statement of the number of oleomargarine dealers in the various States,
for instance, and the number who are doing business in States where
it is contrary to law to sell colored oleomargarine, and the number who
are doing business in States where it is legal to do it. There are quite
a number ot other things here which I think the committee will find of
Senator DOLLIVER. What is the basis of your statistics?
Mr. KNIGHT. The Government reports. All of them come from Gov-
Senator MONEY. We will get that information from official sources,
Mr. Knight, and would very much rather have it in that way.
Mr. KNIGHT. These figures are from official sources.
Senator MONEY. I know it; but they come through you. We would
rather have them through the regular official channel. We are at lib
erty to call on the Departments for all the information they have, yon
Mr. KNIGHT. The only thing was that I wanted to call attention to
those things here.
Senator MONEY. That may be.
Mr. KNIGHT. 1 will at least ask permission to file this map [exhibit-
ing map], to be printed in the proceedings. There is a diagram there
showing the price of butter, and a map showing the laws of various
Senator DOLLIVER. Is that official?
Mr. KNIGHT. One is from Senator Mason's report and the other is
from the Agricultural Department. They are both official. Here is-a
resolution passed by the Chicago Butter and Egg Board.
Senator ALLEN. Will inserting these things delay the printing of
this report 1
Mr. KNIGHT. No, Senator. I think you will find that they are all
made up and in the possession of the Government Printing Office.
| The papers referred to above are as follows:]
IN THE UNITED STATES.
CENTS PER POUND
* - ,
N,. ., .
F E B R GARY
gc P T T O^E B R ER
X^R R , C U H
gA'gu^RV 5 -'*
^....^......j.. .............. ,;,.,
j. to to to t
o to ^ c
nod yid s
FIG. 15. Diagram showins monthly average prices of butter and total monthly production of oleo-
margarine for the years 1890 to 1899.
Now, there is another matter that has been in question here. Mr.
Miller made the statement to you that some 40 or 50 pounds of oleo
oil came from the caul fat of a steer. I have here Iowa Agricultural
Bulletin No. 20, showing the weight of 18 fatted steers fed at that
station, and the amount of caul fat therein, as taken out by Swift &
Co., of Chicago, and reported to Director James Wilson, now Secretary
of Agriculture. That bulletin shows that the average amount of
caul fat in steers weighing on an average 1,508 pounds was 37.66
pounds. The statement made before the Agricultural Committee of
Senator ALLEN. That is a pretty good steer.
Mr. KNIGHT. The statement made before the Senate Committee on
Agriculture in 188(5 by Elmer E. Washburn, a live-stock dealer in Chi-
cago, showed that from 148,893 head of cattle slaughtered in that city
by one of the largest packing concerns, there was an average of 61.5
pounds of fat in those animals used in oleo oil; and that those 61.5
pounds made 28.1 pounds of oleo oil, which goes to prove that there is
less than 1 pound of oleo oil to 2 pounds of fat.
The oleomargarine people, in all of their claims before this committee
and in other places, have stated that the fat used from the steer or
cattle was only the fattest and choicest caul fat; and Mr. Miller made
the statement to you that if they used any other it would be tallowy.
According to this report of Secretary Wilson, there are on an aver-
age but 37.66 pounds of caul fat to the steer of 1,508 pounds, and it is
well known that cattle that are marketed will not average over 1,200
pounds. That would be a heavy average, would it not?
Senator ALLEN. I should think it would be a full average, at least.
Mr. KNIGHT. Under those circumstances, I think you can go to the
bottom of the thing, and find that they can not make more.than 15
pounds of oleo oil from the caul fat of the average animal. Counting
15 pounds to the average animal, and counting 5,000,000 cattle slaugh-
tered last year, they have recourse to caul fat for the making of but
75,000,000 pounds of oleo oil. There were 1 12,000,000 pounds of oleo
oil exported, and 24,4' 0,000 pounds used in oleomargarine, a total, I
think, of over 166.000,000 pounds, with a capacity of but 75,000,000
pounds of oleo oil from caul fat.
