- .' TREASURY DEPAI:~MENT

INTERNAL REVENUE SERVICE

INTELLIGENCE UNIT

Washington (Named Divnbo) SI-7085-F December 21, 1933.

Chief, Intelligence Unit, Bureau of Internal Revenue, Nashington, D. C. In re: Alphonse Capone, Lexington Hotel, 2300 Michigan Boulevard, Chicago, Ill.

\ 1 The above numbered case relates to the evasion of income taxes by dlphonse Capone, Ledngton Hotel, 2300 Mlchiean Boulevard, Chicago, Illimie, for the years 1924 to 1929, inclusive. The case is based on a special report of Special Agent in Charge A. P. Idadden dated October 15, 1928, and m8 jacketed and referred to I' the Shicago Division on October 18, 1928. On May 19, 1930, the I case was referred to me and I was ordered by you to proceed to Special I Chicago to conduct the ir~vestigationunder your direction. Agents &ls Tessm of the Chicago I)ivision, M. F. Wone of the I Washington Division, James N. Sullivan of the New York Division and Revenue Bgents 1. C. Hodgins of the Chicago Division, H. N. Clagett and J. C. Westrich of the Brooklyn Division, were aseigned i to cooperate wlth me throughout the investigation. Special Agents C. L. Clarke and Joe J.Brow of the Florida Division also cooperated during part of the investigation and other agents were celled upan from time to tizs to assiat on the case. During the investigation of this oase it became neceaeary that we make concurrent inveati- gationa of evasion of taxes by other prinoipals in the Capons organization and evidencs was secured which resulted in the convic- I tion or pleas of guilty of Jack Guzik, Sam Guzik, E"raak Nitto, T. J. Dru~ganand l'rank A. Lake. An indictment was secured against Louis Lip~chultz,a membes gf the orfanizatlon and a brother in law of Jack Guzik. The investigation was made at Chicago, Illinoie, Leavenworth, haas, St. Louis, IJIesouri, Idihmi, Florida, New York, t 'dashin~ton,D. C., and other points fram May 23, 1930 to October 30, I 1931.

There ie aul-rmitted herewith as Mibit No. 1, a copy of tha report of Revenue Agents Xodgins, Clagett and .,lestrich dated July 8, 1931, in which they recam:ended tax and penalties as follows: Tax and -Year -Incame -Tax Penal t iee Pennlt ies

Thls offioe conaure in the tax recommended by the revenue agent s . There is submitted herewith ae Exhibit No. 2, a confidential report dated July 8, 1931, of Revenue Bgenta Clagett , Wetstrich and Hodgine, in which they refer to the reputation and previoas hie tory of the tarpayer and eet forth the basis for the tax determined.

At Chicago, Illinoie, on March 13, 1931, a eearetFedcrra1 Grand Tury indioqtment was reported against the taxpayer eoveritlg an attempt to ewde and defeat an inoormas tax of $32,439.84 iinpoired the Revenue Bot of 1924 on a net incame of $123,102.89, ea- by him during the year 1924. A copy of the indictment ie suhltted herewith ae Exhibit No. 3. On June 5, 1931, at Chicago, Illinoirr, the tarpayer was indicted by the Federal Grand Jury for attempt to evade and defeat the income tar covering tbe yeare 1926 to 1929, inclueive. The indiot- ment cantalnsd twenty-two count8 and charged wllful attePpts to evade and defeat' income taxee for the yeare 1925 to 1929, inalusive ( feloniee) , and failure to file returns for the yeare 1928 and 1929 (xiedemanore ) . A aopy of the indictment of June 5th ie submitted aa Exhibit No. 4.

Counts one to four, inclusive, cover the year 1925 and charge a wiltul attempt to evade and defeat an inconre tax (and the payment of the tax) in the sum of #5,365.25 imposed by the Revenue Act of 1926 on a net income'of $257,285.98 earned by the defendant during the calendar year 1925.

Counts five to eight, inclusive, cover the year 1926 and charge the defendant ulth the wilful attempt to evade and defeat an incane tax (and the payment of the tax) in the eum of $39,962.75 imposed by the Revenue Act of 1926 on a net income of $195,676.00 earaed by the defendant during the calendar year 1926. Counts nine to twelve, inclueive, cover the year 1927 and cherge the defendant with the wilful attempt to evade and defeat an income tax (and the payment of the tax) in the sum of $43,557.76 imposed by the Revenue Bct of 1926 on a net income or $818,066.04 earned by the defendant during the calendar yeer 1921.

Counte thirteen to seventeen, inclusive, cover the year 1926. Count thirteen charges that the defendant wilfbJly failed to make a return of income (a misdateanor) for that year. Counts fourteen to seventeen, inclusive, cover the year 1928 and charge the defendant wlth &e wilful attempt to evade and defeat an ,income fax (and the payment of ' the tax) in the sum of #25,887 -78 imposed by the Revenue Act of 1928 on a net inoome of $140,535.93 earned by the defendant during the calendar year 1928.

Gounts eighteen to twenty-two, inclusive, cover the year 1929. Count eighteen chargee that the defendant wilfully failed to make a return of income (a miedmeanor) far that year. Counte nineteen to twenty-two, inclusive, cover the year 19Z9 and charge the defendant ulth the wilful attempt to evade and defeat an income tax (and the payment of the tax) in the oum of #15,817.76 imposed bp the Revenue Aot of 19B on a net inconm of $103,999.00 earnred by the defendant during the calendar year 1989.

The ielmiee charged are in violation of Sections 1114 (b) of the Revenue Act of 1926 and 146 (b) of the Rerenue Act of 1928, and . the midemeanare charged are in violation of Section 146 (a) of the Revenue Act of 1988.

The important facts upon which the tax indictmente were baeed ere as iollowe: The defendant, during the years 1924 to 1929, inclueive, I was a partner in a syndicate or partnership engeged in illicit profit- making enterprises. The defendant was the leader of the syndicate and reaeived one-eixth of the net profits from its activities. During the years in question the defendant Denet earnings fran the source6 indicated included the following: For the year 1924 - $ 123,102.89 For the year 1925 - 257,285.98 For the yea'r 1926 - 195,676.00 For the year 1937 - 218,056.04 For the year 1928 - 140,535.93 For the year 1929 - 103,999.00 Total net income for the six yeare #L ,038,655.84 The defendant received income in the form of cash, sometimes checks, and, on many occasions, wire transfers of money by Western Union. The defendant, Alphonse Capane, had never filed a return for the years covered by the indictment and had never paid any tax on any of the income earned during those years.

The foregoing facts were established by evidence largely circumstantial in character. The defendant had no bank acccrunte, kept no book records of activities, bought no property in his own name, and, wlth the exception of wire tranefers of money by Western Union and an occasional check, conducted ell of his financial dealings with currency only. The evidence of the government, therefore, comes principally from the mouths of those who dealt either with the organization or wlth the defendant, and the entire situation ie made clear only by piecing together many separate facts and circumstances, among which are included some admissions of incone made by the defendant 'himself.

On June 16, 1931, the taxpayer appeared before Federal Judge James H. Wilkineon and pleaded guilty to all counts in each indict- ment. On August 1, 1931, the defendant was allowed to rithdrar the pleas of guilty and the case was set for trial on October 6, 1931. The income of the taxpayer waa drived frw gambling, houses of prostitution and bootlegging. He was referred to by his associates in the newspapers of this country and abroad ae the "Coloseus of Racketeersw, 'Xing of Gangdam" and the "Big Shot". Although hie income was secured wholly through the illegal activities of a' large organization of which he was the leader, his activities had not been seriously interfered with by city, county or state authori- ties. His lnmnmity was explained by etatments of members of hie organization that all of their activities were protected on account of large graft payments made by them to insure the unmolested con- duct of their various bus1 nesees.

One of the largest sources of income of the taxpayer was from gambling establishments in the City of Cicero, Illinois, a suburb of Chicago. Since the election in the spring of 1924 the Capone oreanization has operated in that city without serious inter- ference. There is submitted herewith as Lxhibit No. 5, a photostatic copy of the book in which the daily profits of the Hawthorne Smoke Shop, later known as 'Phe Ship and The Subway, a gambling establlsh- ment conducted by the taxpayer in Cicero, were kept. This place was first operated on May 1, 1924, and the business continued at various points in Cicero for approximately five years. The establish- ment was first located in the Western Hotel, ii4837 Vest 22nd Street, and later at numbers 4818, 4838, 4835 and 4738 West 22nd Street, Cicero, Illinois. This book reflects a net prof it from the business covering the period of BIay 1 to Decenber 31, 1924 of 4300,250.95, from January 1 to December 31, 1925, of 9;117,460.00, and from January 1 to April 26, 1928, of $170,011.00. On the night of April 26, 1926, Aeeistant States Attorney for Cook County if. H. &Swiggin, was murdered in Cicero, Illinois. Ddr. Meswiggin had a few months before interviewed witnesses in a murder case in which Capone was alleged to be involved. 81 Capone was accused of the &Swiggin murder and the police raided his Cicero ambling establiehment on that date. This book was fou 1,d in the safe of the establisbnt by the poli-ce during the raid and it was turned over at thet time together with other records seized, to Special Agent P. F. Roche of the Chicago 3ivision. As no tax case was then pending against Capone, no use was made of this book and it was filed in the Chicago office. After this investigation had proceeded for several months during which time a care- search was made in Chicago, Cicero and other cities, for records relating to the income of the Capone organization, this book was accidentally discovered by the miter in a miscel- laneous lot of apparently unimportant papers left by Mr. Roche when he resigned from the government seroice. The book had no ident if ication marlcs upon it and its value as evidence relating to the income of Alphonse Capone had not been realized. After a thorough analyeis of the entries in the book it me evident that it was the daily record of a large gambling business. A caref'ul comparison of the entries in it with specbens of the writing of various members and employees of the Capone organiza- tion established that most of the writing in it was that of Mr. Leslie A. Shunway and that a Bmall part of the entries were made by Peter Penovich, Jr., and Ben Pope. Investigation by us then established that Alessre..Shumway, Penovich and Pope had been the managers and caahiera of the Hawthorne Smoke Shop, a gambling establishment conducted in Cicero during the years covered by the entries in this book. Our efforts were then directed toward locating Mr. Shumway who disappeared in April of 1926, in order to secure his testimony relating to the operation of the Capone gambling establishment known as the Hawthorne Smoke Shop. Af'ter a search of four months he was located at Miami, Florida, on February 18, 1931, at which time I intex-viewed him. LIis sworn statement taken on that day was the first evidence secured in this investigation dimctly establishing taxable income to klphonse Capone and proving the evasion of taxes by him. Ba it was edvisable to have ha. Shunway testify before the grand jury as soon as poesible I had him return with me to Chicago and he appeared before the grand jury on February 24, 1931. Particular pains were taken to keep secret the fact that b3r. Shunrway appeared before the grand jury and the defense did not learn that he was a goverrxcent witness until he appeared in the court mom at the trial. The book record reletirg to the profits of the gembling establishment which was identified by Eii. Shunmay 6nd his testimony releting to the net profits of the esteblishment were the basis for the first indictment covering tlie year 1924 reported against Blphonse Capona by the grand jury on March 13, 1931, and also for the counts covering the years 1925 and 1926 in the indictment against him reported by the grad jury on June 4, 1931.

There ie submitted herewith as Exhibit 1x0. 0, a sworn statement made by Mr. Leslie A. Shunway at lfiami, Florida, on February 18, 1931, ralating to the gambling business conducted . by the taxyayer, Cspone, in Cicero, Illinois. Mr. Shunnray was cashier of the establishment and made the entires in the book record referred to above as Exhibit No. 5. His statement was as follows:

"Sthte of Florida) ) as. County of' Dade )

Vi. Leslie A. Skunway, of L:iar;li Eeoch, Florida, beicg duly sworn, deposes and says:

From about Jum of 1924 until Liy of 1926 I was employed in Cicero, Illinois, in a gemtline establishment. On account of the illegal nature of this business, it was necessary to move from plece to place in order to cmduct the business without interference from law officers. The business was first conducted at No. 4835 'Jest 22nd Street in a ground floor store in the i;iestern !lotel. A cigar store wes operated in the front of the store by 'Xnock-out" Erown and tte rest of the store was used for the gambling business. This busi- ness conaiated of taking bets on horse races, roulette wheel, craps, twenty-one game and poker. There were approxinletely from 40 to 50 persons employed in the business. me busi- ness at tims was moved to 4838, 4818 and 4738 tiest 22nd Street, the Subway and upstairs over the Subway. All of theae varioua places were in Cicero, Illinois. The business was conduated by the same employees and the same owner at each of these places. In addition to the busineaa conducted at these places, the businese also conducted a book on the horse races at the Hawthorn Race Track.

"When I first started to work in this business I was hired by Frank Pope, who was manager of the horse race branch of the business. Pete Penovidb was manager of thet part of the business relst.ing to games of chance, such as roulette, twenty-one, craps, poker and so forth. Orders and directions relating to my work in this buaimsa were issued to me by Frank Pope and Pete Penovich, whom I recog- nized as ~llysuperiors , and the only other person whom 1 rebognized as an owner of the business and from whom 1 took orders relating to the businese was W. hlphonee Capone. On one occasion (May 16, 1925) I was present in our gambling eatabliahment when a raid was made on the place by law officers who were accompanied by a minister, Rev. Mr. Eoover. The raid took place about ngon and I was in charge of the establishment, as Frank Pope and Pete Penovich had not yet reported for busineae. I ms in the office and the raiding oiiicers entered the office. The raiding officers were going to take posseseion of the bank roll or currency which we had on hand to do business with. Mr. Alphonse Capone then appeared dressed in his pajama pants and coat. He objected to the officers taken the currency on hand and directed me to take posseesion of the cash. I carried out his instructions because I recognized and regarded him as one of the owners of the business. LLr. Al Capone came into the establishment on frequent occasions. He did not stay in the part of the establishment where the patrons conducted their business, but he cane to the office and talked with Frank Pope and Pete Penovich, the active managers of the business. At times he personally made bets with the establish- ment and was extended credit. Shortly after I was firat employed in this business I was present one evening when some men, whom I believed to be the owners of the business, mere in the office. "They were Mr. Louis Alteria, Jack Guzik, Dion CIBannion, Louis La Cava, John Torrio and Alphonse Capone. hir. Pete Fenovich and E'rank Pope were also present that evening. 88 the men mentioned deeired to discuss some confidential matters relating to the business, I was re- quested by Pete Penovich to leave the office, which I did.

"Some of the employees at the establishment were Frank Miliano, Frank McGreevy, Ceorge Rogers, Ceorge Baer, Ji~rmyStanton,' Joe FauUcner.

"During most of the tirre I was emyloyed in this busi- ness, it was my duty to keep a daily record of the estab- lishment in a cloth bound book. One page of this book was ueed to cover the businese for each month, and I made daily entries in this book showing the daily net profit or net loss from the races, the wheel, twenty-one game, wirer, craps and so forth. I arrived at the entries entered in this book from written memoranduma furnished to me daily showins the net g6in or net loas from each branch of the buainesa for the day. The salaries and other expenses of the businese were deducted from the day's receipts each day and the entry entered by me in the book record ma the net profit or net loss of each branch of. the business. I also checked the cash on hand each day in order to verify my book records with the currency on hand for the bank roll. On a very few occasions the cash did not exactly balance but the 'difference was a very small amunt.

"I have to-day been shown a cloth bound book contain- ing records of the business fronMay 1, 1924, to April 27, 1926, and I can definitely state that this is the book containing the records which I kept relating to the gambling business in Cicero which I have referred to in this affidavit. I have also been shorn photostats of the monthly sheets in this book, upon which sheets I made the entries, and for the purpose of idectification I have written my name on the re- verse side of these sheets, The eheets upon which I made the entires in this book include the months of January to December, 1925, and January, February, Xarch and April of 1924. I did not make the entriea'on the sheets for the montha of Yay to December, 1924, but I was directed by Mr. Pete Penovich to perform work upon these sheets and I did check them, as my individual check mark and footings which I recognize, appears upon them. All the daily entries on "the monthly sheets in this book correctly reflect the net profits or net losses of this business conducted at various places mentioned above during the periods referred to. The profit or surplus cash was not distributed by me. I worked on a salary and did not, at any time, receive any peraentage of the profits except a small percentage I got on a pan game. During the summer of 1925, the business conducted a book on the horse races at the Hawthorn Race Track, iLnd I aseieted Frank Pope on that book at the Haw- thorn track for two days. The profits from the book aon- ducted at the race track in 1924 are reflected in the book record whioh was kept, but the profits from the betting at the Hawthorn Race Track in 1925 are not reflected in the book record which I kept. Frank Pope kept track of the profits or losses resulting from the race track book conducted at the Hawthorn track in 1925.

