can be more disingenuous than
should be had, it will probably appear that such a statement of the case.
such confession has been made under duress in  The simple fact is that in all instances
many more cases than one. By adroit manipu- where it is sought to take the benefit of the
lation of the various laws applicable to the act allowing compromises to be made in
subject the swarm of Federal officers at New  alleged frauds the claim of innocence must be
York, or any other large port, are able to work withdrawn.  Without this technical process
the virtual ruin of the business of a large and  the benefit of the procedure cannot be secured;
reputable house by arbitrary seizure of books, and hence, so far as Phelps, Dodge & Co. are




COMMENTS ON THE REJOINDER.                               49
concerned, their action in withdrawing their drawal of any claim  of innocence before
first indignant protest was really in the nature abandoning a suit. The rule subsisted long
of a legal or technical pleading, which is before Mr. Boutwell's day, and has been apessential to an arranged form of settlement, plied in many cases. Made aware of this rule,
but does not at all touch the real issue in- it was obviously necessary for Phelps, Dodge
volved. Their act corresponds to the many & Co., whether guilty or innocent, to comply
familiar pleas in court, or legal fictions, which with these requisitions, in order to arrive at
are required in order to proceed to a summary the desired end. But to turn this purely techsettlement; that it was designed to operate as nical and arbitrary point upon them  as a
an actual confession of guilt is a preposterous moral confession of guilt on their part, is
inference.                                 wholly unjust. Yet the Government has been
Again, the reason why the law requires a forced to resort to this device,in order to
claim of innocence to be withdrawn throws excuse itself for its conduct in taking more
light on the whole transaction. Its original than a quarter of million dollars out of a firm
design was to protect the United States offi- whose invoice accounts were only $2,300 less
cials, witnesses and others, from subsequent than what the Government conceived it ought
legal proceedings brought by the parties ac- to pay. A Government that indulges in such
cused. These officers might be otherwise pro- practices, and defends itself in such a way,
ceeded against for defamation of character, may well expect the indignant comments of
endeavor to injure one's business, and what those who are forced to transact business
not.  Hence, the Treasury Department has with it.
for many years been obliged to require a with







THE OFFICIAL CORRESPONDENCE.








THE OFFICIAL CORRESPONDENCE.
On the 27th of April, 1873, the official correspondence in relation to the case
of Phelps, Dodge & Co., from the files of the Treasury Department, was given
to the public.  Some of the leading newspapers found room to print the volumi.
nois and intricate mass of letters, comprising all which passed between the
officials at Washington and the revenue agents, attorneys, etc., from January 3,
1873, to the final settlement on the 25th of the ensuing month. They commence
with the report of the Special Agent, Jayne, and cover all the negotiations
which subsequently ensued.    Letters are given from U. S. Attorney Bliss, who
shows that the full amount of errors discovered on $40,000,000 of importations
did not exceed the sum     of $1664.68; from      E. C. Banfield, Solicitor of the
Treasury; Secretary Boutwell; Mr. William E. Dodge, and the Attorneys of
Phelps, Dodge & Co. These documents will be found in the Appendix. They
received the careful study and analysis of the American Press, and, as will be
seen by the following utterances from newspapers of high standing, representing
every party and various localities, revealed nothing which in any way contradiets or refutes the story of the case as set forth in the Statement of the Firm.
COMMENTS OF THE PRESS UPON THE OFFICIAL
CORRESPONDENCE.
[From THE N. Y. TRBTNE, April 28, 1878.]  terms in which the proposition for the final
It was threatened by the Treasury Depart- settlement was to be worded.  Finally, we
ment that the correspondence relating to the  have the acceptance of $271,017.23 by the
Phelps, Dodge & Co. compromise should be  Government, with the express understanding
made public if the friends of the firm did not that the compromise covers only a specified
keep quiet. They did not mind the threat, class of charges. To make the correspondapparently; and the correspondence was sent ence complete, the letter of ex-Attorney Davis,
out to the press. From the letters relating to  who had originally the charge of these cases,
this painful affair, which we print herewith, it should appear again. Mr. Davis wrote, when
will be seen that the whole story has been  he had examined the case, that the thought
told already. There is Mr. Special Detective  of defrauding the United States Government
Jayne hungrily clamoring for the forfeiture of had never entered the minds of Phelps, Dodge
goods valued at $1,750,000, on account of an  & Co.  The correspondence does not show
alleged deficiency in duties paid, amounting  that Secretary Boutwell had any opinion difto $1,664.68, according to the United States fering from Mr. Davis's. It does show that
District-Attorney. Then there are the duties the Secretary would not discontinue the suit
claimed.  Then there are the various propo- for $1,000,000 until the firm had withdrawn
sals for compromise made by the defendants. their protest of innocence and had further
The first of these, as we already knew, was conformed to the demands made upon them
rejected because the firm reasserted their in- for money.  The threatened "exposure" of
nocence in making it. Next there was some  the Treasury Department hurts nobody but
higgling as to the amount to be paid and the  its own subordinates.




54                   THE CASE OF PHELPS, DODGE & CO.
[From the same Newspaper, April 29, 1873.]  such fine, forfeiture, or penalty, or remove
THE   TREASURY     AND    THE   MER- such disability, or any part thereof, if in
CHANTS.                  his opinion the same shall have been incurred without willful negligence, or any
-The Treasury Department has not mend- intention of fraud in the person or persons
ed its case by the publication of its corres- incurring the same." The officer upon
pondence in the matter of Phelps, Dodge &  whose representations the Secretary of the
Co. These documents throw no light upon  Treasury is expected chiefly to rely is the
the violations of the revenue laws for which  District Attorney. The District Attorney,
the firm has been mulcted. They make no however, was interested in forcing a comnsensational disclosures.  They discredit promise, because he was entitled to two per
none of the statements which the merchants cent. of the gross amount recovered. The
have published in their own defense. We chief officers of the Custom-house-the colhave first the report of special agent Jayne, lector, surveyor, and naval officer-heartily
reciting the discovery of discrepancies in co-operated with him, because they were
the invoices, and commenting with much jointly to receive one quarter of the reimpertinent virtue upon the wickedness of mainder.
frauds against the revenue. Then comes   In this blackmailing operation the Govthe formal correspondence between Mr. ernment officials stand in a hardly more
George Bliss, jr., and Solicitor Banfield, on agreeable light than the spy who set the
the one band, and the attorneys of Messrs. proceedings on foot. The " compromise"
Phelps, Dodge & Co. on the other, respect- looks like nothing but a scheme to extort
ing the offer to compromise. That is all. money, and the firm made a terrible blunTlhere is no confession of guilt. There is der in submitting to it. Their course, hownothingl, except Mr. Jayne's report, to show  ever, is not incomprehensible. Probably
ally inteition to defraud-and when Mr. they had good reason to dread any further
ltand-cuff Jayne goes after an importer, his quarrel with the Custom-house.  Threatzeal, as we all know, is not invariably tem- ened with a vexatious prosecution, seizure
pered with discretion. Of course the Treas- of their books, interruption of their busiury Department does not publish Messrs. ness, and injury to their credit, they went
Phelps, Dodge & Co.'s explanation of the before the Secretary of the Treasury in the
discrepancies; neither does it publish the attitude of criminals suing for mercy, paid
letter of ex-District Attorney Davis, who de- the quarter of a million, and were told to
dares that an examination of the whole go home thankful that they had not been
case, in the light of their explanations, con- robbed of three-quarters of a million more.
vinccd him that "the idea of defrauding  Long before the political campaign of
the Government of its lawful duties had  1872 we denounced the frauds and injustice
never entered their minds." The papers that flourish in our Custom-house under the
now given to the public show, however, that system which makes the collection of the
Mr. George Bliss, jr., who succeeded Judge revenue a scheme for rewarding political
Davis as District Attorney, recommended  followers and pushing partisan advantages.
the Treasury to compromise the claim, on  The Patterson investigation in 1871 brought
the ground that the Government would not to light an extent of dishonesty among the
get what it demanded if the case went into officials, and oppression of the merchants,
court. " I am influenced to this course," far beyond the current suspicions. A secle says, "by the fact that the nominal ond investigation, in 1872, revealed greater
amount claimed is so enormous in compari- abuses than ever, especially in the extorson with the amount of undervaluation and tionate charges levied upon commerce, the
fraud, that I believe it would be exceed- license granted to spies and informers, and
ingly difficult to obtain a verdict for the injustice towards reputable merchants; but
amount claimed." Mr. Bliss, in fact, ad- the Administration took no notice of the
vised the Secretary to take $271,000 because disclosures because it had no desire for rehe did not believe he could get any more. form. One of the most important witnesses
Judge Davis recommended it because he before the Patterson committee was Mr.
was satisfied of the innocent intent, and did William E. Dodge, who testified emphatinot believe a forfeiture of the whole amount cally that, owing to the extortions of Genwas deserved. But if there was no guilty  eral Order store-keepers, and the various
intent, the Government had no moral right persons connected with the Custom-house,
to exact a penny above the actual deficiency New York had become the most expensive
of duties. The statutes empower the Sec- port in the whole world. His evidence was
retary of the Treasury " to mitigate or remit considered extremely damaging, and has




COMMENTS ON THE OFFICIAL CORRESPONDENCE.                     55
often been referred to in subsequent dis-  [From the N. Y. EVENING POST, April 28, 1873.]
cussions. The names of Phelps, Dodge &   A   UESTION OF VERACITY AND
Co. also headed an unavailing petition for A Q      CHAACTER
the redress of certain grievances, signed by
one hundred New York merchants, and      There is a. question of veracity between
presented to Collector Murphy. Neverthe- Messrs. Phelps, Dodge & Co. and Mr. B.
less, Mr. Dodge was unwise enough during  G. Jayne, "special agent." Messrs. Phelps,
the late campaign to give his influence for Dodge & Co., even Mr. Jayne condescends to
the continuance of the evils of which he acknowledge, is a "house of wealth and'had complained. He believed, we suppose, standing." Other importers are "an ordithat the Washington authorities were really nary brood," but Phelps, Dodge & Co. are
anxious that the management of the Cus- above the influences under which the
tomn-house should be just. We should like  "brood" is supposed by Mr. Jayne to do
to know what Mr. Dodge thinks about it business.
now.                                     On the other hand, Mr. B. G. Jayne, as
For Mr. Dodge's fidelity during the can- the special agent of the Treasury Departvass has apparently not wiped out the re- ment, is simply a detective. An informer,
Inembrance of his testimony during the a spy, a discharged clerk, anybody who has,
investigation. We should be sorry to say or thinks he has, any sort of information
that he has been persecuted for telling the against any of the "ordinary brood of illtruth; but we do believe that if he had not porters " by which they can bring against
offended the Custom-house in 1871 he would such persons a charge of either actual or
have been less likely to suffer from the out- constructive fraud, goes at once to Mr.
rage which has just been inflicted on his Jayne. Mr. Jayne is the receiver of all
firm. It is not often that the great New  such charges from all such persons; he is
York organization of corruption and oppres- the-so to speak-" uncle " of that class of
sion has so tempting an opportunity at gentlemen who thrive by secretly stealing
once to seize a rich spoil, and to revenge into the counting-houses and account-books
itself upon a witness who has exposed its of the "brood" and robbing them-not inabuses. While the Custom-house is con- deed of the contents of their moneytrolled by professional party hacks, we may drawers, but-of their good names, or comexpect ittobefilledwith extortioners. While pelling them to submit to be enormously
it is managed for partisan purposes, we black-mailed according to the act made and
may expect it to be used as an instrument provided.
for enriching party friends, punishing party  Mr. Jayne as "special agent" gets his
foes, and awing those who know too much  legal share of whatever sum the particular
into silence. There is no firm in New York  member of the " brood " who may be caught
which does not run the same danger which may be compelled to pay. But that, it is
Phelps, Dodge & Co. incurred. Any im- supposed, is not all of Mr. Jayne's profit, as
porter who complains of extravagant im- lie is an expert in the.matter of Revenue
posts upon commerce, or exposes corruption laws. He knows just where the traps and
and mismanagement, may have his papers snares and tangles are. He can wind the
seized by a Custom-house agent, and his meshes of the law so tightly and so deftly
business overhauled for any number of around one of the "brood" that his escape
years. Under our complex-system of valu- is hopeless. So clever and so skilful is he,
ations it will go Tiard if some apparent that the miserable spy and informer is perirregularity cannot be discovered, and in fectly helpless without the" special agent."
any case the inconveniences and disgrace The half-forfeit of whatever sum is to be
of the seizure must entail serious loss.  squeezed out of the importer the spy canWe leave this case to the consideration  not touch without Mr. Jayne's aid.  He
of the mercantile community-only remind- may listen at keyholes; he may bribe poring them that if they want to save them- ters to let him into counting-houses at
selves from the fate of Mr. William E. night; he may secretly copy invoice-books
Dodge they must reform the Custom-house or steal memoranda; or he may gather, at
from roof to cellar; and if they want to whatever pains, the information which is
refoirm the Custom-house they must begin to entangle the unfortunate merchant in
at Washington.                         the snares and pitfalls of obscure laws; his
labor is all in vain without Mr. Jayne. He
and Mr. Jayne must agree that there is a
case, and if the Treasury agent "can't see




56                   THE CASE OF PHELPS, DODGE & CO.
it," the spy may go his ways. The poor effect that the above firm had withdrawn
wretch who betrayed the confidence of all claim of alleged innocence of intended
Phelps, Dodge & Co., who picked out here  fraud upon the Treasury before the Treasand there an item, stole here and there a ury Department would entertain any promemorandum, who wove out of these slen- posed terms of compromise, on the ground
der materials a grave offence against the that the Government did not settle with
law in that house, carried his bundle to  aly one until the question of guilt was esMr. Jayne's " spout." Mr. Jayne could tell tablished, the public was led to expect serihim whether there was any thing in it or ous and damaging revelations when the
not worth having, for that is Mr. Jayne's quasi official threat was made that the corofficial business.                     respondence and facts in the case would be
And now comes up between Mr. Jayne given in refutation of the statement of
and Phelps, Dodge & Co. this question of Messrs. Phelps, Dodge & Co., establishing
veracity: Messrs. Phelps, Dodge & Co.'s the groundlessness of the demand made
statement we have already heard. They  upon them.
