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Excerpts From The Book Of Bourbon
  • An Uncivil War and Its Aftermath
  • The Boy From Kentucky
  • Whiskeygate
  • Reconstruction of the Whiskey Business
  • A Matter of Trust
  • The Noble Experiment
  • The Roaring Twenties
  • The Reawakening of the American Whiskey Business
  • The New Deal
  • America "Lightens Up"
  • Whiskey at the Close of the Twentieth Century
  • Whiskeygate

    When reconstruction began, President Andrew Johnson faced huge problems, His policies were bitterly opposed by the Republican majority in Congress, which unsuccessfully initiated impeachment proceedings in the Senate, and he was chided for supporting Seward's Folly, the purchase of Alaska (and its yet undiscovered gold) from Russia for $7,200,000. When Ulysses S. Grant was elected U.S. president in 1868, the Country’s relief was palpable.

    Grant's military experience, however, didn't prepare him for the presidency. After taking office in 1869, he was plagued by the politics of Reconstruction, and his administration was beset by scandal after scandal. One embarrassment came in 1869 when speculators Jay Gould and James Fisk attempted to corner the gold market. They had "conned" Grant into becoming an ally and the scheme backfired into one of the worst panics in American financial history, another humiliation occurred after Grant's reelection in 1872, when Vice President Schuyler Colfax was investigated for accepting bribes. Bur perhaps the worst was a whiskey scandal.

    The Whiskey Ring, as it became known, involved some cohorts of President Grant's skimming more than a few tax dollars from the whiskey producers-and the country. However, to some extent, Grant was directly involved with this scam. One of its main culprits, who was never convicted of any wrongdoing, was protected by Grant, and rumor at the time had it that Grant's son Fred and brother Orvil had directly profited from the fraud, these were to be trying times for the President.

    The major players in the Whiskey Ring were General Orville E. Babcock, Grant's secretary; General John McDonald. The regional superintendent of the Internal Revenue Service headquartered in St. Louis; and Benjamin Helm Bristow, the man who initiated the investigation into the affair when he became Secretary of the Treasury in 1874.

    Here, in very simple terms, is how the scam worked: Sometime around 1870, government agents, charged with keeping an eye on how much whiskey was being made, arranged to ignore a certain percentage of the distillate in return for cash in the amount of roughly half the money the distillery would have paid in taxes. When "straight" tax collectors who were not part of the ring were due to call, the distiIIers.; were forewarned to "play safe" and pay up.

    The Whiskey Ring agents claimed to have a "higher" purpose in their treachery; they told distillers that the dollars they collected were going into a special fund to help reelect Grant. Was this Whiskeygate? Although we can't say for certain how many people actually believed their claim to be patriotic parry do-gooders, evidence points to up to 15 million gallons of whiskey a year, which would have generated a cool $7.5 million in taxes-an extraordinary amount of money at the time-going untaxed between 1870 and 1874. And Grant was returned to office in 1872.

    Due to his incompetency and the number of other scandals within his administration, Grant was not a popular man by the end of 1874. He was thinking of running for a third term-even though he had once told Congress that he was not prepared for the office at all-and people within his administration despaired of some of the people he had chosen to work alongside him. Rumors of the Whiskey Ring were rife at this point, and many upstanding aides at the White House breathed a sigh of relief when Benjamin Bristow was appointed to the Treasury-he was a very well respected man. One of his first acts was to convince Congress to gram money to investigate the alleged corruption within the lnternal Revenue Service. With the help of some newspapermen in St. Louis, Bristow was about to crack the ring wide open.

    The first money used for the investigation went to reporter Myron Colony, who was hired by the Treasury Department to gather evidence against whoever was responsible for misdirecting the excise taxes. Colony did a very thorough job and accumulated enough data to place John McDonald (the St. Louis-based superintendent of the IRS) at the head of the Whiskey Ring. First off, McDonald was confronted with the evidence, and he did indeed confess to his crimes. However, McDonald had a few cards up his sleeve, and although he offered to replace the money in return for immunity, claiming he would get it from the distilleries, he also mentioned Grant's name to add weight to his plea for clemency.