"1 have been shown a sheet in the cloth bound book which I kept, which sheet is marked 'Expenses June 1925.. This sheet is in my writing and indicates that the monthly over- head for salaries, rent, lights, telephone, wire rent, shills, cigar clerks, floor and outside men and similar expenses of all departments of the business amounted to $24,622 for that month. The expenses for each department or branch of the business were deducted daily frcan the gross receipts of each department or branch of the business, and the daily entry which I made in the book record ie the net profit or net lose of each department or branch of the busi- ness. Mr. Ben Pope me also employed by this business. I was sick from February 26 to March 4, 1926, and he made the daily entries in the book record during that period. Mr. Pete Penovich discontinued his connection with the businese a few months before the businese was closed, and after Penovich left Frank Pope was the manager of the business. Wx. Frank Pope was assisted by hie brother, Ben Pope, and by myself, Assistant State1a Attorney W. H. bIcSwiggen was killed in the spring of 1926, and shortly after that I wae informed by Frank Pope that the gambling business would have to be closed (April 26, 1926) . "During the period I was employed by this gambling business, many bets were made by wire with book-makers in various cities. If our establishment lost we would send a check to the out of town book-maker, and if we would win we would receive a check from the out of tom book-maker. Many of the checks which we received were deposited to the credit "of Frank Pope in the Finkert State Bank, and many of the checke received were cashed by me at the Pinkert State Bank at Cicero. These checks would come to Frank Pope and. I was authorized by him to endorse his name on checks to be cashed or deposited. I have been shown certain deposit slips for the account of Frank Pope in the Pinkert 3tete Bank which were written by me. These deposit8 represent the busf~essof the gambling establishment. ?&en our establish- ment lost the bets which we made with out of town book-makers, we sent them a check to cover the loss and the check was drawn on a bank account which was kept at the Pinkert State Bank in the name of Frank Pope. - "The book record of the businese in which I made the daily entries was kept in a cabinet, and the only persons who had accese to this book or who made entries in it were Mr. Peter Penovich, Mr. Frank Pope and ltk. Sen Pope.

(Signed) LESLIE BLBWT SHUWAY, 1358 Pen. Ave. , Miami Beach. Subscribed and sworn to before me this 18th day of February, 1931.

(Signed) FRAM( J. VILSON, Special Bggnt; Bureau of Internal Revenue.

There is submitted herewith' as Exhibit No. 7, a achedule prepared by Mr. Shmway from the book reaord showing the net profit by months and years during the period he was connected with the Capone gambling eetablishment. This book establishes a net prof it of 4587,721.95 coveri-?g twenty-f our months business reported in it.

The night that Assistant States Attorney KcSwIegen was murdered in Cicero, Plphonse Capone disappeared end zn extensive search for him by Chicago Police and Cook County 3eteztives was unsuccessful. BTter several months he was loceted by agents of this Unit and turned over to the Police Departzent of Chicago, Illinois. They then announced that they had no evidence upon which they could hold him for the mler of KcSwiggen. The gambling establishment in Cicero was closed on the ni$t of the murder (April 26, 1326) and the employees and members of the Capone organization promptly left Cicero es the police publicly announced thnt the Capone gang would be cleaned out of that town. The day after the murder Frank Pope, the manager of the gambling establishment instructed Shmay, the cashier, to return to Cicero and secure the surplus cash on had from the gambling business which cash was kept by Shumwalr and Pope in a large safe in the iiestern Hotel. Shumway secured the cash in the safe mounting to $E4,000.00 and took it to the Chicago home of Frank Pope. They then proceeded to the Atlantic Hotel where the entire sun xas turned over to Jack Cuzik, Louis La Cava and Frank Nitto. Frank Pope then demanded 18%of the $84,000.00, which as manager of the gambling house was his share of the net profits, and he via8 told that he would have to wait for it. He later made other demands for his share but claims he never was able to collect it. flithin a few months the gambling business in Cicero was reopened at the sane address and Frank Pope was again employed as manager. He only stayed about a week because he said that he then realized that the Sapone organizati~ndid not intend to give him his share of the $34,000.00 surplus remaining undivlded on April 26, 1926.

There ie submitted herewith as Exhibit No. 8, a sworn statement dated March 10, 1931, mde before me by Reverend Ha C. Hoover of Berwyn, Illinois, relating to statements made by the taxpayer during end after a raid conducted by Deputy Sheriffs of Cook County and membera of a citizen8 organization of whioh Mr. Hoover was the president, on the Hawthorn Smoke Shop, the gambling establishment conducted by Capone at 4818 'nest 22nd Street, Cicero, Illinois, on Debery Day, May 16, 1925. He states tfiat in 1925 he was preeident of the ,Vest Suburban Citizens Associatioa of Cook County; that this aesociation secured information that a gambling establishment wae being conducted at 4818 ifest 22nd Street, Cicero; that he and other members of the association accompanied Deputy Sheriffs lead by Lt. Davidson, in a reid on the joint on May 16, 1925; that guards were placed at all doors by the Deputy Sheriffs; that within a few minutes after the raid 81 Capone appeared accompanied by some of his followers and that hl muttered threats against him saying "It is the laet raid you will ever pullw. Capone then rent to the cash register and took out the money on hand, and Mr. doover asked of the bystanders, is this manw. Capone spoke up and said "Al Iirown, if that is good enough for you", also, "illy are you fellows always picking on mew. la. Hoover further stated that:

"Muttering and grumbling, Capone went out and disappeared down the stairs. Some time later, possibly twenty or twenty-five mi~uiea,he re-appeared, neatly dressed and shaven and clothed " inenentirelydifferentspirit. XhileIwasinthe near room attempting to 'p!ione to the Eerwyn police station for a patrol wagon, Capone came back into the rear room and said, 'Reverend, can' t rve get together? ' I said, 'What do you mean, Xr. Capone?' He said, 'I give to churches, and I give to charity,' and I said, 'Well just what do you mean?' Iie said, 'Now I don't mean money, but if you will let up on me in Cicero, I will withdraw rrom Stickney.' I said, 'Tho only understanding, 1Lr. Capone, you and I can ever have is that you must obey the law or get out of the western suburbs.' The con- versation closed at that point.

Later, when the gambling spparatus was being removed from the building, a man by the namc of Smith, who claimed to be the proprietor, said to me, 'Now Reverend, you have enough for evidence, why not leave these forms and the rest of this apparatus here?' 'Xverything goes' I said, to the Sheriff's deputies. At that point, kl Capone, who was standing near said, ''dell this belongs to mef, painting to a valuable piece of gambling apparatus. 'That goes too' I said.

1.1~suggestion et that tine to the police officers was that Capone be arrested, but he slipped out.

"Q. ~Vhat is your recollection as to whether you did sign a warrant for his arrest?

'1 A . It is not clear, but they left everything to ms that day. However, there would be records cf it, I suppose. There waa a warrant signed, and it occurs to me that I signed it. . I was President of the Jest Suburban h!inistersf Association, and I took the responsibility for everything.

"Q. Did you discontinue or dmp the prosecutim because you felt that perhaps some of your o2eretors might be put in jeopardy?

"A. Yes. They had alreedy been beetell &ad ~ssaulted. ". iere some of your operators assaulted at the time of this raid by some of Capom's followers?

"A. Yes, 9s we left the building and waLke.3 ecrosa the street to our cars, the crowd broka end gagsters appeared a~ongus and I heard a crack of a blow and " I saw one of our men had been struck by a gangster and his face was bleeding. I called to the sheriff's deputies to arrest that man who had struck the blow, and he seized him, but in a mment later, I heard another blow and our second man was bleeding. He had been slugged. Bith the help of the sheriff's deputies, we got our men in between the cars and finally inside the auto and they drove away safely and later I walkad back across the street with the deputy end with the Lieutenant who up until that time had not ap~earedon the scene, being still in the building. ;ie got in the lieutenant's car and drove home. "

There is submitted herewith as Exhibit No. 9, a sworn statement made before me on Karch 18, 1931, by hns. Chester n. 5ragg of Chicago, Illinois, relating to the raid on the Capone gambling esteblis-nt above roferred to in vrhich he assisted the deputy sheriffs on hy 16, 1925. He states as follows:

q%:smorandum of interview held in Room 587 Federal Building, Chicaeo, Illinoie, on March 18, 1931, with biR. CIIES41'k3 H. 9RAGG, 3101 Harlem Avenue, Ijerwyn, Illinois, in the presence of Special Agent Frank J. iiilson and Marie J. Donahue, Sten- ographe r .

1X.R. I:ILSON : Q ,;hat is :mur full name? A,Chester H. Bragg.

Q. Nhat is your address? A 3101 Harlem Avenue, Serwyn, Ill.

Q .'hat i s your business? A Real estate broker.

p ./ill you kindly state the circumstances en6 details with refe7ence to a raid vrllich was conducted at a gambling estab- lishn.ci;l; in Cicero, Illinois, on untucky iJerby Cay,lE25 ,et 44316 ?lest 22nd Street? A I was callei up the day previous by Zevere~dfi. C. Eoover, who esked rce if I n'oulr' re7o1-t clt 11 o'clock the following d~jrat this Crove Ave~ueplece wiie1.e borjan lived,,+3545, for some in*~cstigation. I came there et thet tine and met h squad car rritt. about three stet~settoney sheriffs, and we discussed plans, add lended up at 4816 - 22nd Street, Cicero , just before the noon hour, probably 11: 45. Iioo7er and one other investigator had been there an bow in this " gamtline place,playing the genles and getting the low down on their activities. ;&en re arrived the place was put under arrest, snc? everybody, including our operators, were lined up against the wall (I mean %over and this other phrty). I was stationed aa guard at the front entrance and told tci let nobody out or in. There was a crowd congregated in the street that rapidly reached three or four-thousand people. The noon hour crowd at the Western Electric was then filling the streets, and the people fmm the :iestern Botel (that time it was celled &ton'@ Hotel) across the street soon leame& about this, including 81 Capone, who came across the front door and tried several tinqs to get in there. I stayed there and held the door but he tried to push it open three or four times. I closed it each time. Finally he uade a desperate effort to get the door open' end I opened it part way, and then I discovered from his scarred face who he was. I knew from pictures and otheP information that I had. He said, 'Let me in, I am the owner of the plecef, and I greeted him, and said, 'Come on in Al, we are looking for you1. He went on upstairs where our party was dismantling and loading gambling equipment and bringing it down to the street to be loaded into trucks, end we had backed up to the front of this entrance. I think we also had a truck at the rear, thinking that we might load each way. I am not sure whe- ther they brought nlch of that out the back way, or whether it all came out the front. We loaded two or three truck- loads full of wheels and all sorts of gambling equipment. iien this job was finished, I went out of the front door witb Morgan, a paid investigator, and the crowd milled around so, trying to get st us, and knock us down. They followed us all the way across the street and as I was trylng to get into my car, I was slugged and my nose was broken. brgan also was knocked down end they tried to kick his face in and I got him on his feet, and the two of us made a run for our car, and I got in there with blood spouting fron: my face and nose, all oval* the wind shield, wheel, and my clothes. Je drove through to La Grange and convoyed these loads of gambling equipment, and they were locked in the La Grange ~olicestatio~ for safe keeping. Tnis evidence was used in a trial before Judge Dreher of Erookfield, and although this evidence was brought into the case, it was dismissed for lack of evi- dence. Capone was dressed as though he had been suddenly celled from his om hotel, across the street, by noise of the reid. I am quite positive that he had no necktie and that his shirt was opened and unbuttoned at the neck. "Q Do you know anything with reference to an elleged conversation that he had with h5. Hoover: A I only have a hearsay recollection that he first bullied and then later took a conciliatory attitude toward Hoover, in the hopes of bringing him to lay off of him in part of the district there, if he would stay out of the rest. That is htareay. I did not hear it myself.

Q Were any threats of any nature conveyed to you on account of your activity with reference to this raid? A I was told by severel foreigners, at different times, who leaned into my car, and made verbal threats to me, that they would get me if I didnl t etay out of those activities. My Nash car was ruined by gravel thrown in on top of the cylinders and pistons, by somebody who was evidently trying to intimidate me. I was told through political connections in the town of Cicero tht if I didntt watch my step it would be just too bad.

Q Did you mite a letter to Judge Drehrer,.who dimiseed this case, and can you state what happened to that letter after he received it? A I wrote Judge Drehrer, condemning and blistering him for the dispoeitlon he made of thie case, and evidently this letter was turned over to the Capone interests nith the statement that if he was going to do their dirty work, they would have to put a muzzle on this fellow, Bragg.

Q Did you ever at any other time than the raid, have a conver- sation with Mr. Alphonse Capone? A So.

Q Have you at any other time8 seen ELr. Alphonse Zapone in any gambling establishments or places of thst nature? A I have seen him in the Cicero Court in connection with tbt Harlem Tavern Raid before Judge Sandusky, in the town hall of Cicero, together with his brother, Ralph, (ijottlesj Capone.

Q Hhen you saw him in the court room at that time, was he there as a spectator, or in what capcity was he there? A Both of them were all over the place with an air of familiarity, and ~ropi~ie%or~hip,as though they felt more et home there than the different citizens of the somunity. 'They pointed me out to their Sicilian friends around the hall there, in unmistakable terms, with the idea of intimidating or scaring Kw out. Wae that particular court hearing with reference to an action against a road house horn as The Harlem Tavern, at Harlem, and 43rd Street, Sticknefl

A Yes.

Q Was that place later padlocked ae a nuisance by the States Attorneyte Office? A Yes.

Q Naa the name, Mr. Louis Lipschultz, mentioned as one of the owners of that property? A I personally got the name of that owner, but I do not even recall what his name 18. I got the ormer'e name in the record of this case, and hie leaee was before the court as owner of the proprty.

Q During the raid that occurred at 4818 Nest 22nd Street, was it evident that Mr. Al Capone was the owner .of the place by any other circumstance or action, other than his etatement to you that he was the owner of the place? A His ordere to the emplogees and the people in the place, and their recognition of his authority uas evidence to anybody that he me:

Q Did you see or hear uim issue orders to [email protected] in that place at the time? A Understand that we had the place under arrest, and that all these fellows were lined up so that he couldn't give ordere in the senee of telling them to do eomething that we wouldn't pemit them to do, but I recall very distinctly that hie authority me evidenced there by his oonvereation and the conversation of workere and people who were running the gambling joint.

C Then the actione of Mr. Cepone and the actions of employees in the gambling establishment which you observed during the re id, made i t quite evident the t they regarded Mr. Capone aa the proprietor of the place? A Absolutely."

There is transmitted herewith as Ikhibit No. 10, a transcript of the testimony of David H. Morgan relating to the raid on the gambling establishment known as the Hawthorn Smoke Shop on May 16, 1925. He stated in part that he was a resident of Western Springe, a machinlet, and that he knew the defendant in the case, Al Capone. He identified the defendant, stating he had a conversation with him in May of 1925 at the gambling establiehment located on the eeaond floor of 4818 122nd Street, Cicero, that present were Lieut. DaviQson, Mr. Braas Reverend Hoover and four or five deputy sheriffs assisting Lieut. Davidaon, that Mr. Capone tried to enter and was pushing his way through the door when Mr.Bragg said to Capone, "Rkt do you think this is, a party" and Capone replied, "It ought to be my party. I om the plaaeu. Mr. Morgan then escorted Capone upstairs to Lieut. Davidaon, in charge of the raid, aaying "Here is the llan who mya he owns the place*; that Mr. Hoover was then with Lieut. Davidson and thet Capone eaid, Thy are you fellowe always pioking on me. This is the last raid you will ever make". Mr. brgan said that the second floor of the premisea wae a regularly laid out gambling place with roulette wheels, a black Jaok game, race charts, pool tables with covers used for craps and dice games and that money wae lying on the tables at the time of the raid. Ilk. Morgan stated that during the raid he was struck on the nose and had to be attended by a doctor at the Be- Medical Unit. Be further stated that the IURR alaiming tg be the owner who entered the &ling place at 4818 1. 22nd Street had a long scar onihe left side of his ia0e.

