APPEAL from the Court of Claims.
Dorsheimer, collector of internal revenue at Buffalo, New York, and two others, informers in the case, filed a petition in the Court of Claims to recover from the United States one-half of $220,102, which the government received on a compromise with Sturges & Sons, of a prosecution against property of one Rhomberg, a distiller.
The case was this:
The act of June 3, 1864, 'to provide internal revenue,' enacts, that any distiller who shall fail to make true entry and report of his stills, liquors, &c., shall forfeit all the liquors made, and all the vessels, stills, &c., and personal property on the premises, &c.; and that these may be seized by any collector, and held by him until a decision thereon according to law. And by its 179th section gives authority to collectors to prosecute for the recovery of fines, penalties, and forfeitures, in the name of the United States; and confers the right to one moiety of them upon 'the collector or deputy collector' who shall first 'inform of the cause, matter, or thing, whereby such penalty may have been incurred.'
The amendment to this section in the act of March 3, 1865, gives this to any person who shall first inform, and adds, that when 'the penalty is paid without suit, or before judgment, and a moiety is claimed by any person as informer, the Secretary of the Treasury shall determine whether any claimant is entitled to such moiety, and to whom it shall be piad.' An early act-one of March 3, 1797 -confers authority on the Secretary of the Treasury to mitigate or remit any fine, forfeiture, or penalty, incurred by any vessel, goods, or wares, by force of the laws for laying, levying, or collecting any duties or taxes, which, in his opinion, shall have been incurred without wilful negligence, or any intention of fraud in the person or persons incurring the same.
With these acts in force, Rhomberg, a distiller at Dubuque, Iowa, violated the laws by making false returns, and fraudulently withholding taxes to the amount of $195,000. Upon information furnished by Dorsheimer and the two other persons, his liquors, distilling apparatus, grain, and the cattle at the distillery, were seized, and proceedings for their forfeiture instituted in the several districts of New York, Illinois, and Iowa, where the seizures were made.
After the seizure, Sturges & Sons, of Chicago, intervened, asserting that, without the least knowledge of Rhomberg's fraud, they had made very large advances on the property seized. And they paid to the United States $33,946, on confession, by Rhomberg, that that amount of taxes had been withheld by him.
The government, however, still holding on to the property seized, and the suits being in existence, Sturges & Sons entered into negotiations with the Commissioner of the Internal Revenue, who accordingly released the spirits seized, and dismissed the proceedings, excepting in Iowa, taking, in place of them, the bond of Sturges & Sons for $275,000, conditioned,
That, if it should be determined by the commissioner that the said spirits are not subject to the lien of the government for revenue duties, as against the advances made by the said firm, or if the obligors shall pay such sum of money as the commissioner should determine to be due the government for said property seized, then the obligation to be void; it being understood that the obligors are not liable, under the bond, for any penalty which the government may assess against Rhomberg, but only shall be liable for the actual amount of duties found to be unpaid, together with proper costs and charges attending the investigation of the case and seizure of the property.
In the meanwhile the United States continued its prosecution against the distillery, and to prevent the loss which would occur by stopping it, the officers in charge proceeded to use up the raw materials on hand which had been seized, and, in so doing, produced liquors valued at $150,000; the money (about $54,814) required to pay the expenses of so running the distillery, being furnished by Sturges & Sons.
After various negotiations-Rhomberg's fraud standing confessed on the records of the Treasury-the Secretary of the Treasury compromised with Sturges & Sons, thus: