Indianapolis Times, Indianapolis, Marion County, 18 June 1937 — Page 4
SEVEN NAWED IN PROBE. INTO US. TAX LEAKS
Film Star Laughton and
Jules L. Bache Are Among Those Listed.
(Continued from Page One)
he should be subpenaed,” Senator Harrison said. “Maybe he'll escape to the Bahamas before we cain serve a subpena,” interjected Rep. Fred M. Vinson (D. Ky.). Mr. Irey emphasized the methods used by Mr. Bache were not illegal, and there was “nothing fraudulent” in that case. Col. Schick, retired Army officer, became a Canadian citizen, Mr. Irey said, allegedly to aid in lowering his tax payments.
Cites Schick’s Business
Asserting it was “common knowledge” that the Schick Shaver Co. had “proven a profitable business,” Mr. Irey said that in November, 1933, Col. Schick formed Schick, Ltd., in Nassau, Bahama Island, and assigned royalty income from the company of $129, 000 in 1934. “As a result of “this taxes were saved,” Mr. Irey said. ‘Apparently he was not satisfied with this saving, for in 1935 three corporations were formed in the Bahamas— Schick Industries, _Ltd., Schick Shaver, Ltd. and 'Séhick International, Ltd.”
Mr. Irey asserted that 57,791 shares, “or practically all the stock outdtanding of the Schick Co. controlled by the inventors was transferred to these companies.”
Rep. Robert L. Doughton, chairman of the committee, commented:
“This man Schick should be known as Slick.”
Mr. Bache was described by Mr. Irey as “a prominent capitalist of New York.”
Mr. Bache, 72, New York banker, began his financial career as cashier of Leopold Cahn & Co., in 1880. ‘Twelve years later he became head of the firm, name of which was changed to J. S. Bache & Co. Recently Mr. Bache presented to New York State his private art collection rated as one of the finest in the world and valued at several millions of dollars. He transformed his Fifth Ave. home into an art museum and set up a foundation to administer it. — He is a director or officer of more than a score of corporations, including Chrysler Corp. Dome Mines, Ltd., Kelvinator Corp., U. S. Industrial Alcohol Co., and American Indemnity Co., of Baltimore.
Lists Holding Companies
Mr. Irey discussed foreign holding companies of which he said there were 94 in the Bahama Islands, 202 in Newfoundland, 46 in Panama and 243 on Prince Edward Island. He told the commitiee he wanted to pick out from the Bahama list the following examples for full description: Scuthern Securities, Ltd.; Foley Securities, Ltd; United Securities, Ltd.; Foreign Investments, Ltd.; Bahama Industries. Ltd.; Schick In-
dustries, Ltd.; Schick Shaver, Ltd, and Schick International, Ltd.
“A number of lawyers in the] Groves’ company,
Islands cater to this corporation business,” Mr. Irey said. “A building occupied by a Mr. Kenneth Solomon, one of the most prominent attorneys on the island, is literally plastered from foundation to roof with these corporate name plates. The building constitutes one of the most picturesque features of the island.” Before discussing detailed operations of the individual foreign corporations, Mr. Irey said some of the companies “used a sort of ambulance chasing method” in obtaining clients for tax purposes. He said “nobody knows whether this method of evasion is illegal or not under the
prt. law.”
He said that the bureau sent Phil- |
lip A. Brenner, one of its special agents, to the Bahamas and that “the cases were uncovered only with great difficulty.” Mr. Irey quoted John H. Anderson, a Nassau accountant, as saying that so many foreign corporations had been established there that there was a shortage of bank vault and safety deposit space. “Mr. Brenner learned it is the custom of island-attorneys to meet wealthy Americans on their winter vacations and arrange with them to establish these corporations,” Mr. Irey said. Mr. Irey said Mr. Bache apparently had acted in ‘the honest conviction” he was operating within his legal rights. “Therefore we are presenting his case without criticism of him, but to show what is going on,” Mr. Irey said. He said Mr. Bache organized two foreign corporations, the first of which was the Wenonah Development Co., to which he transferred assets of 13 million dollars in 1930.
Missed Taxes Two Years
In“ 1932 Mr. Bache, according to Mr. Irey, obtained $2,300,000 from the Winonah company as a loan and deducted $25,000 in interest in connection with his taxes. He paid no taxes in 1934 or 1936, Mr. Irey
| said, but paid some in 1935.
