To the House of Representatives:
On April 14th your House adopted the following resolution:
Resolved , That the President be, and he is hereby, requested to inform the House, if not incompatible with the public interest, what facts, if any, now exist which make inexpedient a thorough examination at this time by the House of Representatives of the frauds in the customs service mentioned by the President in his annual message to the Congress at this session.
I beg herewith to enclose a joint report of the Secretary of the Treasury and the Attorney-General showing exactly what has been done by them and by their subordinates and the present state of fact in the matter of the investigation of the frauds in the customs service mentioned by me in my annual message.
This report shows that the executive investigation and the investigation by the grand jury for the purpose of bringing the guilty persons to justice are not yet complete. The danger of granting immunity by a congressional investigation, while the executive and grand jury investigations and trials are proceeding is still a serious one. This is sufficiently illustrated by the case of Charles R. Heike, referred to in the report of the Secretary of the Treasury and the Attorney-General. Heike is the secretary of the American Sugar Refining Company, and is the highest official of the company said to be implicated in the frauds, except its late president, H. O. Havemeyer, who died two weeks after the first discovery of the frauds. In the investigation before the grand jury as to whether the American Refining Company is now a party to an illegal combination under the Sherman Antitrust Act, Heike was summoned officially, as the secretary of the refining company, to produce certain documents and furnish certain information respecting the inquiry under the antitrust law. In the trial of the indictment found against him for complicity in the frauds on the revenue effected by the false weighing of sugar, he filed a special plea in bar claiming immunity from the prosecution of the indictment by reason of his evidence before the grand jury in the antitrust case. His plea was overruled in the circuit court, but the question was carried to the Supreme Court, which refused to pass on it because not properly before the court now, leaving it still to be raised in the event of a conviction, upon appeal from the judgment of the circuit court.
The investigation into, and prosecution of, the frauds in the weighers' office are now nearly complete, though there are a number of indictments yet untried. The executive and judicial investigations into the frauds in the appraiser's office, however, are still proceeding. It will take a considerable time to complete them. It may be added that the character of the investigations into the weighers' and appraiser's offices is such that a congressional committee would have to wait upon such an expert search as is now proceeding to make clear the frauds. The grand jury investigation into the charge of countrywide monopoly against the refining company is being pressed with vigor; but the evidence is so voluminous and widespread that it is necessarily slow.
The primary duty with respect to frauds in the executive service falls upon the Executive to direct proper executive investigation, and upon the discovery of fraud and crime to direct judicial investigation for the purpose of recovering what is due the Government and of bringing to justice the guilty persons. It is further the duty of the Executive to make such executive changes in the service, both by removal of inefficient civil servants and by changes in official methods, as will render a recurrence of fraud less possible. The necessity for congressional investigation arises, first, when executive investigation is either not in good faith, or is lacking in vigor, and, second, when additional legislation is needed to provide new safeguards to prevent a recurrence of the frauds. A further advantage of congressional investigation is that it may hold up to just public condemnation many persons whose neglect of duty or whose ignoring of the public weal for political or other purpose, may have made such frauds possible, without subjecting them to criminal liability and conviction.
The report of the Secretary of the Treasury and the Attorney-General shows beyond question the utmost vigor and effectiveness in the investigation and prosecution up to this time of the frauds developed in the customs service and the achieving of exceptional results, as well in the collection of moneys of which the Government has been defrauded as in the apprehension, indictment, and punishment of participants in the frauds, and in the thorough reformation of the customs service with a view to a prevention of the recurrence of such frauds in the future.
A congressional investigation at this time would embarrass the executive department in the continuance and completion of the investigation of the appraiser's and other offices of the customs service. As soon as these investigations by the Executive and the grand jury are at an end I shall bring the fact to the knowledge of Congress.
WILLIAM H. TAFT
Note: The joint report by the Secretary of the Treasury and the Attorney-General relates that as the consequence of the discovery in November, 1907, at the port of New York, of a secret spring by which sugar was underweighed and the Government cheated out of dues, an investigation was undertaken by the Customs officials, together with the local United States District Attorney, into the business of all importers. Systematic corruption and equitable division of the spoils were discovered, involving all ranks from highest to lowest. The method was for the importer to retain half of the profit obtained by under-weighing and to apportion the other half (which averaged $200 per ship) among the Government employees. Four men who actually applied the secret spring to the scales and their dock superintendent were convicted.
The sugar importers practised this fraud on a larger scale than the others. The chief offender was the American Sugar Refining Company, the so-called trust, which was completely and minutely run by H. O. Havemeyer, its president, whose death forestalled the Government prosecutors. Mr. Taft has related the progress of the prosecution of Havemeyer's chief assistant, Heike. The company's cashier escaped through the disagreement of a jury. This American Sugar Refining Company was also indicted by the Government for crimes in violation of the Anti-Trust Law. The company having resisted subpoenas, and defended such resistance on technical grounds, they were ordered by Judge Lacombe to comply with same; having declined to obey, they were found in contempt and fined $500, and were at the same time informed that subpoenas would issue hourly and fines be imposed as frequently unless they complied. The company yielded. The prosecution under the Anti-Trust Law was (May, 1910) awaiting hearing in the Supreme Court.
The investigations and prosecutions having extended to all the other sugar importing companies, the Government procured the restitution of the following sums: American Sugar Refining Company, $2,135,486.32; Arbuckle Brothers, $695,573.19; National Sugar Refining Company, $604,304.37; and negotiations were (May, 1910) pending for the restitution by the Federal Sugar Refining Company of $106,123.15.
The discovery of smaller frauds systematically committed by importers of Mediterranean products and dress goods, with the connivance of corrupt officials in all ranks from chief clerk of the surveyor's department down to the assistant weighers engaged in the actual weighing, led to the indictment of twenty-four importers, five assistant weighers, a former Government weigher, a baggage-master of a steamship company with his confederate, and thirteen dressmakers. Only one of the assistant weighers was convicted and sentenced, death, jury disagreements, and suspended sentences accounting for the rest. Only two of the importers had been tried, one going to twelve months' imprisonment and the other being acquitted. The former Government employee was convicted. The baggage-master and his accomplice were on trial, the latter having plead guilty. The thirteen dressmakers plead guilty and paid fines aggregating $34,750. More than $100,000 was paid to the Government for property of these kinds confiscated for fraud. Three importers guilty of smuggling were tried, two being sent to twelve months' imprisonment and the other, a woman, being fined $5,000.
William Howard Taft, Special Message Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/207424