Senator DOLLIVER. I supposed they used all the fat.
Mr. KNIGHT. They must do it in order to get out everything, I should
say. Now, those are simply statistics, gentlemen.
Senator DOLLIVER. Would that lift them out entirely ?
Mr. KNIGHT. tSTot at 28 pounds to the head; no, sir.
Senator ALLEN. Many of these animals, as I understand, are calves
and other animals that have not much fat in them.
Mr. KNIGHT. On an average, according to Mr. Washburn's state-
ment, they get an average of 28.1 pounds of oleo oil from each animal.
Mr. MILLER. That was one special lot.
Mr. KNIGHT. Oh, no. One hundred and forty-seven thousand head.
Senator MONEY. Whose report is that?
Mr. KNIGHT. That is the report of Elmer E. Washburn, a live-stock
dealer of Chicago, who appeared on behalf of the oleomargarine makers.
It is in that record.
Senator MONEY. I suppose you want to discredit that report by those
figures, do you?
Mr. KNIGHT. No; 1 am not discrediting it at all.
Senator MONEY. Oh, yes; you make it 15 pounds, and he says it
Mr. KNIGHT. No; I say caul fat. He does not say caul fat. He has
some figures there giving the amouut of oleo oil made from those ani-
mals at 28.1 pounds. Now, if you can get 28.1 pounds of oleo oil direct
from the animal, from 5,000,000 animals you ;ire getting 140,000,000
pounds. But we have records of 106,000, 00 / pounds which are used.
Now, where does it come from?
Mr. SCHELL. Well, we are willing to have the matter investigated.
Mr. KNIGHT. Oh, rather than have it investigated, I will cut out the
whole thing, on account of time. 1 do not propose to put in anything
here that is going to continue these hearings.
Senator MONEY. You are entirely willing to conclude the hearings,
provided you have the last word?
Mr. KNIGHT. Oh, no.
Senator MONEY. Whenever anybody has made a speech on the other
side you have come in here with a whole lot of fresh matter. That is
what you have been doing all the time. After it has been announced
that your side has closed, and the majority of the committee has voted
to close the hearings, and every time anybody else said anything, you
came out here with a lot of new matter; and then you want the pro-
Mr. KNIHGT. Oh, no.
Senator MONEY. That is a fact; that is the record of the committee.
Now, I have not the slightest objection to hearing everything you have
to say. You have brought out some very interesting matter there.
But, still, it is a fact that you happen to be here, and you take the floor
and bring out a lot of new things and then propose to shut down on
Mr. KNIGHT. No; I made the statement before the committee that
if what I said was to prolong the hearings, I would shut off right
Senator MONEY. You never shut off as long as anybody says any-
thing on the other side; I have noticed that. Now, you can give us all
the information you have. I am willing to stay here and listen to you
for a week ; but
Mr. KNIGHT. Well, Senator, will you put to the committee the sug-
gestion that I made regarding the condensation or the briefing of this
Senator ALLEN. I think the committee will take up this matter and
edit it. I have no doubt the chairman will attend to that.
Senator MONEY. As Senator Allen very truthfully said, an immense
amount of what has been said here is merely cumulative evidence. The
same things have been stated over and over again by the people on
Mr. KNIGHT. I suggested, Senator Proctor, that we should take up
on our side the testimony which has been submitted, and point out our
strong points. My suggestion was that we should make it in the shape
of an index rather than a brief, and not make an argument at all, but
simply call attention to the facts which we claimed to have proven.
It was my idea to state the different points we made, and under those
heads to group the statements of the people who have appeared here
and addressed your committee.
The CHAIRMAN. That would facilitate matters very much indeed, I
[After informal discussion it was agreed, and so announced by the
chairman, that after the printing of the testimony both sides would be
expected, within a reasonable time, to brief the case according to their
respective views, calling attention to those particular parts of the tes-
timony deemed important.]
Mr. Knight agreed to present, in due time, the views of his side in
favor of the bill. Mr. Schell agreed, for his clients, to furnish a brief
resume of the proceedings before the committee, and to furnish a brief
on the constitutional questions involved, as he had theretofore promised
members of the committee.
