November 13, 1875 – 143 years-ago yesterday, the head of Internal Revenue’s Southwestern District was convicted for his part in the “Whiskey Ring” scandal.
Over 300 people would be arrested, & 86 government officials would be indicted in the scheme to defraud the government out of millions in tax revenue and funnel the funds to political campaigns. Among those indicted was President Ulysses S. Grant’s private secretary, Gen. Orville E. Babcock.
To show his appreciation for the appointment and on the pretext of building a “war chest” for Grant’s 1872 re-election campaign, John McDonald and his friends devised a scheme to defraud the government of a percentage of the taxes he was responsible for collecting. What the president knew of this scheme is a matter of speculation. Some of the money did go to support his re-election efforts, but a good deal of it lined the pockets of the co-conspirators. The plan involved under reporting the amount of whiskey produced and reusing legitimate federal tax stamps that had been carefully affixed for easy removal. It required collusion among local businessmen and some minor federal officials.
While some distillers willingly participated, others were coerced. When Grant was re-elected in 1872, the original reason for the ring’s existence was realized. By then, however, its operations were functioning so smoothly and the graft so rampant that ending its operations seemed highly unlikely. None of its leaders seemed concerned about the possibility of exposure and openly boasted of their influence in Washington. Periodic attempts to expose suspected fraud were unsuccessful, as ring members always seemed to have advance warning and operated as they should when inspectors appeared.
The national scandal broke here in 1875. Four local men, including McDonald, had already been convicted when the trial of Orville Babcock began on Feb. 8, 1876, and ran for 18 sensational days. Reporters from around the country jammed the U.S. Post Office and Custom House, 218 North Third Street, for the trial of Babcock, President Ulysses S. Grant’s private secretary, who was accused of being the ringleader of the infamous “whiskey ring.”
Standing at the courtroom door, the bailiff told the crowd, “Unless you have a pass, or are under indictment for whiskey frauds, you can’t see the show.”
Babcock had been Grant’s aide in the closing months of the Civil War, & was in the room when Confederate Gen. Robert E. Lee surrendered on April 9, 1865. With Grant’s election to the presidency three years later, Babcock joined him in the White House and handled his correspondence. Prosecutors said Babcock also secretly ran interference for a multi-city scheme of payoffs to let liquor distillers avoid taxes. No evidence suggested Grant took part, though many have speculated that there was no way he could not have known.
Babcock was the only major figure in the scandal to win acquittal, but was soon forced from the White House. Grant made him a lighthouse inspector, and Babcock drowned eight years later when his boat over-turned while inspecting Florida’s Ponce de Leon lighthouse.
John McDonald was sentenced to three years, & fined $2000. President Grant pardoned him on his last day in office.
Photos: General (later President) Grant, & his aide, General Orville E. Babcock; & the Old Custom House, at Third and Olive, demolished in 1941 to make way for the Gateway Arch grounds.