assert they meant no fraud in the particu-  Preparatory prejudicial comments aplar items involved in the charges against peared in a large number of journals, serithem; they meant, where they were really  ously reflecting upon the honor and integat a loss as to the cost of certain goods, to rity of the house in question, so much so
get as near as possible to it. The Liver- that public expectation was greatly excited
pool consul sustains them in this assertion. to see the promised exposures that should
Judge Noah Davis, then District Attorney, demolish the claimed innocence and good
asserts that it was evident to him, from the name of the house in question.
outset, that this was true, and he backed  Well, the statement of the Government
up that opinion by refusing to accept a officials is out, and the most casual reader
cent of the enormous sum exacted; Mr. will exclaim, "the mountain has labored
Bliss, the present District Attorney, said that and brought forth a mouse."
in these invoices, the total value of which  *              *      *    
was $1,726,000, and the items on which the  Not one word of admission of guilt or reundervaluation occurred $271,017.63, the traction of innocence appears, as alleged.
actual loss to the Government was only Possibly a technical trifling undervaluation
$1,664.68! But now comes Mr. Jayne, and or violation of the law might be alleged,
says that, "in fact, they (Phelps, Dodge &  but certainly not sufficient to make a case
Co.) have done business in New York, know- upon which a verdict could be found. No
ing and caring nothing for the laws, or they  wonder the officials one day claimed a
have deliberately and systematically disre- strong case, and the next as strongly urged
garded and defied the laws with intent to acceptance of the first offer made, well
defraud the Government."               knowing no verdict could be expected upon
Here is the issue made up. It isbetween the facts if left to a jury.
Mr. Jayne, the special agent with an ex-  The offer of settlement was made to be
pectant percentage, and Messrs. Phelps, relieved from annoyance, get possession of
Dodge & Co., who he asserts have deliber- their books and property, and to prevent
ately and systematically disregarded the further newspaper misrepresentation. The
laws with intent to defraud the Government facts demonstrated that nearly or quite
of sixteen hundred dollars. We think the every dollar paid should be refunded, as a
case may be safely left just there.    matter of justice and equity between man
Meanwhile, what have " the ordinary  and man. The case proves to be a successbrood of importers" to say about the laws ful effort to defraud Phelps, Dodge & Co.,
that put them in the power of Mr. Jayne through a forced construction, with the aid
and those estimable and respectable gentle- of an informer, out of goods to the value
men who supply him with information?   of $271,000.
[From the N. Y. EXPRESS, April 29, 1873.  [From THE NATION, May 1,1873]
THE CASE OF MESSRS. PHELPS,            The Treasury Department has, in selfDODGE & CO.                defence, published the correspondence relating to the Phelps-Dodge affair. There is
From the bold statement of ex-Secretary  nothing new in it, except the report of the
Boutwell, telegraphed to the press through- detective or " special agent," as he is called,
o'it the country about a week since, to the Mr. Jayne, and that of District Attorney




COMMENTS ON THE OFFICIAL CORRESPONDENCE.                     57
Bliss. Mr. Jayne's letter is highly rhetori- of course it did, and left a small fortune to
cal, amusingly so when one remembers that the informer, and to Messrs. Bliss, Jayne,
his share of the sum extracted from the  Arthur, and Sharpe besides); (2) because
Dodges is $22,5w3, which is very good pay " the firm is composed of a large number
in these times for one little job. In his of partners, and the uncertainty of human
eagerness and excitement over the prospect, affairs, taken in connection with the unhe in one place indulges in a climax which  avoidable delays of the law, is a strong arought to find a place in the " School Read- gument in favor of acceptance "-(a someers." He says he discovered in the posses- what cloudy statement, but meaning apsion of the firm" certain papers, purporting parently that Mr. Jayne takes a sombre
to be copies of invoices from the manufac- view of the future, and hates litigation,
turers of the goods," which differed from  and likes cash payments); and (3) "because
the invoices filed with the Custom-house, in the intent of the law would thus be fulregard to the prices paid, from threepence filled." In short, he wanted the thing setto four shillings per package; "in omitting  tied up, first because it was profitable, and
in many cases the additional charge per next because it was right. The compropackage from the Custom-house invoice;"  mise was finally made, and $271,017.2t
and " in omitting from the Custom-house or paid over by the Dodges. Of this the Gov
Consular invoice the cost of transportation  ernment gets one-half, the knavish clerk
from Wales, the place of delivery, to Liv- who acted as informer, and who ought
erpool, the place of shipment."  If, he to be in the penitentiary, actually gets
says, the same violations of law were prac- $67,754.31, and the rest is divided between
ticed by the firm in all their importations, the District Attorney and the leading Custhe loss to the Government would be about tom-house officials. What a business for a
$15,000 a year.  The loss which has been  civilized and Christian Government to be
proved, however, is all told only $3000, and  engaged in!
this, Mr. Davis says, was more than covered by the losses of the Dodges to the
Government under their own rule. Mr.     [From the BROOKLYN UNION, April 29, 1873.]
Davis, who was District Attorney when the
proceedings began, declared his belief that THE STATEMENT OF THE FIRM UNno fraud was intended, in this differing             SHAKEN.
from the worthy Jayne, who had no more
doubt about the guilty intent than about  No one who has carefully read the statehis own existence.                     ment of Phelps, Dodge & Co. in regard to
*    *    *    *     *    *    *    * their revenue difficulties with the GovernBut Mr. Davis went on the bench at an ment, sustained in its material points by
early stage in the proceedings, and was the letter of Judge Noah Davis, appended
succeeded by Mr. George Bliss, whose share thereto, can well come to any other concluin the prize is also $22,583. He simply re- sion than that a gross outrage was perpepeats the facts as they appear in evidence, trated upon this firm by the Government
expresses his belief in the frauds, but not officials, who squeezed two hundred and
with any great earnestness, and announces seventy-one thousand dollars out of them
that the amount legally forfeited   is as a penal forfeiture. The correspondence
$1,726,060, but he advises the Secretary in regard to the matter sent to the press by
not to go before the court with his claim, the Treasury Department, and yesterday
"inasmuch as he believed it would be ex- published in the New York papers, furceedingly difficult to obtain a verdict for nishes no reason for changing this opinion.
the amount claimed," it being "so enor- It simply proves-what Phelps, Dodge &
mous in comparison with the undervalua- Co. do not deny-that the firm had been
tion and fraud." The total amount of du- guilty of a technical violation of our Reveties lost to the Government is, he says, nue laws. The manner in which this oc$1,664.68; so, like a prudent man, he urges curred, and the circumstances thereof, they
the acceptance of the offer made by the fully explained to the Government officials;
Dodges to compromise for $271,017.23. and this ought to have been satisfactory
The anxiety of Jayne lest this offer should without the payment of a dollar by way of
be refused, and he thus lose his money, is penal forfeiture.
very comical. He urges its acceptance for  The law of 1863, under which these prothree reasons, which he gives seriatim with  ceedings were commenced, aims its penalty,
great naivet6i: (1) because "the sum would  not at mistakes, or mere irregularities, or
more than reimburse the Government"-   technical violations without the purpose of




58                   THE CASE OP PHELPS, DODGE & CO.
fraud, but at intentional efforts to cheat the their deliberate assertions of innocent inGovernment out of its lawful duties. It tent which were contained in their first
declares that-                         offer of compromise; that neither the in" If any owner, consignee, or agent of any  former nor the District Attorney rested their
goods, etc., shall KNOWINGLY make or at- advice or action on any charge of fraudulent
tempt to make an entry thereof by means motive; and that Mr. Boutwell finally acceptof any false invoice or false certificate of ed their offer of compromise without either
a consul, etc., or of any invoice which shall requiring the reca of this asseveraton of
not contain a true statement of all the par- theirs or charging them with that guilt
ticulars hereinbefore required, or by means which he now insists was the only permissof any other false or fraudulent document  ible basis of his final action in settlement.
Or paper, or of any other false or fraudu- Thus the firm stand as free from every imlent practice or appliance whatsoever, said putation of dishonest intention as ever. It
oods, etc., or their value shall be forfeited, certainly is not discoverable anywhere in the
goods, etc., or their value shall be forfeited, halting and badgering terms insisted on by
~~~~etc. ~" ~~halting and badgering terms insisted on lby
Mr. Boutwell. The Tribune brings forward
This law, upon its very face, supposes a theory of motive, however, which the Govguilty knowledge, fraudulent intention as ernment may not be so ready to meet on its
the basis of fraudulent practice, as the in- merits. It hints of the truth-telling prodispensable element of the offence which it pensity of Mr. Dodge during the memoraproposes to punish. Any violation which  ble Custom-house investigation of 1871, and
lacks this feature lacks the quality which  of this present persecution being the sequel
the statute specifies, and against which  of it. It does not hesitate to assert, in fact,
aims its penalty. The statement of Phelps, that but for the offence he gave the AdDodge & Co., not contradicted in a single ministration at that time, and for which
fact by the published correspondence, and  even " his fidelity during the canvass " failed
confirmed by the letter of Judge Davis, to compensate, " he would have been less
clearly shows that their " irregularities," or likely to suffer from the outrage which has
so-called violations of law, were not tainted just been inflicted on his firm." It is no
at all with the fraudulent purpose.     stretch of credulity whatever to believe it.
This is what Judge Davis thought when
he was District Attorney, and what he said
if he did his duty at the time. We have    [From the same Newspaper, April 30, 1873.1
no wish to deal unjustly by the Govern-       PHELPS, DODGE & CO
ment officials concerned in this business; yet
the facts compel us to denounce their ac-  If the several letters that passed between
tion as an outrage under the very thinnest Messrs. Phelps, Dodge & Co. and the Treaskind of legal covering. The merchants of ury officers, all of which appeared in yesNew York ought to hold a public meeting, terday's Post, are capable of yielding any
and take measures to prevent the repetition  special satisfaction to the mercantile comof such outrages. The next Congress will munity, whether in reference to the system
have an ample occasion for an investigating  of collecting the customs, or the confused
committee. It ought so to simplify our ideas of justice and honesty that are made
customs revenue laws that importers can  so apparent, the mercantile mind must
understand them.'                      have become mysteriously charmed with
what it once would have rejected with disgust and indignation. The correspondence
establishes nothing clearly, but leaves
[From the BOSTON POST, Mfay 1, 1873.]  everything still more in a muddle. But one
point is made plain, that a compromise was
The settlement of the allegations brought finally effected for the sum of $271,017.23,
against Phelps, Dodge & Co. by the Treas- which the Government agent, or informer,
ury Department by no means constitutes a assured the Secretary of the Treasury would
final disposal of the case, and all cognate " more than reimburse the Government for
cases, as between the people and the Gov- any probable loss," and with the guaranernment.   The very just and searching teed share of which he shows that he had
comments of a correspondent on the sub- every personal reason to be satisfied. The
ject will be perused with increased interest case appears to have hinged entirely upon
in another column. The writer maintains the pleasure of this informer. Propositions
that the inculpated firm at no time recalled  for a compromise were1 made and with



COMMENTS ON THE OFFICIAL CORREISPONDECE.                   59
drawn only as they seemed to suit him. sible people in this community expected.
The Treasury was secure in any event. The charge that an attempt had been made
The total amount of the undervaluation is by that house to violate the Revenue laws
less than seven thousand dollars; it is and defraud the Government was felt to be
the gross value of the tainted items in. incredible and monstrous.  William E.
the various invoices that comes up to the Dodge is too well known in Tarrytown and
figures of the accepted compromise, which its vicinity to have his own reputation or
were quite large enough to satisfy the ra- that of his house tarnished by any accusapacity of any Government informer and tion unless it were accompanied with the
spy. The District Attorney, whose duty it most positive and overwhelming proofs.
was to prosecute the case, acknowledged to Our people know the man. They have
the Solicitor of the Treasury that the firm's seen his going in and out among them.
books showed no evidence of fraud, the They are thoroughly assured of his spotwhole of that charge of the informer being less integrity and of his broad and generconfined to certain memoranda accompany- ous nature, as far as possible from everying the inculpated invoices.          thing like grasping meanness or dishonest
dealing. And just because they know hiM,
they would not believe him guilty of an intentional wrong in this matter, though it
[From THE CHICAGO TRIBUNE, May 1, 1873.]  were charged by an army of tricky suborTHE CASE OF PHELPS, DODGE & CO. dinates and of interested spies and informers as long as from here to sunset. The
We publish this morning the official faith of the people has been fully justified
statement of the much-talked-of case of by the result.