It was thereupon announced by the chairman that after the honora-
ble Secretary of the Treasury and Hon. James W. Wadsworth, a
member of the House of Kepresentatives, should have been heard, the
hearings on the pending bill would be closed.
The committee thereupon, at 11.40 o'clock, took a recess until 12.15
o'clock p. m.
At the expiration of the recess the committee resumed its session.
Present: Senators Hansbrough (acting chairman), Warren, Foster,
Bate, Money, Heitfeld, Allen, and Dolliver,
Also, Charles Y. Knight, secretary of the National Dairy Union;
Hon. William M. Springer, of Springfield, 111., representing the National
Live Stock Association; Frank W. Tilliughast, representing the Ver-
mont Manufacturing Company, of Providence, K. I.; Charles E. Schell,
representing the Ohio Butterine Company, of Cincinnati, Ohio; John
F. Jelke, representing Braun & Fitts, Chicago, 111. ; W. E. Miller, repre-
senting Armour & Co., Kansas City, Mo., and others.
STATEMENT OF HON. LYMAN J. GAGE, SECRETARY OF THE
The ACTING CHAIRMAN (Senator HANSBROUGH). Gentlemen of the
committee, Secretary Gage was invited to appear before the committee
to answer some questions that were to be put by Senator Money, I
Senator MONEY. No; I do not care to trouble the Secretary. I merely
asked that he be invited here, as the Secretary of the Treasury, to
express (if he saw fit) his views on the pending bill, which is a revenue
measure. At all events, it purports to be a revenue measure.
Senator BATE. Of course you have si en the bill, Mr. Secretary.
Secretary GAGE. Yes, sir. I always respond to the invitations of
the committees, whether it is agreeable or not. I would prefer to
answer questions, if any gentleman wishes to ask them. If, however,
you wish me to state my views of the bill, I can do so very briefly.
Senator ALLEN. I should think that would be better, Mr. Secretary.
We should be very glad to hear your views of the bill.
Secretary GAGE. Of course I only feel at liberty to state my views
as the Secretary of the Treasury, and only upon that part of the bill
which involves the question of revenue. 1 .might have personal views
which go far beyond those; but you would probably not care much
There is, in my opinion, an objection to the bill on either theory. If
it is a revenue producer, it is superfluous; we do not need it. If it is
not a revenue producer, then the title of the bill is a misnomer, and it
is inoperative in the name of revenue. It seems to me that on either
theory there are serious objections to it.
I think that covers all 1 care to say directly on 'the subject.
Senator MONEY. That is pretty good.
Senator FOSTER. It is right to the point, Mr. Secretary.
S. Rep. 2043 36
Senator ALLEN. Have you some statistical matter there, Mr. Secre-
tary, wbicli you desire to submit?
Secretary GAGE. No, sir.
The ACTING CHAIRMAN. Do any members of the committee desire
to ask the Secretary any questions?
Senator FOSTER. I suppose the points you have made bear directly
on the question of revenue, and not at all on the merits of the bill
Secretary GAGE. So far, I have not expressed any views on the merits
of the bill.
Senator MONEY. You only speak of it as a revenue measure!
Secretary GAGE. Only as a revenue measure.
The ACTING CHAIRMAN. Mr. Secretary, can you tell us what has
been the experience, in a general way, of your Department in the col-
lection of the revenue on oleomargarine? You know, of course, that
there is now a 2-cent tax on it.
Secretary GAGE. Yes, sir; I think the revenue is well collected.
There has been considerable discussion of that subject between the
Commissioner of Internal Revenue (especially Commissioner Wilson)
and myself, at different times; and we think we are cheated to some
extent, as we are in all revenue matters.
The ACTING CHAIRMAN. There is bound to be a certain percentage
of loss, of course.
Secretary GAGE. There is bound to be a certain percentage of loss.
That is evidenced by the fact that we receive "conscience money" from
people who say they have defrauded the revenue department, and it has
come to be a matter of conscience with them.
