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RECISION TRADE MARK MICROSTATA MICROFILM ROLL NO. TREASURY DEPARTMENT WASHINGTON DARD FORM No. 14.A AMOUNT MARCH CHARGE TREASURY DEPARTMENT APPROPRIATION FOR TELEGRAM Expenses of perain Loans - Haird a beer How (The OFFICIAL BUSINESS-GOVERNMENT RATES Mr Frederick Gable April 10 1945 Chairman War Finance Committee 1270 Sixth Avenue New York NY Personal reasons of great urgency have made it impossible for - to keep engagement in New York tonight. I cannot tell you how deeply 1 regret my inability to be with you in inaugurating the advance seventh war loan payroll drive. General Enter, Acting Chief of the Army Air Forces, has very kindly agreed to be present in my place and to speak at your meeting. He is one of our ablest military figures and I know you will enjoy him. My best wishes for a successful meeting. HENRY MORGENTHAU, a MICROFILM MICROSTATA TRADE MARK TREASURY DEPARTMENT ROLL amotic -20 INTER OFFICE COMMUNICATION 1 I. Need for Improved Law Enforcement. While there has been a gigantic increase in tax ATE April 10, 1945 Secretary Morgenthay TO FROM Charles S. Bell DK returns, both on individual incomes and on miscellaneous excise items, there has been a relatively insignificant increase in the policing staffs covering these fields. Attached is & survey report on the organization, personnel 11. "Coordination" Weaknesses. and administrative machinery currently employed in the law enforcement activities of the Treasury Department which has been prepared pursuant to your recent request. Particular emphasis has been placed on the Internal Revenue activities and their relationship to the Office of the Chief Coordinator. This analysis has been completed within the past ten days and The "Coordination" program has been of very little service in strengthening Treasury law enforcement. This is felt to be due primarily to the voluntary nature of the progran and to the absence of mandatory power vested in the Coordinator. III. Recommendations: is based on earlier studies of the same problem as well as my ( recent personal examination of representative field establishments having responsibility for law enforcement. A. The elimination of the operating title "Chief Coordinator", and the abandoming of the voluntary District Coordination system. This study is offered to you as an objective appraisal of the administrative phase of the present setup, particularly with regard to the organization and personnel elements. No attempt has been made to comment on the technical side of the work, though it has been my observation that an excellent job is being performed with limited facilities under the able leadership of Messrs. Gaston and Irey. For your convenience, I am summarizing below the major elements of the attached report: C B. The establishment in the Office of the Secretary of a "DIRECTOR, TREASURY LAW ENFORCEMENT", whose policy direc- tives will be issued in the name of the Secretary of the Treasury. C. The establishment of four Regional Deputy Directors of Treasury Law Enforcement, to be distributed as follows: (1) Pacific Coast and Mountain States; (2) Mid-West and Great Lakes Area; (3) Gulf Coast and South Atlantic; (4) Central and North Atlantic. 187 PRECISION MICROFILM TRADE MARK -3- ROLL NO. 189 189 NEED FOR IMPROVED LAW ENFORCEMENT C D. An immediate increase in Internal Revenue law enforcement staffs engaged in Intelligence and Miscellaneous Tax Unit investigations. E. The administrative merger of the several Miscellaneous Tax Field Agent groups, and the subsequent absorption of these groups into the Intelligence Unit. The factors considered in developing these recommendations are taken up in detail in the attached report. It seems. to no that it is feasible from the administrative standpoint to improve the Treasury Department's law enforcement service@with- out materially disturbing existing organizational lines or C prejudicing personnel now engaged in this work. Perhaps the most pressing need is to secure the services of outstandingly well-qualified additional personnel. With the close of the war in Europe, many of the nen who left us to go into the military service will be coming back and there will be opened up a fertile field from which to select new recruits. If you approve of the recommendations offered, I should like to investigate more fully some phases of the problem, and then work with Mr. O'Connell, Mr. Gaston, Mr. Irey, and Mr. Nunan in installing these suggestions so far as practicable at this time. C 0 The Treasury Department's law enforcement problem can best be appraised when considered in the light of the tremendous enlargement of the Federal taxation program since the outbreak of war. It seens significant to note that in 1940 Internal Revenue collections amounted to about 5 billion dollars, while in the fiscal year 1944 they totaled nearly 40 billion. It is estimated that about 85 million returns will be filed in 1945, covering over 200 different sources of revenue. For comparative purposes, I am setting forth below a brief analysis of several of the factors which go to demonstrate that the Department's law enforcement program has not kept pace with the over-all growth of taxation during the war. A. MISCELLANEOUS TAXES When thinking specifically in terms of law enforce- ment it is important to have in mind the gigantic increases in tax levies on "luxury" commodities covered by various Miscellaneous Tax provisions. It is from traffic in these items that fruitful leads into black market operations and personal income tax evasions might have been developed. The figures given below are illustrative of the general increases in revenue from "luxury" goods subject to excise taxes. 181 -3190 -2Admissions Tax - In 1940 collections totaled $ 21,887,916 In 1944 collections totaled $178,562,694 Cabaret Tax - In 1940 None In 1944 collections totaled $26,726,331 Jewelry Tax - In 1940 collections totaled $ 159,810 In 1944 collections totaled $113,372,750 Fur Tax - In 1940 None In 1944 collections totaled $58,725,694 These figures reflect huge retail sales, and serve to focus attention on the growing possibility of tax evasion. As the rate of tax increases, the incentive to engage in illicit traffic is proportionately augmented. In brief, it has become profitable to dodge the tax on high rate goods. For these reasons it is somewhat disappointing to find that the Bureau of Internal Revenue field staff engaged in Miscellaneous Tax Unit investigations has remained almost static during the course of the war. There are today approximately 80 field investigators engaged in policing the collection of Miscellaneous taxes covering some 71 different items. This is substantially the same force as was employed prior to 0 enormous war-time increases in tax rates. Moreover, the number of cases handled by this force has remained virtually static, and there has been but a slight percentage increase in the addi- tional tax collections resulting from their enforcement activi- ties. It is obviously impossible for a thorough policing job to be performed in this field with so small a force distributed throughout the United States. Many of the activities subject to taxation require extensive examinations of transaction records, checking of sales and acquisition documents, etc. At best, only "spot" checks can be made by this force, and those examina- tions are of necessity distributed so thinly as to be of little value in controlling evasions on an adequate scale. The present special field squads engaged in Miscellaneous Tax enforcement are not only inadequate to cover the field of work for which they are responsible but, moreover, are separated from each other by artificial lines drawn on a commodity basis. For example, in New York there are three separate squads, having little contact with each other but all working on various Miscellaneous Tax items. In the interest of organizational and functional uniformity, and with the view toward controlling and strengthening this area of investigation, it is recommended that these groups be merged into one organization. Ultimately, because of the MICROFILM PRECISION TRADE MARK ROLL NO -5-4. D evasion, prosecuting 280 cases. Thus, in 1944, under the C similarity of basic problems, and the need for better coverage, highest tax rate in all history, fewer cases of evasion were all Miscellaneous Tax squads throughout the country should be prosecuted than in 1940. Inssmuch as District Heads of the absorbed into the Field Force of the Intelligence Unit. Unit freely state that if they had the personnel they could It should be pointed out parentbetically that the Bureau make a great many more cases, it seens apparent that there of Internal Revenue has, for the most part, considered the are no fewer violations today than in 1940, and in all proba- collecting of taxes from cabarets, retail dealers, amusement, bility there are a great many more. Today the Unit has 304 oleomargarine, etc., to be the responsibility of the field investigative positions, approximately the same force Miscellaneous Tax Units located in the offices of the Collectors as in 1940. of Internal Revenue. Deputy collectors without special investi- In fairness to the Unit It should be pointed out that gation qualifications are the principal enforcement officers in 1944 the additional tax assessments brought about by their in this field. The fact that they are relatively low-paid investigations amounted to over 45 million as against 33 mil- employees and that they must constantly deal with a class of lion in 1940. Also, It should be observed that the military taxpayers most likely to devise means of avoiding their tax services have taken some of the most able investigators from liability means that there is almost bound to be an unduly this organization. The Intelligence Unit has operated for large number of successful tax evaders and a consequent loss the most part on cases involving individual incone tax evasion, C drawing its work from public "tips", Collectors' Offices of revenues. INTELLIGENCE UNIT ACTIVITY Further evidence of the almost static character of referrals, and cases handled by Revenue Agents when the element of fraud is thought to be present. In point of practice today Revenue law enforcement agencies is indicated by these statis- the number of cases investigated is limited largely by the tics on the Intelligence Unit: In 1940 the Unit conducted availability of personnel. 1,014 investigations of alleged evasion, prosecuting 370 cases. In 1944 the Unit investigated 1,082 alleged cases of tax 193 RECISION TRADE MARK MICROSTAT MICROFILM ROLL NO 195 6- 0 profitable sources of additional revenue first. This is ALCOHOL TAX UNIT ACTIVITY obviously & sound approach but with the greatly increased The Alcohol Tax Unit of the Bureau of Internal Revenue tax rates on Individual incomes and luxury Items, It is impera- has had a substantial change in the character of its work as tive to sound over-all enforcement that the separate avenues a result of the war. On the investigative side, bootlegging of revenue be tied together in some comprehensive schene which and illicit production of liquor has greatly decreased; at will provide complete coverage. the same time there has been an increase in permissive work The problem of "specialization" is well illustrated by and activity associated with the control of industrial alcohol the relationship of the Revenue Agents to the Intelligence produced for war-time use. Unit operatives in the field. It has become somewhat a matter This Unit has lost a great many skilled men to the military, however their work is thought to have suffered proportionately less due to the substantial decrease in enforcement work during the same period. Because of this decline in policing work the Unit has lost some personnel to other government agencies and to war industries. There are some indications that the Bureau of Internal Revenue could have capitalized on the investigative of common complai m among Intelligence Unit officials that a Revenue Agents are reluctant to make prompt referrals of cases when the possibility of fraud appears during an examination by a Revenue Agent. This reluctance, it is claimed, is due in part to the independent nature of the separate units and in part to the fact that sone Revenue Agents dislike being tied up on fraud investigations which tend to cut down on their talent of ATU by transferring sone men to other types of individual production records which are measured in terms of po 1cing work P.O. it became obvious that the customary activity of the Unit WAS falling off. The Unit today has 1,004 investi- the number of cases handled. This situation is said to exist despite a directive by the Commissioner of Internal Revenue which gative positions, with 389 vacancies, making the working police makes fraud referrals mandatory. Further study of this situation force somewhat smaller than in 1940. ABSENCE OF INTEGRATED ACTIVITY WITHIN THE BUREAU OF INTERNAL REVENUE The Bureau of Internal Revenue has conducted its law enforcement activities on the theory of attacking the most would seen profitable with a view to installing appropriate controlling measures. PPRECISION TRADE MARK MICROSTATA MICROFILM ROLL NO -9- 197 D -8- that all services might receive benefits through greater contact with each other and reciprocal assistance. However, for ( Much the same condition prevails in other parts of the Revenue service. The machinery for an interchange of informa- cannot be built on & voluntary basis, without direct and tion, and the cooperative use of all personnel is very weak. specific authority in the hands of the administrator. Among In some areas there are being developed special "Fraud" Units the principal weaknesses in the present set-up are the in Collectors' offices and in Revenue Agents' offices for the following: purpose of ironing out these lisison problems, but progress ( some time it has been apparent that effective coordination (1) The absence of specified authority for treating has been slow. There has never been developed within the any given law enforcement problem on a joint basis. with the Bureau a means whereby a special mobilization could be made exception of personnel character investigations, and the recent under one law enforcement officer with the power to take handling of some Surplus Property investigations, it has been personnel from any unit in order to perform a special "shook a rare instance when any enforcement project was undertaken on troop" operation such as cracking down on cabareta or luxury a truly "coordinated" basis. The Chief Coordinator has not goods retailers. been able to cut across Bureau lines, or establish a mandatory INTER-BUREAU RELATIONSHIPS -- COORDINATION EFFORTS The Revenue service has not been able to organize its executive review of cases which might offer an opportunity for joint effort. As a result, for example, both Customs and entire police force into & single machine of maximum power, Narcotics Agents may work on the same case independent of each and likewise, from a Departmental standpoint, we have not been other. Likewise, there has been little crossing of information successful in creating a working arrangement that will fully between Customs, etc., and the Bureau of Internal Revenue, utilize the combined strength of the law enforcement personnel where one case might well provide a valauble lead for a tax in the Bureau of Customs, Bureau of Narcotics, Secret Service, investigation. Foreign Funds Control, and the Bureau of Internal Revenue. When the present pattern for knitting together Treasury law enforcement activities was first developed it WAS hoped (2) The policy of rotating coordinators by districts. In point of practice it is meant that, prior to the war, a 199 - 11 - 198 0 - 10 - For many reasons, this approach has been found impossible C coordinator ordinarily serves in one district for only a year. of execution. Hence, I have endeavored to draw reconmenda- He has no specific responsibility except to call meetings and tions that would result in achieving many of the benefits of take up such matters as may be voluntarily referred to him. consolidation, while holding to a minimum the disturbance of Since his tenure is so short, he feels no responsibility for existing organization. It should be made clear, however, that initiating programs which may extend beyond his period in the authority to be exercised by the proposed Director of Law office. Enforcement would in all instances be drawn from the Secretary (3) A major weakness of the present system is to and consequently be superior to Bureau direction in case of conflict. be found in the fact that all District officials owe their allegance primarily to their respective Bureau or Unit Head. In these circumstances it is of course impossible to secure o The Director should have two primary functions, each 0 supported by the express sanction of the Secretary. thoroughly objective treatment of matters affecting more than (1) To accept assignments directly from the one office. It is readily understandable that a field official Secretary whenever it is believed that a particular law cannot be expected to serve two masters with equal fidelity. enforcement problem should be dealt with on an over-all, It is an unfortunate commentary that the measure of mobilized basis. success achieved by the coordination program is due for the (2) To examine, through his Regional Deputies, most part to the outstanding personal record of the present all Treasury Law Enforcement groups, and remove from individual Chief Coordinator. The benefits derived from the present units any cases or programs of work which in the judgment of arrangement may be said to flow directly from & single personal- the Director can be more effectively treated on a joint basis. ity, rather than organizational integrity. These two basic functions must be backed by commensurate CONCLUSION power and general administrative controls such as: As a result of much study and constructive effort devoted to this problem over the past several years it has often been C stated that probably the best final answer would be to completely consolidate the Department's law enforcement agencies. (A) The power to take men from any organization 0 in building & consolidated "task force" for a particular project. 