At the raid above referred to Alphonse Capone appeared aa4 I; threatened Reverend Hoover an8 Mr. l@rmand warned them that it ! would be "The laat raid you will ever pull*. It was the1r leat 1 raid. A few nights after the raid Mr. Morgan arrived home at midnight and ae he was entering his garage four foreignere over- [ powered hhand attempted to take him for ridew. He broks away from them but in the fight he was shot and left to die. However, he was found by neighbors who heard the shots and who saw an auto i speed amy. They promptly took ?dorm to a hospital where after a month he recovered but he then decided it was not a healthy diversion to assist the deputy eheriffs in raiding joints operated by Capone and no further railla were made by him or by the Reverend Hoover. On acoount of the attempt to tee the life of Morgan who was an important witness, neither he, the Reverend Hoover nor Mr. Bragg appeared to teatify against Mr. Capbne when the gambling violation case resulting from the raid on 4818 1. 42nd Street came up for trial and the Citizena Baeociation with which they were connected made no further raids or efforts to interfere with Mr. Capone's illegal activitiee in Cicero and vicinity. The place at #4818 1. 42nd Street reopened a half hour after that raid and county and city authorities made no efforts to interfere with its operation uatil the murder of bei8tant States Attorney McSwiggen. The members of the gang who attempted to kill Morgan were not located by the polioe. As soon as the excitement over the murder of Assistent States Attorney McSwiggen on April 26, 1926, died down, Capone resumed his gambling activities in Cicero. The Hawthorn Smoke Shop waa reopened and Eked Hies ma employed as cashLer.~Practically all of the business relating to the profits of that establishment was conducted by Mr. '~ieswith Jack Guzik, the finanoial representa- tive of Capone. There eke submitted herewith as Mibit lb. 11, e sworn statement made before me by Ries dated &pbaibsr18,1930, Exhibit No.12, a morn etatement of Bies dated October 20,.19JO, and Exhibit No. 13, a aopy of the testiqony of Riee at the trial. blr. Ries was a hostile witneee and considerable difficulty me - experienced in looatlng him a8 for a very long time he me kept under cover in Florida and other points by Louie Lipschultz, Jaok Cuzik and other agents of the Capone organization because they were- iniormed that this Unit was looking for him as a witness in this case, They were arranging to furnish him with funds and to send him to California when on August 30, 1930, Speoial Agent Tessem and I found hbat St. Louis, Missouri, as he rae about to leave for Loe Angelee, California. An air mail special delivery letter from Ciaero, Illinoie, nar delivered to Ries by a spealal delivery messenger just before we entered the room, Tbe letter me from Louie Lipeahulta, brother-in-law of Jaok Cueik aki mntained instructions for Ries to proceed at onoe to . California. Lipeohultrr had been f'urniehing large sums of money to Ries to keep .him away from Chiaago in order that he might not be located and used as a govewnt witness against the Capone organi~- tion. Mr. Riee plainly showed and also said that he was filled with - fear of death from the Capons organization in the event he teetifi;ed truthfully to u8. lhen we questioned him regarding his employment in the gambling establishments in Cicero he oleverly denied any knowledge of the faota which could be used by the government as evidence against bl Capone, Jack Guzik or other principals in that organization. By oomparieon of his penmanehip with indorsemanta on canceled cashier s aheoke amounting to $224,704.00 purchased under the name of J. C. Ihbar at the Pinkert State Bank in Cioero during the years 19157 and 1928,.we established that Mr. Ries had ueed the name of Dunbar and had pumhased all of these checks. In spite of his alleged ignorance regarding the cashier's checks or the identity of his employers or other faots of value it wae decided that he should be held as a material ritneee. No Federal Judge was available in St. Louis, Missouri, and he was taken to East St. Louis, Illinois, before Federal Judge 'Ilham who fixed hie witness bond at $15,000.00. He was unable to furnish bail and vas held in the county jail at Wville, IUinois. No publicity was given to his detention as a witness as we did not wish the Capone organization to come to hie rescue bail him out. Uter he had been detained in jail for a i few daye, Tessem and I visited him and persuaded him to identify the cashier's ohecks and to explain his deposit of the funds represented by them. He stated that they represented part of the net profits of the gambling establishment in Cicero during hie employment as . cashier; that the business was operated by the Capone aynd1cate;that the prinaipals in the syndicate were 81 Capone, Jack Guzik, Frank Nitto and Ralph Capone; that he turned the net profits from the business over to Jack Guzik and took' all orders relating to the bueinese from Jack Cuzik. It was believed that the witness migbt become more unfriendly and hostile if held in jail for a low period awaiting trial of the tax oases against the prinaipals in the syndicate so we arranged with Federal Judge Vham to have him released by signing his om bond. Aa he believed that his life was in jeopardy becauee - of Acrniehing evidence to us against hie former employers in the Capone syndicate, it was deoided to protect him in order that he might be available as a witnese for the trial. Through the cooperation of the Chicago Association of Conanerce his expenaes on a trip to South America were paid end we were able to keep him whereabouta secret. Although he continued to be a very reluctant witness, his testimony was of great value in the incorn tax cases which resulted in the conviction of dl Capone, Teak Guzik and Frsak Nitto. His sworn statement made to ms on Oatober 20, 1930, was as follore:

*JTRED RIES, first being duly sworn on oath, deposes end says:

"I was employed in certain gambling houses looated in Cicero, Illinois, known as The Ship, The Subway, Tbe Radio, Leuderbachts on 12th Street and 48th Court, a garage on 25th or 26th Street and 50th Avenue, and a place upstairs over The Submy, from the latter part of 1924 or early in 1925 to the latter part of 1928. These place8 were con- trolled or run by a syndicate sometimes referred to as the Cicero syndicate. I was the cashier in these gambling houses, during the afternoon I took bets which the customers placed on the outcome of the horse races, and after the race track business was closed for the day, all the caeh remaining after the race track bets had been paid off we8 placed in the office safe by me. The businese of these gambling houses was not confined to race track betting as varibus games of chance, such as craps, roulette, etc., were rmn by the houe from which the buainese derived a profit.

"The cash receipts from the gambling games other than the race track bets were 81-so placed in the safe after the business was closed forthe day. I left the gambling houses each day after the race traak business was finished and the cash receipts from the gambling game8 was taken care of by other employees "and put in the eafe by them. It was part of my duty ee cashier to check all the money. in the safe and to arrange to have sufficient cash on hand for each day's busineae in the shape of bills of different denominations and coins of different demominations so that change could be readily made. I would take sum of money to the bank and have it ohanged into the denominations that I considered neceeeary to conduot the race track betting and the games of chance. Some of the other employees of the gambling house in which I was employed in 1927 and 1928 were Pete Penovich, who, part of the time, was referred to a0 nurnnger; Fraak Milano, who was pay-off cashier for the race track bets; a man referred to as 'Post Time*, a1so.a~Dominiak Volpe, whom I had identified as No.4 on Pictures 1266 and 1266-8; Frank Ryan, who sucaeeded Penovich as manager and whom I have identified as No. 3 on Piaturea 1266 and 1266-6; and the man marked No. 1. on Pictures 1267 and 1267-A is Frank Milano. Frank Ryan had charge of the gambling businees after Pete Penovioh was no longer oonnected with the business. The other persons in Pictures 1266 and 1266-6 are as follows:

1 Mike King

#4. Dominick Volpe, lrnorm as 'Post Time '

#6. George Bear

#7. George King .

"These men listed above were employees in gambling houses where I worked. The other persons in Picturea 1267 and 1267-8 are as follows:

1. Frank Milano

#2. Frank Milano's brother

#3. 81 Gordon, known as The Greek

#4. Fred Orlando

, Charles Sklodoweki

#6. Mibs

"These men listed above were emplogeee in the gambling houses where I worked as cashier. "Marty King, No. 1 in Picture 1289 w&s employed as pay-off cashier on the games. Frank Iiilano kept the payroll for the men who were employed on the race track pert of the business and he paid then each day. One of the duties which 1 perfomd was to pay all bills incurred through the conduct of the business, such aa bills for electric light, 'phone, gas, petty expenses, the General News Bureeu for wire service, etc. I paid rent to Xd Freenan, who owned the building The Ship was in, and two Greek men iGiancakes and Teqoulous), who owned the building where The Subway was located. il'e were out of Laucierbachs for a long time, then went back and l~dto pay $300.00 rent before we couzd start the buainese again. '8hen we left the basement . (The Subway) we owed fhe landlords (two Greeks) rent for about six months. 1 bought tickets, a series of numbers, for use in the business from Bentley Idurray Coxripany most of the time but on a few occasions I bought the tickets from the Simplex Ticket Company. These tickets contained a number and when a customer !rrclde a bet a record of the bet was made on the sheet retained by the house end the number was placed in tht record. The ticket bearing that number was given to the customer for hie identification in the event that the horse on which he had Set won the race, and he wes entitled to collect a winning bet. The telegraph operators employed to receive the race informa- tion and results over the wire from the General News Bureau were Jimmie Stanton anb Joe Fuak. M1 employees in the establishments were paid in cash each dey. Cashier's ohecks were not used by me in payillg off the wfnners of the bets. I do not remember of any time, efter Jimnie Mundi discontinued in Cicero tht aalph Capone, Jack Guzik, Frank IJi tto or 81 Capone made any bets on the horses. On frequent occasions Ralph Capone ad Jack Guzilc would ask me how the business WAS getting along and I would tell them whether it was good, bad or fair. I do not how who supplied the money which was wed by me as the original 'bank roll' or for the operation of the business.

"When I first went to work in Cicero, about the latter part of 1924 or early in 1925, I was employed by Jimnie Zundi, who was operating the Gabling house known as The Ship. I acted ss cashier and took care of all the money. tlhile working for Kundi, I hed a bank account in om nams in t3e Pinkert State Bank and also a safe deposit box in the Pinkert State Bank, and they were used by me tc 3epoclt the funds from the gambling business. This bank account and the safe deposit box were not used by ma fcr my personal funds and they do not represent or reflect any transactions in which I was personally financially "interested except that I xas employed by Mundi and the convenient way to handle the money was by a bank account and R safety deposit box. 'Jhile I was working for 1dmdi in The Ship, about the early part of 1927, he, Jimmie, told me that 81 Brown had declared himself in on the joint known as The Ship, that kl Brown and his bunch were taking over the operation of the gambling business. Very shortly after Al Brown and his gang had deolared them- aelvea in on The Shi?, Jiamie left for California. The place we called The Ship was formerly known as the Ffawthorn Smoke Shop. Just previous to Mundils departure for California I turned over to Mundi the cash dhiah I had in the safe deposit box in the Pinkert Bank. It ma about $4,500.00. The funds in that box represented money which had been used in the operation of the gambling bueinesa at The Ship and it belonged to the business. It was necessary from time to time to move the gambling busimsa fram place to place in order that we might not be disturbed in the operation of the business and just before Jimmie's departure we had to move to the place known as The Subway. About the time 81 Brown declared himself in on the gambling business and a short time after Mundi left for California, Ralph Brown, whom I later her to be Ralph Capone, appeared, and Ralph announced to the employees that Pete Penovich was to be the new mmager and would have charge of the busim ss in the future. Penovich then declared that all the persons who had been employed in the gambling house under Mundi were out or discharged, and informed them to mlt around until he called the names of the persons who would be reemployed by him for the new syndicete which was taking over the business. Penovich called out my name and I was reemployed by the new owners. Under the new syndicate my duties were the same a8 they had been when I whs employed by Mundi. Many of the persons who had been working for Zdundi were reemployed but Muadits chauffeur, his brother-in-law, and same of his friends or men who had been with Mundi for a long time yere-- not reemployed. A day or two after the new syndicate took over the gambling business Jack Cuzik appdered at the place where we were operating and instruc- ted me to turn over the surplus funds earnsd in the bueil~ssto Bobbie Barton whenever he sent Bobbie to get the money and he said that when Bobbie telephoned to me informing me that he (Bobbie) we8 comir?~to the gamblirjg house for the surplus funds that I should turn the money over to Bobbie. I decided that instead of turning the surplus cash over to Bobbie that it would be better for me to puxhase cashier's checka at the Pinkert Bank with the surplus earnings of the place and turn over the cashier's checks to Bobbie which accounts for the large number "of csshier'a checks which I hmded to 3obbie. I bought the cashier's checks at the Finkert Benk and when Eobbie came to get the surplus money for tile syndicate, I gave him cashier's checks. These cashier's checks were purchased by me under assumed names and they were made payable to J. C. Dunbar, A, C. Dunbar and Jo C. Chick. On sme occasions I turned ovar the cashier's checks to Pete Penovich but most of the time I handed them to Bobbie. I understood that the persons in the syndicate which took over the business from Jimnie Mundi were Jack Guzik, Al Brown, who is also kno-m as Al Capone, Ralph Drown, who ia also known as Rolph Sapone, and Frank Mitto. After the gambling business wes taken over by this syndicate the members did not come to the gambling houses vary often while I was on duty. I left the place each dey shortly efter the horse races were over and was not on duty in the evenings. Aster the tim that Jack Guzik instructed me to turn over the profits to Eobbie I do not remember seeing Guzik out there any mre than about two times. I saw bl Brown at the gambling houses where S ms employed about two times after the syndicate took over th business, Frank litto about two times, and Ralph Brown was around once or twice a week. I lbter learned that Al Brown is horn as Al Capone and that Ralph Srown is Rolph Cepone.

the pert of the gambling home where I was on duty durine the reces was not near the off ice and I had no opportunity to observe all the persona who entered the office. On the occasions whe~Al Brown came to the gambling houses operated by the syndicate, he was ueually accompanied by bps Volpe. Al 'Capone's younger brother, known as Bottles, was employed in the gambling houses as Floor blan and I think was paid $25.00 per day while businesa was nod. On some occasions we would heve from 300 to 500 persons in the gambling houses making bets,etc., end we would have from 20 to 40 persons employed. ;/hen the crowd wes too lsrge to be eccomdated in the Subway we took care of the overflow by conductine business in T he Radio but this wes only necessary on a few occasions for one or two days a week. ,le conducted business in The Ship, under the ownership of the syndicate, dulifig part of 1927, but the syndicste did not ogerate there efter the day of the 3empsey-Tunney Fight which I think was in September of 1927. The syndicete also conducted busiaees at Lauderbach's, 12th Street an3 48th Court CicGro; a $&rage on 25th or 26th Street, st the corner of 59th Avenue, Cicero. These places viere not operated simultaneously except when we operated The Radio to take care of the overflow. Fete Penovich continued as manager of' these places for the symiicate until Frank Ryan succeeded him. After 3ym took the position as manager I did not hare cbargeof the money but continued to work there taking bets on the horse races. 'While aoting as cashier, I kept a daily record of the bueiness oon- duoted at these gambling houses and eaoh night Pete Penovioh would check this record except on a few ocoasions when he would ask me how it oheoked. Eaoh day I would furnish Frank Milano, pay-off cashier, for the horse races, with tunds for a bank roll and at the end of the day I would abok the amount he had on hand in order to arrive at the prof its resulting on the losses resulting iron the horee raoe business for the day. Eaoh day I would furnieh the pay-off cashier for the games with a bank roll and the next morning I would cheok up the amount on hand to determine the profit or lose from the games. By the gamss I mean roulette, twenty-one, araps, blaok jaok, The we, eto. While I was employed as cashier in the gambling houses run by the syndioate and referred to by me in this affidavit I purahased Cashier's oheake at the Piakert Bsnk with the profits of the businass and I turned the cashiertr oheok over to Bobbie, the oolleotor for or representative of the syndioate, and on same feu oooasions I handed the oashierts checks to Pete Penoviah. On some oocasione I oashed the oashierte ohecks and wed the money in the business. When the syndicate took over the busi- ness from Jimmie Wi they did not furnish funds for a bank roll to operate the business ar I used the bank roll on hand when Mudl was declared out by the syndioate. When I disoontinued as cashier I turned over tlcs money I bad on hand to Post Time Volpe who ie a brother of Mop Volpe. After hgnk Ryan took charge I did not aot ar oashier 8nd Post Tims took charge of the money. I was employed by the syndicate in 1937 and 1928 and after Wdi was out I had no other em- plogmsnt during those pears exoept by the syndioats, On frequent oo- oasionr, mph Capone and Jack Gwik would ask me how the buslnese was getting along and I would report to them that it was good, bad or fair. I had bank aocounts in the Pinkert State Bank under assumed names as follows: A. C. Marble, A, S. Durnell, J. C. Dunbar, and I.C. Dunbar. These aooounts were used by me for the bwineea of the gambling houses where I was employed aod they do not represent any of my personal bualness.