Phelps, Dodge & Co.                     Phelps, Dodge & Co. have published the
*    *    *    *   *     *    *    * facts to the world, accompanied with the
Upon a review of all the facts, it is not statement of Judge Davis, who was the
possible to conclude that there was any in- Government's District Attorney when the
tentional crime committed by this firm. proceedings against the house began, that
The amount of duties they avoided by the in his belief there was no shadow of fraudenormous vouchers does not amount alto- ulent intent on thepart of the firm. The
gether to a sum sufficient to induce any Government has also responded to this
sensible man to commit such an offence. publication by giving its version of the
Upon the whole amount of their importa- story and such parts of the correspondence
tions in a year, the amount thus saved is as would tend to sustain it in its course.
absolutely insignificant. It would not pay But, curiously enough, the statements of
the cost of the machinery necessary to carry  Phelps, Dodge & Co., which carried their
out such a fraud. Technically, and, there- own voucher on their face, are confirmed
fore, legally, they defrauded the revenue; and rendered all the more impressive
but there is nothing in the facts to warrant by the very documents brought forward
the judgment that the fraud was systemat- against them by tie other side. So that
ic, deliberate, or that the firm had any "tlhe engieer is hoist with his own peknowledge that the law was violated. The tard."
case, however, shows the necessity of
sweeping away from trade and commerce
these pitfalls and snares which the Tariff  ro     TH NEW YOR TRIBUNE.]
law has prepared to catch and destroy
everybody who buys or deals in imported  A correspondent wants to know  the
goods.                                names of the Federal office-holders who
shared in the plunder -of Phelps, Dodge &
Co. By law, the money received from
THET TPREASURY "     tHOIST WITH ITST compromises and forfeitures in revenue
TYOWN PETARD."  Icases is divided as follows: One-half to the
Government; one-quarter to the informer;
[From THE TARRYTOWN ARGUS, May 3, 1873.]  and the remaining quarter to the Collector,
Surveyor, and Naval Officer, in equal parts.
In the imbroglio of the Government with  Each of these three officials consequently
the house of Phelps, Dodge & Co., the Gov- gets in the present case $22,583. It is a
ernment has come off second best. The re- dirty, disreputable business, and our Govsult is just what all well-informed and sen- ernment ought to be ashamed of itself.




60                   THE CASE OF PHELPS, DODGE & CO.
THE POWER OF THE POLITICIANS. eminent more frauds and embezzlements
and thefts than any three of its predecessors,
[From an Editorial im THE NEW YORK TRIBUNE, whose habit of appointing rogues to office
3May 9, 1873.]           is only less fixed and pronounced than that
Here is a case nearer home-under our of pardoning them when caught and convery eyes-a case that illustrates the help- victed of crime - an Administration of a
lessness of the people and the subjection of party whose'proudest boast is that it has
our commercial and business interests to survived a deluge of investigations, and
the despotic power of as bad a gang of whose shame it is that it had to pack the
politicians as ever prostituted the scales of committees that made them —what does
justice to dividing loot. A great commer- such an Administration, reeking with the
cial house, one of the first in the country, stench of offences that run up and down the
with an established character and unsullied  scale from bribery to perjury, do with this
reputation, of large wealth and most exten- case, in which by an innocent mistake the
sive business relations throughout the Government has lost the paltry sum of
world, was taken by the throat and robbed  sixteen hundred dollars in transactions
of over a quarter of a million of dollars. covering forty millions? What did it do?
Robbery is a hard word. Were the names Well, what should it do?  What would
of all the men who shared in the proceeds you expect such an Administration to do?
of this transaction published, it would It reached out and took Phelps, Dodge &
seem still harder, for they are dainty gen- Co. by the throat as it might take any other
tlemen, with nothing of the Robin Hood or firm or any other man, and held them till
Friar Tuck about them; scholarly persons, they disgorged $140,500 to a ring of politiwho pluck by precedents and pinch for cians and $1.30,500 to the Government; and
penalties; who only seek to vindicate law  the characterless spies and informers who
and save the Government from loss; who  got the money put on airs of virtue and
handle currency with gloved finger-tips, bragged that they had vindicated the law
and if they divide with spies and informers, against Phelps, Dodge & Co., and punished
do it with a lofty grace and enough of in- them for fraud.
directness to deodorize the plunder. But  Does anybody ask why the authorities
robbery is the name for it, whoever carried  that habitually compound felonies upon
away the ill-gotten profits, or by whatever terms that make felony profitable, should
process it was divided. Look a moment at exact from innocent persons over a quarter
the facts. Not the ex parte statements of of a million dollars for a mistake by which
the victims, but the facts admitted by the the Governmnent lost only sixteen hundred?
informers and their partners, and published  Follow the money paid over and see into
as an angry answer to the explanation  whose hands it goes to be divided. They
offered by the firm. In five years this firm  wanted the money. They got it. They can
had imported goods to the value of forty to-day, as they have heretofore, read the
millions of dollars.  Upon those imports correspondence of any man or firm whose
they had paid the United States Govern- letters pass through the mails. They may
ment eight million dollars in duties. By a seize any man's books and accounts. They
system of espionage which would be a dis- may put an end to his business by obstrucgrace to any country, it was discovered that tion and interference. Commerce and trade
upon these five years' importations of forty  are at their mercy. It is n't worth while to
millions there had been overvaluations of get excited about it. It is a mere abstracsome and undervaluations of other articles tion.  Phelps, Dodge & Co. are rich and
-the latter to the amount of $6,680, upon  can afford it. The Government people are
which there was due the Government the gorged with their $140,000, and it is n't
sum of $1,660 (one thousand six hundred likely they'll pick up anybody else at preand sixty dollars).  And the prosecuting  sent. We are safe.
officer of the Government says publicly that  And yet, perhaps, by and by the people
he does not believe the idea of defrauding  will find it worth their while to turn this
the Government had ever entered the mind matter over a little thoughtfully and see
of any member of the firm. What does an  what sort of men these are who run the
Administration that has pardoned more Government, and what sort of Government
defaulters, compromised at a loss to Gov- they are giving us.




ACTION OF TtHE
NEW YORK
CHAMBER OF COMMERCE.








THE CHAMBER OF COMMERCE.
Proceedings at the Annual Meeting, May 1st, 1873.
PHELPS, DODGE & CO. SUSTAINED.
WILLIAM E. DODGE RE-ELECTED TO THE PRESIDENCY.
[From ThE NEW YORK TRIBUNE, May 2, 1873.]  have been placed before the public during the
The Chamber of Commerce held its 105th past few months, to allow my name to be
annual meeting yesterday, William E. Dodgeaa   presented; and your action at this time
presiding.                                is the more gratifying as it gives assurance of
*    *    *          * *     *        your continued confidence. It has been not
Mr. Dodge called Mr. Sturges to the chair, a little trying to be publicly accused of an
and the Nominating Committee reported the attempt to defraud the Government, while for
selections for officers for the ensuing year. the moment we were not prepared to explain
They were duly balloted for and elected, as our position, and yet having a perfect confollows:                                  sciousness of having done nothing to warrant
President, William E. Dodge; First Vice- the charges made against us. Having been
President, George Opdyke; Second Vice-Pre- actively engaged in business in this city for
sident, William  M. Vermilye; Third Vice- nearly a half century, without ever having my
President, Samuel D. Babcock; Fourth Vice-. 
President, Samuel D. Babcock; Fourth Vice- integrity called in question, it was mortifying
President, Solon Humphreys;    Treasurer, Xth                en
Francis S. Lathrop; Secretary, George Wilson.  n the extreme to see newspapers from day to
Executive Committee-A. A. Low, Chair- day placing my firm before the public in such
man; Charles H. Russell, John C. Green, a position as left the impression that we had
James M. Brown, R. Warren Weston, William                     i a 
H. Fogg,, Jackson S. Schultz, Samuel B. been for years engaged in a systematic attempt
H. Fogg, Jackson S. Schultz, Samuel B.
Ruggles, D. Willis James, Paul N. Spofford,to defraud the revenue. I may be pardoned
John Taylor Johnston, Elliot C. Cowdin, for detaining you for a moment to say that if
Sinclair Tousey.                          this had been simply a matter between ourMr. Dodge was again called to the chair, selves and the Government it could at once
and responded feelingly, as follows:      have been adjusted without any reflection on
GENTLEMEN OF THE CHAMBER: I thank you our mercantile reputation; but the revenue
for this renewed evidence of your confidence. laws, as at present administered, offer such a
It had been my intention to have declined a premium for officials, that even the ruin of a
nomination this year had it been tendered, as merchant's standing is not to be considered
other duties demanded my attention, but the when there is a shadow of a chance to secure
kind intimation of your Nominating Commit- money even by making the better appear the
tee led me, in the peculiar position in which I worse.  In our case we found the several




64                    THE CASE OF PHELPS, DODGE & CO.
parties who were to share in whatever they ment of the Chamber when he declared his
could obtain, had secured the services of some unshaken faith in the integrity and honor of
half dozen lawyers, who were devoting all William E. Dodge and the house of Phelps,
their efforts to secure their end, even at the Dodge & Co. [Applause.]
cost of our good name. Fearful charges were  Mr. Hewitt rose to second the resolutions,
made in public and in private so as to intimi- and said that there were two objections to the
date us, while we were denied the proof which laws. One was the crude, imperfect and imprbthe Government officials assumed to hold by per laws themselves, and the other the character
the possession of our books and papers. Our of the officials who executed them. He eulopublic statement will have explained more gized the house of Phelps, Dodge & Co., charfully our reasons for offering in settlement for acterizing it as one of the most illustrious in
what we have always claimed as only techni- the world. The resolutions were then unanical errors, a sum which, in comparison with mously adopted.
all they have been able to prove, was many      - *     *    *    *          -. 
hundred times in excess. I will only add that     THE ANNUAL DINNER.
since we have fully understood the case we
The annual dinner of the Chamber of Conmhave continued to regret ever having paid a
dollar. [Applause]                   merce of New York was given at Delmonico's
doll   -[Ap ]                        last evening. The hour for the dinner was
Geo. W. Dow offered the following resolu- 7:30; and when the guests were invited to
tion:                                     enter the dining-room, the ante-room was too
Whereas, Certain resolutions touching the full for comfort.  Among the prominent
Revenue or Tariff laws of this country were members of the Chamber who were present
introduced into this Chamber on the 7th day were: William  E. Dodge, President; A. A.
of March, 1872, and referred to Committee. B    k. Opdy, 
No. 4, with power to add to its numbers, forLow   uel D   bcock, Ge. Opdyke, Wm.
a full and careful consideration and report; H. Fogg, J. Pierpont Morgan, R. Warren
and whereas, it is understood that said Con- Weston, John D. Jones, Joseph W. Drexel,
mittee deemed it inexpedient at that time to Henry F. Spaulding, William Borden, Chas. L.
go into the matter in consequence of the 
excitement attending the Presidential election, Tiffany, Charles E. Beebe, S. B Chittenden,
and no report has yet been made; and where- Jonathan Sturges, Jeremiah P. Robinson,
as, this subject is believed to be of the highest James L. Worth, Charles G. Landon, Charles
importance, not only to the mercantile com- Butler Abram S. Hewitt, Samuel B. Ruggles
munity, but also to our country at large;                 G   g      L       0 e
therefore,                                D. Henry Haight, George W. Lane, Orestes
therefore,
Resolved, That Committee No. 4 be re- Cleveland, Francis Baker, Simon de Visser,
quested to give earnest attention to the reso- Wm. M. Vermilye, Jacob Wendell, Joseph
lutions above named, and also to examine the Hyde Sparks, Ambrose Snow, Francis S. Lalaws relating to penalties and additional
In.   o.    x             *throp, James M. Brown, J. Seligman, Wm.
duties as now imposed, and to recommendthrop, James. Brown, J. Sligman,Wm.
such alterations of the same as will protect H. Guion, James S. T. Stranahan, L. B. Wythe honest importer from the forfeitures and man, Wm. H. Webb, Paul N. Spofford, Parker
fines which should fall upon those only who Handy, Morris K. Jesup, Chas. C. Duncan,
are dishonest and unscrupulous; and said
Committee is hereby requested to make its   m. E. Dodge, Jr.,  eorge T. Hope, Frederreport by or before the 4th day of December ick S. Winston, and George Wilson, Secretary.
next.                                       Among those who were present as guests of
Mr. Dow then spoke of the inconsistencies the Chamber of Commerce were: William M.
of the tariff laws, and the difficulty which Evarts, Charles O'Conor, Gen. Joseph R.
honest importers had in interpreting them. IIawley (Hartford), the Rev. William Adams,
He denounced a system which classed honest D.D. the Rev. Roswell D. Hitchccrk, D. D.,
importers and swindlers in the same category, the Rev. Theodore L. Cuyler, D. D., Gen.
and felt that he expressed the general senti- Winfield S. Hancock, David M. Stone, Wirt




PROCEEDINGS AT CHAMBER OF COMMERCE.                          65
Dexter, the Hon. C. C. Childs of Philadelphia, facilities for shipping and receiving freight by
the Hon. J. M. Van Cott, John Jay Knox, our railroads, the enlargement and cheapening
Richard S. Evans of London, Judge Charles of canal transportation, the use of steam for
P. Daly, the Hon. John R. Brady, Dr. Henry propelling the boats, the great question now
R. Lindeman, Prof. Joseph Henry, Edward agitating the country how to facilitate and
M. Archibald, the lHon. Stewart L. Woodford, cheapen the carriage of produce from the West
Commodore J. H. Strong, the lIon. David B. to the seaboard, and particularly to bring it to
Mellish, the Hon. Fernando Wood, Johannes our city, the encouragement necessary to seRosing, the Hon. John E. Devlin, the Rev. cure American steamships, and the great
Alfred P. Putnam, D. D., the EIon. Wim. J. questions of finance and the currency, all these
McAlpine, the Rev. E. H. Chapin, D. D., John demand the most careful consideration, and
W. Simonton, Peter Williams, the Hon. David we can but hope that by these evenifig gathA. Wells, Waldemar de Bodisco, C. G. for erings a new interest will be awakened that
Russia, the Hon. Samuel J. Tilden, Hipolito will secure a larger attendance at our regular
de Uriarte, and T. A. A. Itavemeyer.     meetings. But I did not intend myself to
About 150 persons were present. The din- occupy any time, and will at once proceed to
ing hall was decorated with the arms of Great peset the first regular toast of the evening.