12 - 201 200 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION (B) The power to set standards and programs for Date April 10, 1945 the selection and training of new investigative personnel. TO Secretary Morgenthau (c) The final review of all disciplinary cases FROMActingGeneral Counsel involving investigative personnel. (D) The power to order an increase or reduction in the size of investigative organizations. (E) The power to direct changes in physical location of field offices and set up joint administrative facilities. Finally, in considering this report it should be borne in mind that not all phases of the existing problem have been discussed. I have tried only to high-light typically illustrative elements, and present a pattern which I believe will effectually deal with the Department's immediate problem as posed by you in regard to black market operations, as well as set up, at least for the present, a workable organization which, if accepted by all interests, could develop into the nearest approach to complete consolidated enforcement sought many years ago. Attached hereto is the second of a series of reports which will be submitted to you weekly showing the progress of our current enforcement drive. Myreh SPRECISION MICROSTAT! TRADE MARK MICROFILM ROLL 203 Page Kemorandum Secretary Morgenthau April 10, 1945 agents and revenue agents of 3 of the taxpayers. Among the names furnished were those of certain professional gamblers whose incone tax returns have been examined regularly by agents of the Bureau. All investigation by a special agent and a revenue agent of one of these in particular, Connell G. MoEwen. Knoxville, Tennessee, was completed in December 1944 at which time the taxpayer tendered a certified check for 832 685.95 in payment of taxes, penalties and interest for 1943 and prior years. C MEMORANDUM Secretary Morgenthau TO: FROM: Geo. J. Schoeneman, Acting Commissioner Since Commissioner Nunan's last memorandum of April 2, regarding the organized tax drive against irregular cash operations and black market activities, appropriate instructions have been issued to all special agents in charge who were not present at the meeting in Mr. Nunan' a office on March 28. I an enclosing a copy of the instructions as issued. Special agents in charge will coordinate the pro- It has been a long established practice with special agents in charge and special agents to carefully soan newspapers for current developments pertinent to the Bureau, and special emphasis is being given these matters at this time with the view that immediate tax investigations be made when warranted. Last week the Office of Price Administration instituted court action in Washington, D. C. against Berry G. alleging Company, Beef gran in their respective districts enlisting the aid of col. lectors, internal revenue agents in charge and district supervisors of the Alcohol Tax Unit. Concerted attention of the entire field service, therefore, is now focused upon this subject. As reports are received from the field I shall furnish you timely memorandums showing the number of agents engaged on this work, the number and types of cases under active investigation, together with comments on important developments. Mr. Wenchel and the office of the Attorney General have arranged for special procedures in handling cases of this nature to expedite prosecutive action. The first case coming within this procedure has been received, involving Ben Mayers of Cincinnati who is described as a black market machinery and metals operator and a free spender of currency in cabarets and night clubs. A jeopardy assessment against the taxpayer for taxes penalties and interest in the amount of 893.115.36 has been issued by the Bureau, and a conference has been held Head and Uhler of the Chief Counsel' office who ( withconsidering Meanrs. ofadequacy proof for criminal prosecution the This are taxpayer has a long criminal record and has violated reg- ulations of the office of Price Administration and war Production Board. careful check has been made of the tax history of per- A frequenting gambling establishments in Miami whose names sons were recently furnished by Mr. Irey. Tn some instances it that the taxpayers reported substantial income from was found tended to indicate their legitimate that presence sources and in gambling the circumstances resorts was as a casual di- The income tax returns of 37 of these individuals version. have been referred to the field for examination and however, provisions have been made for joint investigations by special Wright and San Seigel trading as Wright overcharges on meat of 8382,200. Agents of the Bureau are making an investigation to determine whether income tax eva- sion is present in this case. 0 An unusual activity has been discovered in Richmond in that certain individuals wore found to be turning in 1.000 bills and bills of other large denominations in exchange for $20 bills. This was apparently motivated by fear that the large bills could be traced or that the Department contemplated issuing a call for currency of large denominations. The amount involved in these exchanges to date approximates $50,000. The names of the persons making the exchanges have been obtained and appropriate tax inquiries will follow. There are reasons to believe that there has been considerable black market traffic and use of currency in transactions involving jewelry and furs without the payment of excise taxes. Special agents in charge accordingly have been requested to confer with collectors of internal revenue in their districts to consider the advisability of making a thorough canvass in the larger cities of jewelry and fur dealers subject to excise taxes. Aside from the exoise tax considerations. large cash sales reflected on the records of jewelry and fur dealers may possibly afford constructive leads for subsequent income tax investigations A project of this nature already has been arranged at Boston with ten deputy collectors assigned. In New York it has been found that Louis Importer Inc. has sold expensive fur coats ranging as high as $4,051.50 including the 20 percent excise tax, ( 1 liability this in case will be in the neighborhood of $40,000 and that oriminal prosecution will be recommended Special Agent in Charge MoQuillan's New York production report on fraud work for March was received last week and is enclosed showing 4 arreats, 1 prosecution and 1 conviction, together with taxes, penalties and interest recommended for assessment in the aggregate amount of $1,445,647.41. I are enclosing weekly reports received today from field collection district Maryland 418 delinquent districts. AB matters of particular interest it is noted the that in tax of returns and 232 amended income returns tax have been filed since March 25 reporting taxes in the aggregate amount of $133,348.66. There were also 47 deli aquent with- holding tax returns filed voluntarily showing a total tax C in the amount of $515,133.29 and 5 elinquent miscellaneous tax returns reporting taxes due in the amount of $6,256.28. The receipt of a reasonable number of delinquent and amended returns in collectors' offices is not unusual and some of these delinquencies may be accounted for by the proximity of the last filing period on Karch 15 although it is likely that the recent press releases relating to the tax drive accelerated the Additional process. sources of information are being surveyed in the Boston Division including the purchases and one-payment insurance annuities cash large transfers by the means of Western Union telegrams. Western Union maintains a central file in New York upon the subject which will be examined. It has been ascertained that $10,991,555 cash deposits in bills of large denomination were made in three New York banks during the period July 1, 1944, to March 16, 1945, by approximately 1,800 depositors. A list of these depositors together with the amounts and dates of deposit is being compiled by special agents. A of Mr. 'Connell memorandum referred to cash deposits recent made by Henry Lustig, Henry Lustig Co., Inc. and Restaurants and Patisseries Longchamps Inc. during March 1945. An examination of bank accounts maintained by Mr. Lustig and related interests in 8 New York banks revealed cash deposits during March 1945 of $1,658,550 consisting mainly of five hundred by o dollar and one thousand dollar bills. Mr. Lustig rents and has sole access to a safe deposit box with the Lawyers Trust Company which he visited on February 28. March 2 and March 13, 1945, which dates correspond approximately with dates when large cash deposits were made in the various commercial was apparent that the deposits and balances from December 1944 to February 1945 were quite modest as compared with the activity that occured during March 1945. The circumstances succest the conclusion that Mr. Lustig, apprehending some official action in reference to large bills, withdrew a great number from his safe deposit box and restored them to oirculation by deposit in these several bank accounts. Real estate activity in Atlantic City is receivir attention it having been found that approximately 6,800 deeds were recorded in the year 1944, an increase of 58 percent over the year 1943. It is rumored that the consideration in many of these transactions was paid with cash. The case of Bert K. Naster, Chicago, Illinois, which was mentioned in Commissioner Nunan's nenorandum of April 2. has been reviewed by Mr. John Kiley, Division Counsel in Chicago. He has concluded that the available evidence is suitable as a basis for prosecution and a summary report has been prepared and forwarded to the Chief Counsel in Washington for consideration. Several days ago the police raided a private home in the Detroit area, suspected of gambling activities, and among other things seized woman'sone purse containing dollar total bills, thousand 000 consisting of $10,000 in 330 310 000 in five hundred dollar bills and $10,000 in one hunCorrado. one Mrs. claimed of dred dollar bills. The money has been by She stated that she is the wife of Peter Corrado who is known to operate a gambling lottery commonly known as the numbers game in Detroit. Peter Corrado was investigated by the Intelligence Unit several years ago and has been checked since by internal revenue agents. He has always reported substantial amount of tax and the discovery of these large bills may not result in a case although the matter will be thoroughly investigated. The first progress report from the Atlanta Division comments upon investigations involving black market profits in liquor, meat, cotton goods, illegal diversion of sugar and rent overcharges. . matter of such interest developed some months ago from an examination of recordak films of bank in Montgomery Alacama. This examination disclosed indications of a general policy followed by a number of business firms and individuals of cashing customer's checks apart from the regular business deposits, giving rise to a suspicion that the proceeds of these cashed checks may be omitted from regular records. Income tax investigations will be made a but that no excise tax returns have been filed. While the investigation has not been completed, it is estimated that accounts. On March 13, Mr. Lustig visited the safe deposit box at 9:47 A.M. and during the remainder of the day deposited $295,000 in cash. In practically every account analyzed, it a Secretary Morgenthau income Memorandum Secretary Morgenthau Page 3 Memorandum the Page 4 in these cases. MPRECISION TRADE WARE MICROFILM MICROSTATI ROLL NO. 206 Page 5 C Memorandum Secretary Morgenthau I have inquired generally into the condition of the work of the Bureau relating to fraud cases and I believe be interested in knowing that within the past two hasthere been aprogressive increase in the number you years will of cases in which prosecution for income tax evasion was recommended by the Intelligence Unit. The rate of increase the 1943of and has been in the the respec- 1942 tive amounts 20 fiscal percent and 37 percent over fiscal your. AB of March 1 1945 there were 336 cases of this nature pending in the Chief Counsel's office, 26 in the Department of Justice and 82 in the hands of United for 1944 years States attorneys. 0 0 PRECISION MICROSTAT TRADE MARK NO. U.S.PAT.OFF MICROFILM ROLL NO Mr. Helph R. Read April 5, 1945 25 April 5. 