"1 have been shown 44 osshier's oheoks isrued by the Pinkert State Bank of Cicero and made payable to J. C. Dunbar, A,C.Duabar, I. C. Dun- bar and J. C. Chiok. These ohecke represent the profits from the gambling houses operated by the smdicate during the period I was employed as oash- ier by the syndioate. All of these oashier's cheoks were purchased with surplus oat& whlch I bad accumulated fmm the operation of the business and represented the profits from the various gambling houses where I wee employed. I turned these checks over to the Colleotor, Bobbie Barton, who reprerrsnted the ownere of the syndicate and I do not know what disposition he msde of thean. These checks represent the profits of the gambling houses and do not represent any personal profits of myself. My purpose in haadillg the check to Bobbie ras because I knew he repre- sented the persons who owned the gambling houses where I was amplopd as cashier. The aaehierts checks referred to in this affidavit were issued by the Pinkert State Bank and I am informed that their records indicated that they were purohased by J. C. Dunbar. J. C. Dunbar war an asamed nsrme used by me at the Pinkert Bank to handle the b~sineBS "of the gambling houeee and Mr. Albert C. Rhan, Paying Teller of that bank, knew that I was using that asmmred name. I was ordered to make Mr. Rahn a present of about $15.00 per week and when I rent to the bank to purohase cashiertr cheoke or to get change for the bank roll he took an, of me pdptly. The caahier'r checks refermd to above me thir day been inepeoted by me and they bear the following numbem: 1107M-109313-109314-109364-109357-109450-109M- 10957~-1~799-~09900-109918-109995-1~oO~~110147-110180-1102~9- 11~-110580-110788-110890-110954-1~1006-111029-1U115-1~~~02- ~1237-111363-U1419-111525-111693-111758-1U~7-~-113~- 1136e8-1~~~-1~388-128484-1~~-1~547-~9O77-129960. "This is el voluntary statement which I have oarohilly read. . No promises were made to for the purpose of eeatving this statement and no foroe or durses was used by the Government agents to whom I made this statement. This is a statement consisting of tan pages and I have initialed each page. This statement la made in responae to questlone asked by Speoial Agent0 of the Internal Revenue Bureau during the course of an official in~estigation.~

There is Oubmltted hererith, marked Erhibit No. 14, a eohedule of caohierte cheaks amouuting to $l30i3,000.00 purchased by Rier under the nams of J. 0. Dunbar, repreeentlng a part of the net pmflts of the gambling business of the Capone syndicate in Cioero while he rae employed as cashier. *re is submitted herewith aa -bit No. 15, one of the caeUerts oheoks for $8,500.00 purchased by Ries under the name of Dunbar and which beers the indorsenaent oi Alphnnne Capone. There is submitted herewith as Erhlbit No. 16, a sworn statement dated May 30, 1931, msde by Mr. J. K. Brower of Palm Beach, Florida, relating to payments made tbhim by Al Capone for landscape work performed on the Capone estate, mami Beach, Florida, at uhioh time Cepone stated in explaining the use of Jaok Dusik'e cheoks to make the payments, that Mr. Guzik was his iirranoial seoretary. Mr. Brorer further stated that in 1928 he me in charge of the Landscape Department of the Exotic Cardens of LUami, mami, Florlda, that he had charge of the work dona on the Capone estate, that he reoeived three payments from fi Capom, the tirot on June 19, 1928 being a cheok for $500.00 signed by Jack Guik. The second payment on June 28th smounted to $1,000.00 beicg ohecks for $kW.00, $200.00 and $300.00 signed by Jaek Ousik and that the third paymnt of $600.00 was made to him on July 1, 1988, that all the payments ware personally made to him by Alpbonse Capone, that when the payment8 were made Mr. Capone had a lerg0 number of checks in his possaanion for variow amourate dram to cMh, signed by Jaok Wzik, and that in explaining the use of the GuzU che&8, Capone told him that Mr. Ouaik had charge of hie f inanoes and acted as his financial secretary. Mr. Brower aleo identified the book records of the Exotio Cardens relating to the above payments. There is submitted herewith as Exhibit No. 17, a stenographio report of an interview with the texpayer, dl Capone, and his attorney, Mr. Lamnce P. Ykttingly of Maahington, D. C ., held in the office of the Interns1 Revenue bent in Charge at Chi-0, Illinois. It will be noted that in this interview 14.. Capone authorized end delegated Mr. &tthqgly as hie agent to iurnish the Internal Revenue B-au with evidence relating to his inoome. At that tlme Mr. Capone and his attorney wen rarned that any etatamnte or infonuation iurnisbed by them would be used against Capone in a oriminal proseoution if in the judsplent of the govern- ment, it was considered necessary or advisable. In response to pertinent questions relating to his income, the taxpayer stated, "1 will let my lawyer answer that for me*. There is suhiuitted hererith, as Exhibit No. 18, a power of attorney signed by Alphonse Capone authoriziag Mr. Mattingly to represent him before the Internal Revenue Bureau. The original of this power of attorney me filed with ths Comisafonerof Intenral Revenue in Washington, Dm C. , and a duplioate of it was filed in Chicago with the Revenue Agent in Cherge.

&tween May 19, 1930, and September 20, 1990, several aonferences were held at our office in Ohiosgo by Mr. Idat t ingly, Revenue Wnt Hodgins and me. .At each oonfermue Mr. Mattingly expressed the desire that the Capone inoome tar oaso be olored promptly and he wed to furnish ms with all the facts he oould seoure from the tarpaper re- garding his taxable inaw for the years under investigation and also to furnish information regarding his activitier during those years in order that we might get all the faots ao as to expedite the olosing of this oase. We Icnm that Mr. attingly and the emyes had been previously warned and understood that any facts fuxaished by them would be used if necermry or advisable by the government in a criminal prosecution ageinst the taxpayer and I therefore enoouraged Mr. Mattingly to eubmit to ye all the facts he oould rrecure from the tarpayer. AID a result of these confe~nceaMr. Mattlngly sub- mitted a letter to ur dated September 20, 19%. Thir letter oontained admlsrione of large taxable income for the four years 1925 to 1928, inclusive, and it ms introduced as eridence in tho trial against the taxpayer. This letter war considered of great importance by the attorneys presenting the oaeo for the government and the defense attorneys made unusually strenuoue efforts to prevent its introduation aa evidenoe. A copy of the letter is submitted hemrith as &hibit NO. 19. It will be mted that the following admlsaions were made: that the taxpayer was a member of an organization or syndicate from lOZ5 to lea; that he was acting ar a principal in this organimtion with three associates and that the profita were divided as follorr - One third to a group of regular qlopes and one sixth eaoh to the tarpayer and three associates. Gmrnmsnt witnesses established that the three other leaders of the Capone syndicate with mom the taxpayer was constantly aesociated during these years were Jaok hik, filr Nitto and Ralph Capone. The taxpayer stated to J. K. Brower that Jeck Guzik was acting a8 financial secrstarp and taking oam of his finances (See Exhibit No. 16). Durin~this inmstig~tionit beom nece8.ax-y to eemar. evidence winat the other prinaipala in the Capone organization and Jaok Cuaik was convicted ot tar evaaion and eentenced to five yeare at Leavenworth Penitentiary. (huik was next in comnand to Al Capone in the orgemlaation and he handled the syndicate's activities in prostitution and gambling, He was also regarded as the political fixer for the organization. Ralph Capone is an older brother of the tarpayer and ma oloaely assooiated with him in all hi8 activities. He has been'oonvioted of wasion of incane taxes and eentenced to three yearm in the Federal Penitentiary at Leavenworth, Kmsaa. He is now aerving his sentence and was transferred to the Federal Penitentiary at &Neil' s Island. Ralph Capone handlad the activities of the smdioate in operating breweries aad the eale of beer. Frank Nitto was tbe other prinoipal in the Capone syndicate ad he handled the activltiea of the organization in whisky and aloohol, Nitto pleaded guilty to tax evaalon and served a sentenoe of eighteen months in the Federal Penitentiary at Leavenworth. There is mbmltted herewith aa Exhibit No. 80, a =ugh draft ot a letter written by Attorney L. P. attingly in uhioh he fires the inoome of Al Capone at ~,000.00 per month for the year 1929 end thir letter ha8 been wed ar the basis for the taxable inoosne of the taxpeyer tor that year. On aooount of the wldespread publicity since 1928 to the effect that the government was cheaking the inoonm of Alphonse Capone and the membem of his organization, it ia believed tbet they did not place their funds in beeor inmat them in tangible assets or leave other leads rslating to their finamial transaationa as the newspapers warned them that investigation would be made in finanoial inatitutione to establish their iaoame. From that time on their incorn ma ccutef~lly hidden fiom the government and the above letter together with the letter of &.Mattingly dated September 20, 1930, are the most detinite evidences of the taxpayer's income for the year 1929. This investigation established that the taqmyer bl Capone wae intereeted in certain houaer of prostitution rmn by his epndicate since the early part of 1924, One of the buses of pmatitution contmlled by the Capone organization wae the Haria Inn at No. 4225 Harlem Avenue, Sticlcney, Illinois. Stiokney, a weetern euburb, adjoins Cicero, Be- and the City or Chioago. dl Capone attempted to make a deal with Reverend Hoover to allow him to operate the gambling business at the Eiawthorne Smoke Sbp in Ciaero without molestation by agreeing to withdrew his illegal aa- tivlties from Stickney in the event that Hoover and the Vest Suburban Citizens hsociation would not interfere with the activities of the organization in Cicem (see statemsnt Reverend Hoover, Exhibi t No. 8). Reverend Hoover, Mr. Brags and Mr. Morgan, as officers of the West Suburban Citizens Association, previously had forced the sheriff to aotion and bad cooperated with him in raiding the Harlem Inn. The Capone syndicate purchased the property knonn a8 the Rarlem Inn on February 29, 1924. It was bought under the name of Louis Lipsahultz, a brother-in-law of Jack Wik, and on January 7, 1925, the property was deeded by Lipachultlr to Jeannette Keithly, a sister-in-law of Jack Ouzik. Capone waa aware of the efforts of Hoover, Bragg and Morgan to have the sheriff and the state authorities close up this plea6 on aacouut of its beiag a house'of pmstitution and he tried to enter into a deal with Reverend Hoover who refbed to consider any such propoeition. At the time of the murder of Analatant States At- torney McSwlggen, the Chicago police raided the Harlem Inn id their efforts to locate Al Capone who was aceue%id of oauaing the murder of the states attorney but he was not found on the place. They did find a eupply of firearme, a large muat of dynamite, whiskey and detailed records setting forth the daily inoome of the Harlem Inn derived f'rasn prostitut6s. Photoatate of the record8 aeeured durine that raid are submitted herewith as Exhibits Nos. 21 ad21-8 and 22 to 37, and they cover the period of eighteen days. They eetab- lieh that the total income of the Harlem Inn fran this aource for that period amounted to $0,398.00. On that basin the yearly income or this houee of pmstitution was $128,000.00. These daily records cover the period from April 6, 1926 to April 25, 1926. On these daily sheets in column No. 1 appears the name of each proetitute connected with-the Harlem Inn on that date. In column No. 2 appears the ineome of each pmstitute for one night. In column No. 3 the entries represent 5% of the income or each prostitute taken by the establishment. In ooluum No. 4 the entry mpreeenta 10$ of the second columu, which wae the amount charged the prostitute by the eatabliahment for towel eemice. In coluam lo. 5 the entry repmeents the net inqoIP8 received by the prostitute; in column No.6 the entry represent8 the co~rnaierlonsearned by the proati- tute on sales of liquor to customers, and col~No. 7 represents the total smount earned by the prostitute. Varioua other large expenses also taken from the ine- of the women for meals, auto transportation from a downtown hate1 to their place of employment and for room rent at the hotel where the syndicate required them to live. In addition to the inoome from the proetitutee refleated on these exhibits, the syndicate aleo had coneiderable income at the Harlem Inn from eales of liquor and from meale served to patrons. Them is submitted herewith aa Ekhibit 37-6, a newspaper report of a raid whioh the West Suburban Citizens desooiation foroed the eheriff to make on the Barlem Inn on Maroh 7, 1925. There is attached as Exhibit No. 3749, a eopy of the record of the Appellate Court of Illinois, case No. 30463, relating to the raid8 on the Harlem Inn on Maroh 7, 1925 and subsequent dates, In this court record appears the testimony of witneesee proving that this place me en establiehed home of prostitutFon. & Injunction was issued by the oourt against the premises. There ie attached as Exhibit No. 374, a oopy of a mer~orandumpetition of the people of the State of Illinoie versus Jeannette Keithly, oaee No, B-118477, wherein various overt sots eonrmitted by the owners of the Harlem Inn are eet forth, There is attached am Bchibit No. 37-0, a copy of a decree issued in the Circuit Court of Cook Comrty, case B-118477, restraining Louis Lipechults and Jeannette Keithly from further urn of the Earlem Inn for such purposes aod requiring that a bond of $3,000.00 be furnimhed to lneure that the nuisemce would be abated promptly. There is attached as Erhibit No. 374, a oopy of a eworn statement made on June 25, 1931, before Speoial &nt M, B. -one by Mr. John Drigue, In rhlah Grigus states that he Is a heating contractor; that he installed the heating plant for Al Capone h Stidmey; that upon completion of the work Al Capone paid him $1,100.00; that the payment wee mede to him by Capone in the place horn as the Harlem Inn and Grigus Identified a receipted bill covering that work. The receipted bill of Mr. Grlgue for the heating plant was found at the Harlem Inn at the same time the daily records were found relating to the incame of the pmstitutee at th4 Harlem Inn.

In spite of the injunction iesued by the court againet the Harlem Inn, the place me reopened and during our investigation re developed that it was again being used forthe same purpoee. We aleo discovered that the Cepone organization m8 operating another house of proatltution a short my froan there known as the Shadow Inn; that the prostitutee were shifted be.tween the Shadow Inn and the Harlem Inn aa bueinees dea~lndsrequired them in either place and that both of these places apparently hed complete Fnmuuity and police pmtec- fion furni8hed by the Chief of Police who was frequenting the Harlean Inn. I furnished this inforaration to P. F. Roche, Chief Investigator for the States Attorney's office requesting that the state take action to close these houses md arnsnged to be present when hie force raided both of these places on the night of by 30,1931, Special Agents Teeaem, Sullivan and I were present and aesisted in these raids in order that we might loaate some important witnesaee in this tax case knom to be frequenting theee joint6 end also to secure any recorde relating to the bueiness of the syndicate filch might be found on tb premises, There is submitted herewith as Exhibit No .SCFH, a record whiah re found dur'ing thie raid, covering the income from prostitutes at the Harlem Inn for a period of five days. It will be noted that the income frau this source was $730.65 for that period of five days and on that baeis the yearly incone from thie one house would amount to $52,560.00. It will also be noted that the syndiaate had this business so well organized that a printed form was used to keep an aecurate acaount of the inoom. Loula Consentino, bhager of the Harlem Inn, ras arrested during the raid and pleaded guilty when tried. Four women found in the place during the raid were slso arrested and pleaded gclilty. After tht raid the etates attorneyle office again started action to close the Barlam Inn for operating as a home of prostitution and secured an injunction whioh became effeative on Noveer 1, 1931. Mr. John Blahouee, the owner or the plaoe knom a8 the Shadow Inn, identified dl Capone as the man who negotiated the lease and nmde eome of the monthly papnte to him. A copy of a sworn etatemsnt made by Mr. Blahouse on June 9, 1931, ie attached an mibit No. 37-F. The fact that the Capone organimtion had a machine gun aoncealed on the premiees of the Harlem Inn on May Sth, the day befom the raid, was established through a telephone convereation on one of their tapped telephone lines, but it had been removed before a raid could be carried out to capture it. Telephone lines were not tapped by special agents of the Intelligence Unit dur- ing this investigation, but through cooperation from other sources we were legally iurniehed with information relating to and traneeripts of telephone convorsation over aertain lines. There is attached ae Erhibit No.3743, a memorandum prepared by Special Agent James T. Sullivan relative to house8 of proetitution under the oontrol of the Capone organization and showing the connection of dl Capone and Ralph Capone with them. At the trial of Al Capone for tar evasion it was not coneidered advisable to establieh his connection with theee houses of prostitution and in determining his tax liebility we did not take into coneideration any income from such eourcea. There is attached ae Exhibit No. 38, photostat of safe deposit box records of the Pinkert State Bank of Cicero, Illinois, covering a ~afedeposit box jointly rented by Alphonse Capone and Louis La Cam. Misa J. Alexander, an employee of the Pinkert State Bank identified 81 Capone, the taxpayer in this case, as the same person who signed the oontract for this box and who signed the various entry slips oovering visita to the box from tinm to time. Before the Federal Gran4 Jury Mr. Louie La Cara teatitied that the daily records rel~tingto the profite of the gambling businese at Cicero were kept in this safe deposit box by Capone and himeelf. Testimony of Fraak Pope, one of the managers or the Cicero gambling establisbmente, L. A. Shurmray and other witnesaee, established that La Cava made regular visits to the gambling establishmen& to inspeat their necord of profits, that. he mgularly collected the surplus and that he was reganted as the'oolleotor and representative of the owner of the business, La Cava olaimed that aU the oollectione from the business were turned over by him to Mike Merlo and Tony Lombardo. Merlo and Lombardo were murdered before La Cava testified so he knew that the government could not interview them to confirm or refute his statellbent.