Senator FOSTER. Then you think there is "moonshine butterine"
Secretary GAGE. Undoubtedly. Judging by the best means of infor-
mation we have (and we have to guess at it to some extent, for, of course,
the unknown is not known) we estimate that we are cheated out of per-
haps 7 or 8 per cent of the revenue.
Senator ALLEN. I suppose there is no surplus in the conscience fund,
Secretary GAGE. No; and there never will be. (Laughter.] That is
the only fund which will never be troubled with a surplus.
Senator MONEY. In collecting other revenue taxes, like that on
whisky, for instance, is the loss as great as on oleomargarine?
Secretary GAGE. Yes; I should suppose it is about the same percent-
age. That loss occurs mostly in the "rnoonshining" business. In the
large establishments it is probable that the tax is absolutely and fully
Senator BATE. Then I suppose the losses in oleomargarine internal
revenue collections are about on a par with the losses in all other reve-
Secretary GAGE. Well, they are on a par with the losses in most of
the revenue collections. There is not any great disparity.
The ACTING CHAIRMAN. Mr. Secretary, what about the percentage
of prosecutions, as compared with the prosecutions in other lines?
Secretary GAGE. Offenses against the oleomargarine internal-revenue
law are as vigorously prosecuted as any of the other offenses against
the revenue laws, when they come to our knowledge. It is the duty of
the collector of internal revenue in each district to use his agents and
inspect as thoroughly and carefully as he can the manufacturers of
oleomargarine and dealers in it, and to see that they are paying the
revenue. Complaints frequently come to us that they are passing it
off as butter. We always inquire into such matters. While the internal
revenue department does not consider itself clothed with police duties,
exactly (its duty being to collect the revenue), we pursue all cases of
persons violating the regulations in regard to stamping and marking
the product when they are brought to our attention; and there have
been a great many prosecutions.
I have here a letter which I picked up this morning, dated November
24, 1900, which illustrates something. It is a letter from one of our
agents in Cleveland, Ohio, addressed to Commissioner Wilson. This
agent was directed to inquire into the dealings of a certain gentleman
in a small Ohio town, because the report of one of the manufacturers
of butterine set forth sales to this gentleman, whom we will call Mr.
Brown for the purposes of the illustration. You know, gentlemen, that
all of the manufacturers have to report their entire sales to the Depart-
ment ; and the report of this particular manufacturer came along, show-
ing the sale of 228 pounds of butteriue, in three different lots, to this
Mr. Brown, in this town in Ohio. Mr. Brown had no license to sell
butteriue, and we made an investigation. We found that he was not
selling butterine, but was simply ordering it for sundry persons, in
their behalf, and ordering it to be sent to them direct for consumption.
Now, it is a somewhat singular fact that these parties for whom Mr.
Brown acted were all dealers in milk, and were selling all their milk
to Mr. Brown, who was in the cheese business.
Senator ALLEN. Mr. Secretary, was that a mere cover, or was it a
bona fide transaction upon Mr. Brown's part?
Secretary GAGE. Oh, it was entirely in good faith. Mr. Brown lived
in this village, and these milk dealers brought him all their milk, and
they wanted butterine.
Senator ALLEN. Of course you will recognize the fact that if Mr.
Brown, in collusion with these other parties, was simply resorting to
that device as a method of avoiding the tax law, he would be guilty of
violating the tax law and should be prosecuted?
Secretary GAGE. Oh, yes. He did not retail the butterine; he made
no profit on it. He simply acted in their behalf.
The ACTING CHAIRMAN. Were the parties for whom he acted in the
retail business, or simply consumers ?
Secretary GAGE. They were simply consumers farmers.
Senator ALLEN. Is your inspecting force in these districts adequate
to investigate and prosecute these cases?
Secretary GAGE. Well, fairly so. We have a good many of what
are called revenue agents under the collectors of internal revenue.
They pay attention to all the departments of revenue. We do not have
special agents to inquire into the butteriue business who are separate
and distinct from the agents who look after violations of other branches
The ACTING CHAIRMAN. No ; I understand that.