1945 Sources of material information in Washington are being thoroughly convessed, with special reference to Foreign Funds Central, Office of Price Administration and War Food Administration, and date these developed is being sent to appropriate special agents in charge and internal revenue agents in charge for immediate investigation. These sources, except Foreign PERSONAL Mr. Halph R. Read Special Agent is Charge Funda Control, should also be contacted lecally for available information Intelligence Unit San Francisco 4, California in addition to that being furnished from Washington. There is also enclosed for your confidential information in this conDear Mr. Read: section a copy of telegram dispatched by Under Secretary Bell on March 24, 1945. to the presidents of all Federal Reserve Banks. Proper official of Federal Reserve Banks and branches thereof in your district should be - I - enclosing for your information and guidance . copy of the sinutes of meeting held in the Commissioner' office on March 28, tacted from time to time by you or by designated special agents for the purpose of receiving any information compiled in compliance with the request 1945, to consider means for strengthening the Sureau's methods of dis- of Under Secretary hall. covering tax evasions during heavy spending years. The meeting was called by Commissioner Numan who outlined briefly certain recent developments which necessitated a discussion of ways and You are requested to focus special efforts at this time in . concerted drive designed to detect and investigate tax evasions on the part of black seans to per feet and strengthen the Bureau's procedures and activities in discovering tax evasions. Commissioner Numan pointed out that Secretary Morgenthau has expressed fear that the Government is losing tax due market operators and others resorting to cash transactions in the conduct to failure of many individuals to report income derived from substantial learn. other and market black the cash transactions of various kinds in in tive vertime enterprises, legal and illegal. The reasons for operating on . strictly cash basis, eliminating the necessity of drawing and deposit ing checks, maintenance of books of account, etc.. are readily obvious. Commissioner Numan stressed the necessity of active and constant attention to the situation on the part of the Internal Revenue Service in protecting the revenues and in preventing unfavorable publicity which sight be directed to Laxity on the Bureau's part in carrying out its functions as . tax collection agency. Commissioner Numan made 11 clear that because of the to be of . secondary nature. to devote attention to the detection and investigation of potential and market operators and other the part of black resort. ing to cash transactions in the the conduct of various questionable enterprises. coordiand beed Charge Agent Special Commissioner Numen designated of the Bareau and the office of the Attorney General will act upon cases in this category justifying presecution this a few days after receipt of re- ports, and they will be referred promptly to appropriate United States atter mays. proceed without the original returns, working from taxpayer's retained copies. Commissioner Numan issued instructions to the effect that the Special Agent in Charge, the Internal Revenue Agent in Charge, the Collector of Internal Revenue and the District Supervisor would comprise special group on operation and the basic evidence relied upon to prove fraud. The Chief Counsel will relate mainly to those three years. If current income tax returns are not on hand in cases requiring immediate attention, 11 will be advisable to is the first order of business. In other words, all other functions are evasions showing triefly the personal and tax history of the taxpayer, the nature of creased in during 1943 and 1944. These investigations accordingly Secretary Morgenthan, the attention which is to be given this situation tax and unburdened by intricate accounting and technical problems. In such clear out cases, the special agent's reports should be streemlined as such as possible Activities of the character described, began generally in 1942 and in- general seriousness of the situation and the deep concern expressed by possible of various questionable enterprises. It will be in keeping with the program to select, as far as may be possible, cases with clearly defined fraud issues in to nate the activities of the group is his territory and made it clear that the Special Agent is Charge may call upon the Internal Revenue Agent is Charge, the Collector of Internal Revenue, and the District Supervisor of the Alcohol Tax Unit for any personnel needed to carry - the program. Reports of participating revenue agents and deputy collectors should be submitted to their respective offices concurrently with reports of special agents. The internal revenue agent in charge or collector of internal revenue, as the case my be, should be requested, in cases carrying . recommendation for prosecution, to expedite transmittal of the examining officer's report to the Bureau. There are reasons to believe that there has been considerable black market traffic and use of currency in transactions involving jewelry and fure without the payment of excise taxes, I accordingly suggest that you or designated special agente confer with collectors is your district to consider PPRECISION MICROSTAT TRADE MARK REG. U.S. PAT. OFF MICROFILM ROLL NO. April 5, 1945 Mr. Halph N. Reed Mr. helph R. Read April 5, 1945 Form No. SI-105 This form is the - as SI-104, except that 11 applies to internal revenue agents in charge. of the advisability of making . thorough canvess in the larger cities of Jewelry and for dealers, subject to excise taxes. If such projects are found to be feasible, 11 will be well to prepare schedules of all known establishments of this nature, with specific assignments to deputy collectors. Verification should then be made of excise tax returns for several current months or for such period as may appear warranted, by an examination of books and records of the taxpayers. This does not contexplate . reexamination of any taxpayers whose recent excise tax returns have been verified. The results may be tabulated by collectors, as projects in particular cities are completed, on the enclosed form (SI-100), and forwarded to the special agent in charge for transmittal to this office. Large cash sales reflected on the records of Jewelry and fun dealers may possibly afford constructive leads for subsequent income tax investigations, and notations should be made of ususual items of this nature, Form No. SI-106: Inventory of cases under investigation by the office the special agent is charge, classified according to will the of black market or cash operation. This also type include cases under investigation by special agents, jointly with revenue agents and deputy collectors. Collectors and internal revenue agents is charge should be requested On Saturday to the applicable form reports to you on Friday of each week. re- mail 11 is desired that you air sail all weekly form reports of each week, with . narrative report commenting upon important develop- reports ceived, sents and together the progress of particular investigations. Your narrative and an will be referred promptly to the Commission and the Secretary, original and five carbons should be sent forward. Very truly yours, In order that the Commissioner and the Secretary may be kept informed relative to the soope and progress of the drive, I as enclosing certain form to be used in making weekly reports. These form are described as follows: Chief, Intelligenoe Unit Form No. SI-101 This form is intended as a compilation of cases of this nature that were completed and reported prior to April 2, 1945. It is desired that you complete this form and that you ask collectors and internal revenue agents in charge in your district to record information on . similar form of any known black market cases handled independently of the Intelligence Unit, prior to April 2, 1945. Form No. SI-102: This form should be submitted to collectors of internal revenue in your district with request that they furnish weekly reports thereon to you of any current black market and cash cases handled independently of the intelligence Unit. Form No. SI-103, This form should be submitted to internal revenue agents in charge in your district with request that they furnish weekly reports thereon to you of any current black market and cash cases handled independently of the Intelligence Unit. Form No. SI-104: Teekly inventory of information or data on hand in collectors offices. An effort 10 being made through this form to visualise the volume of pertiment information in field offices, justifying investigation, and collectors should be asked to compile such information on this form. -3- Enclosures 212 SI-Special TREASURY DEPARTMENT 1 INTERNAL REVENUE SERVICE INTELLIGENCE UNIT April 9, 1945 Washington overcharging at the rate of eight cents per pound. It is not thought by O. P. A. officials that Wright is permitted to retain all of the "side" payments. Mr. Berueffy believes that the Wild SI-Special Packing Company receives at least 50 percent of the overpayments collected by Wright. JDL-sfp Wright also secures meats from Kilsheimer Bros., local meat processors, Superior Packing Company, Superior, Wisconsin, and Dubuque Packing Company Dubuque, Iowa. It is well to note that Kilsheimer Bros. on two occasions during the early days of Special Agent in Charge Intelligence Unit rationing and price control was convicted of charging over ceil- Treasury District No. 5 ing prices. Washington, D. C. On Saturday last, the Office of Price Administration filed In re: Berry Wright t/a Wright Beef Company 1254 Fourth Street, N.E. Washington, D. C. On April 5, 1945 data was had from Carl W. Berueffy, ( Enforcement Chief for the District of Columbia, Office of Price Administration, regarding black market activities of the abovenamed. Mr. Berueffy advised that Wright stands charged with accepting "side" payments of six to eight cents per pound on mests sold to local a A list bearing approximately a San Seigel claim for treble damages against Wright Beef Company. This claim recites . figure in excess of $1,250,000. According to Mr. Berueffy, his agency and the United States Attorney's office feel that the criminal charges and civil claim against the sub- ject will be sustained. The internal revenue agents are currently engaged on exam- inations of several of the marchants incorporated in the list lifted from Wright. The income tax returns of other customers contained in the list are docketed for examination by the agents at the earliest practicable dates. 175 names of customers, who allegedly accepted the "side" pay- ment system, was taken from Mr. Wright at the time of his ar- rest. According to Mr. Berueffy, number of these merchants have testified before Office of Price Administration investigators and admitted paying Wright over ceiling prices. JOAN D. LATHER, JR. Special Agent Wright was formerly employed by Witt & Company, a local meat distributing firm, which only recently was penalised for black market operations. Witt Company previously secured their supply of beef from the Wild Packing Company, Indianapolis, Indiana. After Wright purchased an interest is the Seigel Beef Company, he changed the name to Wright Beef Company. Upon entering business on his own account, the wild Packing Company ceased supplying Witt & Company with meats and diverted its products to Wright. Investigators of the local office of the Office of Price Administration, according to Mr. Berueffy, have ascertained that the Wild Packing Company has shipped weekly not less than 10 care of 25,000 pounds each of beef to Wright. Mr. Berueffy also stated that Wright originally charged six cents per pound over ceilings that this was later increased to saved cents: and that for several weeks past he has been -2- TREASURY DEPARTMENT TREASURY DEPARTMENT 1 INTERNAL REVENUE SERVICE INTERNAL REVENUE SERVICE INTELLIGENCE UNIT INTELLIGENCE UNIT New York New York, New York, April 6, 1945. Division) Treasury District No. 5 Box No. 1793, Righmond 14, Virginia April 4, 1945 (Name EGR REVENUE Chief, Intelligence Unit, INTERNAL 81- 1045 EHK KVP APR Bureau of Internal Revenue, INTERNAL KLVENUE APR Washington, D. c. 1945 INTELLIGENCE Special Agent is Charge The following schedule is submitted relative to work of this Intelligence Unit Treasury District No. $ office during the period March 1-31, 19451 INTELLIGENCE Washington, D. C. - (c) Persons Conviction Apparently as the result of . rusor given radio and newspaper publicity, to the effect that the Treasury Department would recall all bills of large denominations is as effort to apprehend income 1 - (b) Total number of persons prosecuted: 4 (a) Total number of persons arrested tax evaders, one loosl bank has reported, through confidential channels, that several persons have recently had number of and other changed 1 ( thousand dollar bills bills of large denominations Fred 8, Reilly into twenty tollar bills. The total amount reported thus far exceeds (d) Sentences (Total number of years): None $50,000. (e) Court Fines (Total): I have obtained the DADOS of these persons and preliminary inquiries are being made concerning each. (f) Taxes: $100.00 $ 1,014,023.51 Penalties: 326,015.77 Interest: 105,608.13 Employ (Everett Y. Kuebler Special Agent Hugh McQuillan, Special Agent in Charge. INTERN RECEIVED DIVENUE I APR 1945 5 Coffee E Hary 4/5 SIMES INTELLIGENCE UNIT 215 216 TREASURY DEPARTMENT 1 INTERNAL REVENUE SERVICE INTELLIGENCE UNIT or the jacketed 08808 ten have not been assigned to special agents for investigation and eleven are presently under 509 Calvert Building Baltimore 2. Maryland Washington investigation. These include the following April 6. 1945 (Name Divisions 1 Patchery 1 Grocery 1 Serap Iron Dealer 4 Wholesale Liquor Dealers 1 Tavern Operator INTERNAL REVENUE 1 Retail Liquor Dealer APR 1945 Special Agent in Charge Intelligence Unit Treasury District 46 1 Wholesale Meet Dealer 1 Restaurant Operator INTELLIGENCE Washington 25. D. C. In FBI Included in the unjnoketed ORDER are the following Black Market Class Baltimore Office 1 Wholesal whoe Dealer 1 Hotel and Bar Operator 2 Whiskey Brokers The following resert relates to the chaos involving socalled black parket operations on hand in this office at this time. together with information concerning action takes with . view to further eveloping such cases and the results thereof. For purposes of this report only cases involving taxpayers who des) in the sale of which is regulated by the Office of Price administration price ceilings or who are known to have violated 0. P. A. regulations. are included: 5 Wholesale and Retail Liquor Dealers 51 Retail Liquor Dealers so Tavern Operators 40 Restaurant and Operatore 150 Blooe March 26th request has been made for five 0840 jackets involving taxpayers who deal in commodities, the sale of Jacketed pases Injacketed cases which is controlled by ories seilings. 21 160 Exmaination is now being add by three deputy collectors The jacketed cases include taxpayers ahose business trans- actions are cleasified as follows 3 Invernal of $10,000.00 during the years 1942. 1943 and 1944. The Collector of Internal Revenue has obtained and turn- 1 Hotels and bare Net Contractors ad over to no . complete list of all building and loan associations is the State of Maryland and he has suggested that I request these associations to furnish no with the names and addresses of all share 5 Groceries Night Clube 4 that office since the commencement of business on March 26, 1945. 1 1 Such retort indicates the receipt of the following voluntary re- 1 Total any of the years 1942, 1943 and 1944. The Collector of Internal Revenue has also furnished se with . record of the number of delinquent returns and smended returns and the amount of tax received in 1 Scrap Iron Dealers 1 wholesale Meat Dealers Restaurants holders who have deposited or withdrawn $5,000.00 or more during 4 Retail Liquor Dealers 1 Poultry Dealers Wholesale Liquor Dealers of the land records of Multimore city for the purpose of obtaining . record of sales of real estate involving sales prices in excess turns 21 418 delinquent income tax returns indicating taxes totaling $69,255.12. RECEIVED C APR 1945 INTELLIGENCE 232 assended incoue tax returns showing additional taxes totaling 164,093.54. 