There are submitted herewith as Exhlbite Nos. 39, 40, 41 and 42 sworn etatea~entsof Frank Pope, Ben Pope, Louis La Cave and Peter Penovich, Jr,, ulth reference to the operation of the gambling businese at Cicero and the distribution of the profits fram the bueinesa. Conflicting, indeiinite, misleading and untmru testimony was given by these witnesses during interviews in our office and later before the grand jury a8 they were members of the Capone organization eaoh one being homtile to the government and they olaimsd they were afraid of reprisals from the Capone organization in the event the $overmat uaed them as witnesrres to conviot their leader of evasion of inom tarem. Mter a aareful consideration of their'statements, to'gether with the testimony of L. A. Shunnray (Fkhibit NO. 6 and No.6-A) and one sheet of the gambling record kept by Penoriah and Shunmay (Exhibit NO. 43) it was found that during the pear 1924 the net profits reileated in the book record (Exhibit No.5) of the gambling business in Cicero were divided ae follows:

Louis Alterie, for John Torrio and Dion 0 fBannion Dave Bates, for Dion OfBannion and John Torrio

Peter Penovich, Jr. !% The net profits established fnom this buaineas for 1924 by the mbling book record, Exhibit No. 5, and by testimony of Mr. Shmey, ram $300,250.94 and 41% of thie amount or $123,102.89 ras the net income of Al Capone from that source for that year. Thie wunt wae the net income set forth in the indictment covering the year 1924. No evidenae was submitted by the defense to refute this income from the gambling buainese but the defense did produce witnesses to testify that the taxpayer suffered greet loeses through bets on horse races with bookPrakers at Uhicago, Illinois, and Mismi, Florida. lhese witnesses were oalled by Capone to his headquarters in the Ledngton Hotel the night before they testified and their evidence coneieted of oral testinrony entirely unsupported by recorde of any nature. After the trial wae over the court publicly oharged that those nitneesee were forced by Capons to give perjured testimony. Thie statement was made in open court by Federal Judge WiUcereon on October 27, 1931, when he sentenced Phillip D9Audrea, a bodyguard of Capone, to sir montha in the county jail for contempt of court cdtted during the Capone trial. The contempt oase was developed by us during the trial from confidential infonmation f3wnished on October 10, 1931 to Mr. Elmer L. Irey, Chief of the Intelligence Unit, that DeAndrea, the bodyguard who accompanied Capons to court each day, sitting at the oouneel table with him, wae 08r1ylng a loaded revolver into the court room in defianue of the order of the court that no one should caPry fire MM Into the oourt room. 'Mr. Irey oonveyed this informatioa! to me during a oourt recees and I immediately took DtAndrea to the chambers of tb Judge. Spoial Agents Sullivan, Melone and I found conoealed on his person a loaded thirty-eight positive police Colt revolver and an extra round of ammunition. When the gun was taken from DtAndrea, I asked him why he oarried it and he replied that he hail authority to do 80 as he wae a deputy munioipal court bailiff of Chicago. I then took from him a bailiff'e bade and appointawnt card. Upon investi@;ation it me established that DvAndrea had not been employed in that capacity tor several pears and had no permit or justification for carrying the revolver. The matter was referred to the aourt. The judge held hin: for contempt of court relllaading him to the custody of the United States Marshal without bail. He pleaded guilty and was sentenced on October 27th to six months in the Cook County Jail. In imposing the sentence the court referred to the perjured testirPony of the defense ritneaeee in the Capone case stating as followe:

"?PEE COURT: The respondent here la charged with contempt of court. The epecifio act upon which the proceeding is based ma that of coming before the court in company with the defendant in the case of United Statee vs. Capone with a revolver and ~mnunitionin his pooket. wNow, it clearly appears from the facts and circumstences before the court in this proceed- ing and at the trial of United States vs. Capone, that this reapondent ' e activitiee were linked with those of an organieed body of men whose outlaw camp ie at the Lexington Hotel. Of this body the defendant Capone was ohief. The res- pondent claima that he didn't know what this band was doing, but his understanding is that they Were engaged in gambling and bootlegging.

"It is perfectly clear from a long array of can- alusive circumstances that this band ereraises a coercive influence over those with wholn it aomss in any aontact .hiah is nothing less than ineurrection against the law8 of the Dnlted States. The eourt would bave been blind indeed if it had not observed the intimidation practiaed on wit- nesses almoat under the eyes of the court.

"It met be borne in mind that this respondent ras in aourt, sitting rlth his oonoealed flm- ambehind the defendant, while the defendant ras glaring at ritnerrres who were on the point of rememibering aomthing about the business in wbioh the defendant rar emd,and rhioh the ritnesr omld not porsibly have forgottan; pt ritnesses faltered and failed at the aritiaal point.

"To this oamp at the Lexington were srorrPbDed the witnesses who testified to the defendant Cap- one's loares at horse rgces. To that camp rere sunmoned counsel for conferences. And from that camp, under what aoercive influenoes we can only conjeaturo trOm whet trampired in court, aame that array of shooking perjury with whioh the court was affronted during the cloelng days aP the trial. We bad here the spectaole of wit- ne6s after witness testifyiw in a way uhioh ma psychologically impossible , pretending to remem- ber things whioh in the very nature of the human mind the witness aould not have remembered if he had forgotten the things which he pretended to have forgotten. It me perjury on its face. "The activities of this band were a menace to the court and its officers and to the due administra- tion of justice. However, the part of the respon- dent was not the major one. The pistol was far less serioue them the perjury.

"The respondent is sentenced to six month& in the county jail of Cook count^.^

From the testimony of witnesses Shumway, Frank Pope, Ben Pope, La Cava and Penovioh, Exhibite Nos. 6- 6-4 39, 40, 41 and Be it was found that the profits of the gambling business known as the Hawthorn Smoke Shop In Cicero, Illinois, as shown by the gambling record, Exhibit 140. 8, covering the yams 1985 and 1926 wen, divided as follows:

Frank Pope 16 Peter Penovioh, Jr. ss% Ralph Capone 5%

Cicero Town Oiiioiele for gSait 26 proteation

Based upon the statements of the taxpayer through his attorney, Exhibit No. 19, that he reaeived one-sixth of the total income from the eyndicate, his taxable inacnae wae fixed at one-sixth of all >ank deposits and mahandled by the syndicate prinoipalcl, Jacrk Guxik, Ralph Capone and Frank Nitto during the years 1925 to 1928, plus one-sixth of the bank deposits of Sam Guxik for the years 1927 - and 1928. A sahedule setting forth the inaome and a oompuhtion 'L of the tax for the years 1925 to 1929 is attaohed as Exhibit No.44. Sam Ouzik ma a member of the syndicate and pleaded guilty to +- eraeions of income taxes. He stated that the funds haadled in hie bank acoounte were monies colleated by him for other members of the syndicate. He is a younger brother of Jack Guzik and handled colleotione from slot maohinea andolther illegal aativitiee of the organization. Sam Cuz~ikserved a eentenoe ot one year at the Federal Penitentiary at Leavenworth for the evasion of inoome taxes aa a result of a case developed during this investigation.

There are submitted herewith as Erhibite 45 to 74, ledger sheete of ]mom bank aocounte of Jaok Guzik and a caehierls oheok ehoring total l'unde handled by him a6 followa: Total $1,427,408.95

There is submitted herewith Exhibit No. 75, sohedule of bank acoounts and tunde handled by Ralph Capone, ae follows:

There are submitted herewith as Ekhiblts No. 78 to 84, eohedules showing hdshaudled by Frsnk Nltto as follows:

TZlere is submitted hewrlth as Exhibit No. 86, a sohedale ahowing mneys handled by Sam Cbik as folloru:

Total $185,164.37

There is submitted herewith as Exhibit No. 42, a traasoript of the testimony of Peter P.'Penovieh, Jr., Mumgar of the Hawthorn Smoke Shop, a witness oalled by the defense. Mr. Penovieh identified government Mibit No. 43, etated that it was in his handwriting; that it had been previowly shorn to him in the Gmnd Jury roam and that he bab been under brand Jqsubpoena for approximately mixteen months. In reply to a quoat ion of the eourt as to what the douument identified by Penovioh represented, Attorney Ubert Fink stated, "That is appamntly a list of the owners 'of thlr gambling house, in the handwriting of thir witness, with a~~ountsset opporite their respeotive names, from rhich it can be ascertained exactly, the percentages in rhich they omed the businesrw. The aourt direoted that Attorney Fink's anaer be rtrieken from the reoord and would not permit the defense to pmueed with the exeminntion of the wit- ness regarding wbat trampired in the Orand Jury proaeedings. The sheet identified by Penoviah oontained emtries shoring the dietri- bution of $32,607.00 on December E, lQB4, ao follows:

Tom #6,537.U (Paid) Ralph 1,834.56 Pete 1,651.36 Frank 5,780.U J&A 5,780.M (Pald) LW s ,vreo.ea D 5,780.88

It also bad the following entry: "Frank paid $17, ~0.00for blu. (Thir Uheet me explained to me by witnesoerr Shuaaap and Frank Rope as a reoord of the dietribution of the syndicate profits of the Harthorn Smoke Shop on hand Deembar 2, 1924). On orosrr orandnation Penoviah teotified that he did not how what the entries -ant; that it'was an -of oopy of a slip that he reoeired at the end of eaah monthtrr business of the syndicate Ralph Capone and whioh he oopied into the book! that he did not pay any of the muntr to the permno Indicated; that he hrrnaled the oaoh in the Inmineso =ti1 marplum lprofitr aoarrmulated; aud that at the euul of the month or the first of the month, he would give if to Frarrk Pope to be dirtributed; that ha, (Pemovioh) ma a pertner In the business when it started in May of 1924 and war rupposed to wt 8M but ram out to S$ by Ralph Capone; that he went into the business rith Ralph Capone beoause he (Ralph) wcould do the firiw in Cioero rith politioal powers, pliae departmnts or anyone that might be in a positLon to stop the gambling, or authorities that we- In a position to arrert; ouch ao the Stateam Attorney, the Mayor or the Sherlff; that he knew of there oonneotiono tbrough oonversationrr he hall with Ralph Capone and beoatme or the attentions ehom to Ralph when he appeared In public places. Penovich had been a witness before the Federal Grand Jury and bad not been used at the trial .ar a Governmsnt wltnees beaause it rao plainly evident that he was at- tcrmpting to ehield Alphon8e Gapone. Hi8 anewers to queetions we- misleading and false. He had hen a member of the Capone orgar~i~S- tion for aereral years and ma hortile to the Oomrmmnt. When ap attempt narr made to wrre him rith a &rand Jury rubpoem in Febnrary of 1951, he wee operat- a gambline houae for the organization at &lly.od,Florida. He avoided eerviae and left the State of C PTorida the same day he learned that a eubpoena rrar about to be served upon him. After several weeks he returned to Chibago for a I day and ua learned that he war at the home of hrie Ilbrsn, a woman and I with whom he lived who ran a bouee of prostitution at 439 Belmont Avenue, Chicago, Illinois. Penovich telephoned from her house to a friend, stating that the Government was trying to eeme him with a subpoena to testify in the Capone caee; that it was too hot for him in Chicago and that he ma leaving early the next morning for Canada in order to keep under cover until the Capone tax case was diepoaed of. We overheard the phone conversations and served him with a subpoena that night. He wae then kept under eubpoena until the case was tried. In the meanthe we learned that Penovioh conferred with Capone at the Lexington Hotel on frequent oooasions imnediately after he had been questioned by Oovernment attorneye before the Grand Jury; that he also ms receiving presents from Capone and naking statements to other ritnesses to the effeot that the Government would never get evidence to oonviot Capone of tax evasion. The taotice used by Penovich were used by other witneeses employed around the gambling hmms in their attempts to shield the leader of their organization, end on account of their antagonietio attitude the United Statee Attorney decided it would be inadvisable to uee Peter Penovioh, Prank Pope, Ben Pope, Robert Barton or Louie La Cava as government witnesses at the trial of Capone.

There 10 submitted herewith an lhhibit No. 86, a eohedule ahowing Weetern Union wire treneiert~of money amounting to $72,380.00 sent by or for the tarpayer. These Western Union money order8 were sent to the tarpayer or his agents at hi6 winter horns in Miami, Florida, by members of hia organization, Sam Ouzik, Roeoo Fieohetti and Bobby Barton. Barton was ohauifeur and messenger for Jaok Ouzik and was the representative of the syndicate to whom Fred Riee turned over a number of cashier's oheoks from the Pinkert State Baak oovering the prof its of the Harrthom Smoke Shop. In an interview with States Attorney Vernon Hawthorne at Mid, Florida, Al Capone stated that he was in the gambling business and reoeiving funds from that business by nire from Chi-. He also stated that a large part of theee funds were received by him under aesumed names and that the name A. Costa was used frequently by him. A copy of a stenographic report covering . the interview tbt States Attorney Hawthorne had with Capone ie attached herewith as Exhibit No. 87. The fact that Capone used the name A. Costa and that the ftmde so mceired were inooms sent to Capone from Chicago was further eetabliehed by Mr. Parker Henderson of Miami, Florida. A sworn statement made by Mr. Henderson is at- tached herewith as Exhibit No. 88. Mr. Henderson etated in part that he beoanm acquainted with dl Capone at Miami in 1988; that Capone lived at the Ponce de Leon Hotel whiah was omed by him;that he frequently cashed Western Union money orden for from $1000.00 to $5000.00 for dl Capone; that he conducted the negotiations for the purchase of a heon Palm IeLand at Miami Beach for Al capone at a price of $40,000.00; that as a favor for Al Capone he took title to the property and later trtrneferred it to Mae Capone, rife of Al Capone; that Al Capone said Jack Cuzik was his partner; that Al Capone mid he owned a gambling house in Chicago; that he met Ralph Capone and FFank Nitto at the home of Capone; that 81 Capone preeented him with a diamond belt buckle and that he viaited Al Capone fn Chicago in 1928 when the headquartere of Capone and his organization were at the Metropole Hotel. Mr. Hendereon also informed me that at Al Caponets request he purchased eix revolvere . at a pawn ehop in Uami for which Capone furnished the money; that he Immediately turned them over to 81 Capone never eeeing them again; that he (Henderson) was later arrested and accused of the mnrrder of Frank Yale because an inveetigation of the New Pork Police Department established that one of the revolvere had killed Yale; that the revolver found near the body of Yale bore the same serial number as one of the gun8 purchaeed by Hendereon at the pamshop for Capone; that Capone told him not to worry about the mder charge; thet the Capone organization ras accused of that mder ae Yale was an enemy bootlegger; and that finally the oaee was dropped.

There is submitted herewith as Exhibit No. 89, tranecript of the te8tFmony of Ruth Gaskin of Miami, Florida. Miss Gaskin etated that she had been employed as stenographer for eight yeare; that she knew the defendat, Alphonse Capone, and identified him; that on February 14, 1929, she took notes at a hearing where Capone was present in the oiiioe of the County Solicitor of Dade County, Florida, and she produced tha original mtee taken on that ocoaeion. Miea Oaekin stated that present were Robert Taylor, County Soliaitor, Louis Coldstein, Distriot Attorney of Kings County, Brooklyn, and Sheriff Me P. Lehman; that Capone told them he first met Parker Henderson in Mlami about tm years ago when Henderson was running the Ponce de Leon Hotel in that city; that he was a guest in mom 804 at that hotel; that Henderson bought the home on Palm Ieland with $50,000 caeh given him by Capone; that Dan Seritella was hie friend and visited him in Miami. In anewer to the question "What business are you in?" he stated, "I am a gambler, play race horsesw; that he mew Jack Guzik snb Jack Cuzik viaited him in Maml last sumner; that people called him 81 Brown; thet Jack Cuzik had gambling busineae dealing8 with him; that he was horn by and ueed the name A. Costa, and that he received money by Pestern Union wires from Chicago in regard to his gambling business.

There ie submitted herewith a8 Exhibit No. 90, a sworn statement of Catherine Caines, of MidBeach, Florida, dated June 4, 1931, and Erhibit No. 903, a transcript of her testimony at the trial. Hies Ceines stated that she wae branch manager of the Weetern Union Telegraph Company at 803 Fifth Avenue, Miami Beach, Florida, in 1928 and 1929; that she ksew the defendant, Nphonee Capone, snd identified him; that she received inatruo- tions from Capone regarding various wire transfers of money sent to him through the Western Union Telegraph Company; that she was directed by Capone to cash them when they were presented by any member of hie household; that the members of the household reoog- nized by her were the oaretaker, Frankie Newton, another caretaker, Johnnie Mom, Albert Capone, John Capone and Mather Capone, brothers of Alphonse Capone; that she knew the elgnaturea of Alphonee Capone and she identified the followi~wire transferred drafts an4 the signature of Alphonse Capone upon them: June 22, 1928, $2,000; July 2, 1928, $900; July 2, 1928, $600; December 18, 1928, #5,300; Deoember 29, 1928, $2,000; December 29, 1928; #1,000; January 11, 19Z9, * $5,000 ; January 17, 1929, $2,000 ; February 13, 1929, 12,000 ; February 13, 1929, $5,000; April 14, 1929, $500; June 10, 1928, $2,000; July 17, 1928, MOO; July 17, 1928, $1,600; July 2, 1928, $900; July 2, 1928, $600.

There ia submitted herewith as Exhibit No. 91, a tranecript of the teetimony of Mrs. Luoille Cashell, of Miami, Florida. Mrs. Cashell etated that she was an employee of the Western Union Telegraph Company at YUami, Florida; she identified five Weatern Union drafts made by her in favor ot the defendant and stated that the endorsements "Al Caponew and "Albert Caponew appearing qpn them were in the handwriting ot the defendant.