Britain, Austria, the United States, and New-  Mr. Dodge then gave the first toast: "ComnYork, appropriately festooned with flags. A  merce, the great disseminator of Christian
long table was placed along one side of the civilization," and called upon the Rev. Dr.
hall, at which were seated William E. Dodge, Adams, who responded.
President of the Chamber, the Hon. William
SPEECH OF DR. ADAMS.
M. Evarts, the Rev. Dr. Adams, the lion. Samuel J. Tilden, ex-Judge Joshua M. Van Cott.      [Reported by THE N. Y. SUN.]
George Opdyke, the Rev. Dr. Putnam, ChiefJustie Daly, an ther..                 The reverend gentleman described commerce
Justice Daly, and others.
*   X    *         *     *        as a powerful agent in diffusing Christianity
and bringing nations together. "What grand
At the close of the dinner, Mr. Dodge in-         ^ o     a
Zn r   lessons of Christianity," he said, " do you
troduced the first toast and speaker in te learn on the docks and in the Custom-oue 
learn on the docks and in the Custom-House?"
following brief speech:
Here the doctor was interrupted by audible
SPEECH OF WM. E. DODGE.  sm     an   smilemile radually overspread his
SPEECLI OF WM. E. DODGE.,            r
own placid countenance. Ile continued: "I
GENTLEMEN: We are met on this anniversi- see an incredulous smile on the face of a
ry evening in this social way in much larger friend." [Hearty laughter.]
numbers than can usually attend  on our     "It compels me to say in explanation of the
regular monthly meetings.  Many of our word, that I mentioned it as relating to that
friends who are unable amid the pressure of vast variety of commodities representing the
business to meet with us, and yet feel a deep different nations of the globe supposed to pass
interest in the Chamber, are enabled at these through the Custom House. I did not speak
annual dinners to renew their acquaintance of the system of man-traps [applause]-not
with the members and take part in the discus- of the place where fattened depredators grow
sions that may come before us. There are rich on the spoils which they get within reach
important interests connected with the pros- of their tentaculars. The object of civil govperity of our commerce which should command ernment is not to hurt but to help, not to
the careful consideration of the Chamber, but oppress but to protect. I wonder that the
which can hardly be attempted during our merchants of this metropolis do not spring to
hurried meetings at mid-day. The question  their feet in protest against the atrocious idea
of rapid transit, of wharfs and piers, better that the administration of the government is




66                    THE CASE OF PHELPS, DODGE & CO.
not to be regulated by obvious equity, but by  Mr. Low  said that in union there was
literal technicalities. [Applause.] Your voices strength, in a multitude of counselors there
should be raised like the sound of many wa- was wisdom, and this would seem to be about
ters above partizan clamor in vindication of enough for this occasion. The Chamber had a
your rights and of justice. The publican in multitude of men, representatives of this great
the Scripture offered to restore what he had commercial emporium. They were the men
wrongfully taken fourfold. Here an upright who dominated public sentiment in matters of
citizen is required to pay for a breach of tech- commerce, and ought to do so. It was their
nicality one hundred fold. Pardon this unex- duty to speak when flagrant wrongs were conpected parenthesis.  Distinguished merit will doned by improper compromises and honest
always rise superior to opposition, and draw  merchants were made to pay penalties one
lustre from conspiracy and reproach."     hundred times in amount of the offense which
was claimed to have been committed. [ApSPEECHI OF MR. A. A. LOW.       j plause.] It was doubtless true that immense
(Tribune Report.)             wrongs had been committed against the United
States, involving losses to the Government of
The third toast was:
The third toast was:          many hundreds of thousands, and these were
"Chambers of Commerce —the best conser- 
vators of true commercial principles, and the compromised by th   abandonment of a just
most efficient organs through which mer- claim for one-half the amount, while an honest
chants may exert their proper influence upon man is compelled to pay one hundred times
commercial legislation."                  the amount claimed to be lost by some techniThis was responded to by A. A. Low.     cal irregularity. [Applause.]
COMMENTS OF THE PRESS.
[From THE N. Y. TRIBUINE, Jay 2, 1873.]  signal mark of confidence the Chamber folThe New York Chambler of Comnmerce, a lowed up by heartily applauding speeches in
time-honored and influential institution, yes- which unshaken faith in the integrity and
terday entered its weighty protest against the honor of his house was expressed, and by
present administration of the Revenue laws. unanimously adopting resolutions instructing a
That protest took shape in the unanimous re- committee " to examine the laws relating to
election of Mr. Wm. E. Dodge to the Presi- penalties and additional duties as now imncy of the Chamber, and te passage of a posed, and to recommend such alterations of
resolution instructing one of its standing com- thsame as will protect the honest importer
mittee immediately to examine the laws re- from  the forfeitures and fines which should
lating to Custom-house seizure, with a view to fall only upon those who are dishonest and
their amendment by the next session of Con- unscrupulous." Mr. Dodge himself, il acgress.                                    knowledging the honor conferred upon him,
stated that except for the attitude in which his
firm had been placed by the Government he
[From TnIE NATION, Mlay 8, 1873.]  should have declined a renomination.  Referring to the excessive payment in settlement
At the annual meeting of the Chamber of made by Phelps, Dodge & Co., he said that
Commerce on Thursday of last week, Mr. Wm. since they had fully understood the case, they
E. Dodge was, re-elected President.  This regretted ever having paid a dollar; and this,




COMMENTS OF THE PRESS.                              67
as we have before had occasion to remark, is  [From TiE ALBANY ARGUS, May 3,1873.]
the only regret which the public can entertain     C       R OF CO    ERCE
on their account. While this rebuke to the
Government for its outrageous treatment of  The action of the New York Chamber of
one of the half-dozen representative firms of Commerce, in re-electing Wm. E. Dodge as its
the country was being offered by the leading President, is a complete vindication of the
merchants of its chief city, at Vienna the open- firm of Phelps, Dodge & Co., and a merited
ing of the Exposition on the same day gave rebuke of the Federal blackmailers who robbed
equal occasion to Americans to'blush for the the firm of $271,000 as penalty for unintencare which the Government bestows on the tional frauds amounting to less than $2,000.
commercial and industrial interests of the We have heretofore shown that the Governpeople, whether at home or abroad.        ment had the right to remit the entire penalty,
if it could assume to compromise the affair at
all. The law is specific. Under its terms the
firm of Phelps, Dodge & Co. were liable in the
[From TDE N. Y. OBSERVER, M~ay 8, 1S73.1              I"
[From T  N. Y. Osv, May 8,.1  sum of one million of dollars, if liable at all;
MR. DODGE'S VINDICATION.            and the Government had the power to remit
the entire amount, if satisfied that fraud was
We do not know in what way a more cor- not intended. That no fraud was intended
plete vindication of the good name of Hon. would seem to be plain from the small amount
Wm. E. Dodge could be made than that which conceded to have been due, the total amount
he received on Thursday last.  The high of duties lost being admitted by the Governstanding of the New York Chamber of Corn- ient to have been only $1,500. It is not to
merce is well known. There is not a body of be supposed that the firm deliberately perpemore honorable merchants in the world than trated any such petit larceny operation; and if
the men who compose and control this Board. it had not been that the amount received was
Mr. Dodge has for some time past been Presi- to be divided among the officials, not one
dent of the Chamber, and in view of the cent would have been claimed.  The amount
recent difficulties which his fitrm has had with to which the Treasury was entitled was willthe Government, the annual meeting for the ingly conceded by the avaricious persecutors
election of officers was anticipated with no of the firm; but they wanted their own share
little interest by Mr. Dodge's friends.  lie too badly to concede a cent of that. Of the
himself had decided to decline being a candi- sum thus villianously extorted, $180,000 went
date for re-election, but the nominating corm- to the blackmailers, $11,000 was paid as costs,
mittee urged him to allow his name to be and the Government received the remainder.
used, and at the regular annual meeting he  The Chamber of Commerce not only vindiwas unanimously re-elected President for the cates the outraged firm, but it prepares for
coming year. We regard this as the strongest aggressive war. A committee has been apendorsement of Mr. l)odge and of the firm of pointed to consider the question of radically
Phelps, Dodge & Co. that could be made by modifying the revenue or tariff laws, and also
the merchants of New York, with many of to examine the laws relating to penalties and
whom the house has been in intercourse for additional duties as now imposed, and to renearly half a century.                    commend such alterations of the same as will
*        *    *    *     *    X     protect the honest importer from the forfeitWe heartily rejoice in this most satisfactory ures and fines which should fall only upon
vindication of one who has been held in such those who are dishonest and unscrupulous.
high esteem, and who has occupied so con-   There is no danger that this movement will
spicuous and influential a positioni in the result too greatly to the advantage of the imChurch and in the country. The vindication porter. Congress does not seem disposed to
is all the more satisfactory coming from such a look with favor even upon the rights of consource, from men of business, whose motives sumers as against monopolists, and much less
in paying this tribute to the honorable stand- is it likely to give the importers any undue
ing of one of their own number cannot be advantage. The revenue laws are now unnecalled in question.                       cessarily cumbersome, fearfully oppressive and
There is one more act of justice due the convenient instruments for blackmail operafirm of Phelps, Dodge & Co. It is the restitu- tions. These evils must be remedied. Agitation of the money which has been taken from  tion to that end will be the leading question
them, by legal process it is trule, but by a in the next Congress. It is to be hoped that
species of black-mailing that in all transactions weak subterfuges and shuffling compromises
between man and man would fail to be re- will be no longer tolerated. There is a wide
garded as honest.                        margin between the exorbitant and extortion



68                     THIE CASE OF PHELPS, DODGE & CO.
ate tariff under which the country is now  Commerce, is of itself a very powerful vindigroaning, and the ruined industries which the cation.  It is a declaration by the leading
monopolists pretend will follow from  any businessmen of the great metropolis, who cerchange.                                    tainly know and appreciate fully the circumstances in the case, that confidence il his
moral integrity and commercial honor is un[From Tin BALTIMORE INQUIRER, May 6,1878.]      ntgrity and commercial honor is unThe re-election of Mr. Wm. E. Dodge to the
Presidency of the New York Chamber of Commerce, is the most emphatic condemnation of   [From'TE BOSTON GAZETTE, May 4,1873.]
the late action of the Treasury Department in  The proceedings against Phelps, Dodge &
the matter of the alleged frauds upon the  Co., of New York, for defrauding the revenue,
revenue by Phelps, Dodge & Co. that any pub- are such as should attract universal attention.
lie body could have given. It is impossible to There is no evidence that this firm, which, as
suppose that an influential body of merchants is generally known, is one of the most repulike the Chamber of Commerce of New York table, as well as one of the wealthiest, in the
city, would select for its presiding officer the country, was aware that there was any wrong
head of a house tainted with the dishonesty  upon the Government in its transactions. The
and fraud implied in the charges.          case, on its face, appears quite palpably one of
oversight only. The whole amount of which
the Government was deprived was less than
From THE SPRINGFIELD REPUBLICAN, May 3, 1873.] two thousand dollars.  Yet advantage was
The case of Phelps, Dodge & Co. is in every- taken of the technicalities of the law to atbody's mind.   We shall feel amply compen- tempt the forfeiture of' a million dollars in
sated for this great scandal, if it arouses the value of goods, and the case was finally settled
merchants of New York to a sense of their by exacting a fine of $271,000!  As a proof
political responsibilities. There are indications that the merchants of New York believe that
of such a result. The New York Chamber of no wrong was intended, they have since this
Commerce, at their annual meeting Thursday  transaction elected Mr. Wm. E. Dodge, one of
night, re-elected Wm. E. Dodge President, and the partners of the firm, as President of the
took pains to give this action the air of a Chamber of Commerce.    The leeches conrebuke to the Government.                  nected with the Custom House of New York
are at the bottom of this scandalous levy upon
honorable merchants. They have received a
[From THE TARRYTOWN ARGUS, May 3, 1873.]  large share of the forfeit-money. It may be
There is but one feeling in the public mind. asked why did not Phelps, Dodge & Co. appeal
It is that the Government has been guilty of to a Jury. The probability is  that they feared
an outrage, and ought to send back the moneytheenmty of the Custom House too much to
with n humble apology. We are glad to see do this thing. There is power in that body to
with an humble apology. We are glad to see inconvenience importers to Ri enormous exthat the New York Chamber of Commerce re-inconvenience importers to an enormous exbuked the Government on Thursday by unan-tent, and it    often freely exercised. Mr. A.
imously re-electing Mr. Dodge as its President. T. tewart, when he  ave moe  to ad the
~ lLiberal movement last Summer, made it a
~~ —-- --  ~       stipulation that his action should not be
[FIrom THE JANESVILLE (Wis.) GAZETTE.]  known, on the ground that he could not afford
to have the Custom House people unfriendly
Hon. Wm. E. Dodge, senior member of the to him.
firm of Phelps, Dodge & Co., which has lately
had difficulty with the Treasury Department,
was yesterday unanimously elected President     [From TiE BOSTON POST, May 5, 1873.]
of the New   York Chamber of Commerce.