218 217 TREASURY DEPARTMENT 0 VERNAL REVEN INTERNAL REVENUE SERVICE RECEIVED INTELLIGENCE UNIT Box No. 1793, Richmond, Virginia, APR 1945 April 6, 1945. ( Treasury District No. 5 WASHINGTON I of INTERNAL RESEIGENCE UNIT $515,135.29. and delinquent miscellaneous tax returns filed voluntarily totaled five, indicating taxes due in the amount of $6,256.28. Special Agent is Charge, Intelligence Unit, Treasury District No. 5, In addition to the above. field deputy collectors obtax tained 157 delinquent returns showing taxes due is the amount of $11,665.39 and six spended returns indicating an additional liability in the amount of $2,426.90. On April 4, 1945 I conferred with Mr. J. B. Cupit cashier. APR 1945 INTELLIGENCE Washington, D. C. In re: Special Tax Drive Weekly Drive to The activities of this office for the week ending Baltimore Branch, Federal Reserve Bank, with regard the request addressed to.the presidents of the various Federal Reserve Banks by the office of the Secretary of the treasury under 1945. Mr. Cupit, in the absence Milford, advised that he director. date of March Mr. W. 24. R. is familier of the matter with managing the matter and stated that Mr. wilford had already taken the us with several banks located at Baltimore, which banks, while appearing to be willing to cooperate, have not as yet furnished any information. Apparently no definite olen has vet been determined by Mr. Milford regarding the manner in which the verious banks today, is connection with the Special Tax Drive, are here. imafter listed 1. Final steps were taken to close case 81-21910-F, which conorns the operator of large low-cost dry goods business at Borfolk, Virginia, who has made a In addition. there were 47 delinquent withholding tax returns filed voluntarily. showing total tax in the amount huge profit as . result of the war. 1 2. Case SI-22096-F, which relates to . trucking company of Lymohburg, Virginia, making large profits will be contacted nor the manner in which the information is to be accumulated and made available to this office. However, Mr Milford from was time trucking, was under active investige- tion. for has discussed the situation with Mr. Metthins F. Peese, manager of . the Maltimore Clearing House, who will arrange to not date meeting of the officers of the Baltimore Clearin House, at which time Mr. Milford will outline the nature of the information to bethat obtained and stress its confidential nature. It is expected 3. Case SI-22265-F, which relates to a restaurant operator at Norfolk, Virginia, who has made large profit as the result of the war. has been under active at that time BOOK definite plan will be devised. investigation. I an to confer with Mr. Milford tomorrow, April 7th. and if such conference results in more definite information than is indicated above, it will be promptly reported. operator and liquor distributor at Norfolk, Virginia, 4. Case 81-22266-7, which relates to . tavern who has made large profits during the past few years, has been under active investigation. 5. Investigation was begun on . large Richmond dry cleaning company which had large aray contracts. J. Edward Bank Special Agent 6. Investigation was begun on a local moonshiner who was recently apprehended by the Alcohol Tax Unit. 7. Investigation was begun on three persons who had $40,000 in large bills changed into 820 bills at a local bank. 0 (Everett H. Kuebler). EHK:NDT Special Agent. 220 TREASURY DEPARTMENT 0 In re: Special Tax Drive. INTERNAL REVENUE SERVICE INTELLIGENCE UNIT Boston 1, Mass.. April 6, 1945. BOSTON DAK:air influence to obtain for us a favorable reaction from the bankers assembled on the basis of our promise to keep the sources of information confidential and to protect the banks by the issuance of summons when information regarding specific taxpayers was made available. INTERNAL It appears that there will be very little information regarding the flow of bills during the years 1943 and 1944, which are the years of prime interest to us, but it is now very probable that the principal Chief. Intelligence Unit banks in Boston and the Federal Reserve Bank will be cooperative to Bureau of Internal Revenue the extent of reporting to us any suspicious transactions is bills of Washington, D. C. large denominations. Cashiers' Checks In re: Special Tax Drive There are indications that in some banks checks have been presented not for cashing but for the purchase of cashiere' or treasurers' checks. Herewith is a report of the present status of the special tax drive in connection with the investigation of cash transactions and In some instances these were cashed at other banks. This situation is black market transactions. being explored and there is . possibility that with the ocoperation of = the banks. an examination will be made of cashiers' checks to determine those which were purchased for currency or were exchanged for other checks Large Denomination Bills in large amounts. 1 A check of the principal banks in Boston disclosed that no attempt had been made to keep record of the traffic in large bills in any Real Estate customers. field discloses no unusual transaction# or sales for large amounts of cash. This field has been temporarily abandoned although we have the prouise of persons in positions to observe real estate transactions that they will inform us of any suspicious circumstances in connection of the banks contacted. Most of then reported that the thousand dollar bills are now accumulating is the banks and that the decard for then has dropped off greatly since the publicity regarding the Treasury activities. Soun are being received for cashing but is the good banks in Boston large denomination bills are being cashed only for regular An intensive investigation conducted by us in the real estate with large real estate deals. The President of the Federal Reserve Bank was contacted and statistics in regard to the flow of one thousand dollar and ten thousand Revenue Agents the Federal Reserve Bank were very cooperative. They had been contacted by the Treasury Department and had in turn contacted many of the banks after they were briefed as to the purposes of the drive, eight of them dollar bille are being gathered by that organization. The officials of Ten revenue agents reported to this office on April 4, 1945 and in the Boston district and probably others throughout the State. were assigned to examine into the information available regarding checks cashed at the Pilgrim Trust Company. Two were assigned to special An interview was had yesterday with Mr. Wilbur Lawson, Vice President and Comptroller of the First National Bank in Boston, which is by far the largest bank in New England. Mr. LAWSON is Chairman of agent to investigate cases already is this office regarding alleged cash and black market transactions is lumber and leather. Deputy Collectors the Bank Management Association which is composed of cashiers and comptrollers of the principal banks in this section. The purposes of Ten deputy collectors reported to this office on April 5. 1945 under the supervision of Division Chief Kever. It was arranged that the present drive were explained to Mr. Lawson and his cooperation and the cooperation of the other bankers in Beston was requested. It was explained to his that in addition to being an income tax matter this is also . drive against inflation. Mr. LAWSON promised to use his 0 ROLL NO TRADE MARK 222 221 0 In re: Special Tax Drive. In re: Special Tax Drive. Cash and Black Market Cases Already Investigated. Before this drive started, this office had been engaged in similar work which, of course, was restricted in scope by our limited sanpower. A resuar of the cases already completed is herewith. they start . check on furriers and jewelers. Their approach will be . verification of excise taxes but they have been instructed to look for cash sales or anything suspicious. LTD., INC. - SI-20865-F Western Union This case, which involved approximately $900,000.00 in taxes and fice in New York . list of all money transfers amounting to over penalties, was recommended for prosecution, a jeopardy assessment was obtained, and liquor owned by the company WILE sold in the approximate amount of $280,000.00. The president of the company was prosecuted for that it might be well to put squad of - on this work to take off violation of OPA regulations and has been sentenced to serve one year Arrangements are is process to obtain from the Western Union of- two thousand dollars which have New England angle. It is suggested and day. The income tax case is in process of settlement and from a complete listing of the money transfers over two thousand dollars which are available in New York covering the entire country. The Alcohol Tax Unit has already made . similar transcript for 1943 which is available is New York. it the Government will realize over $300,000.00, which comprises all the available assets of the corporation. AMERICAN METAL CRAFTS COMPANY - SI-21130-F Unless otherwise notified, Special Agent Peabody with an Alcohol Tax Unit agent will proceed to New York shortly to make this transcript Special Agent Hurney will make . survey of the insurance companies at Hartford, Connecticut regarding the possibility of obtaining informa- tion in connection with the purchase of one payment acquities by suspects. Jewelry The investigation of cash and black market transactions in the This case involves, among other evasions, the sale of scrap metal, by-product which has become extremely valuable because of its scarcity and because of high priorities. Approximately $400,000.00 was recom- sended in taxes and penalties. No prosecution was recommended because of the ill health of the principal figure in the case. A check for 225,000.00 is on deposit with the Collector of Internal Revenue at Boston, Massachusette in partial payment of the taxes and penalties. JOHN HOLDEN - Purchases of Annuities , . in so far as it applies to this division. SI-21734-7 This case is similar to the American Metal crafts Company case in that it relates to the disposition of scrap metal and there is Special Agent Cleary This is field in which there appears to be cash angle in it. This case was not accommended for prosecution. A check in the amount of approximately $56,000.00 is on deposit with the Collector of Internal Revenue covering taxes, penalties and interest in full and agreements have been signed. Arrangements have been made for . meeting next week between the Revenue Agent is Charge at New Haven, Connectious, the Collector of LEVY-ANDERSON CO., INC. jewelry business is progressing by squad under the direction of an unlimited amount of tax evasion. Internal Revenue at Hartford, Connectiont, and no. Present also will be group ohiefs and officials of the Collector's office. There is . considerable activity in the Connecticut district at this time but at the meeting the efforts of the different organisations will be coordinated. SI-20617-F This case involves an evasion similar to the other two cases sectioned. In all of these cases cash angle is present and all relate largely to the disposition of scrap metal. In this case taxes and penalties of over $100,000.00 were involved and prosecution was recommended. The case is at present in the office of the Chief Counsel at Washington. The taxpayers claim ill health on the part of one of the stockholders and conspicuous war contributions by another. It is believed that an offer will be made in full settlement of taxes, penalties and interest. C TRADE MARK MICROSTAT MICROFILM ROLL N -223 1 In re: Special Tax Drive. YENNERBECK & CLASS CO. - CISION SI-21527-F This is . jewelry case and is similar to the others is that it involves disposition of scrap. in some cases for cash. The taxes and penalties in this case will amount to approximately $263,000.00. The investigation is complete and we are awaiting . revenue agent's report, which is in the process of being reviewed and typed. It is expected that . recommendation for prosecution will be made in this case. There are many other cases of this type under preliminary investigation and the above represents only those cases in which investigation has been completed. David David N tellabe David A. Keileher : Special Agent in Charge. 224 TREASURY DEPARTMENT INTERNAL REVENUE SERVICE INTELLIGENCE UNIT Sex York (Name of Disease) See York 7, : Y., April 5, 1945. JFS, Menoreacus yelle willow Mr. Hagh Requilian, Special Agest in Claim in York, .. Y. In *** Heary Lastic, 400 N. 16th St., New York, i. T. Demosits of Cash. AD analysis of the : mits in the account of the above and related tank accounts saints inc with . Letronolites incide reveals cash deposits accounting to 11,688,550 race curine the nont) of March, 1945. The fol- lowing is . surary of the Analysis 1. Chemical Pank and Trust Co., 74th St. ADD adison Are. Branch. (a) estaurants and Statisseries, Longehenns, Inc. (b) H. Lustig Co., (c) 1. Lustic - Personal : Chase National Pank, Times Square (a) 1.00 41st it. Corp. 3. Class National tents, 14th Street knarch. (a) Lestaurants and intimeries, Inc. (b) - Lustig Co., Inc. (c) 3. Lusti: - personal 4. enufecturers Trust Co., 14th st. and 5th AVE. Branch. (a) estaurants BILL +stisseries, Longehamps, Inc. (b) He Lustic Co., Inc. (o) it. Lustic - versonal $86,500.00 75,000.00 147,000.00 35,000.00 105,000.00 35,000.00 44,000.00 90,000.00 60,500.00 99,000.00 5. Lawyers Trust Concern, 14th St. and 5th Ave. Brench. (These accounts opened 3/5/45) (a) Restaurants and ratisseries, Longehamps, Inc. (b) M. Lustig Co., Inc. (c) M. Lustig - Personal 45,000.00 20,000.00 35,000.00 PRECISION TRADE MARK MICROFILM MICROSTATA ROLL NO. In re: Lustic. 6. Corn 1 change tank M.D. that Co., 14th it. and 7th AVE. French. . 90,000.00 (a) Restaurant PHIG Ptimoric, Issue. (b) He Lustig Co., Here (c) H. Lusti, - Personal 7. Guaranty Trust Co., 650 Avenue Larich. (a) estaurects and intisseries, is Inc. (b) H. Lustic - persons 8. Irving Trust Contacy 350 birth brench. (a) Fifth Enrire, Inc. (b) Restaurants and Patisceries, Inc. (e) Eerry Lustic Co., Inc. (c) Henry Lustic - Personal (e) 340 Mediton Live. Corpor 49-63rd it., Pklym. (r) Lexington Long hears 25,000.00 172,000.00 105,000.00 90,000.00 82,500.00 30,000.00 $5,000.00 40,000.00 03,050.00 49,000.00 $1,658,550.00 During the course of analyzing these accounts, it was ascertained that Heary Lustic also seintains come accounts at the following tanking institutions, but three accounts have not been exerined as yet: 1. Bank of See York 2. Central Hanover Lenk . Trust Co. 3. Bank of Hamhattan 4. Manufacturers Trust Co., Long Island city 5. Miami First National Bank, Misci, Florida Lustic rests and has sole access to a safe deposit box with the Lawyears Trust Co., which be visited on February 28, 19th, arch 2, 1945, and March 13, 1946, which dates correspond approximately with dates when large cash deposits were cade in the various commercial accounts. On March 13, 1545, Lustic visited the safe deposit box at 9:47 here and during the re- minder of the day he deposited $295,000 in cash in various bank accounts above on the analysis at the beginning of this report. Withinwals. In practically every account analyzed it was apparent that the deposits and balances free December 1544 to February 1945 were quite nodest as compared with the activity that occurred during March 1945. Several large withdrawels during Larch were rade from the accounts, but these were not in cash but in checks, made payable to a related account and de- posited in another bank. In brief, it appears that portions of the heavy cash deposits were subsequently routed in the form of transfer of sheaks in . circuit of the related accounts in the various banks. a PRECISION TRADE FARK MICROFILM MICROSTAT ROLL NO. 206 In re: Henry Lustic Other check payments than those described above were estensibly used for the liculcation or bank lease, payments of income taxes and petty cash, payments to whichroutice is recorted howa racing hores and Check dated drewn overSAS 519, February 20, 1945, against "Henry Lustig that be Brown. (erecal account at Manufacturers stable, Longchaaps which Farms, expenditures Inc., I. Miller Trust for Co., and food, to re-endorsed the etc. order to One operate by of exception, . I. signature viller, for 16,000, is illegible but vas right endorsed Goldornt This check was deposited in the Hiend First National Bank, Mani, Florida, co February 26, 1945, and cleare through the Federal Reserve Pank on March 1, 1945. hypothesis. After consideration of the foregoing, it say be theorized that Henry Lustig night have heard runors in the early part of March 1945 of the consideration of the U. S. Government to restrict bills of large denominations, and immediately endervored to convert those bills 01 large denon- in In of hypothesis, it instions that te lac his safe deposit box and other places of security into SOCA other form of legal tender. support this was note that nearly 611 the cash deposits consisted of 500.00 and $1,000 bills. James F. Soanles, Special Agent. 