There is submitted herewith as Rhibit No. 92, transoript of the testimony of Miss Jean Rives ot Chioago, Illinois. Xiss Rives stated that she was bookkeeper for the Jaek Niles Furniture Company of Chicago; that the company had bueiness with Alphonee Capone; that in 1928 he came to the store to eeleot furnitum; that he bowht it in the name of P. Henderson; that it was oent to 93 Palm Island, Miermi Beach, Florida; that the first purohaee amounted to $7,289.15; that on placing the order he made a de- poat of $1,500.00, represented by three checks of $500.00 eaoh; that two days later (June 13, 1928) he paid the balance by three checks, one for $1,500.00, one for $2,000.00 and anather om for $2,000.00; that Sack Guzik was the maker of these ohecks; that they were drawn on 'the Equitable hvet Company of Chicago; end that in Janlrary of 1929 Al Capone bought additional furniture valued at $1,250.00.

Thew is submitted herewith as Rhibit No.93, transoript of the testlnnny of Mr. F. L. Wehran, of Chicago, Illinoie. 16.. Wehran stated that he was employed as a sales- by Peck &Bills Furniture Company; that he sold furniture to bl Capone starting in November, 1928, valued at between three and four thousand dollars, some of which was sent to the Metropole Hotel and some to him home, 7244 Prairie Avenue, Chiaago; that he paid caah for aame; that he also sold him furniture which waa delivered to the Lexington Hotel valued at from $1,500 to $8,000. He produced invoicea of the firm and testified regarding the following items which were sold to Capone: desk set, $39.00; lamp baae, ehade and two elephants, $105.00; dreeser and set, $913.00; aabinet, $358.00; 2 torchierree, sofa, chair, table adelephants, $1,083.00; bed and dresser, $153.00; chair and two lampa, @51.50; easy chairs, davenport and smoker, $1,038.W; mattreas, epringa eta., $226.00; china cabinet, $266.60; chair, $11.00; lamp $86.00; table pad8 $20.55; mirror $05.00; ahair $260.00; chair $55.00; highboy $68.00; bed #27.00; chair $13.50; pillow $16.50; eprings $46.00; tick $47.50; pair pillowa $106.50; humldor $28.00; pillows $12.50; settee $105.00; maker $50.90; chair $50.00; table $26.00; chair $21.75; table $17.00; chair $24.75; lamp base $50.00; shade $22.00; shade $55.00; base $46.50; foot end 620.90; dresser eta. $410.50.

There 1's submitted herewith as Exhibit No.94, transcript of the testimony of Fred S. Avery, Manager of the Auditorium Hotel, Chiaago. Mr. Avery stated that he me merof the Metropole Hotel, 23rd and Michigan Avenue, Chicago, about % yeare ago; that Al Capone was a permanent guest regularly ocaupying a oornea! suite . on 'the 4th floor ot about eight rooms; that he had other persona in the suite with him; that on one oaoaeion he went to the sate to eee dl Capone, requesting the payment of the room rent; that the amount due was about $3,000 whiah Al paid the next day in our- renay from a roll of bills he had in hi8 pocket; that Capons gen- erally paid Us bille about once a week, usually amouting to isom $1,200 to $1,500 per week; that he engzged the banquet room of the hotel for two nights at the time of the Dempeey - Tuaney prim fight in September, 1927, where he entertained friends; that the bill for the service in the banquet lgom was around $3,000; that dl Capone bad an office in his suite and thet he saw Jack Culk at the Metropole Hotel when Al wae living there.

There la eubmitted herewith as Exhibit No. 95, a traneaript of the teetimony of Paul H. Mincer, Chicago, Illinois. Mr. Mlncer etated that he was a rug salesman for Peok & Hills, 1353 South Wabaeh Avenue, Chicago; that in 1927 he sold ru@~to Al Capone; thet on November 8, 19a7, a sale mounted to between $1,400.60 and $1,500.00; that eome of the rugs were aent to 7244 Prairie Avenue, to Uemi Beach, Florida, and that rugs valued at 4706.60 were aent to the ~exb~gtonFiotel; that a eale wae made to Capone on November 11, 1927 of nine Chineee rugs for $1,312.25 and that he rold him other mga at later datee. He identified the records of Peok & Hille relating to traneactione with Alphanse Capone. There is submitted herewith ae Exbibit No. 96, a transcript of the testimony of Walter Housen of Chicago, Illinoie. Mr. Hausen stated that he had been room clerk at the Lexington Hotel for about five yeare and previously had been room clerk at the Metropole Hotel; that on July 30, 1928, he registered Al Capone as a guest of the Lexington Hotel; that Capone came to the hotel with 15 or 20 men to secure roams; that none of them would consent to sign the hotel register; that he then signed the regieter for them, giving Capone mom 230 under the name of George Phillips; that Capone etill lives at the Lexington Hotel; that when they mgietered into the hotel assumed names were used for all of the men; that he had horn dl Capone when he was clerk at the Metropole Hotel; that he lived there under the naaw of Roes; that same of the men who moved into the Lexington Hotel on July 30, 1928, had lived at the Metropole atel at the eamb time Capone lived there and that Butsie, one of the men in the party, paid the bills. There is submitted herewith as Exhibit No. 97, a photostat of the regieter of the Lexington Hotel for July 30, 1928, the date upon which the organiza- tion mved from the Metropole Hotel to the Lexington Hotel.

Them is submitted herewith as Exhibit No.98, a tranmript of the teetimony of C. A. Roy, Miami Beach, Florida. Mr. Roy stated that he wae in bueiaess a8 an interior decorator; that in 1929 he had busim as rith Alphonee Capone amounting to $1,500.00 for draperies, bed spreads and upholstery work. He produced his book records relating to the tmnaaationa and iurtbsr stated that the direations relating to the work were personally issued to him by Alphonso Capone who outlined just what he wanted.

There is submitted herewith as Rhibit No. 99, a transcript of the testimony of Abraham Jo Quint, Wholesale Jeweler, 5 South Wabash Avenue, Chicago, Illinois. Mr. Quint stated that he was in the wholeeale jewelry business under the name of A. J. Quint & Compsny; that he had had transactions with Blphonse Capone in the years 1928, 1929 and 1930, duriag rblch period he sold him Jewelry and eilverrare amounting to $5,932.33. Them are submitted herewith as Erhibit No. 99-A, photostate of bills covering transactlone of Alphonae Capone with Quint & Company, rhioh the witnese identified, the total amount of the pumhaee being $ 5,932.32.

There ie submitted herewith ae Exhibit No. 100, a sworn etate- ment of Mr. F. A. Whitehead, of Idiami, Florida, and a8 Exhibit No. 100-8, a transcript of his testimony at the trial. He stated that he was aearetary-treasurer of the Dykea Iron Ilorks, which firm built an iron gate for Alphonse Capone at the entrance to his estate at Palm Island, Miami .Beaoh, Florida; that the cost of the gate wae $490; that it war paid for by a oheck spd that the cheok was signed by Jack Guzik. Mr. Whitehead produced the mcords of the G. M. Dykea Iron Worka, Inc., relating to this traneaction and there ie submitted herewith as Exhibit No. 100-B, a photostat oopy of de- posit slip mede by him on June 26, 1928, ahowing a check deposited on that date for @00, aigned by Jaak Cuzik.

mere is autdtted herewith aa Exhibit No.101, the transcript of the testimony of Earl A. Corbett, of Chicago, Illinoia. Mr. Corbett etated that he was a salesman employed by Marshall Field & Company In the Custom Shirt Department; that on November 14, 1928, he sold Al Capone 28 ties at $4.00 each, 28 handkerchiefs at $3.00 and $2.75 each, the total blll being $213.50, aad that on the same day Capone purcheaed other item of merchandiee for $36.50, $48.00 and $46.60. He produced the reoorda of Marshall Field k Company relating to them transactions.

There ia eubmitted herewith a8 Exbibit No. 102, tramscript of the teatimony of Mia8 Johanna E. Sullivan, of Chicago, Illinoia. Mias Sullivan etated that she ma employed aa a bookkeeper at the S. k L. Motor Company of Chiawp Illinoia, in 1928; that the reaorda of the 00- show that in 1928 buainese waa condmted wibh 41 Brom of Michigan Avenue (Metropole Botel), Chicago; that he purchaeed a eeven passenger Linaoln Sedan on ?&y 18, 1928 for $5,380.15, lurd that a used eevan paaaenger Linooln waa turned in on tb tranaaction, for whlch he wee allowed $2,630.75.

There la eubitted herewith aa Exhibit No. 103, a sworn etate- mant of John Newton Lunmia, Jr., of Miami, Florida, dated Septem- ber 5, 1931, and Exhibit No. 103-8, a transcript of his teatimony at the trial. Mr. Lummie stated that he wae in the real estate busineea and la at the preaent ti.m tax aaaeaaor ia-Dade County, Florida; that he knew the defendant, Alphonse Capone; that in 1928 he wae conneoted with the real estate aompaay that sold a hamre to Capone; that he and Parker Hendereon took Capone to inapect several houeea at MI& Beach; -that Capone pmhaaed for $40,000 a place on Palm Ialend; that #2,000 in cash aa a down payment waa made by Parker Henderson; thet $8,000.00 in cash ma paid at the closing of the tranaaction, the property being deeded at the req~~etof Capane to Parker Henderson, and the balance of $30,000 waa aecured by three noterr signed by Henderson for $10,000 each, due in one,' two and three years. He identified a certified oopy of the deed to the property at Palm Ialand, atating that he ear it in hie real eatate office et the the of the tranaaction and that it covered the property known ae No. 93, Palm Ieland, desoribed as lot 8, block K, of Palm Iehnd. There ie attached as achibit No. 104, a sworn statement made on February 20, 1931, at Palm Beach, Florida, by W. Joe Faulkner, a roulette wheel operator. He states that he was employed in gambling eetablisbmente in Cicero in 1924 and 1925; that he wae emploH in the Hawthorn Sleoke Shop on 22nd Street on the first day it opened and remained about six months until Dioh OtBanion mekilled, at which time the giamee of ohanoe were closed for a short period; that later he worked upetairs over 4818 W. 22nd Street; that he was hired by Peter Penovioh; that it was the general understanding of himself and other men employed in these places that.they were owned and operated by 81 Brown (A. Capone) Ralph Bmm (8. capone ) Frank Pope and other6 and that he saw Al Brom in the place in the offioe of the eetabliehment . There is submitted herewith as Exhibit No. 105, a morn statement of Guy Claire Buxton dated Ootober 1, 1931, in which he states that in 1924 or 1925 he sold Al Capone a McFarlane DeLure Cabriolet auto for $12,500; that about one year later he sold him another MaFarlane special body auto for $12,500.00 and that on each occasion he took in a wed car in trade.

There is submitted herewith Exhibit No. 106, a sworn etate- ment of Samuel J. Steinberg, wholesale jereler , dated September Z9, 1931. Be states that about December of 1926 he sold to 81 Capone 88 to 25 ladies beaded bags lor $22.50, or $27.50 eaeh; that later on Capone sent to him a design of a dimwind studded belt buckle for a quotation; that they agreed upon a prioe of $275.00 for thirty buakles; that they rere delivemd on December 24, 1987; that $2,500.00 oaeh was paid on delivery and the balance was secured by George J. Liedennan.

There ir attached as Exhibit No. 107, a swrn statement dated September 23, 1931, of Louie Karlebaoh, proprietor of a mat market at Miami Beach, Florida. He states that Capone started dealing with him on about May 7, 1927; that his meat and poultry bill would run from $20.00 to $50.00 per day; tbet the total pur- chases exceeded $5,000.00 in about two years; and that frcm time to time he oashed %stern Union money orders for Capone covering funds that Capone war receiving from Chicego.

There is attached as Exbibit No. 108, a statement of J. J. Swell dated October 1, 1931. He atatee he was introduced to Jack Cuzik by Al Capone; that when the introduotion was made Cuzik said he ues the founder of the syndicate; that Capone bought merchandise from the store operated by him; that Capone attempted to make political oonnections in Miami; that Capone told him he had given money to local politicians and hsd said "ahow me the next Sheriff of Dade County and I will back himw and that Capone made a donation of $1,000 to the Uami Comrmnity Oheet which they refused to accept.

There arsattaohed as achibit No. 109 and 108-A, statements or James D. Stanton. He testified that he war employed ae tele- graph operator on a private wire in gambling eetabliehments in Cioen, from 1925 to 1928 at 4818 lest 22nd Street; Western Hotel; 4835 West 22nd Street; 4738 W. 22nd Sfreet known ar the Harthsrrn Smoke Shop; the Subway and the Ship; that Fred Ries was oaehier, Frankie Pope and Pete Penovioh were mansgere; that bl Capone, Jaok Guzik, Ralph Capone, Frank Hitto and Louie La Cava would come into the private offioe and he would give them intonuntion regarding the bets which were being placed over the wire from varioua cities throughout the country and that Mops Volpe and Charlie Fiechetti usually aocompanied bl Capone on his viaits to the oflice.

Them ir attached as Rhibit No. 110 a sworn statement of Joseph H. Rmk dated October 15, 1930. He rtatee that he ram emplogad as telegraph operator on a private wire in gamblln~ establishments at Cicero from 1924 to 1928 of which Fred Riee ma oaehier and Peter Penovich and Frank Pope managsre, horn as Ths Ship, Hawthorn Smoke Shop and The Submy; that come of hie boeaes were bl Capone, Ralph Capone and Bottles Capone; that on various oocasions when he was handing daily reports to Ries, he would see bl Capone in the private office and that Jack Ouzik would aoms into the private wira off1a.e and request full informa- tion with reference to reports that he would be receiving over the telegraph wire.

!here is submitted herewith a8 Ezhibit No. 111, a sworn statexmnt of Fred Girton dated May 29, 1931, editor of a weekly newspaper, published at Miami, Florida. hir. Girton testified regarding the lavieh mode of living by B1 Capone at his Miami Beach home, He said that he had born the defendant real well since 1928, had been entertained at hi8 home about thirty tFms8; that he regularly had about fifteen to twenty pereone at hie home for meals; that he frequently had large partlee for dinner averaging from forty to sixty persons; that he had a gold dinner senioe; that Capone told him it ooat him about $1,000.00 per week for food; that he had a chef whom he had brought fromColosLmo'8 Restaurant in Chicago; that he bad a Cunningham sixteen crylinder Cadillac and two other autos and that he with several others, has been Caponeve guests on a boat trip to Bimini; that all the expeneee of the perrone on that trip rero paid by Capone and that Caponeve bodyguard, Phillip DV&drea, had aaaompenied them on that trip.

There ie submitted herewith ae Erhibit No. 118, the mrn statement of Ruseell Carnett of MI&, Florida, dated September 10, 1931, in whiah he etatee:

"I me in the real estate buaimee in Miami and llid Beach, Florida, in 1987 and 1928. The latter part of 1927 I me made aaquainted rith bk. Alphonse Capone. I shed him several f'urniahed houses at Miami Beaah, as he dealred to rent the homo for the season, aad he also informed me that he ma eeriouely coneidering the purohase of a ham. I finally showed hlm a rurniehed houee at 3605 Indian Creek Drive, Mlaml Beeah, omsd by a Mrs. Sterns. The rent of the property for the eeaeon me $a500. Mr. Capone agreed to rent this property and made me a down pagmsnt of either eigPt or nine-hmdmd dollars, all of rrhioh wae in $100 bille. I euggeeted that I give him a receipt but he mid that he did not need om. The next day he paid me the balance of the rental for the season in $100 dollar bille. The property was rented for a period of sir months. During the tlm that Mr. Capone ocoupied the property, I viei ted him home wn several oaeasions, and I ale0 aoaampanied him and other friends of his to varioua night alubs In and around Miami. Mr. Capone entertained at the house extenelvely, and bad a great number of guests there. He-also entertained extensively at the night alube, and would have a large number of guests in his party, upon each oceaeion that he visited the night clubs. Mr. Capone aluaya paid the entire bill for ths food and entertainmeat, and aleo upon paying the bill would give the waiter a large tip. I hare frequently eeeh hlm give the waiter a $20 bill ae a tip." In order to ahow intent to evade by the fact that the defendaat'e attention had been officially called to hie meponeibili~to file inaama tax return6 and that he had failed to do so, the Government produced a revenub agent, blr. E. P. Watere, and hie teetinmy is submitted herewith as Exhibit No. 113. Mr. Waterr stated that several yeare ago he called at the Hawthorn Smoke Shop in Cioero, Illinois and asked for hl Brom; that them me a barroom on the firrt floor and that gambling ma then being conducted on the second floor where an employee took him to look for Al Capone (Brown being hir nickneIne); that Capone was not located and Waters called again in a few days; that he then raw Al Capone, ~howinghim hie official credeatials; that he discussed income tax liability with Capone ,with no. results; that he saw Capone again in 1926, discueei~hie income tax liability with him and aleo discussing a report that he (Capone) owned a etring of race horeee and hed earned a million dollars at the race traoke, to whloh Capone replied the report me all ubaloneyu and that the horeea belonged to hie brother Ralph.

