Papers Relating to the Foreign Relations of the United States, Transmitted to Congress, With the Annual Message of the President, December 1, 1879
to Mr. Evarts
Washington , October 10, 1879.
Sir: Numerous complaints having reached me during the past summer from San Francisco in regard to a decision of the collector of internal revenue there affecting the interests of Chinese residents, I venture to call your attention to the facts, and I inclose documents which fully explain the subject.
It is alleged that for the first time in twenty years the collector refuses to accept as bondsmen for tobacco manufacturers wealthy Chinese merchants, but insists that the sureties shall possess real estate. As the Chinese rarely own houses and lands, the new regulation operates harshly against them. In many cases they are driven into the hands of professional “bond-signers,” who exact exorbitant fees for signatures. Under the former regulation the government never suffered loss from the Chinese, but under the new its receipts are diminishing.
The collector was not compelled by law to establish the new rule, and there are many things connected with it which look like a design to drive the Chinese residents from trade in San Francisco. If this be true, it is a violation in spirit, if not in letter, of treaty stipulations, and by an officer of the United States Government.
As the regulation referred to is within the discretion of the Executive, I have no hesitation in presenting the subject for your consideration.
I have, &c.,
Mr. Bee to Mr. Wing.
Dear Sir: I regret exceedingly the necessity of calling your attention to a matter which I am compelled to say, after a thorough inquiry, partakes of persecution towards a large number of Chinese engaged in the manufacture of cigars and tobacco in this city. I am compelled to say that, for the first time, this persecution comes from the United States officials, through the internal-revenue office of this district. I need not call your attention to the many annoyances the Chinese have been compelled to submit to by statutory enactments of the State and local authorities. But I must say I never anticipated the United States Government would, in any of its departments, without good and sufficient reasons, be influenced by the clamor of a foreign mob and lend its aid in striking down any class of residents, and I don’t believe it will tolerate such an act when inquiry is made. Hence I place the facts before you that you may judge if my language is too strong. As a preface to the great wrong, I call your attention to what I call petty persecution. A few months since a new special agent made his appearance here, representing the Internal-Revenue Department. As to his acts in connection with “the citizens” the proof has fully ventilated; his acts towards the Chinese have never been made public.
This man learned that the Chinese vegetable peddler, in self-defense, had to take with him in his rounds each morning a pocket full of cigars to appease the hoodlum who met him regularly and demanded his supply of cigars, which the poor fellow at once complied with to save his wares. Scores were arrested and imprisoned for having unstamped cigars in their possession to the ruin of their calling, and loss of a city license of $10 per quarter paid in advance.
The hoodlum and ex-convicts were pressed into service to convict old established factories of illicit acts. The collector ordered the investigation of one of the oldest factories here upon the affidavit of a young thief who, five days after, was sent to the industrial school for ninety days for petty larceny, and a most estimable gentleman, Mr. Cooper, removed for refusing to be a party to such a transaction. So much for petty acts.
Please turn to Revised Statutes of United States, second edition, p. 664, sec. 3387, which requires all cigar manufacturers to give a bond, &c.[Page 238]
In this connection it is well known to every resident of California that the Chinese own hut little real estate. In executing bonds it has been the custom for fifteen years in the internal-revenue office to take a “Chinese merchant’s bond,” or personal property security; how this class of security is looked upon by our leading business men, I refer you to 200 pages of printed testimony taken before the Morton committee; and, further, I challenge the internal-revenue office to show the loss of one dollar from this class of bonds for ten years past; in fact I cannot learn of any loss since the inception of the cigar interest, and I get my information from officials who for several administrations have been in the office. For ten years past, up to three months since, every “anti-coolie club” and “white man’s cigar union” have petitioned, resolved, and urged, threatened vengence unless this practice was changed requiring Chinese to give real-estate bonds, openly said in their meeting, and re-echoed daily on the “sand lot” that that only would destroy the Chinese cigar business, but representations have been urged in time and out of time to aid in this nefarious business, but have refused to help in so contemptible a transaction. It was left for the present agent, Mr. William Higby, to comply with this demand, who issued an order about three months ago calling in the old bonds and demanding new ones in real-estate security from all cigar manufactories. As there are but few white men in comparison with the Chinese it was an easy matter for them; in fact quite all were already doing business under real-estate security.
The result of this action of Mr. Higby has been to put the Chinese manufacturers in the power of a class of men who make a living by an occupation known as professional bondsmen, otherwise straw-bail men. I know of firms who paid these cormorants from $50 up to 250 as a bonus to get them to go security; many are paying one per cent. per month interest on the full face of the bond; upwards of twenty factories have had to close up business. The books of the internal-revenue office here will show that these factories have paid over $500,000 yearly for stamps and licenses in this business alone.