228 227 TREASURY DEPARTMENT C C INTERNAL REVENUE SERVICE Representatives of the Federal Reserve Bank have been anticipating difficulty in procuring information from member institutions respecting some who have been dealing in currency in large amounts. During over- a INTELLIGENCE UNIT Chicago 90, Illinois, Chicago customers conference with them on April 2, they said that they had already nade kind April 7, 1945. (Name of Division to member insti tutiona and had received assurances of some INTERNAL NEVEN tures that information would be forthooming from certain members. No wait specific for APW MD Chief, Intelligence Unit, had been received. There was nothing to do other than to clearly the attitude of member stitutions had been more APR 1945 some definite information on data outlined. a fewthatdays until It is likely this subject Bureau of Internal Revenue, will be available for incorporation in the next weekly report. Washington, D. C. There is even now no dearth of information regarding black market the This is the second weekly report covering black market income tax investigations. A conference was held in this office on April 3. Internal Revenue can be used as a basis for investigations. However, at cases which in this office on April 3. it appeared unwise to begin new conference until it was known what could be expected from the Office investigations and from the Federal Reserve Bank. For instance, Agent in Charge E. C. Wright, Collector of Internal Revenue Nigel D. of two Price agents Admini might stration have been instructed to start information a particular received investigation from tendance. Careful consideration was given to black parket cases already the office of Price Administration, or from the Federal Reserve Bank, indicated the necessity of taking up something of more importance or are Campbell, and additional representatives of their offices were in at- under investigation, and to cases of that character scheduled for investigation prior to the inauguration of the so-called black market drive. It was decided that the black market investigations already under way would be carried to & conclusion, unless something unforseen developed respecting particular cases which would point to the necessity of suspending them for the purpose of taking up others more urgent and more important. It was decided to defer the commencement of certain other black parket cases already carried in the lists of the Internal Revenue Agent in Charge and of the Intelligence Unit, until information believed to be fortheoning from the Federal Reserve Bank and the office of Price Administration had been received. During the week conferences were had with representatives of both the regional and district offices of the Office of Price Administration They were informed regarding the present objectives of the Treasury Department. They have agreed, as BOOD as possible, to present to this of fice inf ornation in selected group of O.P.A. cases. The intention is to turn over information in considerable number of the largest and on April 3, only to find ten days later that from the general conference held on April 3. several conferhave Apart been had during the week with Collector Campbell. He is ready in ences to assign a group of deputy collectors to work in one field, or perhaps that or four fields. However, be believes, as does this office, three be inadvisable for him to begin anything in the nature of it would it known what the Office of Price Administration and the drive until Reserve is Bank will offer. The feeling here at this time is that Federal the Collector can make better use of his facilities by utilizing then on groups of snaller cases. In the following will be set forth certain information in amplification of that submitted in the first report, and information relating to matters to which no reference was made therein. Dert K. Master, at al., Chicago, Illinois. si-20841-F most aggravated cases, with emphasis upon those which offer the best ten week Office prospects of reasonably early closing. Representatives require of the would that estimated Price Administration it a of or This case has been reviewed by Mr. John Kiley, Division Counsel. for that the available evidence is suitable as a basis days for then to go over their own material and to make A determination He prosecution. has concluded A ammary report has been prepared and Counsel. was forwarded last was a better position to make the selection than would be the Internal Revenue forwarded to your office at the SADE time. of the best information to refer to this office. Obviously, they are in Service, even if free access were given to all of their files. They have made thousands of investigations and no plan other than the one suggested appears practical Receipt of the information from the office of Price Administration should begin on or shortly after April 11. 2 promise. evening to the Chief Counsel through the Division A copy PRECISION TRADE MARK MICROSTAT MICROFILM ROLL NO 230 1 the of 1943, has been engaged in the business of feeding and 1943, live J. C. Ferry and Company, et al., Indianapolis, Indiana, SI-21380-F The report in this case was received yesterday. It contains a reccemsndation for prosecution of three principals on charges of eva- sion of corporation and individual income taxus. It is the intention of this office to coneur in that recommendation. The indications are that the report and exhibits will be available for considerstion in the Office of the Chief Counsel, in Washington, on April or immediately thereafter. The total additional taxes and penalties recommended for assessment for the years 1938 to 1943, inclusive, does exceeds 3500,000 While a considerable part of the deficiencies not rest upon black market transactions, there are, nevertheless, black market transaction in substantial amounts accompanied by eri- dence of studi efforts to conceal the transactions by the use of "side payments" in currency, etc.,etc. Amazon Hose and Rubber Company, Harry E. Jacoby, President, Chicago, Illinois, SI-22118-7. There is nothing new to report in this case other than that prac- tically all of the sales of the Anazon Bose and Rubber Company to the spring a fare acquired at that time. For the years 1942 $16,500. stock corporation on reported total net income of approximately of approxi- the the same years, Mr. Charman reported total net income the For The corporation returns are consistent with sately $131,000. and the apartment buildings income appears to corporation records on the individual returns. Mr. Chapean have been correctly reported winnings" in the filed an of amended $24,102.60. return In for 1943. 1942, be reporting reported "giscellaneous "gambling agents. income His of amount He has refused to discuss these items with the the $71,000. has informed then that Mr. Chapman has stated that accountant "gambling winnings* and *niscellaneous income" were derived from sel- ling nest at "over invoice" prices. considerable number of the corporation's customers have been then A Thus far, all except three have stated (most of interviewed. that they did not make any over-ceiling payments. Con- under oath) has been done on this case, including the examination of siderable customers work records, which need not be set forth in detail herein. connection with the purchase of the farm in 1943, Mr. Chapman In $100,000 in currency. In that year be used additional currency farm, used substantial amounts in payment for improvements made on the in net in for live stock. It appears that his increase conclusion United States Rubber Company appear to have been diverted for the and in payment will be at least $150,000. That tentative his States Rubber Company is the largest customer. Mr. Jacoby has stated that the diverted sales to that one customer will aggregate somewhere worth is based for upon 1943 evidence of funds available to him, as disclosed by years 1961 to 1944, inclusive. The indications are that the United between $100,000 and $150,000. The agents exployed upon the investig tion are inclined to believe that Hr. Jacoby's estimate is too low. Reports are axaited from the New York Division, which has been requested to verify the purchases of the United States Rubber Company. It is understood that the records of the latter are maintained in such a MAY as to make the work alow and arduous. ven when the information from New York has been received, there will be large amount of work to be done elsewhere, Huch of the money received by Mr. Jacoby from diverted sales was dissipated in Florida. A Chicago internal revenue agent has been in Miami for more than a month on this and other Chicago assignments. Work on this case will be carried forward as rapidly as possible, but it is too early to estimate the time that will yet be needed for com- income tax returns for the years beginning with 1932. The customary difficulties are being encountered in this case and it is not known what the outcome will be. Imperial Importers, Inc. Harry J. Rothman, William Siegal, Chicago, Illinois, and the two principals named have been under inThis corporation for some time. A recommendation should have been made, done but has vestigation not yet been made, for the jacketing of a case. That will be shortly. corporation was organized on July 1, 1943. The controlling is The Nears. Rothann and Siegel. The wife of the former the pletion. inspire Packing Company, Samuel Chapman, President, Chicago, Illinois, SI-22140-F is stated in last week's report, the Kapire Packing Company is engaged in the meat packing business. Mr. Chapman is its controlling factor. He also operates a number of apartment buildings, and since factors are and the wife of the latter is the secretary The corporation ended treasures sales of $1,329,321.64 on its return for the fiscal year tax reported June 30, 1944. Net income of 14,906.21 was reported, on which a of $1,226.55 was paid. PRECISION MICROFILM TRADE MARK ROLL NO 232 231 The corporation maintained an orderly set of accounting records. They reflected the purchase and sale of approximately 60 ,000 cases of whiskey and other spirits, between July 1, 1943, and March 2, 1944, at ceiling prices. Mr. Rothman, after prolonged efforts on the part of the agents, has recently made a statement to the effect that an ever- age of $12.50 case, above ceiling, was received by his on 45,000 cases of liquors sold. He stated that the total amount of money redelived by Mr. Siegel and himself above ceiling prices approximates This corporation and its officers, Mr. Sydney Prosterman, President, and Mr. Leo M. Mitteldorf, Treasurer for some time, have been under investigation for the years 1943 and 1944. The , and V Liquor Corporation was organized on July 13, 1943. Both before and after incorporation, solicitations were made and orders were received from ten wholesale liquor dealers, located in various parts of the country Advance payments of 815 A case against the ceiling price of whisky were procured. In this manner the cor- $600,000. (Figures manifestly do not reconcile) He has further poration accumulated approximately $400,000 Out of this amount, the was turned over in currency to Mr. Robert Could, Cincinnati, Ohio, through whom Imperial Importers, Inc. purchased 2,050 barrels of with its principal office located at Indianapolis, Indiana Staple, stated that approximately hree-fourths of that amount, or $450,000, liquor at approximately 85.50 per gallon. The position which Mr. Rothman now takes is that he and his associate, Mr. Siegel, retained only $150,000, approximately, of the black market profits. The income tax returns filed by Mr. Rothman and Mr. Siegel for the calendar year 1943, reflect gross income for each individual of approximately $93,000. of this amount each reported $62,800 as "Other Income Brokerage". Income reported, apart from this, was designated as coopensation received from Imperial Importers, Inc., and old Fort Dearborn Liquor Company Both individuals were employed by the latter as salesmen prior to the organization of Importal Importers, Inc. The 1944 returns are not yet available. Based upon testimony accompanying the Alcohol Tax Unit report in this case, there is basis for the suspicion that the amount received by Measrs. Rothman and Siegal in over-ceiling money was nearer $800,000 than $600,000, as stated by the former. The liquor here in question was purchased and sold in the name of the corporation. The present intention is to restore all of the sales to the corporation and then to designate the distribution of profits as preferential dividends. It is qui likely that Kessrs. Rothman and Siegel, for the year 1943, have reported all of the income that they were permitted to retain out of the operations of Imperial Importers, Inc., and that Mr. Could received the excess. It is not believed that a large amount of additional work will have to be done on this case to bring it to a conclusion. Apparently there are obstacles in the way of prosecution of Kesore. Hothman and Siegel on charges of evasion of income taxes. That matter will be taken up at a later date, perhaps when the final report is submitted. P and M Liquor Corporation, et al., Chicago, Illinois, (Not Jacketed) This case also is unjacketed. A recommendation for the jacketing of . case will be made shortly. corporation loaned $370,000 to Staple Inc., an Illinois corporation, Inc., used the money to acquire the capital stock of Judge and Dolph Misconsin, Ltd. The latter owned warehouse receipts for 2431 barrels of whisky Judge and Dolph-Wisconsin, Ltd. sold the certificates to the F and K Liquor Corporation. The P and M Liquor Corporation had some of the bulk whisky bottled and distributed it to most of the ten wholesale liquor dealers from whom the advance payments had been obtained, and to four other wholesale liquor dealers. The remining whisky was sold in bulk to seven wholesale liquor dealers in Illinois, Indiana, and Kentucky. all of the P and M Liquor Corporation's whisky was disposed of between August 20, 1943, and December 30, 1943. The corporation sur- rendered its basic permit and went out of business in July, 1944. The Alcohol Tax Unit, in its investigation, procured statements from cus toters disclosing over-ceiling payments aggregating $248,722.08. Certain of the P and W Liquor Corporation's customers, interviewed by agents of the Alcohol Tax Unit. denied that over-ceiling prices had been paid. It is entirely unlikely that such was sold at ceiling prices. Messrs. Prosternan and Mitteldorf were interviewed in this office on March 22, 1945. They denied that any payments in excess of ceiling prices had been received. However, they had been indicted, 8 February 2, 1945, by a federal grand jury, sitting at Chicago, along with Nears. Louis H. Rosenblum, Hammond, Indiana, and Vax Stryk, Gary, Indians, charged with so-called O.P.A. offenses. The present intention is to again interview the customers who denied to agents of the Alcohol Tax Unit that they had paid over-ceiling prices. There is scon probability that Yesars Frosternan and Mitteldorf will at a later date acknowledge receipt of the over-ceiling pay- cents. Mr. Sosenblun is a brother-in- of Vr. kitteldorf and some inf 'ornation is available tending to show that he was the real principal in the transactions of the and K Liquor Corporation, as well as the recipient of the major part of its profits. 