There ie submitted herewith aa Erhibit No.114, a traae- oript of the teetinrony of Peter M. &l of Chicago, in which he statee he me employed at Yhrehall Field and Company in the cuatom ehirt department; had buaineee with LU Capone atarting about 1927 and aold him custom made ahirte at from $18 to $27 each. From the reaorda of the oampany he teatifled that on May 18, 1927 he eold him four shirta at $22.50; one at $23.00; three at $37.00 and one at $30.00; three at $12.00 and eighteen collara at $2.00; 24 mnogrsms for $17.00; that on aovember 25, 1927 he bought three at $22.00; ty at $24.00 and twenty-two collara at $2.00; on Novermber 25, 1927, five at $22.00 and three at $24.00; November 15, 1929, eix at $22.00 and twelve collara at $2.00; April 17, 1928, four at $Zl.50; two at M1.50; four collars at 82.50, four at $2.00 and ipur minogrma at $1.00.

Them is atteabed ae Exhibit No. 116, a tranaoript of the teatimonp or J. Panloan of Chicago, in whlah he etates he wee a aaleamn for Marehall Field and Company; that he had tranaaotione with Al Capone; that he aold him four union suite for $1~.00 each and.that theee were made of Italian glove silk, that ie a knitted very fine ailk eimilar to ladiee gloves.

There ie attached as Exhibit No. U6, a transcript of the teetimony of A!. A. Oles of Chicago, in rhioh he etatea he ma employed by Mnrshall Field and Company and had transactlone with Al Capone; that he aold him three union euita of underwear in 1927 for $12.00 eaoh, and that at the same time he bought nine underehirta and nine aborts at $5.00 each for whioh he paid cash.

There is attached ae Ekhibit No. 117, a tranecript of the teetimony of Ira Day of Chicago, in which he statee he me employed in the Cuetom Tailoring Department of Marahall Field and Company being present when traneaotions rere had with Al'Capone; that he first ordered air suits for himaelf on April 18, 1927 at $135.00 eaoh; that in 1927 and 1928 he ordered a total of twenty-three suite at $135.00 each; three topcoatr at $135.00, one overcoat at #150.00; that he paid cash for them; that hie total purchaeee were #?,635.00 in 1927 and $1,080.00 in 1928; that Al bought and paid for suite for four or five other pereone at $l35.00, also eome overcoate.

Them are tranesnitted herswith ar Rhibite No.ll0 to 124, photostate of recorde of Marehall Field and Company relating to merchandiee sold Al Capone as followe:

and photostate of reoorde of the cuetom tailoring department covering euits paid for by Al Capone and made up for the following: Daniel A. Serritella - 10 suits at $135.00 Frank Perry 2 " * 136.00 and 1 at $150.00 Nick Ciroella 2" 135.00 John Costo, 1 suit at $125.00, 3 at 8135.00 and 1. at $150 Tony Pagenta, 4 suits at $133.00 and 3 troueere at $35.00

It will be noted from the inetructions on theee reoorde that special heavy pookets were made in these olothes. We learned that the reamn of these heavy paakete was that revolvers rere carried in them.

There ie attaahed as -bit No. 125, a transoript of the testimony of Owar D. DeBoe of Chioago, in whloh he stater he waa a tailor employed at Ursball Field and Company and had tkeaotione with Al Capone in 1937; that he rent to the Metropole Hotel to fit hi9a; that the suite were 8135.00 eaoh; that he oolleoted 8700.00 on one ocoaeion and $1,000 on mother ocaasion for the suite; that he had made more than twenty auite for hlm and two or three top ooats, andl that Al Capone had bo#t and paid for suite tor four other pereons. (Theee suite made for Al Capone and for hie bodyguards were tailored with a epecial heavy pocket to carry a revolver.)

There ie attached aa mibit No. lg6, a traneoript of the teetimony of Herbert E. Keller of Miami, Florida, in wbich Mr.Keller etatee he is an eqineer and built a doak for 81 Capone at Palm Ialand, that he received $550 for hie servioes; that the material was paid for direot to the lumber company; that in a conversation with 81 Capone he wae told by Al that his firat job was tend- bar at Coney I eland . There is attaahed a8 Exhibit No. 127, a eworn statement msde by 1. T. Harris, General Bdanager of the Southern Bell Telephone and Teleg~aphCompany, Miami, Florida. He produced a oontraot signed by the taxpayer for telephone service at hie home, 93 Palm Island and recorde ehaing hie paymsnts for 8ervices as followe: There are attaohetl as Exhibits Nos.128 to 136, photostats of ledger sheets of Jaak Niles Company of ahioago, covering furniture purchased by Al Capone amounting to $9,897.97. &at of this Arrniture ras shipped dimat to .the home of Capone on Palm Island, Miami Beach, Florida.

There are attached as 'mibits Nos. 137 to 140, photoetats of reconla of Peck and Hills, Chicago, Illinois, covering sales of rutniture to dl Capone as follarrr:

Practically all of this funit- rras sent to the home of the taxpayer at FUm Island, MId Beach, Florida.

There are submitted herewith aa Erhibits Nos. 141 to 144, invoices covering purohaees made by dl Capone from A, Sulka and Company on April 25, 1931, of ten pair of French model pajamar at $50.00, one pair of French mbdel pa j-r at $46.00 and eleven moaograms at $3.10, or a total of $580.10. They were identifled by Albert Nusbaum rho Ha8 a saleanmu and he testified that he secured the orders from Al Capone at the Lexington Hotel. A tranaoript of his testimony is attaohed as Exhibit No. 148.

There is attached as lbhibit No. 146, a sworn statement dated September 30, 1931, made by Helen E. Anderson of Cioero, Illinois. She stated that rhe had been employed by the Pinkert State Bank for seven and a half years, that in 19Z6 she was in charge of the safe deposit vault departmmt renting vault boxer and comparing eigpatures; that on April lZ, 1986, dl Capone and Louie LaCava rented Box 1635 giving their addresr as Harthorn Hotel, Cicero, Illinole, nnd that they rimed the aontraat in her presence. She identified the contraat, Exhibit No.38, tha signature aard and signed entry rlips bearing the signature of AI. Capone made in her presence. She then oompared the endorsement Caponew on cashier's aheok lllU7 (Bhlbit No.15) and etated that the eiwtures were identical.

There ir attaahed ar Exhibit ND. 14a sworn statanent mde by Don D. Cunninghamas September 29, 1931, in which he etates he ras employed by the Bquitable RPst Compaay for air years; that he was manager of the safe deposit vault and that on several ocoasions he admitted Al Capone to the sere deposit vault department. He identified a contract si&md by A. Capone renting Box 536 and also an entrance tioket dated May 7, 1939.

There is attaahed as Exhibit No. 148, testimony of krge F. Qeineer of Chicaga, Illinois, rho state6 he wae a manager of the Hotel Metropole during the period Al Capone was a guest tbem arrd th~ton August 4, 1927, he colleoted from Al Capone #4,169.76 oovering raom rent for 41 and dersof the organization. He identified reoords of the hotel relating to tranaactiona with Capone.

Tbere is submitted herewith M Exhibits Nos. 149 to 153, a schedule prepared by Revenue Agent Hodgins from the reaords of the Idetmpole Hotel, Chicago, Illinois, ehoning payments made by dl Capone. It rrill be noted that in 1927 he paid the cum of $18,642.96, and from February 8, 1928 to July Z5, 1938 the sum of $7,654.42. This hotel was the headquarters of the Capone organization before they moved to the Lexington Hotel.

There is submitted herewith aa Jhhibit NO. 154, a traneoript prepared by Revmu Agent W. C. Hodgina from the recoda of the Lexington Botel elmwing payment8 made by Al Capone as follows:

~ugust8, 1928 to xjeo. 18, 1928 $4,136.48 Jan. 8, 1929 to Deo. 10, 1989 7,738.79 Jan. 6, 1930 to Cbt.3, 1930 9,285.67

There are alm submitted -bit8 &a. 155 to 162 showing long die- tance telephone messages charged to his room in t& Lexington Hotel during that period. It will be noted that he ras frequently in coamunication with persons in wet of the large cities in the country. Exhibits Nos. 163 to 164, a sobedule shorbg amounts paid to the Lexington ktel by the Cepone orgaaizstion are also attached as f ollore :

bug. 9, 1928 to Dea. 18, 1928 $11,710.36 Jsn. 8, 1929 to Deo.10, 1989 13,886.70 Jan. 6, 1930 to Sspt.10,1930 13,342.65

Rank Nitto was indioted on Ykrah 15, 1930 for evasion of taxes covering the yearn 1926 to 1928. Bail was fixed at $50,000.00. The warrant for hi8 arrest was delivered to the U. S. Mareha1 at Chicago on bkmh 15, 1930 for service and the defendant could not be loaated. Biter three months the presa ridiauled the government for its inability to arrest thie member of the Capone organiza- tion. The Chicsgo Association of Connwroe then offered a reward of $1,000.00 for infolmation leading to hie arrest but without results. bited States Attorney Johnaon requested our Unit to endeavor to locate Nitto and In Oatober of 1930 I ma direoted by you to make em effort to apprehend Nitto. At my auggeetion Speoial Agent Malone was ordered to pmceod to Chioago to oooperate with me on that assignment. We found that Ni ttofe rife ras mving a Ford auto with a Wisconsin license talcan from a stolen auto. The auto with the Wisconsin license me loaated by Special Agent Malone aa4 trailed to a large apartment building in Benryn, Illinois. P mom ma rented aeross frola the apartment and after several &ye of aontinuoue surveillance by Special Agents Malone and Tessem, the apartment occupied by Nitto was looated and it wae found that he was home. We immediately oalled upon Chief Investigator P. F. Boohe of the States Attorney's office for some deputies to assist In surrounding the apartment and Nltto wae arrested on Wvermber 1, 1930. Nitto pleaded guilty in December 1930 and was sentenced to one year and six months in Leavenworth Penitentiary.

In February of 1931 Al Capone was tried in the Distriat Court at Chicago, Illinois, on a charge of contempt of aourt, arisiq~out of his failure to appear at Chicago, Illinois betom the jury in February, 1989 in response to a federal grand jury subpoem served upon him at Mlami, Florida. At the requeat of United Statea Attorney Johuaon and Aaeistant United States Attorney Jaoob (Bossman, special agents of this Unit engaged on this oase at Chioago end Midaooperated with the Department of Justice in assisting in looatin& witneseem and scouring evidence to establish the oon~pt. In Januaxy of 1931, United States Attorney Johnson and Speoial Agent in Charge Madden went to Warmi and interviewed several ritnemem with referenoe to this oase. Special Agent Clarke of our MI& office oooperated by interviewing proposed witnesees at Mimi, sea- documentary evidenoe, and he also was a government ritnesm when the ease was prosecuted at Chiaago. Capone was found guilty In the Dietriot Court and appealed to the Circuit Court of Appeals but upon his conviction in the income tax caoe the appeal was withdrawn,

The investigation established that the winter home of tb taxpayer at Miami Beach, Dade County, Florida, was purchased by him in the name of hie agent, Parker A, Henderson of Miami, in April 1938, and that it was deeded by Henderson to Mae Capone, wife of the tarpayer, on July 19, 1920, On Oatober 10, 1931, the writer recom~snded(Exhibit ~0.165) that a jeopardy aeqescrmat be -lately made againet the tarpayer end that liens be riled by the Coll~tor of Internal Revenue in Florida in order to protect the interest of the government, ae we found that the taxpayer wae attempting to dispoee of hie home, the household furniture, two yachts and a McFarlane automobile for $150,060.00. The aaeeeament wae made and due notice served on the tarpayer at Chicago on October 24, 1931. The aeseesment againet Alphonse and heCapone for four yeare, 1926 to 1989, inclusive, ras $137,328.16. On that date liens were filed by the Coilector at the wunty seat of Dade County, Florida, and the caretaker on the premises mas warned not to remove or allow other pereone to mmve the personal property in violation of the lien. There ie attached as Exhibit 166, a copy of a telegram reat by Capone on July 6, 1931 to the White R alty Company, Miami Beach, Florida, in which he offered hi8 home !or ~150,000.00 cmh, including the furniture, two yachts and a MoFarlane automobile. There is attached as Erhibit No.166Aa certificate of appraisal made by two members of the Miami Reel Eetate Assooiation appreieing his home at $65,000.00. & this inveetigation eetabliehed that the funds for the purahaee of the home and for the improvemeat of the estate were entirely furnished by the taxpayer, 81 Capone, it ie believed that the government lien covering the property ie valid and it ie reconmended that unless the tax aeseeaed ie paid within a reasonable time that appropriate steps be taken to forecloee the lien and cauee the male of thia property, the proceeds to be applied to the unpaid taxes. bueual difficulties were encountered during the entire course of this inrsetigation beoause all important witnesses were either hostile to the government and ready to give perjured testimony in order to proteet the leaders of their organimtion or they were rro filled with ?ear of reprisals of the Capone organization in the event they testified truthrully regarding their activities that they evaded, lied, left tom and did all in their power to prevent the goverxuwnt using thean as witneesee. . Maay of the ritnesme. wem fomigners and knom only by their nioknmss having m permenent homes or places of business. de Boon as it becaw horn that we wen, looking for certain witnesses or the organization euepected that the government might need certain of their employees as witneesee, they promptly went under aover or rere sent out of torn and eonmtimes out of the country. In order to locate them and serve them with subpoenas it was neceeeery to pick them up on the streets near the Capone headqmrters at the Lexington Hotel, at racetsaoke, at mid6 on gambling eatabliabmnte and houses of ~ostitution,at Cicero hotel. end at niat olube, also through varionrr eubteriugee. Considerable of the work in locating witnesses me performsd at night in and around the hang-out8 of the Capone orgaaitation by Speoial writs Teeam, Malone, Converse and Sullivan and the agent. were faaing danger in the event their identity was disoovered by tho meters. Mnny witnesses were looated in Hew York City, Florida and other point8 throughout the aourrtry.

