811.114 Canada/5065

Memorandum by the Assistant Chief of the Division of Western European Affairs (Hickerson) of a Conference at the Treasury Department on March 30, 1936

The following persons were present:

  • Treasury Department:
    • Acting Secretary Wayne Taylor (in whose office the conference was held)
    • Mr. Harold Graves, Special Assistant to the Secretary of the Treasury
    • Mr. Eli Frank, Assistant to the General Counsel, Treasury Department.
  • Department of State:
    • Assistant Secretary R. W. Moore
    • Mr. Green H. Hackworth28
    • Mr. John Hickerson
  • Canadian Representatives:
    • The Canadian Chargé d’Affaires, Mr. Hume Wrong
    • Mr. Lazarus Phillips and
    • Mr. Sam Jacobs, representing Joseph E. Seagram and Sons, Ltd., and the Distillers Corporation, Ltd. (these companies comprising the so-called Bronfman interests).
    • Mr. Jack Lash, of Toronto, representing Hiram Walker and Sons, Ltd., Gooderham and Wortz, Ltd.
    • Colonel J. L. Ralston and
    • Mr. Forsythe, representing Canadian Industrial Alcohol, Ltd. (of which the Consolidated Distillers, Ltd., is a subsidiary).

After a few introductory remarks by Acting Secretary Taylor and Mr. Wrong, Mr. Frank, of the Treasury Department, stated that he thought that the representatives of the Canadian companies understood the nature of the claims which the Treasury Department was asserting against them; that is, a claim for $5.00 import duty and $2.00 excise tax per proof gallon of spirits introduced into the United States during 1933 and earlier years of the prohibition era, to say nothing of possible income tax claims.

Mr. Forsythe, representing Canadian Industrial Alcohol, stated that the company which he represented had a new president, who assumed office in 1934, the Board of Directors had changed completely since 1933, and there had been great changes in lists of stockholders. He went on to say that he found it difficult to understand how the management of the company as now constituted could be said to be responsible in any way for any alleged actions on the part of their predecessors, actions of which Mr. Forsythe stated he was totally ignorant and about which he could express no opinion. He and Colonel Ralston expressed the thought that the pending legislation is unfair and unprecedented. They stated that they had never heard of legislation which in effect gave an executive official power to force a private company in a friendly country to withdraw from business on the assertion of a claim against it; they stated that this was prejudging the merits of the claim and giving the company virtually no recourse.

The representatives of the Treasury Department insisted that the Canadian companies misunderstood the nature of the proposed legislation. There then followed a brief discussion of the legislation, inconclusive in nature, until someone suggested that the purpose of the meeting being to devise a means to make the legislation unnecessary, the discussion of the legislation was perhaps out of place. Acting Secretary Taylor thereupon stated that this was true and that the discussion might well be confined to practical assurances on the part of the Canadian concerns that they would appear in court to contest any suits which the Government brought against them and [Page 812] give guarantees that the United States Government would be enabled to collect any judgment which it might obtain. At this point Mr. Forsythe stated that, notwithstanding his earlier comments about the complete ignorance of his company in respect of any alleged infractions of American law on the part of their predecessors, at the request of the Canadian Government his firm had sent him to Washington to discuss the whole question with the Treasury Department. He said that he was completely in the dark and would find it difficult to discuss “practical assurances” until he knew the amount of the American Government’s claim against his company and the nature of the charges. The representatives of the Treasury Department indicated that they were not in a position at this time to reveal the amount of the claim. There was much discussion over the point of whether practical assurances could be given by the companies until they knew the amounts of the Treasury’s claims. Mr. Lash, representing the Hiram Walker interests, and Mr. Phillips stated that they were of the same mind as Mr. Forsythe about the necessity for information respecting the amounts of the claims.

Mr. Lazarus Phillips, representing the Seagram interests, stated that he and other legal representatives of his company had seen various references in the American press to possible claims by the Treasury Department against their company and had at various times last year discussed the question informally with legal representatives of the Treasury Department. He indicated that then, as now, his company was prepared to discuss a settlement out of court; if this could not be achieved he was, he said, even though his company considered the Treasury claim without merit, prepared to discuss practical assurances that his company would contest the suits in our court and pay any judgments obtained against them. He stated, however, that he regretted to see the haste with which the Treasury Department desired to proceed in the matter of the pending legislation. He urged that the Treasury Department drop Section 403 in the pending bill in order that the enactment of the general liquor tax bill at the earliest possible date be facilitated. He stated that he was sure that the other Canadian companies would be prepared to discuss their cases fully and frankly with the Treasury Department and that, should it not be possible in the next month or six weeks to obtain settlements or satisfactory assurances that the companies will submit to our jurisdiction and pay judgment obtained against them, the Treasury could then very easily obtain either this legislation which is now pending or a modified version of it. He made it clear that he considered the legislation unfair but indicated that he believed that the Treasury Department might find that it was unnecessary.

Acting Secretary Taylor, after about an hour and a half of conversation along the above-mentioned lines, suggested that the meeting [Page 813] be adjourned and that the representatives of the Canadian companies discuss their cases either individually or collectively with representatives of the Bureau (presumably the Bureau of Customs). This was agreed to, and Judge Moore, Mr. Hackworth, and Mr. Hickerson left the meeting.

John Hickerson
  1. Legal Adviser.