    McDonald was somewhat of an old pal of the President, having been recommended for his position by more than a couple of friends of Julia Gram's family. Even so, Grant made it dear that he wanted to clean up the whole mess and prosecute whoever was responsible for stealing the money. The following month, over 300 distillers and government employees were arrested for their involvement in the Whiskey Ring, and everyone was certain that justice was being served. But Grant was soon to have a change of heart, one that would rock his aides and affect the outcome of the whole affair.

    Further investigations implicated Babcock, Gram's personal friend and trusted secretary, in the ring-but Grant refused to believe the evidence. And while Grant had originally claimed to have been "grievously betrayed" by McDonald, he now said that McDonald was a reliable friend and cited McDonald's friendship with Babcock as good enough reason to believe that he was innocent of the charges. However, some potentially damaging documents had been discovered that pointed to reasons other than friendship for Grant's change of heart.

    A series of cryptic telegrams in the Treasury Department's possession tied Babcock to the affair. Not only did they suggest that Babcock had warned McDonald of the impending investigation, but they bore a strange signature~"Sylph." Was Sylph the Deep Throat of the day? No, not really. It turns out that Sylph was a White House sexual dalliance rather than an anonymous inside source. It was Babcock who wired the warning and added the odd signature. According to most reports, Sylph was a woman said to have had an extramarital affair with Grant, and she had pestered him ever since. Rumor had it that McDonald had helped Grant by making sure Sylph left him alone, and if the rumors were true, it was no wonder that Grant allied himself with McDonald. Why did Babcock use the name Sylph on the telegrams? Well, he certainly didn't want to use his own name on them-they were, after all, fairly incriminating and it seems that Babcock and McDonald used Sylph's name as a kind of inside joke when exchanging correspondence. If trouble occurred, perhaps the name Sylph could heIp secure a show of friendship from the President. The ploy seems to have had the desired effect. From there, things went from bad to worse for the investigators. According to William S. McFeely, author of Grant, A Biography, although both Grant and Babcock were confronted with this very damning evidence, Babcock insisted that the telegrams were about something other than the Whiskey Ring, and Grant sided with him. However, the Treasury was not to be deterred. Even though some documents pertaining to the case were stolen (allegedly by a man in the employ of Grant himself), in due time Babcock was indicted.

    Grant's actions in this sordid affair can be interpreted in several ways: Grant was trying to help some old friends; he was afraid that his alleged affair with Sylph would be revealed; or members of Grant's family-and maybe even Grant himself--were implicated in the Whiskey Ring.

    Babcock was finally brought to trial in 1876, and due in large part to testimony from Grant in the form of a deposition, he was acquitted of all crimes. Although Grant allowed Babcock to return to his job at the White House, officials made sure that he was replaced just a few days later. Babcock became an Inspector of Lighthouses and drowned in 1884; McDonald was found guilty of his crimes in 1875, fined $5,000 and sentenced to three years' imprisonment but was pardoned, less than two years later, by President Hayes.

    Upon his release from jail, McDonald accused Grant of taking part in the Ring in his book Secrets a/the Great Whiskey Ring, 1880. In it, McDonald maintains that his actions in the Whiskey Ring were a direct result of instructions from Babcock. And since, according to McDonald, Babcock was widely regarded as being "the President's chief advisor," he regarded any requests from Babcock as having "emanated from the highest authority." Sylph, again according to McDonald's book-and we should take into consideration that he wrote the book to throw most of the blame for the Whiskey Ring scandal on others-was a woman with whom he had arranged a liaison for Babcock, not Grant. He described her as '"unquestionably the handsomest woman in St. Louis" and went on to say, "Her form was petite, and yet withal, a plumpness and development which made her a being whose tempting, luscious deliciousness was irresistible." Obviously, McDonald was quite taken with the woman, although a sketch of Sylph in his book reveals her to have been more homely than irresistible.

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