Wly in November of 1930, it apparantly beom evident to the Capone organization that the United States government .as making real hendray in the income tar investigations relating to the prinolpale in their organization and that most strenuous efforts were being made to build up a oase against the leader, 81 Capone. At that time Jack Ou9ik, the right hand man of Capone ma indicted for tax evasion, tried and aonvicted within one month in spite of unusual efforts rmde by the orrnization through politioal influence and otherwise, to poetpone the trial of that case and Frank Nitto, another principal of the organization ms apprehended by epeoial agent8 of this Unit after he had sucoesafully defied metfor a period of over six months by marshals on a benoh warrant for tar evasion. This progress was being reported to the President from time to time by offioiale of the Treasury Department and he indicated that it uas hie wish that the drive be continued against the leader of the Capone organization. At that time you made a trip to Chicago to confer nith us regarding thia case and you advised me that on acoount of the great interest shorn by the President, he was being regularly informed regarding the tax cases relating to the Capone organization by Lbsistsnt Seoretary of the Treasury Walter 6. Hope. bl Came's fear that he would be the nert one to be indioted was reported to me by a very contidential muroe and also tbat he had decided upon a sensational method to prevent -her molestation of him end his gang by the government. We were reliably -0-d that in order to put an end to our further aotivities in tb tax inve8tigation, he ma planning to kill United States Attorney George Ee Q. Johnson, Speoial dgent in Charge A. P, ~addm, Investigator P. F. Roohe fmm the offloe of the Cook Oaunty States Attorney and nrs. We alro were advlaed that he had arranged to wrt fire gunmen irorm New York Oity to murder the offioialr wbm he was oonvinced intended to seoure evidence to oause his proseoution. We were later informed thnt the Imported Hew York had mived in Chieago and were oruislng around in a blue sedan baaring a New York lioense tag. Thie information was partly oozmbomted through iniormafiorr iurniahed voluqtarily $0 the Chioago Wibune from a souroe considered dependable by them whioh war entirely uurelated to the original 8orrrae whioh fumiehed ue the above report regarding the plot to murder u. An aotive seerah for Capone and the imported gunmen ras Incmdiately etarted by our agent8 and investigators from the States Attorney'rr Ofrice. We learned that Capone and same of him gaag wre hiding Ln the house of a friend in Cioero. aamenta were made to mom the ooopercrtios of a detail of deteativem from the oflioo of de States Attomy of Oook County in onder to rail the house but upon the arrival of the raiding detail it me founl tbat Capane end him gene had jmt deperteb. I raa later informed that 0- oi the Cook County deteotiver tipped off Capone in alranoa or the raid and was paid for tbs warning. Further effort8 at tbt the to locate Capone and hi6 aeaooiatea were unaucoeamftd. We were informsd that he had learned that the government ram aware of him plot to stop his proeeoution, that he then abandoned fhs plan at the demand of other msmberrr or his organization and tbat he had depertel for hie home at Mid, Florida. Our aotivitiem in interviewing ritneeser rrith reference to Capone arrd in gathering evidenae to eatablirrh his inoome tax evasion were not diverted beoauee of hi6 threat or plot against our lives. We did, at your suggestion, take certain preoautions in order that pereone not connected with our office would be unable to learn about our movements. In view of the progrese which re were making in establishing evidenae relating to his tar evasion, and a8 he had abandoned his plot, it war not oonsidared advieable to take -her action regarding his efforts to prevent tho oontinuance of our investigation8 but re did redouble our efforts to seom tax evidenaa against him. The fact6 regarding this plot of Capone to put an and to ths investigation were aarelhU~gufia and reported only to our superior8 and to P. F. R0oh4, Chief Inve8ti@tor for the States Attorney of Cook C0~ntya8 UO felt tbf ~ubli~~~Y regardim Capone's plan to caass the murder of f0m officials would instill greater fear in the minds of all our witnerses and make them purposely forget about their dealingr with him or cause them to give perjured testimony for fear they would be murdered by the Capone organization if they arrieted the government. On April 21, 1931, we were surprised to read In the Chicago Daily Tribuna a oomplete report of the facts regarding the Capone rnurtier plot whloh had beea given to that paper by a representative of the Cook County State6 Attorney. A oopy of that artiole is attached ar Exhibit No. . In that artiole referenae ir made to the murder'of Jake Lingle, a reporter on the Chieago Tribune rho had been for many years a pereonal friend of dl Capone and who lmew a great deal about hie illegal eotirities. Shortly after arrival in Chiaago on thlr aselgnment I wan informed that Lime and Capone were no longer on friendly terms. On June 1, 1930, a few dayr before the murder of Lingle, I had arranged thrpugh an attorney repreeenting the Chioago Tribune rho had given me valuable oooperation on another aase and through the Editor of the paper, to interview Lingle at their offioe in order to attempt to eeoure his oonfidential cooperation in thie investigafion. The repreaentativea of the Tribune advised ms they hew that Al Capone oonfided wlth Lingle; that they believed Linglo knew a great deal more than any other reparter in the oouatry regarding Capone'r aotivities; that they would be pleased to have him aoafldentially oooperate with me and they aeaured m they roald oneoarage him to do ao but he wae murdered before theg were able to fir the date of the interview for me. The motive for the murder of Lingle bas never been establishsd. The Ohicago Tribune offered a reward of $50,000.00 for the arrest and conviation of the guilty persons .and epent nearly that amount in qeir efforts to rolve the -tory, errpeoially to establish a motive for the murder, A gangster from St. Louis, Missouri, named Brothers wge convioted of this murder but at the trial no motive war proven and it war strongly euspcted that he had been hired to do the killing by eoms of the Chicago aasooiates of Linglo. U Capone was one of the pereone most mentioned in referenoe to the Lingle murder and many persona alleged that the death of Lingle was caured by the Capone organization. In Ootober of 1930, P. ?. Roohe am Chief Investigator for the Cook County States Attorney in Charge or the inve~ti~tionto looate the murderer of Lingle, appmaohed Al Capone and Louis Greenberg, a member of the Capane gang, in an effort to reoure Capone's aeristaace in finding the wilty person. At a eeorete conference which Mr. Roche had with Capone, he profeased imoraace re-ding the identity of the murderer and sgrsed to assist Roche in loaating him. Later during the negotiatione Capone intimated that he had found the guilty man and early in November 1930, Capone offend to turn the dead body of the mwderer of ~iWl-0 over to Roahe. Roahe then deollned to have anything further to do with Capons. John Boettiger of the Chiusgo Tribune ataff, an investigator familiar with all the facts and circumetaaces oonaerning the murder of Lingle and the eubeequent inveetigations by the States Attorney's Offioe and by the Chioago Tribune, published the following statement in that paper regarding Capone'a Wlty knowledge conaerning the identity or the murderer:

"The best guesr is that Capone did know, and this guess is borne out by evidence to be disalosed later. There is no doubt that if Capone thought he aould remove the 'heat1 from himelf and his gang, and bargain for a reprieve from the raids and arrests and convictions resulting from the investigators' activities, he would have done so, even at the ooet of putting the Lingle murderer on a doorstep somewhere, dead.

This officr ha8 exprealred no opinion as to whethetr the Capone organization was involved in tho Lingle murder and has dram no conalusions with referenoe to the motive for his murder. In the artiale in the Chicago Tribune, Erhibit No.167, the follow^ atate- ment is made regarding the motive for the murder of LingLe:

wde a matter of fact, the authorities poaaeesed information that established a possible motive whioh Capone himeelf might have had to desire the death of Lingle. Within three days after the reporterla murder, agents of the federal department of justice cams to TBE TRIBUNE, inquiring whether TBE TRIBUNE had any knowledge of evldence conaerning the inaome of Capone.

i "The federal inveatigntore were at work seeking evidence upon which to baae an indictment of the chief for inoome tax frauds, and sought this newspaperla aid. "TEE TRIBUNE knew of no evidenoe oonoernlng sources of Capone's inoome. But Lingle, through the fa- m I liarity he maintained with the gangster, might heve poseeased larowledge of the manner in whioh Capone dis- guised and concealed the souroes of hir illicit profits, and of banks in whiah Capons maintained aoaounta under rictitiow name. wLingle, dead, could not present evidence of Capone1s income tar fmuda.n There is attached herewith ae Exhibit No.168, a memoland= atating the position of United States Attorney Johnson in refemnce to the acceptanoe of a plea of guilty fran the defendant, Al Capone. Thie Department omcurred with the Department of Juatioe in the deuision to entertain a plea of guilty from Capone. I believd it advisable to entertain a plea of guilty because on aooount of my very close contaot with the important witnesses in the tax oam, I rae convinoed that every one of them was in deadly fear of tb Capone organization and we could not be certain that they would identify bl Capone at the trial or that they would etand by the testimony given before the grand jury. We took unusual preoautions to keep their identity eeoret and to proteot them from contact with any members of the Capone organization between the time they appeared before tbe grand jury and the trial so that they muld not be threatened or influenoed. However, manp of the key witneruee did temper their teetimny in his favor at the trial when ther were faced by Capone and his body guard, DIAndrea. I also oonridemd the aoceptence of a plea of guilty adviaable beoause I knew tbs organization muld attanpt to illegally influenoe the jurg at the ti- of the trial and if their efforts to do so had not been proraytly discovered and thwarted I am sure they would have sumeeded in influencing or bribing one or more of the juror8 so that th~trial would have been unsuoaessrul for the government. (Detail6 relating to WIEI~oCe88hilattempt to fix the jury are set forth later thie report). No stones were left unturned by the defense in order to pre- vent the conviction of the defendant, Capone. Some of tbeir efforts met likely would have been aucoesstul if they had not been &is- oovered by ue and drastic and prompt aotion telsen by the govenmnt to prevent the cone\mpoatla of their trioks. Important nitneseem were sent by the defense to other states, also out of the oomtry, and the prinoipal defenee witnesses gave perjured testimony at the trial. During the trial the defendant and his armed body guard, Phillip DtAndrea, glared at the goverament witnesrea instilling fear in them and causing them to temper their testimony in favor of Cspone. The met daring effort to thwart the case of the government rarr an attempt to fix the jury. A fem daye before the trial was scbsduled a special venire of one hundred was oalled for jury service in this oaee. By en underhand method and through the peyment of a lawe sum of money, the defenee secured a copy of the list of propoeed jury men several days before it becams public. The liet wae turn& over to B1 Capone at hie office in the Lexington Hotel (thie infomntion wae secumd from such a confidentiel source that no proeeautian of the membcre of the organization for attempts to reach the j~ -8 advisable). Capone then submitted the list of aam6s to rarioor members of hie organization, agente of labor unions and other friends in order to have them promptly start to work to bribe or to bring influence to bear on the proposed jury men in favor of Al Capone. Undoubtedly they would have succeeded through these efforts in planting one or more friends on the jury if they had not been oyt-smarted. Their ectivitier were at once reported to Federal Judge Same8 H. Wilkereon who was to try the case and on the first day of the trial the entire panel of one hundred wae withdrawn by the Judge fram this care, a new venire being uaed. This eurpriee move by the goverament did not atop the efforts of the defenee ae a special copmittm of the eaag immediately started to gather in- formation regarding the coaneotiolll~of the men selected as jury msn from the new venire. During the couree .of the trial attempts were mede to have members of the family of the jurore convey meaeages to influence them in favor of the defendant and Capone bragged to his tollorere that he would not be convicted because he had the jury. Their efforts rere uneuccesrful as the court ordered the jury locked up until the trial rae completed and details of deputy marshals and special sgente were placed on duty to prevent inter- ference by the organization with the orderly and fair trial of the case. It is not at this the alleged that the attornaye representing the defense took any part in the attempt8 of the organization to reach the jury.

On Oatober 17, 1931, the defendant was found guilty of evasion of inome taxes for the yeerr 1925, 1926 and 1927 and for failure to file incane tax returns for the yeare 1928 and 1929. On October 24th Federal Judge Wilkerson sentenced him to five yeare in the Federal Penitentiary on eaoh of the three felony counte, two of which are to run ooncurrently and he was sentenced to one year in the Cook County Jail on each of the two mledemeanor counts, the jail sentence to run concurrently. This sentence requires the defendant to eerve the ten years sentence in the Federal Penitentiary first and when released from the penitentiary he will be taken to the Cook County Jail to serve the jail sentence. He was also fined $50,000.00 being #10,000.00 on each of the five counte and in addition to that amount he ma fined the costs of the proeeoution. The defendant we8 remanded to the cuetody of the United Statee Marshal without bail and was confined in the Cook County Jail awaiting the outcome of an appeal. The time served by him in the Cook County Jail awaiting the outoome of his appeal did not apply on either the penitentiary or the jail sentence. On February 27, 1932, the United States Circuit Court of Appeals for the 7th Distriot unanimously euataFned the conviction. An appeal was then taken to the United State8 Supreme Court without success. On %y let, 1932, he entered the Federal Penitentiary at Atlanta, Georgia.. diter the indictan8nts against Capone were returned and during the trial it was anticipated that the attorneys for the defense would attempt to cauee the.iadictmente to be set aside on the ground that the offenses charged in the indictment were out- lamd by the Statute of Limitation but that paint was not pressed by the defense until after tbe defendant had been convicted and the convictim was sustained by the Supreme Court. We were proceed- ing on the theory that a pmeecution could be started within sir years but as a District Court in Boston had recently set aside an indictment based on the elk par etatute, we were prepared to base our prosecution on the three par statute in the event that qmstion were raised at the trial. We had seaured evidence and were ready to establish that the defendant was outside the jurisdiction of the Northern Diatriot of Illinois having spent from time to time in excess of three years at Philadelphia, Pennsylvania, Mami, Florida, Hot Springa, Arkansas, Los dngeles, California, and other points, thereby bringing the offenses charged within the three year term. After the defendant started to serve hie sentence in the Federal Penitentiary at Atlanta, his attorneys attempted to secure his release on the ground that the Statute of Limitation6 had expired before the indictments were seoured but they have been uneucoeseful in their efforts.

I desire to call attention to the fine cooperation extended to ms during thie inmstigation by the following of ficiale in' Chiosgo and to espresa my thanks for the aourtesies extenclod by them to me and the other a-ts engaged upon thie inwetigation: United States Attorney Oeorge E. Q. Johnson, Speoial Agent in Charge A. P. Widen, Aosistant to the General Comsel Dwight H. Green, Assistant Attorney General William J. Froelich, Aaeietant United States Attorney Jacob L. 9rosclmaa, Ansititant United State8 Attorney Samuel Claweon, Interndl Revenue bent in Charge C. W. Herrick, Supemlsor of docounts and C ollections Jams Mitchell, President of the Chicago Association of Conmerce, Colonel Robert Isham Randoiph:

The splendid cooperation and whole-hearted encouragement of United States Attorney George E. Q. Johnson and his staff during the grand jury investigation and at other times during tb prepare- tion of thie case served to spur me and the other agents engaged upon the investigations to exert our best efforts to secure evidence end witnesses who could furnish the facts necessary for the indictments. One of the met important factors in the eucoess of the proeeoutions was tbe policy established by Mr. Johnson that all other cases in his offioe would be eubordinated to Capone caeee and that the cases should be tried with unusual promptness. A new record for quick action in income tax oases was established in the oase against Jaok Cuzik. An indictment was secured on Ootober 3, 1930, and he was brought to trial on November 3rd, 1930, the trial resulting in a oonviction for which he was sentenced to five years in the Federal Penitentiary at Leavenworth, ICaneas. The prompt justice dealt to the defendant, Guaik, was a master stroke in breaking the mordleof the Capone organization and thereafter we did not enmunter eo muoh resietance from uStnesses and others as they had been ahom by tbat prompt aotion that the government was in dead earnest in these investi~tions. The ability and sound judgrPsnt of Mr. IM@t R. Green, Chioago representative of the General Counsel of the Internal Revenus Btu~eauwho was designated by &. Johneon to have oharge of the proseoution and who oooperated with the writer during the entire inveetigation, was demonstrated by the exoeedingly able manner in which the case was prepared for trial and presented in court. Mr. Green had the efficient oo- operation and valuable assistanoe of Assistant Attorney General William J. Roelich, Aaeietgt United States Attorney Jaoob L. Grosemazr and Ausistant United State8 Attorney Samuel Clawson.

During the entire Investigation all ths.faailitie8 of tb Chieago owice of this Unit were plaoed by Mr. A. P. Madden, Speaial Agent in Charge, at the diepoml of *elf and other agent8 engaged upon the ease and Mr. Madden ooaperated whole-heartedly rith me thn>usbout the entire invertigation. The oontinued interest of Mr. hdden in this case after it had been asdgned to me, hie valuable oounsel and his very material sug@rtionr regarding important phases of the Investigation were einoerely appreciated and were very important factors contributing towardm the sucuerr of the vsrioua proeeoutions. From tinre to time it became neceeeary I for mb to secure assistanae from Revenue Agent in Charge Herriok, Supervieor Mitahell and Colonel Randolph, President of the Chieago Assoelation of Com~erce,and upon each oecasion they 00opemted to the 1Fmit. It ir alm desired to call attention to the feat that as agent in charge of this investigation I received frequent arrirtanoe snd om ti on of very great value from confidential source8 whioh was one of the moat Important faotora in the eucoeearul coneluaion of the aase. Aa the lives of the persons who furnished this infor- mition and cooperated with the government during the investigation would probably be placed in jeopardy on aocourrt of the vengeance of the Capone organization if their help became bun, it is not con- sidered advisable to mention their names in this report. These persons, together rith the organizations which they represented, deserve great conmendation for their faithful and unwlfirh pub110 eervice rendered to the government. Although their name8 cannot be furnished at this time it is suggested that eom action ebould be taken to express the appreciation of the government for their cohiidential cooperation.

I deaiw to call attention to and to express great appre- ciation for the spirit of cooperation apparent at all time8 and the unusual ability displayed during this investigation by Revenue Agents W. C, Hodgins, Noble Claggett and Jacque Westrich and Speoial Agents Nele Teeeem, M, F. Melone and Jwe T, Sullivan. These agente were engaged upon the investigation almost continuously from bky 1930 until it8 conalueion. The ability shom by &.Teasem in tracing various tinancia1 traneaatione of members of the organiza- tion through the Pinkert State Baak and other inetitutions wee one of the most important factore of the investigation. The aucceeaful termination of the income tar: cases and proseoutiona in Chicago of 81 Capone, Frank Nitto, Jack Gudk, Sam Cuzik and Louie Lipschultz was due to a great extent to the pereietence of these egente, to their exoeptional ability and to their willingnesr to assume their share end more than their share of the hard work whioh ma facing all of the agent0 aeeigeed to these cases. Valuable assistance waa alao rendered on these cases by Special Agents Oliver, Clark, Brown, Converse and hre. The cooperation of Aemiatant Chief W. 8. Woolf and Specialdgent in Cbarge John R. Cox of the Washington Division and their staffa in erpediting reports on frequent requests made by me for information desired from the ~ureauat Washington and other points, was of great value in the turtheranoe of our investigation at Chiuego. 'The unusual Interest ehom in this investigation, together with the encouragemest and whole-hsarted cooperation rendered at all timee by the Ceneral Counsel of the Internal Revenue Bureau and start, offioers and emplopeee of the Bureau, agente in the field end your offioial and personal intereat in supervieing the inveetigat ion was a continual source of eatiefaction to me and all of the agents engaged upon thie work. At your direction I furnished you with frequent reports regarding the progress of the investigation and your oouneel at maay confernnoes in Waehington aad during your several tripe to Chioago to help on the important phases of thie case was of great value. I desire to erprese try appreciation and that of the agents for the efficient manner in rhioh our activities were direoted by you during this inveetigation end to thank you for the courtesies and encouragement sham to us during the entire period.

It 18 recanmbsnded thet copies of this report be referred to the General Counsel of the Internal Revenue Bureau and the Spcial Mjuet- ment Section for appropria te action and