Two weeks since, at the urgent request of these persecuted people, I called upon the new special agent, Mr. Grimson, and laid this whole matter before him. He pledged his word that he would at once investigate, and, if he found that the government had not lost by the old system of merchants’ security, he would at once so report to Washington. I have not heard from him since I inclosed copies of my correspondence with Mr. Higby on this subject. Please note that he places his action upon orders from the commissioner at Washington, under dates of February 6; that of June 12 he says, I had to do it to protect the interest of the government,” which is the most astounding assertion, in view of the real facts, yet made. I herewith inclose letters received bearing upon this matter. You quite naturally ask why this change from the old and tried system, wherein the government was fully secured to this irresponsible straw-bond security?
Representing in part the interests of the Chinese here resident, I deem it my duty to place this matter before you, that you may take such action as the necessities of the case may dictate.
With high regard, I am, &c.,
Mr. Bee to Mr. Higby.
Sir: I am requested by the proprietors of the Roscoe cigar factory to present the following two Chinese mercantile firms—Kim, Lung & Co., 728 Dupont street, corner of Clay, and Quang Man, Long & Co., 620 Dupont street—both old firms in good standing financially, for your acceptance of them for bondsmen in the sum of 5,000, either of which firms can justify before you in the sum required on personal property security. Will you oblige me by an early answer?
Your obedient servant,
His Imperial Chinese Majesty’s Consul.
Mr. Higby to Mr. Bee.
Sir: Your note of yesterday receved, referring to the Roscoe cigar manufactory, &c., I regret I cannot comply with your request. By doing so I would violate a rule I had to establish to protect the interest of the government.
Mr. Bee to Mr. Higby.
Sir: In reference to the notification to the Chinese cigar-manufacturers, issued by you, requiring hereafter that the manufacturers of cigars, &c., must give bonds in real estate in accordance with section 3387 of Revised Statutes of the United States, on examination of the law, I believe it is left to your option to determine what is a bond, or as to the security being good and sufficient for the purposes of the law.
Have you made this new departure under instructions from the Commissioner of Internal Revenue? I am satisfied that to insist upon bonds secured by real estate will destroy two-thirds of the Chinese cigar manufactories now in operation, and reduce the revenue of the government proportionally, as but few will be able to execute the bond required.
I have, &c:,
His Imperial Chinese Majesty’s Consul.
Mr. Higby to Mr. Bee.
Sir: Your letter of date February 4 is received. A great crowd of business has delayed me in my answer.
In regard to the class of bonds of which you inquire, the Commissioner has ordered a thorough examination, and in calling for new bonds, I am exacting such security as I think the law requires to prevent frauds, and no more.
Mr. Adams to Mr. Bee.
Sir: In reply to your letter of the 10th instant, in regard to the nature of bonds taken from cigar and tobacco manufacturers by the collectors of internal revenue of this district, in answering, I have to say—
- I have been in the internal-revenue service since June, 1869, until March, 1879, and during nearly all that time I had the supervision of all the cigar and tobacco manufacturers in the city of San Francisco.
- The nature of security of the bonds has been more of a commercial nature than otherwise, such as stock in trade and personal property.
- I am unable to say what amount has been paid by the Chinese manufacturers annually for stamps, but would estimate that they have paid for one-third of the stamps that have been sold by collectors.
- The number of Chinese manufacturers has averaged for the past five or six years about from 60 to 70, employing, I should judge, from 900 to 1,100 persons.
- The government, as far as I know, has never, during the time I have been in the service, lost anything by reason of such bonds.
- Business men considered an established Chinese merchant as good a surety on a bond as an American, whether he has realty or not.
For the past six years it has been my duty to make all bonds for cigar manufacturers in this city. Whenever they offered Chinamen or Chinese firms as sureties, I have invariably (if not known by me) examined personally the property or goods and insurance policies of the firms offered, and if, in my judgment, the property was not sufficient for the amount named in the bond I rejected them, and required them to furnish other sureties before I would pass the bond to the collector for his approval. And I believe those bonds were better than those the collector is approving now (and has been for the past two months) from these “professional bondsmen.”
Having answered your inquiries as near as I am able to do,
I remain, &c.,
Mr. Cooper to Mr. Bee.