233 234 ( Information received in this office, from time to time, during The intention now is to add over-ceiling prices to corporation the past two or three years indicates that large numbers of taxpayers engaged in one or another of the branches of the jewelry business income and to designate the distributions as preferential dividends to those who received then. are trading in the black market, are using currency in substantial amounts, and are understating taxable income. The only case of consequence closed during the past year, which I recall, without making There is considerable work yet to be done in this case, but the indications are that & recommendation will be made for prosecution. a detailed inspection of the files, was an Indiana case in which total taxis and penalties of approximately 25,600 were recommended for assessment. At all events, when the black market Income tax Gary Nine and Liquor Corporation, tax Stryk, President, Louis Rosenblun, Secretary, Gary, Indiana, investigation program was inaugurated, I was somewhat hesitant about SI-22212-7, continuing the Gordon and Hornstein investigations. It is not known to what extent they are engaged in black market activities. It is is stated in the outline covering the case of the P and If Liquor al.. Mr. Rosemblun is suspected of being the real that case. The Gary line Corporation, principal in et and Liquor none Corporation, little time. et known that they are doing large business, and transacting mach of The investigation is being made, so far as the Intelli once Unit only if it appears socewhat later that the agents employed upon the work it in currency, and probably have enjoyed very large profits. has been under investigation, intermittently, for is The intention is to continue with this investigation and to suspend concerned, by its pranch office at Indianapolis. The file in the could serve to better advantage on some other assignment. division office in chicago is not complete. However, it indicates that on July 26, 1944, witness at Columbus, Chio, made statement Crueible Steel Casting Company, et al., in which he alleged that on May 5, 1943. and May 17. 1943, currency Vilwaukee, Wisconsin, payments representing over-ceiling prices were made to Kr. Rosechlas 51-20963-F in the respective amounts of $91,375 and 335,459.41. On July 28, 1944, another witness at Columbus, Ohio, stated that "commissions" amounting Louis Rosenblum, at Chicago, in May, 1943. This is another case in which sales at ceiling prices were made in the DATE of a corporation and "side payments are alleged to have been cade to an officer thereof. An effort will be made to saimit core enlightening information on this case in the next report. Keyer Cordon, Irving Hornstein, Chicago, Illinois, SI-21429-1 and st-21431-F These cases have been under investigation, Intermittently, for several months. The years involved are 1935 to 1943, inclusive The taxpayers are engaged in the retail jewelry business, in the jewelry business, and in the pawn shop business. They have bad brokerage reputations and are said to be well known in the trade as receivers of stolen perchandise. Kr. Gordon paid approximately 3600 in income Horn- taxes for the nine years covered by the vestigation. Apparently Mr. never filed return prior to 1941. For 1941 and 1942 his tax stein parients totaled approximately 8700. He filed a non-taxable return for 1943. This case has been under intensive investigation for approximately 1 a to $12,551.97 were included in the cost of whisky purchased from Mr. year. One of its most important features is that it involves the diversion of corporation sales and *padding" of payrolls in large Mounta. A considerable part of the funds thus obtained went to Walter 1. Lange, an officer and one of the principal stockholders Mr. Mr. Lance maintain ned A racing stable under the name of the Royal Palms Stable and entered his horses at various tracks throughout the country. He engaged on a large scale in race track wagering, and was otherwise spending money lavishly in Florida and elsewhere. If the investigation had not been made, it appears that the government, on account of evasion of income taxes. would ultimately have been the payer of large per- centage of these expenses. The last estimate received from Milwaukee of taxus and penalties that will be recommended for assessment in this case WILD 1,500,000. This case has not been regarded as a black market case, but it is believed that in it are of jectives which the Department desires to reach in the program of investigation recently inaugurated. Louis 5. Berkoff, Abel D. Berkoff, Eva Berkoff Bass, Milwaukee, SI-19328-F, It appears advisable to saice some mention of this case, despite the fact that the final report has long since been submitted. There PRECISION TRADE MARK MICROFILM ROLL NO. 235 TREASURY DEPARTMENT INTERNAL REVENUE SERVICE are two reasons for mentioning it. One is that the criminal proceedings have not finally been disposed of, and, so far as this office is INTELLIGENCE ( sware, there has been no final settlement of the civil liability. PHILADELPHIA The second reason for mentioning it is that it is case wherein an elaborate and acat unusual plan was followed in efforts to conceal income. The investigation covered the years 1923 to 1941, inclusive. Beginning about 1922, the Berkoff brothers and their sister ostensibly operated a partnership, the Wortenoth Company at Milwaukee. The Philadelphia, Pa., April 7, 1945. SI-AWF-cks INTERNAL NEVER alleged partnership was manufacturer of moth crystals, insecticides, and funlgants, which had a wide sale throughout the United States and Canada. The final report contained reconsendation for the assesssent of taxes and penalties in the total amount of $247,127.70. It Bureau of Internal Revenue, Washington, D. c. appears that several adjustments in the tax liability, downward, were In re: Current Income Tax Drive made at conferences with representatives of the Bureau in Washington, and perhaps, also, with representatives of the Attorney General. At all events, the taxpayers, from first to last, caintained approximately In accordance with the request of Mr. Joseph D. Numan, Jr.. Commissioner of Internal Revenue, there is set forth herein & brief report of progress made during the past week on the current income 250 separate bank accounts, located in practically every state in the United States. They also had accounts in Canada, and, for time 2 1945 Chief, Intelligence Unit, had funds in England. The business establishment maintained at milwaukee was insignificant in appearance, and was not such as to indicate a business as extensive as the one which was actually conducted. In the final report, recommendation was made for the prosecution of Louis S. Berkoff for evasion of his OWD income taxes, and for prosecution Abel D. Berkoff and Era Berkoff Bass, as aiders and abottors. ndation was also snde for the prosecution of the three individu- tax driver Federal Reserve Bank of indicted on a charge of having made false and fraudulent statements and A general discussion was had with Mr. C. A. Sienkiewies, VicePresident of the Federal Reserve Bank, Philadelphia, Pennsylvania, regarding the contents of Under Secretary Bell's telegram of March 24, 1945. to the President of the Federal Reserve Bank. at Milwaukee. Recently the Intelligence Unit and the Internal Revenue presidents of large banking institutions in the Philadelphia area, als on a charge of conspiracy Louis S. Berkoff had previously been 0 representations of his net worth to the Collector of Internal Revenue, Vr. SienkLewics reported that he had contacted seven or eight Agent in Charge were requested to make recommendations on offers in who, while expressing sympathy with the idea that black marketeers should be investigated, also presented objections to furnishing compromise submi ted by the three individuals, which offers were all contingent upon Louis S. Berkoff's agreement to plead nole contendere, or guilty to the indictment pending against him. The recommendations were against the acceptance of the offers in compronise, but Louis S. Berkoff did plead guilty on Karob 2, 1945, and it may be that pros- leads, stating that to do so might give their depositors grounds for legal action. Mr. Sieniciewica offered to renew his negotiations on the basis that the leads could be presented in an informal but confidential manner. pective prosecutions on charges of evasion of income taxes have been compromised by the Attorney General. Mr. Sienkiewies accessed most enthusiastic about this matter and expressed his desire to cooperate in every way possible. I asked his if it would be possible to have study made of the flow of bills of large denominations froe one Federal Reserve Bank to another, which matter he has taken under consideration. Valuable leads could accrue from this source, as I understand that Federal It was ay intention to take some comments herein regarding one other black market case now under active investigation, and several which had been scheduled for investigation prior to the becinning of the present project. Time will not permit it now. out BOEE of that information will be submitted in later reports, unless you indicate that the deairs is to have these reports henceforth in briefer form. Reserve notes issued by the Bank in New York, for example, which are placed in curculation in the Philadelphia area, are returned to the issuing bank through official channels. The Bank in Philadelphia FORDEFENSE A.Though Special Agent in charge. would know the name of the Pennsylvania Bank forwarding the same and the date of transmittal, is addition to the amount and the denomina- BUY tions of the bills. Then, if agreeable to Mr. Frank J. Wilson, Chief, Secret Service, one of his Agents could inquire of the Pennsylvania Bank as to the source of the bills, which would be a positive lead. APRECISION TRADE MARK MICROFILM MICROSTAT BOLL NO 237 0 Current Income Tax Drive -2- Atlantic City Real Estate Atlantic City, New Jersey, was selected as a focal point for the spending of black market cash in this area. Inquiries revealed that there were approximately 4,300 deeds recorded in Atlantic County during 1943, as against approximately 6,800 in the year 1944. It is remored that the consideration in many of these transactions was cash. It WILL ascertained that all abstracts of deeds, as forwarded by the Country Clerk, to the taxing authorities in Atlantic City, were in good condition and could readily be examined. A special agent from this office is now in Atlantic City survey- ing this project with view to establishing the possibility of obtaining positive leads from this source. There are transmitted herewith news items showing the natural publicity following inquiries of this nature. Office of Price Administration Mr. A. P. Schuster, Internal Revenue Agent in Charge, Philadel0 phia, Pennsylvania, advised that he had received master list of damage suits instituted by the Office of Price Administration for ceiling price violations. Revenue Agents are now decoding this list with . view to obtaining leads for income tax purposes. Investigations Mr. A. P. Schuster, Internal Revenue Agent in Charge, reported that seventeen black market cases in this division were under active investigation during the past week. accus or theming Alfred W. Fleming Special Agent in Charge -2- PRECISION F TRADE MARK MICROSTAT S.U.S.PAT.OFF MICROFI ( Treasury Agents Check Realty Deals Here In Search For 'Black Mart' Cash By ALLYN JONES A Federal investigation de signed to learn the connection, if any, between cash property transactions on Absecon Island Check To Take Months The special-agente expect to spend months and months in tracing the and "hot' black market money through the buyer and either of them fail launched by the T-men. Under instructions of Secre- true tax from out-of-town has been tary of the Treasury Henry Morgenthau, eight special transactio reports prosecution Because of reflected agents of the Intelligence Unit of the Department of Internal Revenue already have moved in to start the investigation. More agents are expected to be assigned here by Elmer Irey, chief of the Intelligence Unit, as the probe progresses The investigators it was learned real estate sale of the PAN LED and years and are searching the records at the office of County Clerk WE im Blain at Mays Landing as well M those in the offices of City Engli beer George R Swinton of Atlantic City. and Tax Collector Owen Kirkland Records in Margate will be amined also as in local real estate The learned was yesterday course cash money many the from Philadelphia, New York other big cities. found have agents The where there were less than disorderly tractors recordings the county clerk for 1942 was increased to more than TOOO 1944 Because black market operators do not pay income taxes on their earnings, the government believe they dare not put their money . bank invest stocks, any other place where there will record of it. Hence the Treasury probe. There is more cash money In cir- relation than ever before history. The government evidently believes that into way Its of it much has found hands the market operators want to hide away One hiding place the suspicions, may Cases have already sewamen were told erty owner has been for celves building The not show on the price' recorded with the THE ATLANTIC CI'D PRESS money back on they their are April 6, 19 TRADE MARK U.S. AGENTS PROBE C THE EVENING BULLETIN SHORE LAND SALES chief Black Market Profits are 239 Believed to be Hidden in Realty Deals APRIL 6. 1945 Treasury Agents Check Realty Deals Here In Search For 'Black Mart' Cash By ALLYN JONES A Federal investigation THE ATLANTIC CITY PRESS April 6. 1945 2 U. S. AGENTS PROBE SHORE LAND SALES Chief Black Market Profits are 239 Believed to be Hidden EVENING BULLETIN in Realty Deals APRIL 6, 1945 Atlantic City, April -Federal tax agents are here in new hunt for black market profiteers who may have Invested their money in real estate in this area it was disclosed today. Eight agents from the Intells. gence Unit of the Federal Bureau of Internal Revenue are conduct- ing the inquiry here at the sug- gestion of Secretary of the Treasury Morgenthau Working on the theory that . considerable amount of illegally gained money has been used by black marketers in buying resort properties on Absecon Island, the agents have undertaken the task of checking every major real estate transaction in Atlantic County during the last two and one-half years, was reported It They will examine the records In the office of William A Blair. Clerk of Atlan the County and those of the city engineers and tax collectors in other communities in. cluding Ventner, Margate and Long port. Man Who Caught Johnson More agents are expected to be assigned soon by Elmer Irey, chief of the Intelligence Unit. who well known as the man who directed a four-year Investigation into protected gambling at this resort. resulting in the jailing of Enoch L. (Nucky) Johnson Republican county leader, and others, on charges of income tax evasion Trey also directed an Investigation of lavish spending at Miami, Fla. recently, recovering thousands of dollars in unpaid Federal taxes The real estate angle in the black market picture is believed to be comparatively new. Although there has been no official announoment it is supposed to work something like this: A man agrees to buy property for $30,000. but, because he has made his money illegally, be does not want it officially known that he paid that much. Suspleious Cases He therefore pays the seller $15.000 in cash on the side, and has the other $15,000 recorded officially as the actual seiling price. It is dials such as these cases were projierties appear to have been boughtfor much less than their actual worth that the agents are investigating M was said. The agents, It was reported will question all buyers whose names ap pear in such deals If they fall to prove that they reported all of their earnings charges of income tax eva sion will be brought against them There has been quite boom in property sales in this area during E. last two years In 1942 less than 2,000 recorded in the office of the county clerk Last year more than 7,000 deeds were recorded RECISION TRADE MARK MICROFILM MICROSTAT UNITED Hunt black market cash in shore- realty - DATE ATLANTIC CITY. April hundreds of thousands in shore dollars real salted ofAWAY black gleaned market effort avoid tax payments, thedepartment's II this an last night and track down the Elmet trey. short ury said that Henry than has ordered agents PRECISION TRADE MARK MICROFILM MICROSTAT chief Milo chice 4/7 145 242 Tax Agents Probe Shore Realty Boom Buying Is Linked To Black Market U.S. Probes Shore Realty Boom In Search for Racket Profits ATLANTIC CITY. property. Thing PRECISION TRADE MARK MICROSTAT MICROFILM G.U.S.PAT.OR BOLL N 244 Special Tax Investigations 243 TREASURY DEPARTMENT . is a record kept of bills going between the member banks and the Federal INTERNAL REVENUE SERVICE INTELLIGENCE UNIT Reserve Bank, but this would not do great deal of good in ascertain- 1028 Federal Building ing the individuals originally handling the funds. Detroit 26, Michigan Detroit April 7, 1945 Aside from the suggestion pade to operate through the banks, I have certain contacts established, both in Cleveland and in Detroit, which it is believed may produce some information along the line desired, and you will be advised of any results as soon as they develop. INTERNAL REVENUE A00,bba APR Chief, Intelligence Unit Bureau of Internal Revenue 1945 In consection with this subject, it might be stated that several INTELLIGENCE days age the police reided a private home in the Detroit area, suspected of gambling activities, and among other things soized . woman's purse Washington, D. C. containing total of $30,000. consisting of $10,000 in $1,000 bills, In reg Special Tax Investigations $10,000 in $500 bills and $10,000 in $100 bills. The money has been claimed by one Mrs. Corrado, who states the is the wife of Peter Corrado, who is known to operate numbers class in this city. Pete Corrado was investigated by this office during the general investigation There are attached hereto schedules showing the status of cases in this Division at the present time, pertaining to black market activities and cases arising out of large cash transactions. These of gambling in this city four or five years ago and has been checked once or twice since that by the Revenue Agents. 