This action, it is understood, has been adopted    REVENUE SPY SYSTEM.
to express the conviction of the merchants of  In his reply to the compliment of a re-election
New York that the firm was innocent of the to the Presidencv of the New York Chamber
charges preferred against it by the revenue of Commerce, Mr. Wi. E. Dodge laid all the
officers of the Government.                troubles that had befallen his firm upon the
administration of the revenue laws, which
offers such a premium to officials that a mer[From THE AGE, (Houston, Texas,) May 3, 1873.j chant's standing is not considered in compariThe re-election of Mr. Dodge, on Thursday, son with the opportunity to make money out
to be President of the New York Chamber of of him, Mr, Dodge referred also to the half




COMMENTS OF TIHE PRESS.                               69
dozen or more lawyers who were all zealously Dodge & Co. could occur; for no charge
working against his house in company with the would ever be compromised where the parties
informers and officials, to secure their end accused were guilty, and money would never
even at the cost of its mercantile standing of' be taken from them where it could be proved
half a century. He especially regretted that that they were innocent.
he had ever consented to pay a dollar in com-  The whole thing is a network of chicanery,
promise, when he now sees that his duty was espionage, double-dealing and rapacity; a seto contest the case to the last. But this prev- ries of revenue traps and pitfalls, to involve
alent reluctance among merchants to be even unsuspecting firms with technical guilt, and
temporarily clouded with lawsuits that are force them to offer round sums for official
based on allegations of fraud is the strong greed in preference to submitting to an expoint which the official informer seizes upon. posurc that is supposed in any event to carry
Detective Jayne wrote to the Treasury in refer- more or less infection. Phelps, Dodge & Co.
ence to the Phelps, Dodge & Co. case, that the undoubtedly see by this time that it would
Government was sure to get more by compro- have been morally better for them to have
mising than by going to court; and District proved their innocent intent before a court of
Attorney Bliss did not hesitate to forward his law, than to have paid over more than a
opinion to the same effect to Washington. quarter of a million to the officials and reThe object, then, of the informer, is only ceived the brand from Mr. Boutwell aftermoney; and it is altogether too plain that the wards. If this experience and example shall
system set on foot by the revenue laws is pre- avail to rouse the mercantile community to its
cisely adapted to secure it. Protection to the duty in respect to the revenue laws, it will not
revenue is of secondary concern. If that was be wholly a subject of regret.
the object, no such case as this of Phelps,








CONCLUDING ARTICLES.








CONCLUDING ARTICLES.
[From THE NATION, May 8, 1873.]   popular mind a strong presumption of guilt
THE CONTRIBUTIONS OF THE GOV- against him. There is a traditional preERNMENT TO PUBLIC MORALS.            judice that such a suit, bring undertaken
on public grounds and in the public interWe discussed one aspect of the Phelps- est, cannot be dictated by private malignity
Dodge affair last week-the economical or passion, and must have an array of facts
one. The matter ought not to pass from  behind it; so that, when the District Attorthe public, mind, however, without some ney files his bill against a merchant to
notice of another and still graver aspect of punish a fraud on the revenue, anld the
it-the moral one; the importance of which  "special agent" seizes on his books and
is increased by the spectacle of the frauds, papers, and the telegraph spreads the news
defalcations, breaches of trust, venality, over the country, the fair fame of a lifetime
and, in short, general loosening of the  often vanishes in a moment.  The man's
bonds of honesty and fidelity which meets character is damaged to an extent which no
the eye in every direction, and over which  subsequent refutation or vindication can
patriots and moralists are lamenting so wholly cure, because such are the intricacy
deeply.  It is now  and has long been and obscurity of our Revenue laws that,
generally conceded that governments owe even if the facts were clear of all suspicion,
something more to the cause of good the defence must, from the nature of the
morals than legislation against vice. They  case, be dry and tedious reading, while the
not only provide penalties for offences, but charge can be contained in two lines of a
they refuse the aid of the judicial ma- spicy despatch.
chinery for the enforcement of contracts  Now, no man is arraigned on a criminal
which are contra bonos mores-or " against charge without a preliminary investigation
public policy," as the lawyers say. More before an impartial tribunal. He is taken
than this, they are expected to refrain from  before a magistrate who has no personal
making money by pandering to vicious interest in his acquittal or conviction, betastes or habits.                       fore a grand jury who are indifferent also,
X*         *         *          and before a district attorney who, at worst,
What has all this got to do with the is animated in the prosecution by nothing
Phelps-Dodge affair?  Much, as we think  stronger than professional pride. It is only
we can show.   The legal proceeding by  after all these have agreed that there is
which our Government punishes infrac- fair ground for trying him, that he is, as
tions of the Revenue laws is, in form, a civil the law says, "put in jeopardy " before a
one. On its face, it is a civil suit for an  court. When, however, the Treasury directs
amount of damages previously fixed by the the prosecution of a merchant, entailing
statute. But, in reality, it is a criminal pro- possibly the ruin of his business and of his
ceeding. The evidence to sustain it is pro- reputation, it acts on the report of two percured by the criminal process of searches sons, who both have a strong pecuniary
and seizures. The amount of damages re- interest in his conviction-that is, it decides
coverable bears no moral or mathematical to prosecute him, as it were, on the comrelation to the injury sustained. It is, in  mitment of a magistrate who will make
all respects, a penalty, and may be a tre- thousands of dollars by having him found
mendous penalty, even from a pecuniary  guilty; and on the presentment of a grand
point of view; as when in the Phelps-Dodge jury who, if he is found guilty, will be
case a million and a half of dollars was allowed to divide between them a considerclaimed, and over a quarter of a million  able portion of his assets. But this is not
actually extorted, by way of compensation  the whole nor the worst. In order to profor the loss to the revenue of little over cure the information on which these prosesixteen hundred dollars. Not only, how- cutions are founded, the Government does
ever, are the damages a real penalty, but not employ policemen and pay them itself
the suit is, from its very commencement, for their services, as in the case of other
an assault on character of the most terrible breaches of the law, and keep up among
kind. Private individuals sue each other them by discipline a sense of honor and
for all sorts of reasons-good, bad, and in- self-respect and of regard for the rights of
different-and the public pays little heed to their fellow-citizens. On the contrary, it
the plaintiff's story until it has heard the enlists in its service a class of detectives
defendant's.  But when the Government whose zeal is stimulated not by the prospursues a man in the courts, it raises in the pect of promotion, or by public spirit,




74                  THE CASE OF PHIELPS, DODGE & CO.
or any of the honorable incentives to ex- fiduciary capacity in this city, and to whom
ertion, but by the prospect of sharing in long hours and small salaries are hard to
a division of the criminal's property. Even  bear. That he is a thief, a cheat, a liar, a
if the experience of all nations and ages as hypocrite, a monster of ingratitude and
to the effect of this mode of reward on police baseness, is all hidden under the fact that
agents were not known to us, we should le has assisted the worthy Jayne in bringonly need very little knowledge of human  ing a charge of having defrauded the renature to predict the result of it on the venue to the extent of sixteen hundred
morals of the officer and on the peace and dollars against a house whose importations
welfare of persons exposed to his attacks. are every year worth six millions, and the
It is a common and justifiable practice of income of whose partners is counted by
governments to offer rewards to educe evi- hundreds of thousands.
dence likely to lead to the conviction of the  We may depend upon it that as long as
perpetrators of crimes already committed. the national Government lends its sanction
But to offer large rewards to persons who to speculations of this kind, the fountain of
will bring accusations and make them good, corruption and dishonesty will not dry up
is a well-recognized offence against public or cease to spread. There is no way, we
welfare, to which only the basest govern- are glad to say, of keeping rascality confined
ments in the worst times have ever re- to "the politicians."  We cannot make
sorted, because it not only breeds one of politics a lazar-house, and prevent the conthe foulest classes of men, but places all tamination from reaching trade and comgood citizens at their mercy.          merce. Perhaps one of the alarming signs
The detectives employed by our Govern- of the times was that little burst of janisment, and whom it dignifies with the name sary's insolence in which this detective,
of "Special Agents," are constantly trying Jayne, spoke in his "report" to Mr. Boutto procure materials for charges, and in  well of the merchants of New York as " the
order to do so are constantly endeavoring  ordinary brood of importers," evidently
to put themselves in communication with looking at them much as one of Louis
"informers," with whom they afterwards Fourteenth's dragoons looked at peasants,
share the enormous reward.  It is well ora Mameluke looked at a rayah. When
known that it is not uncommon to use a person of his calling and position inclerks as spies on their employers; or in dulges in remarks of this kind to his official
other words, to induce young men to en- superior about the traders of the principal
gage in one of the lowest forms of hypocrisy  American city, and the superior has the
and perfidy of which a man can be guilty, audacity to publish the letter, we may be
and the one which most rapidly and surely sure it is high time for the axe to be laid
eats out the very roots of manliness, hon- at the root of the tree. The worst charge
esty, and self-respect.  We may depend that can be made against the house of
upon it, anybody who has ever taken Cus- Phelps, Dodge & Co. is that, having wealth
om-house pay as a spy, issues from his em- and character, they did not stand firmly in
ployer's counting-house in just that state the forefront of the battle which undoubtof mind which makes slow and lawful gains edly must be fought out before the great
irksome, and chances for fraud and defal- Custom-house nuisance is abated, and the
cation welcome. In the Phelps-Dodge case, lesson finally taught that Government exa confidential clerk first sells his employer's ists for the convenience and aid of the citibusiness secrets to business rivals, and  zen, and not for his confusion and annoyspends his nights in helping them to ran- ance.
sack their books and papers. When he is
detected and prosecuted and escapes through
a technicality, far from flying, he puts him- [rom TII CICAGO DAILY TRIBUNE, May,183.
self in communication with the representa-  BLACKMAILING   AND   THE   SPY
tives of the United States Government, who           BUSINESS.
welcome him as a valued coadjutor, and
the result is that by this one stroke of ras-  When the United States Government
cality he walks off with nearly $70,000, or, goes into the blackmailing business, it is
in other words, a larger fortune than  very likely to succeed; but it seldom hapusually rewards a lifetime of honest and  pens that a single firm will pay $271,023 as
successful toil. It requires no great effort a penalty for the non-payment of $1,664 of
of the imagination to figure to one's self customs duties on a few scattering packages
the effect of this man's performance on the of tin plates.  That Messrs. Phelps, Dodge
thousands of youth who are serving in a & Co. allowed themselves to be mulcted in




CONCLUDING ARTICLES.                             75
this enormous sum for so trivial an error is this enormously disproportionate fine was
almost as surprising as that the Govern- not intended as a punishment for crimes,
ment exacted it from them. A more fla- because the punisllnment would be excessive,
grant outrage was never committed or sub- and therefore apt to defeat itself in the end.
mitted to in any country, civilized or bar- The sum of $271,023 was exacted at the
barous. That Messrs. Phelps, Dodge & Co. urgent solicitation of the spies and informdid submit to it can only be accounted for ers, and with the purpose of dividing
on the score of extreme terror of the power among them as large a sum as possible, in
and unscrupulousness arrayed against them. order to encourage similar outrages in the
"Anything to be rid of these dogs," was future. This doctrine is a vital part of the
probably their despairing cry as they hand- spy system. It is necessary to appeal to
ed over the cash. And yet they were not the greed for gain, which is the most conjustified in purchasing their peace at such  spicuous incentive to corrupt and disgracea price, or purchasing it at all.  They  ful practices, in order to induce men to soil
ought to have gone into court and shown  their hands with business that renders them
up the whole conspiracy, beginning with a repulsive to decent men forever after.
false-hearted clerk, running the gamut of  The American Government has at last
Custom-house blacklegs, spies, and District gone systematically into the spy business.
Attorneys, and ending with a Secretary of It was put in active operation last summer
the Treasury who had no more sense of de- and fall in a political way. The usurpation
cency than to aid and abet the blackmailing  of authority on the part of United States
tribe in their villainous operation.  Mr. Supervisors and Deputy Marshals, under
Boutwell has thus put a blister on his own  the protection of United States Commisreputation, but none on that of Phelps, sioner Davenport, of New York, was part
Dodge & Co. No petit juryon earth would  and parcel of the general system.  The
hlave given a verdict against them for more right to enter men's houses, tamper with
than the sum of unpaid duties, while any  their employes, bribe their servant-girls,
grand j ury would have felt moved to indict browbeat their wives, and exercise terrorism
the rascally gang of conspirators who were over their families, under the name of the
persecuting them. Whatever loss of repu- law, in order to ascertain their political
tation the firm may have temporarily suf- preferences, was only the prelude for bolder
fered, must be attributed to their payment and more profitable operations. A United
of the enormous blackmail levied upon    States law of recent enactment authorizes
them. If they had stood up and fought like proceedings with the purpose of ascerfrom the beginning, there would have been  taining the condition of private business
no suspicion of their guilt in the minds of affairs; under pretence of ascertaining
the public. The presumltions would have whether any moneys due to the United
been all the other way.                  States at any former time have been unlawThe clerk who consented to betray his fully withheld. It cannot fail to produce a
employers, after having enjoyed their confi- race of creatures as vile and vicious as the
dence and assistance, and took advantage harpies of fable. Multitudinous branches
of technical informalities to earn an inform- of infamy will grow out of it. The princier's fees at the hands of the Government, pie that underlies the law and the practice
instead of reporting the irregularities he will infest all kinds of business and the rehad discovered to the firm, is, without,doubt, lations between man and man; it will dea repulsive object, with whom no decent stroy all commercial confidence, and render
men will care to come in contact. So are blackmailing a fine art, in which the vilest
the employes of the Government who, un- and the dirtiest will be the adepts.
der the name of detectives, bribe clerks to  The Nation strikes at the root of this
betray the confidence intrusted to them, rank growth when it repeats an expression
suggest ways and means for prying into   nade by ex-Secretary of the Treasury Boutprivate business, entering business houses well, who said that he regarded " the interafter dark, and institute secret censorship  ests of the Government and the interests of
over correspondence, books, and papers. the merchants as diametrically opposite."