Sir: In reply to your inquiries under date of the 10th instant, in regard to the nature of the bonds taken from manufacturers of cigars and tobacco by officers of internal revenue in this the San Francisco district, answering your inquiries in the order made, I have to say:
- I have been in the internal-revenue service in San Francisco some seven years and for six years and up to the 20th of last March I held the position of principal deputy in the collector’s office;
- The nature of security on what is generally known as cigar and tobacco bonds has been, up to within a very recent date, of a commercial nature, such as bonds, stock in trade, personal effects, &c.
- This system has prevailed under the administration of the late collectors L. H. Gary, John Sedgwick, and under Mr. Higby until within a few months past, and the government has met with, no loss from this class of bonds.
- When the Chinese manufacturers of cigars were required to furnish bonds with sureties having and owning realty, they found it difficult to comply, and were obliged to pay a bonus for parties to act as their bondsmen. I cannot say that I personally know any “professional bondsmen,” but a bondsman on one of these bonds told me that he received $100 for so doing, and that the Chinaman transferred to him his bankbook, worth $1,000, as security.
- Business men regard the commercial security given by established Chinese merchants as better than a security purchased from professional bondsmen.
- I know of no loss to the government under the old system and nature of security. Since my connection with the revenue service here there has been no occasion to bring suit on a cigar manufacturer’s bond. Since the requirement of realty on the bond I learn that 15 or 20 factories have discontinued business.
- I regard the surety of an old established Chinese merchant based on stocks and personality as ample and good, though not better than that of realty.
Mr. Van Shaiek to Mr. Bee.
Sir: You are aware that I have a large number of clients among the Chinese population of this city and, as their attorney, many facts come to my knowledge as to the manner in which these people are oppressed and plundered by outrageous and unnecessary rules and regulations of public officers and more particularly the internal-revenue office in this city.
I now desire to call your attention to the present management and conduct of William Higby, collector of internal revenue of this district. It seems to be his object and aim to drive the Chinese cigar manufacturers out of the business by persecution and oppressive rules and regulations discriminating against them alone in the matter of giving bonds, and compelling a renewal of good and sufficient bonds.
Mr. Higby is enforcing rules entirely outside of internal-revenue law relative to the sufficiency of bonds for the manufacture of cigars. His uncalled-for and arbitrary course has closed up many Chinese cigar factories, besides incurring great loss to these people, depriving many of employment, besides lessening the revenue of the government, from this source alone, at least from severity-five to one hundred thousand dollars per year.
This collector refuses to approve a bond signed and properly qualified to by a Chinaman as one of the sureties, no matter what amount of property the surety is worth. He also requires at least one white man on the bond, and refuses to accept a bond of two good and sufficient Chinamen even if they are worth ten times the amount of the penalty mentioned in the bond.
It has come to my knowledge that there are respectable Chinese cigar manufacturers in this city, who have been engaged in the business for years, who have paid the government thousands of dollar’s for stamps, under the uncalled-for regulations of Mr. Higby, were called upon to file new bonds in accordance with the above-mentioned rules of his office or close up business. These men have been obliged to seek out and employ “professional bond-signers”—white men—and pay them each as much as $250 [Page 241] to sign a cigar manufacturer’s bond in order to comply with Mr. Higby’s requirements and to coutinue in business, and that Mr. Higby has refused to sell them cigar-stamps until such new bonds were filed and while the old bonds were still in force and effect.
These bonds have been approved by Mr. Higby after his attention had been called to instances of a similar nature to the above.
There are other instances where Chinese cigar manufacturers are now paying white “professional bond-signers” interest at the rate of one per cent. per month as the amount of the penal sum mentioned in the bond signed by them, besides a bonus at the time of signing the bond. These bonds have also been approved and accepted by Mr. Higby in preference to receiving good and sufficient bonds signed by Chinese sureties or permitting the old bonds to remain intact and allow the manufacturers to proceed under them as he had been doing previous thereto.
I know of one instance where a respectable Chinese cigar manufacturer, who has been in the business for years, and who has now on hand 440,000 cigars ready to be boxed, stamped, and put on the market. This man was recently notified by Mr. Higby to fill a new bond in the sum of $4,000, and the collector’s office refused to sell him stamps until he did so. He procured one white man and one Chinaman to sign the bond, each of whom justified in more than double that amount, the Chinese surety being a merchant in this city owning two stores and worth at least $15,000 in personal property; still Mr. Higby refused to receive this bond or to sell the manufacturer stamps, so that he is deprived of selling his cigars and subjected to great loss.
I might mention other instances where great injustice has been practiced upon the Chinese cigar manufacturers by this collector’s office under the sanction of Mr. Higby.
I remain, &c.,