10th has always reported . substantial amount of tax and this particular uncovering of large schedules have been arranged to show the jacketed cases which are under active investigations the pending cases which have not been jacketed but are being worked on by Deputy Collectors and others, prel iminary to getting a jacket and the closed cases. whom your office made inquiry during the past week. 1 I was in Cleveland on April third and fourth at which time I had bills may not result in . case. However, the letter will be gone into thoroughly nevertheless. It night also be stated that Pete Corrado 10.1 . forner partner of Joe Massey who is now in Miami, Florida, and about : have approximately eight Deputy Collectors in cleveland and about conferences with Mr. Cake, the Internal Revenue Agent in Charge, and Mr. Carey, the Collector of Internal Revenue, as well as the vice president of the Federal Reserve Bank at Cleveland. A program conforming to the instructions received in Washington has been started in Cleveland, and number of cases in that city and vicinity are actively under in tes or twelve in Detroit working on produce distributors, with a view to developing black parket 06508 in that line, and it may take a week or two before anything is developed from that source. vestigation as indicated on the attached schedules. A number of these 08500 pertain to the liquor black parket cases and have been in progress for some time in the Cleveland area as well as other points in this Division, and It is expected to have some of these 08808 completed very C. soon. Concerning the suggestion made of tracing large denomination bills through the Federal Reserve Bank and its member banks, no tangible re- sults have been obtained up to the time of this report. The Federal Reserve Bank in Cleveland, and the bank in Detroit, willingness which is a branch cooperate indicated have the Chicago Federal Reserve, to . of with this office and have assured us that any information coming to their attention will be transmitted to us at once. Inquiry has been made among the member banks, both in Cleveland and Detroit, and as near as can be ascertained, none of these banks have any regular system or method of watching or controlling the identity of depositors or persons with- drawing large denomination bills from their banks. It is true that there POLICTORY drunewald Special Agent in Charge - 246 245 ACTIVE CASES Office Cinnimmati S.S. Freedman Robert Gould IN HUREAU FOR PROSECUTION Black Market Liquor Tax Penal ty Cleveland Fred Garmone Sam Deutsch . . . . - . - . Anthony DeLuon SI-19603-3 SI-21650-3 . Dominic Olivo $24,028.00 $66,907.22 Dave Nolin Ben Neyers Business Kest Packer Black Market Used Machinery . . H.A. Ungerleider . C. E. Busener . David Godes William Bauer L. H. Barken N.V. Mangine . Detroit Tom Bundros - Sauce Mayers Sol Omborne Paul VanDenabeele - Cleveland William Weisnan . J.A. Bradley Arthur Bennett CLOSED - NO PROSECUTION "labor pirate" Union Radal Liquor . SI-21473-F SI-21825-P SI-21821-P SI-21358-Y SI-21428-P SI-21926-F SI-21512-8 SI-21511-F SI-21925-F SI-21898-F SI-22041-9 SI-22087-F SI-21989-F SI-21656-P SI-21855-F SI-22027-7 SI-22138-P SI-21583-7 SI-21927-F Tax Penalty PENDING CASES SI-22002-P Geo. J. Bruick $1197.25 Sale of Gas Coupons C Office . Karl Freiberger Cleveland . Chas. Bromley Goo. Shinola 24 Siegel . . Anthony Golubich Ray Sharwell Victor Fur Company notal and produce. They are not big cases but will produce n fair Amount San Siegal Mr. Kahan These cases cover black market in liquor, furs, of tax. Detroit Stanley Mason Joe. Frokowaki Jos. Buyse John Walke Harvey Glick A A.A. Tool & Gauge Co. William Goldman Walter Shaffer Louis Kosiel Sunny Wilson Barrelhouse Beer Jos. Deutsch Cleveland 0 Black Market 248 TREASURY DEPARTMENT 0 INTERNAL REVENUE SERVICE INTELLIGENCE UNIT Atlanta P. O. Box 4144, Atlanta 2. Georgia April 7. 1945 PKS.CB VIA AIR MAIL APR 345 Chief, Intelligence Unit Bureau of Internal Revenue Washington 25, D. C. INTELLINIENCE In re: Tax Drive Narrative Report April 7. 1945 The following information is submitted relative to the progress made and the plans effected in connection with the tax drive which was the subject of your letter of April 5. Communications have been mailed to the senior special agents of each of the branch offices at Miami, Jacksonville, Tampa, Columbia and Birmingham, outlining the plans of the drive and the procedure to be ( followed. They have been instructed to initiate investigations at the earliest practicable date. Special Agent H. T. Jones will confer with the Collector and the Internal Revenue Agent in Charge at Jacksonville Special Agents Kenneth Morton and F. C. Park have been directed to To Chief (In re: Tax Drive, etc.) market is the sale of cotton goods in Alabama was reported to this office and is now under active investigation. An examination of recordax films in . Montgomery, Alabama bank by . special agent dis- closed indications of general policy followed by number of busi- ness firms and individuals of cashing customers' checks and secret. ing the proceeds. An income tax prosecution case was recently reported from this section involving these features (81-20080-F), and another case in that section of similar nature is presently assigned to special agent. In Georgia two cases are now under active investigation involving wholesale liquor representatives who engaged in black Barket. A soft drink bottling concern, the subject of . charge by the Office of Price Administration in sugar transactions, is under active in. vestigation for tax evasion. Collector Allen invited my attention today to two communications be has just received alleging evasion of excise taxes on Jewelry by local concerns, In Florida an investigation is now being conducted involving the Miami Provision Company, a meat case, and . considerable number of investigations are on the way concerning black market. contact similar officials at Columbia. Special Agent Barno will confer with Collector Willingham at Birninghan and arrange for conference with Internal Revenue Agent in Charge Marah T. Polk or his represents. tive as early .. precticable. In addition, I have addressed communica. tions to each of the Collectors and Internal Revenue Agents in Charge informing then of the nature of the drive and advising that the details of procedure will be discussed with then by . senior special agent of their locality. 1 have personally interviewed Collector Marion E. Allen, Internal Revenue Agent in Charge William Brusse, and District Supervisor R. A. Benan in Atlanta. Collector Allen plane an extensive campaign through- out the State, which will include spot checks of fur and jewelry dealers in five of the largest cities, with the view to determining if more extensive drives are justified. District Supervisor Benea has offered full cooperation. There are quite a number of cases under active investigation by this office, as well as potential cases involving black market profits. These will be assembled and made part of the drive when time permits. Evidence of black market activities are reflected is each of the states in the Division, In South Carolina . tax case is now under examina- tion involving rent overcharges. A recent matter involving black K. Sanders Acting Special Agent in Charge ideas TREASURY DEPARTMENT 250 24 (COPY) 0 INTER OFFICE COMMUNICATION DATE March 6, 1945 APR 10 1965 TO Secretary Horgenthau FROM Hr. O'Connell Secretary Herrenthan Mr. o*Connell leg Criminal Convictions Involving vertions of Freezing Control 1 sent you a memorandum on March 6 concerning the conviction of Alice H. Moran and Gladys Roth for conspiracy to violate the Foreign Funds Control. I believe you will be interested in the attached letter which we received from the U. S. Attorney concerning the assistance rencered by one of our lawyers in this case. In Vay 1910 securities and cash accreration $60,000 belonging to Georges Schnitzer and "adeleine Schmitzer, his wife, Belgian nationals, were on deposit in the Bankers Trust Company of New York in the name of Credit Suisse. Lurich Germaine Schnitzer, sister of Georges, then residine in the United states, devised the schene of noting as Madeleine in order to unblock the funds. Uning a member of sheets of American watemarked naper cm which the obtained the signature of Indeleine, the issued instructions to Credit Suisse to transfer the cash in the subscocunt from Bankers Trust to an account in the Chase in the name of "Vadane 0. Schnitzer". When the attented to have the securities transferred, the Swise bank asked for acce evidence that "Madame 0. Schnitser 132 resident of the United States. In order to supply this orcef, Gersaine Schuit ser obtained the accidance of Alice Koran, an attorney, and of cne Gladys Both. who produced ferred letter hurbertion to there that ladeleine Schnitzer had entered the United States in 1939. lines. Schnitzer, and Foth were indicted in September 1955 in the Southern District of New York for commitacy involving violations of the freesing centrol. Censine Schmitter entered . alea of milty and testified as . Government gitness in the trial of the other defendante, which remited in convictions. The court imposed fine of 05.000 or Cernalize Schmitzer, and fines of 2500 each :lice oran and Gladys with respended jail on sentences. (Srd.) Joseph J. O'Consell, Jr. - DEPARTMENT OF JUSTICE - REPLY UNITED - UNITED STATES ATTORNEY INITIALS NUMBER SOUTHERN DISTRICT OF NEW YORK UNITED STATES COURTHOUSE BB POLEY SQUARE 1s 99025 NEW YORK 7. N.Y. c 118.204 April 2. 1945. Honorable Joseph J. 'Connell, Jr.. General Counsel. Treasury Department. Fashington 25. D. C. Re: United States v. Schnitzer. Moran and Roth (Conepiracy to defraud the Governsent and to violate the Foreign Funds Control), Sir: As your Department has heretofore been in. formed. Germaine Schnitzer. one of the above named defendants. had pleaded guilty. The trial of the re. maining defendante. Alice H. Noran and Gladys Roth. consenced on February 6. 1945 and ended on February 15th. On the latter date the jury found both defen. dants guilty. Sentence was adjourned until February 27th when it came on before the Honorable Grover M. Moscowitz. United States District Judge. who had pre- sided at the trial. As you know. the case was a difficult one for the Government. It presented many new and unusual problems of law and of proof. Judge Noscowitz was ao impressed with the skill with which the case had been prepared for the Government that he asked me for the names of those who assisted in the preparation. At the time of sentence he mentioned in open court the splendid work of Mr. Irving Moskovitz, Associate Chief Counsel Foreign Funds Control. He consended his work and he attributed the success of the prosecution in large measure to his efforts. I. too. feel that Mr. Moskovitz displayed unusual legal ekill and devotion to duty, both in preparing the case and In the aid which he furnished ay Assistant Mr. Bruno Schachner at the trial. I deeply appreciate your having made his services available to se. Respectfully. BUY John X.McGOHEY, TheSohey JOHNP. P. X. United States Attorney. TREASURY DEPARTMENT 252 INTER OFFICE COMMUNICATION DATE 4/10/45 TO FROM Secretary Morgenthau - For Your Information Mr. Coe FC Subject: Prospective Brazilian Proposal for Division of Canadian Cotton Market with the United States The Executive Committee on Economic Foreign Policy has decided, with the concurrence of the Secretary of State, that this Government should not consent to the prospective Brazilian proposal that the Canadian cotton market be allocated between Brazil and the United States. It has been agreed that any such bilateral allocation of a foreign market would be inconsistent with this Government's general economic policy and that, furthermore, it would not significantly improve Brazil's cotton situation. The Committee recommends, however, that If approached by the Brazilians, this Government should express a willingness to consult with them concerning any alternative suggestions for dealing with the Brazilian cotton problem. International Bank For Reconstruction And Development ORGANIZATION AND MANAGEMENT BOARD OF GOVERNORS . Security Council and other international 44 Members-Ifrom each country 5 year term Add new members 2 increase decrease Cooperation with Fund capital Voting-Each Governor costs 250 votes plus f for each short (see voting schedule below) Meetings Annual and other nest . Suspend c member other organizations Advisory Council Membership Powers Reserved to Board 5 Decide Arrange appeals cooperation on Agreement with international organizations Suspend operations of Bank , Distribute income , more representatives Borking Commerce Industry Labor and Agriculture Meets annually and when Bank requests may be earled the Board and the Executive Directors Head Office in US EXECUTIVE DIRECTORS Powers AR Powers Regions Office delegated by OFFICERS Board of AND STAFF Governors Regional Council representing grade Membership 12 Members 2 Year Term Regional Office Members each OF ICERS and France Members elected by Governors of other 39 countries AND STAFF each costs votes that elected him Av number 4786 Regional Councils Continuous MESSION meets - business requires represent grace President serves - chairman of Executive Directors . Loan PRESIDENT Other Committees Committees Officers and Staff VOTES Regiona Office OFFICERS AND STAFF Regional Council representing green MICROFILM MICROSTAT ROLL NO 4/10/ is International Bank For Reconstruction And Development ORGANIZATION AND MANAGEMENT BOARD OF GOVERNORS Reserved Board Advisory Council Membership representatives 44 Member from country 5 year Labor Cooperation - Fund T or more Banking industry Commerce and Government Security other internationalall Agreement Decide appeds cooperation organisations Meets annually and when writing schedule below) Powers Admit increase Suspend = Arrange III c member member members III decrease - - copital Bank requests Amount Meetings called 6 Support internationaloperations operations organization Bank Executive Detribute income Head Office in US EXECUTIVE DIRECTORS Membership 12 Members Year Term Powers appointed by US,UX USSR Charge AS Powers Regions by OFFICERS Board AND STAFF Governors Regional Council of the39 countries Members France each Governors the elected - 4786 when Continuous each - needs business As number requires President server - chairman of Executive Directors representing oreas 1 RECISION Loan PRESIDENT Committees Officers and Staff VOTES Other Committees PRECISION TRADE MARK MICROSTATIUUP.O MICROFILM ROLL NO 255 Caire 18-668 This telegram must be paraphrased before being communicated to anyone other than Government Dated April 10, 1945 -2- #673, April 10, 2 p.m., from Cairo. will be substituted only for free packages sent hitherto. Fee'd 9:55 p.m., 11th Agency. (RESTRICTED) Secretary of State, fashington. Four. To now exploring possibility sending individual parcels free Tehran to liberated Poland duty free. Have already made test shipment several hundred parcels through regular post office facilities and switting re- 873, April 10. 