But we must go back of these vampires to  So long as this idea prevails, just so long
find the source of these disgraceful prac- will the spy system be sustained and enices. It is in a Government that exacts a couraged. So long as the Government coninle of $271,023 for unintentional irregular- tinues the policy of exacting tolls for the
ities that led to a loss of revenue of only  benefit of privileged classes; of collecting
$1,664, that the main cause of the spy sys- revenue by strained and artificial processes;
tern is to be discovered.  The exaction of of confusing the laws in such manner as to




76                    THE CASE OF PHELPS, DODGE & CO.
render them  difficult of comprehension; admission was through the agents, and
and of combining the interests of a political nothing had been feloniously removed from
party with every branch of the administra- the premises. Among those concerned was
tion of Government, just so long will the a young man whoml they had taken into
interests of the Government and the inter- employment in charity; had been educated
ests of merchants be " diametrically oppo- in the house, and finally promoted to be assite," and spies and informers abound in all sistant invoice clerk. lie had got access to
the land. The existence and work of these the store at night on the plea of posting up
people will act as important agents in that arrears; and foreseeing that the investigation
impending revolution which Carl Schurz would lead to his dismissal, like the unjust
pictured in his speech on the proposed ex- steward he took steps to secure his future
pulsion of Caldwell from the United States position at the expense of his employers.
Senate, in which he reminded his auditors As assistant invoice clerk he was aware of
of the historic lesson that corruption must irregularities in certain invoices, and havbe summarily put down by the people, or ing stolen these, he put himself into conit will bring them to speedy and inevitable  munication with the Custom-house officials,
ruin.                                    instead of informing his masters.  Before
submitting them to the officials, the case
against the firm was drawn up by lawyers
[From the ANGLO-AMERICAN TIMES, London, lay of high standing, to be placed in the hands
17, 1873.]               of Custom-house detectives. The object of
A TALE OF MERCANTILE          LIFE   IN  the clerk was to secure the portion of the
NEW    YORK                 fine which would be imposed, one-fourth,
and the result proved that his calculation
The story of Messrs. Phelps, Dodge & Co. was correct, for he pocketed upwards of ten
would be of interest to manufacturers and  thousand guineas;-but, let us glance at
dealers with the United States under any  the way. The statutes of the United States
circumstances, but in itself it forms so curi- are piled into a complicated and confused
ous a tale, that it can be read with instruc- mass from the beginning of the century; so
tion by all. We must preface what we are confused, that but few men in the Union
about to tell by stating that the subject has fully understand the code, and it would
been the cause of furious newspaper discus- take a lifetime to comprehend its requiresion, official discussion, and mercantile dis- ments, provisions, limitations, and interprecussion; the majority of the papers assailing  tations. To confound confusion, this code
the firm in unmeasured terms, which, by  requires invoices, certificates, and declarathe way, is conspicuous from its high rank  tions in triplicate of shippers, consuls, ownand long standing, as well as from the rec- ers, and consignees, in respect of cost,
ord of its senior partner, one of the most market values, freights, charges and comesteemed citizens of the Union. Last sum- missions. But the Government may set all
mer a contract was entered into with Euro- this aside, and assess on the judgment of
pean manufacturers for the purchase of the  appraisers.  After their decision has been
whole output of a certain metal fabrication  accepted by Government and merchant, the
involving a large amount of capital and  goods delivered, sold and consumed, the
risk. A partner was sent on this business Government practices the right at discreto Europe, and the negotiation was of course  tion of referring the transaction back, if
strictly confidential. The firm was waited  within five years, for further adjudication,
upon when its arrangements had been thus for in the case of Phelps, Dodge & Co. this
far completed, by a competitor who dis- was actually done. Further, it is asserted
played a full acquaintance with all the de- that where the duty is per pound, per yard,
tails, and, demanding a participation in the or per dozen, without reference to the value
enterprise, said he would " burst the whole  of the article measured, yet, if the invoice
business if denied."  The demand and the  does not correctly state the value, the goods
threat were resented, but as they were reit- are liable to confiscation. Nay, more. In
erated in Europe, searching inquiries were the matter of some South African diamonds,
made, when it transpired that certain metal- forwarded to the care of the Collector for
brokers and others were in the habit of in- appraisement, instead of the owner or conspecting the letter-books and invoices of the  signee, the absence of an invoice giving defirm at night, getting their admission there- tails unknown to any one, even the finder
to by dishonest clerks and watchmen. On  of the diamonds, was held to render the
a reference to the law it was found that no goods liable to forfeiture, and proceedings
criminal charge could be sustained, as the  for forfeiture  were  actually instituted.




CONCLUDING ARTICLES.                            77
Messrs. Phelps, Dodge & Co. published a ing up obstructions at the entrance-gate of
statement showing the difficulties under its domain; making it the interest of its
which the inmporter labors, and an extraor- officials to knock down and rob any of its
dinary comlentary on the Government it customers who may be caught stumbling
is, considering that the great Republic over one of these obstructions; and who,
holds itself to be the leading trading com- not content with the intricate obstacles,
munity, and openly declares its design to throw in political considerations to blind to
make this port of New York, where these the path of virtue, and endeavor to drive
obstructive regulations exist, the first em- those determined to enter, into the path of
porium in the world, commercially and  fraud. At the same time we have this very
financially.  We believe it was Sidney  Government publicly declaring New York
Smith who said that a Bishop would have to be the freest and most open port in the
to be sacrificed before public attention could  world, inviting mankind to make it the
be attracted, and a reform instituted; and great depot of the globe, and predicting for
it is probable that the sacrifice of this lead- it a future which is to constitute it the mar.
ing American firm may be needed to com- vel of the planet.
mence the reformation so much needed in  The articles which the firm were alleged
the Custom-house of New York; for this to have undervalued were tin and tin plates,
business has assumed a black-mailing char- the duties on which were ad valorem. A
acter, conceived in dishonesty, commenced  rigid investigation by the District Attorney
in dishonesty, continued and ended in dis- and special agents, developed the fact that
honesty. With such a complicated code, the Government had lost by undervaluation
with regulations, and a procedure appar- a sum of $1,664, while it had gained in
ently framed to entrap any importer whom  other cases more than sufficient to cover that
an official might desire to trip up, we have amount. This inquiry led Mr. Davis, the Dispolitics so intertwined that the motive may trict Attorney, to the conclusion that "the
come from a proceeding utterly unconnect- idea of defrauding the Government of its
ed with the merchant's business. When  lawful duties had never entered into the
the Custom-house was on the trial into  minds of the above firm." But Mr. Special
which the Executive had been lashed by  Agent Jayne had another card to play; for
the press after Mr. Murphy had been made he had to work for his two per cent. If the
Collector, the gentleman who gave the firm fought the Government in the courts
most dama:ging evidence against it was Mr. of law, there was every chance that the
William E. Dodge, who emphatically as- Government would be defeated, and where
serted that the extortions of the General then would be Mr. Special Agent Jayne's
Order Storekeepers, and others connected two per cent.? He strongly advised the
with the Custom-house, had made New    Secretary to take the sum the house was
York the most expensive port in the whole willing to pay, on the plea "that it was
world. Thatwas astatement to be wiped out enormous, in comparison with the amount
only in blood. It was a bombshell exploded  of undervaluation, so enormous that it
in the nest of corruption, and it remains on would be exceedingly difficult to obtain a
record, a remark frequently referred to both  verdict for the amount claimed." Why did
in debates in Congress and discussions ill this firm, the chief partner of which has
the press.  To add to the Custom-house just been re-elected President of the New
grievance, the name of Phelps, Dodge & Co. York Chamber of Commerce, accept the
headed the petition of 100 New York mer- compromise proposed, paying $271,000, unchants for the redress of certain grievances; der such circumstances? Why did one of
and the injury which has been done to the the partners, we may ask, give the damagfirm is all the more marked from the fact ing evidence before the Congressional Cornthat Mr. Dodge threw all his great influence mittee on the Custom-house? They had
into the Grant political scale during the brought upon them the enmity of a body in
campaign; a service, however, which ap- whose power they were made to feel they
pears to have failed in propitiating that were. They had been made to feel that the
section of the party headed by the New  ways of fraud were the pleasant ways in
York Custom-house. To make the case their metropolis; and they had been sharply
complete, not only had the Custom-house to corrected when they were caught bungling
make an example for the injuries it had  over the obstructions on the paths of rectisustained, but the officials were incited to tude. To fight the Custom-house was to
this course by a direct gain, two per cent. of destroy their business; the sum they rethe fine being awarded to certain of their garded as blackmail, and as blackmail they
number. Thus we have a Government pil- paid it,








APPENDIX.
[Sec page 53.]
THE OFFICIAL CORRESPONDENCE.
WASHINGTON, April 27.-The following is the cor- great caution, but having in my possession certain
respondence, from the files of the Treasury Depart- papers purporting to be copies of invoices from the'. relan to te ce of       manufacturers of these goods, giving the sizes, kinds,
ment, in relation to the case of Phelps, Dodge & Co.: and qualities, with shipping marks, dates, and number
LA.-Inclosure.1               of packages, I proceeded to compare them with the
Custom-House papers on file and found them to agree
CUSTOtM-HOUSE, NEVw-YORK,             in every case in the following particulars: In number
SURVEYOR'S OFFICE, Jail. 3, i873.  of packages, in marks, in sizes, and kinds of goods,
in all the subdivisions that distinguished the different
ifon~. GEoRGomE S. BOUTwELL, Scey of//he Treasury. sizes and qualities under the different marks with the
SIR:                                          number of packages.
I herewith inclose detailed report of result of  First, establishing beyond all question the identity
examination of the books and papers of Phelps, Dodge  of the goods; seeond, that these papers were different
& Co., importers of metals, doing business in this invoices of the same goods. These invoices differed
city. I have endeavored to make this statement as from those in the Custom-House in the following parintelligible as possible, but the large sum involved  ticulars, viz.: In the prices paid, the difference per
in the suit that has been instituted, and the long and  package being from three pence to four shillings sterfavorable standing of the house, must be my justifica- ling; in omitting in many cases the additional charge
tion for explaining at more length than usual the  per package from the Custom-House invoice; in
exact character of the fraud, and the character and  omitting from the Custom-House or consular invoice
extent of the proof.                            the cost of transportation from Wales, the place of
According to ordinary modes of reasoning, a house  delivery, to Liverpool, the place of shipment.
of the wealth and standing of Phelps, Dodge & Co.  In other words, the identity of the goods being eswould be above the influences that induce the ordin- tablished, and the genuineness of these papers as
ary brood of importers to commit fraud. That same  invoices in the possession of the firm being established,
wealth and standing becomes an almost impenetrable this firm had deliberately violated every provision of
armor against suspicion of wrong doing, and diverts the law of 1863 now governing the invoicing and enthe attention of the officers of the Government, pre- tering of imported merchandise paying ad valorem
venting that scrutiny which they give to acts of other duty.  By diligently comparing these papers with
and less favored importers. It would require more their invoices on file they were found to be in the same
than mere suspicion to justify a customs officer in  handwriting of their Custom-House invoices, and I
questioning the truth of the declaration under oath of had reason to believe that a systematic fraud had
a member of this firm before the United States Consul, been perpetrated.
that an invoice of merchandise purchased by this  I therefore called Judge Noah Davis, the then
house and consigned to them was in all respects true, United States Attorney, to my office to go over the
that it represented the actual prices paid with all papers with me, and he fully concurred in my belief
charges thereon, that no other or different invoice that a fraud had been committed, and assisted me in
had been or would be furnished to any one.      procuring a warrant for the seizure of their books and
It would for the same reason require almost positive papers. After procuring the warrant, however, Judge
proof to justify a suspicion that the members of this Davis suggested that he come to my office and send
firm did not swear to the truth when they made entry  for the nmembers of the firm, and say to them that if
of these goods, and solemnly declared on oath that no  they would deliver such books as I might indicate he
other or different invoice have been received by them, would not have the warrant served. This course was
and that the invoice produced represented the true pursued, and they delivered to me such books as I
purchase price, and was in all respects true, and that asked for. Upon examination of their invoice books
if any other or different invoice or account was received  exact fJzc simine invoices of those in the Customby them they would immediately notify the Collector House were found, to which was found attached in
of that fact, and the officer that should have the tem- many instances other invoices similar in character
erity to proceed, without the most positive proof, to to those hereinbefore described.
charge this, or any other house of like standing, with  This certainly brought the knowledge of the frauduhaving failed to comply with the law in these most lent transaction directly home to the members of the
essential particulars, must expect to bring upon him- firm, and to each one guided by the invoice price
self a shower of deserved odium.                either in selling the goods, making up the accounts, or
Feeling most keenly the requirements of the situation, in conducting the financial transactions of the house.