(R. Mass.) about the
Rep. Allen Treadway questioned Mr. Magill “morals of tax avoidance.” “We don’t want to persecute anyone, but simply show the loopholes in the law,” Mr. Magill answered. Mr. Bache's action in setiing up the foreign corporation “was legal enough” in the sense that it all had been disclosed and there had been no fraud, Mr. Magill said. “Would you classify his action as immoral?” asked Rep. Treadway. “It is not illegal,” said Mr. Magill. Mr. Irey next discussed the case of Wallace Croves, a New York financier who he said had been
of Internal Revenue for years.” He said Mr. Groves controlled the General Investment Corp., the Equity Corp., and other holding companies which in turn controlled the United Cigar Store chain and the Whelan Drug Store chain,
Describes Stock Case
In 1936, Mr. Irey said, Mr. Groves organized Nassau Securities, Ltd., with -a capital stock of $50,000. “But he only issued five shares,” Mr. Irey said. Mr. Irey said Nassau Securities, Ltd., agreed to buy stock of the General Investment Corp. and then sell it back, with the entire transaction being handled Canada. “Yet the Nassau Securities, Ltd., did not own this stock which it
“in | constant litigation with the Bureau
in Montreal; |.
agreed to sell back,” Mr. Irey continued. “The net effect is that Mr. Nassau Securities, Ltd. bought stock from the General Investment Corp. at $87.50 a share and sold it at a profit of $14.50 a share. Mr. Irey said that Mr. Laughton, who is a British citizen, caused his salary in this country to be paid to a British corporation.
“Under the contract the British
company paid Mr. Laughton $20,000 in 1935 and in the same year his motion picture earnings of $190,000 went tothe British company which thus, of course, got all his income,” Mr. Irey said. “Such conduct may be perfectly legal but it is cited as an example of the increasing use of methods to avoid taxes which an individual would otherwise have to pay on his earnings in the United States.” Mr. Laughton is one of the outstanding character actors in Hollywood. He won the National Academy of Arts and Sciences award for his performance in “Henry the Eighth” in 1934.
Naturalization Questioned
Senator Harrison then returned the inquiry to Col. Schick's affairs with the inquiry: “Was there anything unusual in Schick’s Canadian naturalization in 1935?" Mr. Magill said he understood that Col. Schick was a “personal friend of the prime minister.” He said that Canadian law requires a three to five-year residence by persons desiring to become citizens, but that “Schick got a special dispensation.” Mr. Magill added that Col. Schick's action in changing his citizenship made it particularly difficult to collect taxes from him. “But we will go after him as hard as we can under the present law,” he said. “This is a striking case, because the man went the whole route in his effort to avoid taxes.” Mr. Irey described Mr. Hudson as a former member of the New York Stock ‘Exchange. He said Hudson used a Newfoundland helding company setup ‘which, however, was
probably within the letter of the}
law.” Mr. Irey said intricate security sales had been made, “permitting reduced tax payments.” Mr. Irey said that 202 personal holding companies had been set up by Americans in Newfoundland. “It is difficult to see why there
- mony,
THE INDIANAPOLIS TIMES
La Porte Officer Elected by
"Association
Carl Baumgartner,
of Police Chiefs
La Porte Police Chief, is the new president of
the Indiana Association of Chiefs of, Foley succeeding Chief Morrissey,
Indianapolis.
Other officers elected at vostofdayis closing sessions of the organization’s three-day convention were Clessie Kendall, Richmond police captain, first vice president; George Eisenhut, Ft. Wayne chief, second vice
president; Lawrence T. Studness, Gary chief, third vice president; Thomas W. Rice. Crawfordsville chief, sergeant-at-arms, and A. G. Eversole, Lafayette chief, secretarytreasurer. The 17th annual convention next year is to be at ‘Ft. Wayne. Speaking at the closing dinner
should be so many except for tax evasion purposes,” he said. Mr. Irey discussed the holding company situation in the Republic of Panama and in the European principality of Lichtenstein. He said the Panama laws were ‘‘favorable to foreign corporations” and 46 personal holding companies had been established there by Americans in the last two years. Senator Harrison asked Mr. Magill whether any effort had been made to open negotiations leading to agreements for the dissemination of tax information between this and other countries. “The State Department has made some exploratory moves,” Mr. Magill said. “But not many countries are interested. Canada and France, however, have expressed interest. If we can work out a situation where we exchange information it would be of benefit to all countries.” At conclusion of Mr. Irey’'s testithe committee adjourned until next Tuesday.
Three Named in Tax Quiz Absent
By United Presg NEW YORK, June 18.—The office of Phillip de Ronde, first name mentioned in the Washington tax hearing today, said de Ronde was in Vermont. The office said it did not know where dé Ronde could be reached. The office of Jules S. Bache said he was in Europe. Wallace Groves also was reported in Europe.
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police power extension had pro~
gressed far enough and that state|
police enforcement in rural areas is now needed.’
National Constabulary Opposed
“The Federal Government now has sufficient positive power, as
much as it should have, in the general enforcement of criminal law,” he said. “We will rue the day upon which we vest too great authority in the Federal Government in this field.” Such ‘action would result in a great national constabulary, directed from the national capital, which may, on occasions, become as offensive in violations of the rights of persons and homes as was the horde of late, but not lamented, Federal prohibition in-
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