2 D.R. sults. should this be possible it would open up useful FOR MOSES LEVITT JOINT DISTRIBUTION COMMITTEE FROM avenue of relief this area and make possible greater JOSEPH SCHRAPTS. Agree your suggestion increase package service participation relatives through greatly reduced price of packages. Exploring same possibilities for Lithmania and : budget first quarter by $150,000 by reducing 1945 appropri- Latvia and will keep you informed. Suggest you explore ation Poland this amount. Regarding possibility sub- possibilities parcel service from USA to those areas stituting bulk shipments for individual package this has view more available and cheeper supplies your and and been receiving our attention and position as follows: shortage supplies Tehran which beginning give - concern. One. Passsan will explore possibilities distribution bulk supplies with Voscow committee and if they in position undertake and execute work on fair and equitable basis bulk shipments may then be undertaken. Tec. Present available supplies Tehran will have to be used for individual parcels in accordance our agreement with owners of supplies. Three. Even if and when bulk shipments can be inaug= wrated it will be advisable continue paid parcel service thus assuring relatives participation while bulk shipments TUCK JIS MICROFILM TRADE MARK ROLL NO. 257 -2- #870, April 10, 11 a.m., from Caire Caire ASB-62 This telegran must be paraphrased before being communicated to anyone other than Government Dated April 10, 1945 Two. Regarding maintenance transportation at Rec'd 12 Noon Istanbul - both agree claim of $40,000 should not Agency. (RESTRICTED) be paid since Agency representatives had possibility Secretary of State, ask our consent in advance which would not have been Washington given and view fact agency itself would probably not have authorised those expenditures if their represent 870, April 10, 11 S.A. tatives had consulted with them. Suggest you inform FOR MOSES LEVITT JOINT DISTRIBUTION COMMITTEE Kaplan of above general decisions and leave final FROM JOSEPH SCHEARTZ settlement of account to Passman and Agency representatives Have discussed with Passman Jewis Agency trans- portation accounts accordance his recent cable to Jerusales. Final adjustments can be made within you and have arrived following conclusions. reasonable time and you will be fully advised. One. Regarding ... transportation although TUCK Paseman's reasons for questioning payment valid nevertheEDA less we both agree amount of 31,000 pounda sterling should be paid since - always knew that in view nature of project control of expenditures in Rumania would be impossible and in final analysis .. would have to pay 80% of what Jewish Agency claims to have excended connection see transportation. Passman has made it clear to Kaplan and you should emphasize again that the account as presented now is final and that no further claims will be recognised or considered. 1 MPRECISION PRECISION TRADE MARK MICROFILM MICROSTAT ROLL NO : 258 April 10. 1945 4 P.A. 10-426 Caire This telegram must be paraphrased before being Dated April 10, 1945 communicated to anyone other than Government LONDON agency. (RESTRICTED) Rec's 11:45 A.M., 11th 2769 Secretary of State, The fellowing for Vinest and Stone from Department FEA and War Refugee Board 1. WRB 63. Washington. Reference our 2070 March 17 and your 2965 March 22. No part of the proposed expension in our 2070 will 872, April 10, 1 p.m. originate free the United States, but rather all will be indigenous to Sweden. FOR UOSES LIVITY JOINT DISTRIBUTION COMMITTEE FROM JOSEPH SCHWARTZ The relations between this proposed expension and the originally approved 100 tons feedstuffs is only this now purchasing for our account 30,000 That proposal outlined represents an extension of the pairs of shoes for which he has export licence of expansion inclusion medical supplies and clothing are proposed for 20,000 Tehran parcel service. the estimates it will originally approved procres of foodstuffe and in that which 10,000 chargeable Csechoslovakia appropriation be possible secure export permit additional 70,000 pair for balance this year which would cost approximately It 1. our intention that the distribution would be ) handled and supervised by the Swedish THCA, which, .. for as cablee free Sweden indicate. acted with respect to handling and supervision of the initially approved 100 tens foodstuffe, However, we have no objection to participation either on the part of Swedeoress or Intercress Insamuch It has been proposed that the American Jewish Joint Dietribution Committee here finance this expended program, it is 3560.000 including freight, insurance etc. View urgent requirements Bangary and anticipated need other territories now being liberated would urge we authorise this amount charging budget each country as shipments are nade. Only other articles for which export permits as our intention that their representative in Stockholm shall be the spokesman for private agency interests in Sweden. Tour reference to commercial channels. that is, J. Heatbarr and A.D. Bankeapanist, dees not have our approval. Father, obtainable and which urgently required are medical supplies which sight reach about $50,000 and light currents amounting approximately $100,000. This latter article should be considered only if heavier garnenta not available elsewhere, would therefore suggest immediate appropriation $600,000 above purposes. Advise 11 is proposed that feed parcel distry butter to interness TUCK is concentration campa is enemy Europe continue to be COB- trelled .. is the test by private humanitarian organizations HDA who ties. have demonstrated ability to perform with respect to distribuSTETTINIUS (OHN) BC 4/9/45 NO SWE FIA 10.00 Chauncey (for the Sec'ty), Cohn, DuSots, Caston, Model, Bitchison, BeCommon O'Dayer, Files I 261 250 Bero Dated April 10. 1945 Cairo 103-442 This telogram must be paraphrased before being consuminated to anyone other than Government Dated April 10, 1945 Rec'd 6:37 p.a. Secretary of State, Rec 'd 11:57 a.m., 11th Veshiarton agency. (RESTRICTED) UII URGENT 2120, April 10, 11 D.S. Secretary of State, FOR WRB FROM WOLLKLLAND Washington. Division Special Assistance of ICRC informs (Department's 1392, VRB'. 490 April 9 and our 2009, 871, April 10, 12 della April a) it will be materially possible (containere are FOR MOSES UNITED JOINT DISTILIUNTION COMMITTEE FROM JOBKPH SCHENTS obtainable) repackage these PO. parcele in Switzerland If this 1. considered absolutely necessary by our Var Department but is will be time-consuming and expensive precess. Repactaging could begin in four to five days Group now interned Mauritium expected leave for Palestine within DEAT future. Transportation being provided by Palestine Government. Governor Mauritius has advised High Commissioner Palestine that approxinately 850 persons including 320 pen 400 women 73 children and 54 infanta will require clothing urgently and has suggested that it be distributed to then upon their arrival Port Said. Amount required this purpose 4 to 5 thousand pounds starling which we guaranteeing BUT asking South Africa and Kgyptian commuties stare which may reduce our participation substantially. Pasaman proceeding with arrangements and will keep you fully advised. TUCK at . rhythm of from two to three thousand parcels per day and at . sinisms cest of one Swiee franc per parcel. Working space to remeckage more then three thousand sereals per day is exceedingly difficult to obtain immediately. Output of three thousand parcels per day would be sufficient utilize trucks likely to be available to our program but insefficient to make use of railread our space we should receive within next ten days on ICRC blacked traine at depot at Revensuber in IGNC dan satisfactorily demonstrate (if War Department considers this technically possible) that identity of origin these parcels can be destroyed, will 11 permit Var Department to waive repackaging condition HARRISON KDA LAS RECISION TRADE MARK MICROFILM MICROSTAT MJV-303 ROLL NO PLAIN 262 Chungking via Navy Dated April 10. 1945 Rec'd 10:05 P.M. $ Secretary of State Washington. 603, April 10. commerce. Reference Rebessy's 431, March 14. March economic review for One. General. Although Free China's inflationary spiral continued to gain sementus, Chinese Government took positive action to retard is- flation by: (one) continuing to carry out drastic governmental retreachment policy; (Two) abolishing National Mobilisation Council, hitherto charged with enforcement of price control and other measures designed to check rising prices, and making executive Tuan directly responsible for this work: (Three) appointing Leon Hendereon as advisor to help government combat inflation: and (Your) increasing official gold sales price by 75% is effort to aboorb larger amounts of speculative capital and increase revenues. Expected seasonal leveling off is commodity prices following spurt before and after Chinese new year. C UNSIGNED JMS eficeps 3-13-45 , PRECISION MICROFILM MICROSTAT TRADE MARK ROLL N 264 April 10. 1945 253 PARAPHRASE or TELEGRAM RECEIVED FROM: American Legation, Born TO: Secretary of State, Washington April 10, 1945 DATED: NUMBER 4 P.A. US UNGENT ANLIGATION BURN 1493 8108 The following for MeCielland 1. WRO 503. CONFIDENTIAL Transfer of 206,000 United States prisoner of var parcels AMERICAN INTERESTS CHINA. var before Years from Var Devertment has BOW been effected, Mar Department has requested American Red Gross to hold these to This is in reference to the Department's eable of March 24, parcels for the Var Refuree Pearl and to dispose of them in accordance with directions of Ver Refuree Board, subject to following conditions: No. 1195. In A note dated April 7. the Foreign Office stated that QUOTE (a) That such food purcels will be distributed solely is concentration cause supervised by the Inter- according to telegrim from Fontanel, looal conditions in occupied China during the last weeks hav undergone important modification. national Red Gross Committee in accordance with existing practices; (a) That all such food parcels will be repackaged Wholesalers are proceeding to liquidate their stocks, is containers not bearing any reference to the United States Aray or to prisonare of war before being introduced into. or ) 1 probably as the result of events in the Far East, and have placed on the market Father large quantities of a which has resulted in the stoppage of inflation prices. Fontanel estimates that under these circumstances budget for assistance of American nationals during April may be calculated upon that of the March basis. (As reported in the Legation's 1420, March 6, the Foreign Office refers to its note dated March 2.) Information is requested by the Foreign Office as to whether distributed is, Germany. UNDOOTS Zeart his requested Agrees to state evailable the 206,000 parcels to you as Var Refuree Board representative. You are instructed to arraning at once for repackering is accordance with the conditions sprcified by the Ver Department. Please alvise (1) when Ancreas makes packages available to you. (a) when repackaging has commenced, and (a) when Interpress starts sending these parcels to Gaymen concentration CANCE Please report weekly to Board the number of Board percels which have goda forward and the number remaining in Switzerland. STATTINIUS (OLV) the Department is disposed to approve the expense of 83,510,000 CRB dollars proposed for April relief, even though Department's No. 1105 was communicated to the Foreign Office by note dated March 26. MARRISON DC/LINASIAN 4-12-45 03: 4/18/45 SVP SION TRADE MARK MICROS COPY NO. SECRET OPTEL No. 115 Information received up to 10 a.m., 10th April, 1945. 265 NAVAL HOME WATERS. 9th. Beaufighters made two attacks on midget U-boats off The Hook probably sinking one. 1. MEDITERRANEAN. 9th. Serious explosion occurred Bari Harbour where 3 ships on fire and Navy house damaged. 2. 3. ENEMY ATTACKS ON SHIPPING. 9th. Two U.S. Ships in convoy torpedoed off Dungeness and later sank while in tow. A U.S. tanker mined or terpedoed off Ostend with no survivers. 4. ANTI-SUBMARINE OPERATIONS. 9th. 3 U-boats attacked by Mosquitoes in Kattegat and attacks on 2 of these considered promising while 4 Mosquitoes are missing. MILITARY 5. WESTERN FRONT. Southern Sectors 1st French Army continued make steady progress and has captured road communication centre Phorzheim while to north 7th U.S. Army has practically eliminated large salient which stretched north from Wurzburg to Suhl. Central Sector: On 1st U.S. Army Front River Weser cressed North Cassel and infantry now striking N.E. against light opposition have captured Gottingen. Considerable advances made Eastern and Southern flanks Ruhr pocket where progress limited more by difficult country than by enemy resistance. On Eastern Front of 9th U.S. Army infantry have crossed Weser in area Hoxter and have advanced some 10 miles. Northern Sector: Armour of 2nd British Army has advanced further 15 miles N.E. between River Weser and made to reach Neustadt while further north armoured spearheads now meeting strong opposition at approaches Bremen. 1st Canadian Army continues meet strong opposition in front of Deventer but has armoured car patrols operating N.W. to Meppel. EASTERN FRONT. Northern Sector: Russians report fall of Konigsberg. Southern Sector: Centre of Vienna has been reached while further progress also made along north bank Danube from Bratislava while N.E. this latter town further advances made into 6. Czechoslovakis. 7. ITALY. West Const Sector: Further progress made towards Massa. 8. BUEMA. Central Sector: Further small advances made south Meiktila while 3 miles N.W. Thazi determined opposition still being encountered. AIB 9. WESTERN FRONT. 8th. SHAEF (Air). Belated reports state further 771 tactical aircraft operated southern sector destroying 50 locomotives, 259 railway vehicles and 114 M.T. while 72 enemy aircraft destroyed on ground. 8th/9th. Bomber Command despatched 930 aircraft (12 missing), 441 U-boat yards Hamburg (1491 tons), 242 Lutzkenderf (928 tons), 71 Dessau, 28 Berlin and 148 other missions. At Lutzkenderf weather clear and bembing accurate. Constal Command heavy bombers attacked shipping off the Skaw when 2 ships between 2500 and 3000 tons bit and 4 others left burning. 9th. Bomber Command Lancasters attacked oil storage and U-boat shelters Hamburg (335 tons) 1202 U.S. heavy bombers (13 missing or outstanding) dropped 2688 tons in clear weather on 10 airfields when 94 enemy aircraft destroyed on ground and oil storage and explosive plant Munich area. SHAEF (Air) medium bombers dropped 102 tons gun positions Holland and 1189 tens other targets central Germany, while 1868 fighters and fighter bombers operated battle areas destroying 250 railway vehicles, 350 M.T. cutting railway lines in 54 places and causing enemy aircraft casualties 72 on ground. 9th/10th (night). Coastal Command heavy bembers report hits on one 9900 ton, 1 5000 ton and 1 4000 ten ship while 2 others also hit. 10. MEDITEBRANEAN. 8th. Heavy bombers dropped 254 tons targets North Italy. 484 tactical aircraft attacked various targets Italy, while 59 medium and light bombers attacked gun positions Rab Island, and 151 Lightnings dropped 71 tons on railway targets Germany &Austric ) $