I proceeded with the investigation in this case with  The only escape and only answer that could be made




30                                      APPENDIX.
was that Phelps, Dodge & Co., in the transaction of sent for the senior member of the house, and he voltheir enormous business, knew nothing of the import untarily produced the books, though one of the junior
or meaning of the oath taken before the U. S. Consul partners attempted to keep back the one book which
at Liverpool, knew and realized nothing of the nature  was especially desired, being one containing invoices
of the oath taken almost daily by some member of the  and memoranda. An examination showed, what was
firm on entering their goods, knew nothing of the law  believed before, that the defendants had committed
enforced so vigorously and relentlessly against their two apparently distinct species of fraud. One of these
less favored neighbors. In fact, they have done busi- consisted in invoicing tin shipped from Liverpool at
ness in New-York, knowing and caring nothing for the price paid for it in Wales. There were with the
the laws, or they have deliberately and systematically invoices brief memoranda stating that fact in terms,
disregarded and defied the law with intent to defraud  the memoranda being sent by the Liverpool house,
the Government.                                 always in the same handwriting, and stating expressly
The total value of the invoices examined amounted  " We invoice them to you at the prices paid in Wales,
to about one and three-quarters of a million of dollars, or words to that effect. There is at hand no means
and this amount is plainly and certainly forfeited to  of showing the amount of undervaluation on this acthe United States by the statute of I863; not by any  count, or we have no proof of the cost of such transtechnical construction or far-fetched interpretation, portation. The other species of fraud consisted in
but by deliberately and systematically stating the  trifling undervaluation of some single item or class of
cost of their goods below the purchase price by a false items, in an invoice in which most of the items were
invoice, made false for no conceivable reason but to  correct. There are, however, one or two instances in
lessen the duties to be paid to the United States.  which a whole invoice seems to have been undervalForfeited for not doing the things commanded by  ued.
the statute, and which the law made it their duty to  There is no actual evidence of any fraud in either
do.                                             class prior to January, I871. The books neither before
Forfeited for doing what the statute in express terms nor since contain any evidence of fraud, but it is found
forbids their doing.                            in the memoranda already referred to and in duplicate
Forfeited because they did defraud the United States. (true) invoices. If these ever existed for the importaForfeited because no explanation can be given or tions prior to about January, i871, they have been
motive found for systematically understating the destroyed. The informer asserts that the frauds have
cost of their goods, and thus defrauding the United  extended over several years, and there is considerable
States, except that they did intend to defraud the indirect proof that this is so in the similarity of rates
United States.                                  before and since January 1871, the invoices showing
If the excuse or pretense that they acted in ignorance  the same prices before I871 in the classes of goods
of the law can be made to serve, then the plea of igno- which are shown to have been undervalued since that
rance may be interposed in any case, and the intent time.
can never be inferred from any act, and the first ele-  Of invoices entered since early in 1871 which are
ments of reasoning are set at naught in the search for tainted with fraud the total value is $I,726,o60. The
some motive that will explain why they made the two items in these invoices in which undervaluations occur
sets of invoices.                               amount to $271, 017 23, while the amount of underThe items proven in these several invoices to be un- valuation is $6,658 78. The total amount of duties
dervalued, when taken separately, amount to about lost to the Government was $I,664 68. The total
$275,000.                                       importations of the defendants are about $6,ooo,ooo a
The percentage of loss on the whole amount is, year.
therefore, small, yet the importations of the house are  While the investigation was going on various provery extensive, and if the same or nearly the same  posals of compromise were made, but none of them
percentage of fraud extends through their importations, were such that the Collector deemed it worth while to
other than those included in the statement, and on  hold out any hope that they would be accepted, though
which we have positive proof, the entire loss to the  I think that my predecessor was disposed to advise the
Revenue must have been some $io,ooo or $I5,000 per acceptance of a considerably smaller sum than that
year, perhaps more.                             now offered. I was personally cognizant of the whole
Be this as it may, the evidence on these invoices is proceedings, but took no active part in them until
conclusive. I have the honor to be, very respectfully, after I had taken my oath of office. I yesterday deyour obedient servant,                          voted considerable time to the examination of the
B. G. JAYNE, Spccial Agent. papers.
After careful consideration I have decided to recommend the acceptance of the compromise offered. I
am influenced to this course by the fact that the
I[B. —Oe,incloslre.]           nominal amount claimed is so enormous in comparison
with the amount of undervaluation and fraud that I
OFFICE OF THE DISTRICT-ATTORNEY OF THE        believe it would be exceedingly difficult to obtain a
UNITESATES FOR THE SOUTHERN DISTRT  verdict for the amount claimed. The smallness in
UNITE  NEW YOR, NEW-YORK, Jan. 2, I873 T  amount of the fraud also makes the amount offered an,  adequate-perhaps an extraordinary-punishnlent for
lIon. E. C. BANFIELD, Solicitor of the Treasury.  the offense committed. The proposal, therefore, seems
to me to secure the two things that should be required,
SIR:                                          an adequate sum to punish the offenders and a payI herewith transmit an offer of compromise made  ment into the Treasury, not only of the amount
on behalf of Phelps, Dodge & Co., in the suit of the diverted from it, but of as large a sum as it is probable
United States against themselves. The suit is brought that litigation would secure.
to recover nominally $t,ooo,ooo, though the detailed  I am a little sorry that my first formal official act
statement furnished me discloses a few thousand dollars should be to recommend a compromise for a sum which
less.                                          seems so much smaller than the amount the GovernThe charge is for violations of the first section of ment could justly claim. In the recommendation I
the act of Congress of March 3, i863.           make 1 have the concurrence not only of the officers
The facts in the case are as follows: Acting upon  of Customs, but of my experienced predecessor.
information received by him, Special Agent Jayne
applied about a week since for a warrant to seize theYour obedient servant,
books and papers of the defendants. My predecessor,              GEORGE BLISS, JR.,
after a careful examination, deemed it a proper case
for the issue of a warrant, but hefore it was served                  U. S. Att'y, S. Dist. N. Y.




APPENTDIX.                                        81
[C.-First Proposal.]             alleged violations of the Revenue laws of the United
States; and whereas there are certain invoices of imNEw-YORK, Jan. 2, 1873.   portations entered into the Custom-House by said
To GEO. BLISS, yr., Esq., U. S. District-Attorney ncompany between the first day of January, i868, and
for the SoBusthern District of SNew-AYork.   the first day of January, 1873, which are claimed by
the United States to have been in violation of the
SIR:                                           Revenue laws of the United States.
As the attorneys of Messrs. Phelps, Dodge & Co.,  Now for the adjustment and a compromise of all
in the suit of the United States against Wm. E. Dodge claims arising out of violations of the Revenue laws
and others:omprising the said firm, this day instituted, of the United States between said dates, and in settlefor a claim of $i,ooo,ooo for alleged violations of the ment thereof, the mercantile firm of Phelps, Dodge &
Revenue laws of the United States in relation to the Co., by their attorneys, hereby offer to compromise
importation of merchandise, and particularly the said suit and all violations of said Revenue laws, by
provisions of the first section of the act of Congress entry and payment of a judgment in said suit in favor
approved March 3, I863, in respect of the entry of of the United States for the sum of $260,000 in curcertain importations of merchandise within and during  rency without costs, which sum is hereby offered and
the five years last past, we are instructed by our clients is to be received by the Government in full compromise,
-while protesting that no fraudulent intent has ever satisfaction and payment of all duties, penalties and
been entertained by them toward the Revenue of the forfeitures for said or any violations of the laws of the
United States in any of their acts respecting said or United States by said Phelps, Dodge & Co., between
any importations made by them-to offer in compro- said dates.
mise and settlement of the said claim of the United
States in the said suit the sum of $260,000 in United          WAKEMAN & LATTING,
States currency, oil the sole ground that there may       A ttorneysfor saidfirnm and defendants.
have been acts in connection with the entry of the
said importations in violation of the provisions of the WILLIAM FULLERTON, HENRY KNOX, of Counsel.
said statutes and rendering it proper that such an offer
as the above should be made. Yours, &c.,
WAKEMAN & LATTING,.. n
WAKEMAN & LATTING,          [The following is the indorsement on the foregoing
A ttorneys for the Defendants. letter:
WILLIAM FULLERTON, of Counsel.                     r
WILLIAM FULLERTON, of Counse.                 This second offer was presented to me by the Counsel
of P., D. & Co., Jan. 25, and was verbally rejected,
and after a long conference I intimated that I would
recommend an offer in which the release should be
[D.                        limited to such frauds as were embraced in Mr. Jayne's
reports, if the U. S. Attorney should concur. —E. C.
CUSTOM-HOusE, NEW-YORK, Jan. 6, I873.    B.j
Hon. E. C. BANFIELD,
Solicitor of the Treasury DeIartomet.
SIR:                                                           [E. (2) —Telegram.l
Suit was instituted against the firm of Phelps, CXLIX.             NEW-YORK, Jan 29, 873
Dodge & Co., for the reeovery of $I,ooo,ooo currency,
being the value of certain invoices of merchandise im- Solicitor BANFIELD, Treasury Departzent, Washported by them in violation of the first section of the  ington.
act of March 3, 1863. The defendants offer the sum
of $260,000 to compromise the suit. I would recom-  The circumstances under which our proposal of
mend the acceptance of this offer for the following compromise was made having entirely changed, we
Of260,000 tCOmpromise the suit. Iwould reco- compromise was made having entirely changed, we
reasonsn teac: tacoftiofefoth              w     have notified the Secretary of the Treasury that we
First: This sum will more than reimburse the   have withdrawn the offer made by our attorneys.
Government for any probable loss.                                   PHEPS, DODGE & CO.
Second: This firm is composed of a large number
of members, and the uncertainty of all human affairs,
when taken in connection with the unavoidable delays
of the law, is of itself a strong argument in favor of                 F.]
acceptance.
Third: The purpose and intent of the law will   OFFICE OF THE DISTRICT-ATTORNEY OF T
have been complied with.             UNITED STATES FOR THE SOUTHERN DISTRICT OF
Very respectfully, your obedient servant,            NEW-YORK. NEW-YORK, Feb. 8, 1873.
B. G. JAYNE, Special Agent. Hon E. C. BANFIELD, Solicitor of the Treasury.
DEAR SIR:
I beg to transmit herewith a copy of proposition
of compromise made by Messrs. Phelps, Dodge & Co.,
[E.-Second proposal.]            for the settlement of the suit of the United States
against them. The proposal is, I understand, in the
NEW-YORK, Jan. 2, 873.   form which met the approval of the Department prior
to the withdrawal of the original proposition. I have
GEORGE BLISS, 7r., Esq., U. S. Attorney for the no hesitation, for the reasons heretofore given by me
Southern District of New-York.             with reference to the prior proposition, in recommendSIR:                                           ing the prompt acceptance of this offer. 1 beg to say
that I hold on deposit, subject to the acceptance of
Whereas, a suit has been commenced this day  the offer by the Department, checks for the amount
against William F. Dodge and others, composing the  proposed. Very respectfully, your obedient, servant,
firm of Phelps, Dodge & Co., to recover damages or
penalties in the alleged sum of $i,ooo,ooo, for certain |     GEO. BLISS, JR., U. S. Attorney.




82                                        APPENDIX.
[G.-Third Proposal.l              Government their total amount. This, however, was
modified to a round sum estimated to cover same. As
NEW kYOTRK, Jan. 2, i873.  there was long and unexpected delay in acting upon
GEO. BLISS, JR., Esq., U. S. A ttorney for the South- this offer, and our motives were likely to be misappreern District of New- York.                  hended, we concluded to withdraw, and so advised
SIR: -you. We find, however, which we did not then know,
that you had already approved of the proposed settleWhereas a suit has been commenced this clay  ment, and it was considered as settled by the officers
against William E. Dodge and others, composing the  of the Government here. They felt that our withfirm of Phelps, Dodge & Co., to recover damages or drawal at so late an hour did not seem in good faith
penalties in the alleged sum of $I,coo,ooo for certain  to them, and we have therefore concluded, if the
alleged violations of the Revenue laws of the United  matter can be at once closed, to renew our offer, and
States; and whereas there are certain invoices of im- that it may fully cover all the claims made by your
portations entered into the Custom-House by said  agents here. We make this in the exact sum ascercompany, between the first day of January, I868, and  tained by them. Very respectfiilly yours, etc., etc.,
the first day of January, 1873, which are claimed by
the United States to have been in violation of the                             WV. E. DODGE.
Revenue laws of the United States. Now for the adjustment and compromise of all claims arising out of
violations of the Revenue laws of the United States
between said dates, and in settlement thereof, the                     [J.]
mercantile firm of Phelps, Dodge & Co., by their
attorneys, hereby offer to compromise said suit and                TREASURY DEPARTMENT,
all violations of said Revenue laws by entry and pay-          WASHINGTON, D. C., Feb. IO, 1873.
ment of a judgment in said suit in favor of the United
States, for the sum of $27I,017 23 currency, without WAM. E. DODGE, Esq., care of Pheles, Dodge &O' Co.,
costs, which sum is hereby offered and is to be received  ionjorters, New York.
by the Government in full compromise, satisfaction,
and payment of all duties, penalties, and forfeitures  SIR:
for said or any violations of the laws of the United  I am in receipt of your letter of the 8th inst.,
States by said Phelps, Dodge & Co. between said  advising me that your attorneys have renewed an
dates,                                           offer for the compromise of a suit commenced by the
WAK MAN & LA TT~ING'          United States against youi firm. In that letter you
WAKEMAN & LATTING,                      state that you did not know, when the last offer was
A ttorneysfor Defendants.   withdrawn, that the Secretary of the Treasury had
WILLIAM FULLERTON of Counsl          already approved of the proposed settlement. I write
WILLIAM FULLERTON Of Counsel.                    early to advise you that the statement so made to you
is erroneous. Your second offer for compromise was
under consideration when it was withdrawn, but the
Department had not reached a conclusion as to what
[H.]                       should be done, nor was it in possession of information
sufficient to justify action at that time. If your action
OFFICE OF B. G. JAYNE, SPECIAL AGENT OF THE )  in renewing the proposition has been influenced by
U. S. TREASURY DEPARITMENT, CUSTOrM-HOUSE,     this representation you will have an opportunity to
NEW-YORK, Feb. 8, I873.     consider the subject anew, and take such course as
you may think proper before final action by this DeHon. E. C. BANFIELD, Solicitor of the Treasury.  partment. Very respectfully,
SIR:.                          GEO. S. BOUTWELL, Secretary.
Messrs. Phelps, Dodge & Co. submit a new offer
to the Department. They offer the sum of $271,017 23
to compromise the suit of the Government. This
goes forward with the recommendation of the United
States attorney. The offer is the same in form as the                  [K.]
one before submitted. The amount is the value of
the items undervalued in all the invoices so far as we     PHELPS DODG & Co     Cliff St
can trace, including two invoices entire, where the  B    J    ad Fl, NE       O,   FeI. I, 1873
undervaluation consists in leaving off about $I,ooo
dutiable charges. I am decidedly in favor of the ac-  The Hon. GEO. S. BOUTWELL,
ceptance of this offer.
~~ceptance of this offer.  ^Secretary of the Treasury.
Very respectfully, your obedient servant,
B. G. JAYNE, Siecial Agent.   MY DEAR SIR:
I am in receipt of your favor of the Ioth inst.,
and thank you most heartily for the kind motives
which prompted it. In reply would say that as so
[I.-Private.]                 much has transpired in public, about the proposed
compromise, and though I was misinformed as to the
NEW-YORK, Feb. 8, 1873.   acceptance of the previous offer of my firm in comh  S.       promise of the claims of the Government against it,
The Hon. GEO. S. BOUTWEI.L, Wnastizngton.        I still adhere to the last offer made and trust it may
MY DEAR SIR:                                   be accepted. Very respectfully yours,
As the attorneys of my firm have renewed an offer                          W. E. DODGE.
for compromise, I deem it proper to advise you of the
reasons of this step. On the first notice being given
us that through misapprehension of the Revenue laws
we had violated some of its provisions, we offered on  The foregoing is indorsed: Respectfully referred
consultation with officers of the customs here, to select to the Solicitor of the Treasury (Department of
out the items from the various invoices which they  Justice).
claimed had been undervalued, and to pay to the                   J. N. SAVILLE, Chief Clerk.




APPENDIX.                                          83
[L.]                       proposition, for the reason that, in my opinion, the
release demanded was so broad in its terms that it
DEPARTMENT OF JUSTICE,       could not properly be granted by the Secretary of the
OFFICE OF TIIE SOLICITOR OF TIIE TREASURY,  Treasury.
WASHINGTON, D. C., Feb. I3, I873.     Upon further consideration, I am disposed to recomGENTLEMEN:                                    mend that the proposition be accepted upon the unA proposition submitted by yo  through the U. derstanding and condition that the release to be given
Aproposition submitted by you through thes. to Phelps, Dodge & Co., upon the payment of said
S. Attorney at New-York, in behalf of Messrs. Phelps, sum, shall only extend to and cover such alleged frauds
Dodge & Co., to settle the suit recently instituted su   o Revenu   a ve e    c alled to the noce of
against said firm on account of certain alleged viola-  u po th e Reveue as hae by Mr. Jayne, the Special
tions of the Revenue laws of the United States, bearing  the  reasury Department by Mr. Jayne, thepec
date Jan. 2, 1873, was received by me on the Ioth  Agent of the Treasury, who has had charge of the
inst.  his is the third proposition which has been  investigation. If you concur in this recommendation,
inst. This is nthe third proposition which has been- I will authorize the United States attorney to conclude
submitted by you in behalf of said firm for the settle- the compromise upon the condition herein indicated
ment of said suit. The first was rejected for the  th e coprie upn the    condition herein  inicate
reason that it was accompanied by asseverations of herewith the papers inhelps, Dodge & Co. I ill thank
innocence of all intent to defraud the Revenue. The herewith the papers in the case, which I will thank
innocence of alintent to defraud the Revenue. i  hed  you to return to this office. I am, very respectfully,
second I declined to recommend because it contained. B
a condition that the sum offered to be paid by said                   E. C. BANFIELD,
firm should be received in full compromise, satisfactionSolicitor of the Trensury.
and payment of all duties and forfeitures for said or  To HIon. GEORGE S. BOUTWELL,
any violations of the laws of the United States by   Secretary of the Treasury.
said Phelps, Dodge & Co., between Jan. I, 1868, and
Jan. I, I873.
No facts were submitted in connection with the case                [N.]
that would justify the Secretary of the Treasury in
giving so broad a release as was asked. The third                  TREASURY DEPARTMENT,      l
proposition, being the one now under consideration,           WASIINGTON, D. C., Feb. 17, I873. 
is open to the same objection as was made to the second,  SIR:
and I therefore decline to recommend the same to the  I have received your letter of even date herewith
Secretary of the Treasury for his favorable action. relative to the proposition of Messrs. Phelps, Dodge
The objection indicated is to my mind so conclusive  & Co., to compromise the suit pending against them
in its nature as to preclude the necessity of considering  to recover damages or penalties for certain alleged viothe proposition in any other aspect. I am, very re- lations of the Revenue laws of the United States, by
spectfully,                                     the payment of the sum of $27.0oI7 23, in currency,
E. C. BANFIELD, Solicitor of the Treasury.  without costs, said sum to be received by the Government in full satisfaction of all duties, penalties, and
—.~____ __forfeitures for said or any violations of the laws of
the United States by said Phelps, Dodge & Co.,
[L.-No. 2.]                   between Jan. I, I868, and Jan. I, I873.
In your letter it is recommended that the proposition
DEPARTMENT OF JUSTICE,       be accepted upon the understanding and condition that
OFFICE OF TIIE SOLICITOR OF TIlE TREASURY,  the release to be given to Phelps, Dodge & Co., upon
WASIINGTON, D. C., Feb. 13, I873.  payment of said sum shall only extend to and cover
SIR:                                          such alleged frauds upon the Revenue as have been
I transmit herewith a copy of a letter which I called to the notice of the Treasury Department by
have this day addressed to Messrs. Wakeman & Lat- Mr. Jayne, the Special Agent of the Treasury, who
ting, declining, for the reasons stated therein, to  has had charge of the investigation.
recommend the acceptance of the offer of Phelps,  As the compromise is also recommended by Mr.
Dodge & Co., referred to in your letter to this office of Jayne, in his letter to you, dated the 8th inst., the
the 8th instant. Very respectfully,             settlement, as recommended by you, is hereby authorE. C. BANFIELD, Solicitor of the Treasury. ized, with the additional undertaking, however, that
BIJE.US.,-      it shall embrace only such clauses as I am authorized
GEO. BLISS, JR., Esq., U. S. Attorney, NXIew- Y ork.  to compromise by the tenth section of the act of March
3, i863. Should Messrs. Phelps, Dodge & Co., agree
to the terms herein mentioned, you are requested to
give the proper instructions to the District Attorney
[M.]                      to carry the settlement into effect. I am, Sir, very
DEPARTMENT OF JUSTICE,       respectfully,
OFFICE OF TnE SOLICITOR OF THE TREASURY,          GEORGE S. BOUTWELL, Secretary.
WASHIINGTON, D. C., Feb. 17, I873. )
SIR:                                            Papers inclosed with Solicitor's letter returned hereI herewith inclose a communication from the  with.
United States attorney at New-York, dated on the 8th  The Hon. E. C. BANFIELD,
inst., inclosing a proposal made on behalf of Messrs.  Solicitor of the Treasury.
Phelps, Dodge & Co., to compromise and settle the
suit pending against them to recover damages or penalties for certain alleged violations of the Revenue    [o.]
laws of the United States, by the payment of the sum
of $27T,017 23 in currency, without costs; said sum to            DEPARTMENT OF JUSTICE,
be received by the Government in fill compromise,       FFICE OF TlE SOLTCITOR OF TIIE TREASURY,
satisfaction and payment of all duties, penalties and        WASIINGTON, D. C., Feb. 17, 1873.
forfeiture for said or any violation of the laws of the  SIR:
United States by said Phelps, Dodge & Co., between  The Secretary of the Treasury has decided to
the dates of Jan. I, 1868, and Jan. i, I873.    accept from Messrs. Phelps, Dodge & Co., the sum
On the i3th inst. I addressed a communication to recently offered by them as a compromise, viz.; $271,
the attorneys of Phelps, Dodge & Co., advising themn  o7 23, currency, upon the express understanding and
that I declined to recommend the acceptance of the  condition that the release to be given them on payment




84                                        IAPPENDIX.
of that amount shall only extend to and cover such  the case of the United States against Phelps, Dodge
violations of the Revenue laws of the United States  & Co., of which I inclose a copy. You will perceive
as have been the subject of investigation and report that the Solicitor directs me to include in the comproto the Treasury Department by Mr. Jayne, the Special mise " such violations of the Revenue laws of the
Agent of the Treasury, who has had charge of the  United States as have been the subject of investigation
investigation, within the limits of time specified in the  and report to the Treasury Department by Mr. Jayne,
offer, and it shall also embrace only such claims as the  the Special Agent of the Treasury, who has had charge
Secretary of the Treasury is authorized to compromise  of the investigation within the time specified in the
by the tenth section of the act of March 3, I863. In  offer."  For the purpose of enabling me to define with
case Messrs. Phelps, Dodge & Co., agree to the terms accuracy what is covered by a settlement, if one shall
herein mentioned, you are requested to cause the pro- be made, I have to request that you will inform me
posed compromise to be carried into effect upon the  what violations of the Revenue laws of the United
terms and conditions so decided upon.            States by the defendants have been the subject of inVery respectfllly,   E. C. PANFIF:TD,       vestigation and report to the Treasury Department by
yourself. Please state the period covered by your
Solicitor of the ircaszury.  investigation and the general nature of the alleged
To GEOR)C;E B.ISS, Jr., ESQ.,                    violations. Your obedient servant,
U. S. Attorney, NZe —York.                          GEORGE BLISS, JR., U. S. Attorney.
A true copy.
(P.]'           GEORGE BLISS, Jl., U. S. A ttorney.
OFFICE OF TIIE DISTRICT-ATTORNEY OF TIIE IT. S. I
FOR TIIE SOUTIIHERN )ISTRICT OF NiEW YORK, 
NEW YORK, March 4, 1873. )                       Ln.
The Hon. E. C. BANFIELD,
Solicitor of t/e ITreasury.                        CUSTOr i HousE, NEW YoRK, Feb. 24, 1873.
DEAR SIR:                                      1.1iHonG. GEO. BLISS, JR., U. S. Attorney.
1 have to inform you that in pursuance of the 
authority given in your favor of the I7th ultimo, I  SIR:
have compromised the matters in dispute between the  In reply to your letter of the 22d, making inquiry
Government and the firm of Phelps, Dodge & Co. in regard to what was covered by my report in the case
The compromise has been effected by means of certain  of Phelps, Dodge & Co., I would say that my invespapers, of which I transmit copies herewith. You will tigations covered all the importations of that house
perceive that on the receipt of your favor of the I7th  for five years next preceding Jan. I, 1873, and that the
ult., I addressed a letter to Mr. Jayne, the Special matters called to the attention of the Department
Agent referred to in it, in order that by means of his related to undervaluations of merchandise as well as
reply I might be able to define more clearly the mat- suspected payments of money for damage allowances
ters included in the settlement; and I have received  during that period. Very respectfully, your obedient
from him a reply of which a copy is herewith inclosed.  servant,
I thereupon, after some negotiation, received from               B. G. JAYNE, SSpecil Agent.
Messrs. Phelps, Dodge & Co. the sum of $27I,017 23, 
and gave to them a receipt, of which a copy is among  A true copy.
the papers.                                                  GEo. BLISS, JR., U. S. Attorney.
It appeared to me that in this way the limits of the
settlement were more definitely marked than could be
done by the drawing of any declaration, or by any
more formal agreement. Owing to the manner in which            [S.] (The Compromise.)
the settlement was made, the money was not paid into  Whereas by letter of the Hon. E. C. Banfield, Sothe registry of the court, but an order was entered ad- itor of te Treasury, dated Feb. 7,  73, of which
justing the costs of the clerk, and of the District-At- a copy is hereto annexed, certain authority is given to
a   copy is hereto annexed, certai h au thority is given to
torney, and the balance, amounting to $262,872 14, the undersigned; and whereas, for the purpose of dewas paid over to the Collector of the Port, and 1iis fining the same more accurately, the undersigned, on
receipt taken. This course was pursued in accordance  Feb. 22, 1873, addressed to B. G. Jayne, the Special
discontinuance of the suit has not been entered, but hereto annexed, to which the said Jayne replied on
will be at once.                           Feb. 24, in a letter, of which a copy is hereto annexed.
Very respectfully, your obedient servant,    This instrument witnesseth that I have this day reGEO. BLISS, Jr., U. S. lttorney.   ceived from Phelps, Dodge & Co., the sum of$27I,07
23 in full settlement and compromise of the claims of
the United States upon them on account of the matters in said letters referred to, including the matters
[Q.]                      involved in the case of the United States against
()FFICe OF TE DISTRICT-ATTORNEY OF TIlE UT. S.  Phelps, Dodge & Co., now pending in the District
FOR THIE SOUTHERN DISTRICT OF N EW YORK,    Court of the United States for the Southern District
NEw YORK, Feb. 22, 1873    of New-York.
PB. Gr. JAYNurE, ~Sleci~( lolzSlz. AGEO. BLISS, JR., U. S. Attorney.
B.DEAR SG. JAYNInR: &e~ial AFeb. 25, I873.
DEAR Sin:
I have received from the Solicitor of the Treasury
a letter with reference to a proposed compromise of