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The Pamphlet Collection of Sir Robert Stout: Volume 56

Why Have Not Customs Frauds Been Punished?

Why Have Not Customs Frauds Been Punished?

Such is the law to-day. Certainly the language used in the act of 1874, is broad enough to cover each and all of the offences, whether of false invoices or false valuations, about which so much is now heard. This law has been in force during the last eleven years and more. If false invoices, false statements, or other wilful acts by means of which this Government is, or has been, deprived of its lawful duties on imported merchandise, have so abounded during the last ten or five, or three years, or one year, how, or why, has it happened that so few prosecutions, for confiscation of the inculpated merchandise, or for criminal punishment of individuals, have been undertaken? If any class in the community, whether manufacturers or importers, or if any individuals in the community, whether in office or out of office, are, or have been, cognizant of these frauds, why have not the charges and page XXII specifications been made to the Treasury Department, or to Collectors of Customs, or to District Attorneys, thereby compelling the attempted imprisonment of the offenders, and confiscation of the offending property.

I was perplexed by inquiries of this character while engaged in the preparation of my Annual Report, and I am still perplexed by them. Out of an effort to come to a satisfactory conclusion therein in my own mind, came the series of inquiries which I addressed to customs officers in the several collection districts, and to law officers in the several judicial districts, the replies to which I transmitted to Congress. In that document I omitted nothing contained in the records of this Department which I thought would aid Congress in coming to a safe conclusion. To that end I included in the document what seemed to me the conflicting views of the several agents of this Department, on the one hand, and of the local officers in the several collection districts on the other hand. The opinions of these two classes of officers, it will be observed, came from those who had been for a long time in the service of the Government and had been responsible for the execution of the customs laws before I became the Head of this Department. I presented facts and statistics tending to show that prosecutions and indictments for customs frauds, which had been many and continuous from 1863 to 1874, suddenly ceased after that date. It will be observed, for example, that the Collector of the port of Boston, from 1882 to 1886, reported to me (p. 468) under date of September 16, 1885:

"I have no evidence, neither have I been able to procure any, that the duties have not within the last few years, been levied and collected as the law prescribes. I have no evideuce, neither have I been able to procure any, that the full amount of duty prescribed by Congress has not been collected."

The Naval Officer and the Surveyor at the port of Boston appear to have substantially concurred in this opinion. And yet Mr. Bingham, who had been Special Agent in that Collection District from 1869 to 1885, reported to me (p. 385) on September 21, 1885:

"There is abundant evidence in the records of the Department and the several custom-houses that various kinds of imported merchandise have, within the last few years, been entered and passed at lower rates than those prescribed by law."

My attention having been called to the divergence, if not positive conflict of opinion, between the Special Agent and the Collector at the port of Boston, I addressed to Special Agent Bingham, under date of October 2d, 1885, a second inquiry calculated to call for a revision of his opinion, as to any differences that might exist between himself and the chief customs officers at the port of Boston. In his second reply page XXIII Mr. Bingham substantially reiterated his previous opinions, and added that "Undervaluation is the rule rather than the exception."

A similar divergence or conflict of opinion may be said, I think, to exist generally throughout the country between the Special Agents and the chief officers at the several ports. The replies of the appraising officers, including the examiners at the port of New York, which are published in the volumes referred to, are especially noteworthy in this connection as tending to deny or ignore the existence of undervaluations or frauds at that port, such as exist in the opinions of the special agents, and of so many manufacturers and importers.

Great stress has been laid upon the sixteenth section of the act of 1874, because, as is alleged by many, it made successful prosecutions for forfeiture impossible, by reason of the provision that the jury must specially find intent, and because it shifted the burden of proof upon the prosecution. In that regard 1 think the letter which Mr. Justice Blatchford so kindly addressed to me in reply to my inquiry (p. 868) is most important. That sixteenth section of the law of 1874 only required the Court to submit to the jury as a distinct and separate proposition, whether the alleged acts were done with an actual intention to defraud the United States, and to require on such proposition a special finding by such jury. If frauds have been within the last few years, and now are, perpetrated upon the customs revenue, of such a character as are generally indicated, I am at a loss to understand how, with adequate knowledge on the part of those who are cognizant of those facts, and also on the part of prosecuting officers, the sixteenth section can be a serious impediment in the way of confiscation. The averment is, as I understand it, that, foreign manufacturers and others deliberately, knowingly, intelligently and intentionally prepare invoices, and cause them to be presented at the custom houses in this country, which do not, and that those who prepare such invoices know that they do not, contain the prices which the laws of this country require to be inserted in such invoices, but that lower prices are, with guilty knowledge, inserted in such invoices in order to evade the payment of duties known to be chargeable thereon, and to defraud the revenue of the United States. If such facts actually exist, they must be within the knowledge of persons in this country who can produce, or enable the Government to produce, the proof thereof, and if produced and presented to a Court and jury in New York, or in any other judicial district, I am unwilling to believe, and do not believe, that there would be a failure of justice by a refusal of juries to return a verdict which would enable the Court to pronounce a condemnation.

page XXIV

I do not wish to be understood as expressing the opinion that such frauds have not been perpetrated within the last few years in great abundance, or that they are not now perpetrated. But why have not more prosecutions been attempted? One reason may be that under the existing law there is no one with sufficient motive, or inducement, I will not say sufficient fidelity to the Government, to make the preliminary seizure which must be made before the property can be taken possession of by a Marshal on a warrant issued by the Court. It is not possible for the Head of this Department to make such seizures in any or all of the one hundred and sixteen collection districts of the country, nor is it practicable for the Head of this Department to direct that such seizures be made. The law contemplates that one whose property is seized shall have a remedy for an unlawful and an unjustifiable seizure, by a suit against the one who makes it. The law prudently requires that there shall be an actual seizure before a libel of prosecution is filed, inasmuch as if a seizure by order of the Court is the first seizure made, the person injured cannot bring a suit for damage against the Court. If the Head of this Department should direct a seizure to be made by a customs officer, it would be unjust to hold that officer responsible in damages for an unjustifiable seizure which was made by command of his superior officer. I am not aware of any statute which authorizes a warrant to be drawn to pay a judgment recovered against a person making a customs seizure, if that seizure shall have been pronounced by the judgment unjustifiable. Under the moiety law, as it existed from 1799 to 1874, the officers of the customs appear to have been willing to take that risk. The arrangements of the law of 1799 by which the distribution of a share of the proceeds of forfeitures to informers, was a judicial act, wherein the informer could vindicate his rights in Court, tended to uncover and display to the Government information in regard to attempted or perpetrated customs frauds, the obtaining of which is now practically impossible.

It is, I repeat, impracticable for the Head of this Department to make seizures, or order them to be made, or make affidavits charging criminal offences, but I am authored to say that if any responsible citizen,—manufacturer or importer,—will present charges and specifications showing probable cause to believe that a fraud on the customs revenue has been knowingly perpetrated, the whole power of the Executive will be immediately brought to bear, and vigorously applied, on the criminal and civil side of the Court, in order to bring the accused to condign punishment.