Autobiography of Seventy Years, Vol. 1-2

by George Frisbie Hoar

CHAPTER XXIII THE SANBORN CONTRACTS

The forty-second Congress, at its second session, repealed all laws which provided for the payment of moieties, or commissions, to informers, so far as related to internal revenue taxes. But a provision was inserted by the Conference Committee, which attracted no attention, providing that the Secretary of the Treasury might employ not more than three persons to assist the proper officers of the Government in discovering and collecting any money belonging to the United States whenever the same might be for the interest of the United States. The Secretary was to determine the conditions of the contract, and to pay no compensation except out of money received. No person was to be employed who did not file a written statement, under oath, stating the character of the claim under which the money was withheld or due, and the name of the person alleged to withhold the same.

Under this law John D. Sanborn of Massachusetts, an active supporter of General Butler, applied for a contract which he obtained on the 15th of July, 1872, for the collection of taxes illegally withheld by thirty-nine distillers, rectifiers and purchasers of whiskey. He was then himself an employee of the Government as Special Agent for the Treasury Department. Secretary Boutwell being then absent or otherwise unable to attend to his duties, this contract was signed by Assistant Secretary William A. Richardson. Sanborn had already been employed to work up certain whiskey cases for which he had been paid $3,000 by the Government, and these cases were included in the foregoing contract.

On the 25th of October, 1872, Sanborn made application to have added to his contract the names of 760 persons, alleged to have withheld taxes imposed on legacies, successions and incomes. An additional contract for that purpose was signed by the Assistant Secretary Richardson. On the 19th of March, 1873, Sanborn applied to have the names of more than 2,000 other like persons added to his contract, which Mr. Richardson permitted. On the 1st day of July, 1873, Sanborn again asked to amend his contract, and Assistant Secretary Richardson signed the contract by which the names of 592 railroad companies were included. That was substantially a complete list of the railroad companies of the country. Some of them had been examined by Government officials before the day of the contract, and the claims had been brought to light and found due. Sanborn had no knowledge of any delinquency, except as to about 150 of them. When he so represented to the officers of the Treasury Department he was told that it did not make any difference, and to put them all in. Thereupon he took oath that they were all delinquent, and had them added to the contract.

The form of this contract was taken, in part, from one prepared by Secretary Boutwell, which he had carefully considered with Mr. Kelsey, a subordinate in the Treasury, in June, 1872. That prepared by Mr. Boutwell, if adhered to, would have amply protected the Government. But it was departed from in essential particulars. Under Secretary Boutwell's contract only a small number of claims was included. Sanborn collected, in the course of a year or two, $427,000, on which sum he received 50 per cent.

The unanimous report of the Committee of the House who investigated the matter was written by Charles Foster of Ohio, afterward Governor, and Secretary of the Treasury. The Committee comprised the following gentlemen: Henry L. Dawes of Massachusetts; W. D. Kelly of Pennsylvania; Horatio C. Burchard of Illinois; Ellis H. Roberts of New York; John A. Kasson of Iowa; Henry Waldron of Michigan; Lionel A. Sheldon of Louisiana; Charles Foster of Ohio; James B. Beck of Kentucky; William E. Niblack of Indiana; Fernando Wood of New York.

The Committee found that a large percentage of the $427,000 was not a proper subject for contract under the law, and that it would have been collected by the Internal Revenue Bureau in the ordinary discharge of its duty. The law provided that the person with whom it was made should assist the Treasury officials in discovering and collecting, so that the collections were to be made by the Treasury. But the contract in fact signed authorized Sanborn to make the collections, and required the Treasury officials to assist him.

The Committee further called attention to the fact that the law provided that no person should be employed who should not have fully set forth in a written statement under oath the character of the claim out of which he proposed to recover or assist in recovering the moneys for the United States, the laws by the violation of which the same had been withheld, and the name of the person, firm or corporation having withheld such moneys. This provision was disregarded utterly.

The Committee found that the Commissioner of Internal Revenue was not consulted in the matter, nor was any official of his Bureau, nor was he advised as to the making of the contracts or of the character of the claims, although the proper officials of the Government, referred to in the statute, could only have been the officials of the Internal Revenue Bureau. It was shown that the Commissioner of Internal Revenue wrote a letter protesting against the manner of these collections to the Secretary of the Treasury, which was never answered. The Committee found that the Commissioner was studiously ignored by the Secretary of the Treasury and the officials in his office.

The wicked and fraudulent character of the transactions is shown in the report.

When the Committee made their report the matter was debated in the House of Representatives by Governor Foster and other gentlemen who had taken part in the investigation. All these Sanborn transactions were with the Assistant Secretary in Mr. Boutwell's absence, until later Mr. Richardson became Secretary of the Treasury. The Committee unanimously agreed to report a resolution that the House had no confidence in the Secretary of the Treasury, Mr. Richardson, and demanded his removal. President Grant was notified of this conclusion. He sent for the members of the Committee and personally urged them to withhold the resolution, and offered that the Secretary should resign, and that he should be provided for in some other department of the public service. To this the Committee agreed. It was never thought that the Secretary himself profited corruptly by the transaction, but only that he had suffered himself to be hoodwinked. It was unfortunate that nearly all the persons who were connected with this transaction were from New England, most of them from Massachusetts, and several of them from Lowell.