Secretary GAGE. They watch the tobacco dealer; they watch the
whisky dealer; they watch the brewer; and they watch the oleomar-
garine man. They plan to cover them all, and to drop in and inspect,
and catch them if they can.
Senator ALLEN. They depend largely on outside sources for their
information, do they not?
Secretary GAGE. A good deal. They get a good many u tips" from
The ACTING CHAIRMAN. Your revenue agents, Mr. Secretary, are
expected to visit these factories and to take observations with respect
to the quality of the ingredients constituting oleomargarine, are they
Secretary GAGE. Yes, sir.
The ACTING CHAIRMAN. What are their opportunities for observa-
tion in that direction ?
Secretary GAGE. Oh, they are ample in these large establishments.
They are all open to our agents.
Senator BATE. Have you scientific inspectors to investigate what
the component parts of this product are?
Secretary GAGE. No; I do not think we have. We put it to the
test frequently, however. We get samples and have analyses made of
the product. That is to say, we have done so in the past; I do not
know what we are doing just at this moment.
Senator ALLEN. Your agents, however, are not all experts in the
examination of oleomargarine, are they?
Secretary GAGE. Oh, no no.
Senator ALLEN. So that they might be imposed upon, as well as the
ordinary intelligent citizen?
Secretary GAGE. Very easily.
Senator ALLEN. They might walk into a place and call for butter,
and oleomargarine might be handed to them as butter; and unless they
took it to some person competent to make an analysis of it, they might
not know the difference?
Secretary GAGE. That is quite true.
Senator BATE. Do you keep agents at any of these large establish-
Secretary GAGE. I do not think we do keep any regular watch on
Senator ALLEN. You take the same precautions respecting this
article that you do regarding liquors?
Secretary GAGE. Except that we do keep gangers men who gauge
the quantities of liquor or storekeepers, in the bonded warehouses.
We go a little further with the liquors, because the temptation to evade
the law is immensely greater.
Senator ALLEN. Then you do not keep such agents in these large
establishments which manufacture oleomargarine?
Secretary GAGE. No.
Senator MONEY. These storekeepers take note of the quantity of
liquor made, do they ?
Secretary GAGE. They take simply the proof and the quantity.
Senator ALLEN. Of course the liquor can not go out without the
consent of the Government?
Secretary GAGE. No, sir; but the tax on liquor is $1.10 a gallon,
while that on butterine is 2 cents per pound, so that the temptation
is very much greater in the one case than in the other.
Senator ALLEN. The only thing with which you are concerned is
Secretary GAGE. That is the main thing, of course.
Senator MONEY. The remark you have just made, Mr. Secretary,
suggests this question : You say the greater the tax the greater the
incentive to fraud. The same rule would apply here, would it not?
Secretary GAGE. Undoubtedly.
The ACTING CHAIRMAN. Do the instructions of your Department,
Mr. Secretary, require the agents who visit these manufactories to
report to you with respect to the puriiy of the ingredients used ?
Secretary GAGE. No ; I do not think so.
The ACTING CHAIRMAN. So that you have no means of knowing
exactly what constitutes oleomargarine?
Secretary GAGE. Except by inspecting the processes and methods
of the manufacturers.
The ACTING CHAIRMAN. And the product itself, I presume?
Secretary GAGE. And they make a general examination of the product
Senator ALLEN. I suppose the processes of manufacture are as dif-
ferent as the shades of color, are they not?
Secretary GAGE. I do not exactly know how many methods of com-
pounding the manufacturers have. I think, however, that they follow
pretty closely the same general line.
Senator DOLLIVER. Mr. Secretary, have you a sufficient revenue force
to look after the observance of that portion of the oleomargarine law
which relates to the putting up of the packages and the quantities in
which it may be sold under these licenses?
Secretary GAGE. Well, 1 think, perhaps, we have not. No; I do not
think we have.
Senator DOLLIVER. We had here the other day packages of oleomar-
garine said to have been bought in retail stores in Chicago, in which
the mark, the name required by law to be affixed, was turned under in