IRS releases files from case against "hoodlum" Capone

Papers capture agents' travails to win conviction

Al Capone (in white hat) emerged from a federal building in Chicago after his trial on Dec. 10, 1931. The gangster was convicted of five counts of tax evasion and failing to file a return. (Associated Press/FILE)

WASHINGTON - Al Capone was a "punk hoodlum" whose "native Italian secretiveness" confounded tax collectors for years in the 1920s before the government convicted him in the most celebrated tax evasion case in US history, newly released IRS documents show.

The Internal Revenue Service, in what it calls a "highly unusual" move, released a trove of records on its investigation of America's most notorious gangster Thursday night, 76 years after his conviction. The memos, covering 1931 to 1936, were released after a Freedom of Information Act request by a book author.

They show how agents struggled to connect Capone's income to sources such as prostitution, gambling, and bootlegging during Prohibition, all while avoiding threats of assassination. The agents even sent Capone's bookkeeper, a hostile witness, to South America to keep him alive before Capone's trial.

"That Al Capone is shrewd, there is no doubt, which, together with his native Italian secretiveness, has made this case a most difficult one to handle," Internal Revenue Bureau agents W.C. Hodgins, Jacque L. Westrich, and H.N. Clagett wrote in a 1931 memo to the agent in charge of the Chicago office. The IRS was initially called the Internal Revenue Bureau.

"Al Capone never had a bank account and only on one occasion could it be found where he ever endorsed a check, all of his financial transactions being made in currency," the memo said. "Agents were unable to find where he ever purchased any securities, therefore, any evidence secured had to be developed through the testimony of associates or others, which, through fear of personal injury, or loyalty, was most difficult to obtain."

Hodgins, Westrich, and Clagett determined that Capone failed to report $1,055,375.07 in income from 1924-1929. They proposed taxes and penalties of $383,705.21.

After a three-year investigation, the agents succeeded where Elliott Ness and his team of liquor agents, dubbed "The Untouchables," failed: They convicted him of a federal crime. Capone was found guilty of five counts of tax evasion and failing to file a tax return. Sentenced to 11 years in prison, he was released for good behavior after 6 1/2 years and died in 1947.

The memos repeatedly refer to the danger of investigating Capone, who was known as Public Enemy No. 1 for his violent attacks on rivals and government agencies. The documents, marked confidential, in many cases did not identify sources or agents.

"As the lives of the persons who furnished this information and cooperated with the government during the investigation would probably be placed in jeopardy on account of the vengeance of the Capone organization if their help became known, it is not considered advisable to mention their names in this report," Special Agent Frank Wilson wrote in a 60-page report dated Dec. 21, 1933, to Elmer Irey, then chief of the tax agency's intelligence division.

The IRS said releasing Capone's records is highly unusual because current confidentiality laws prohibit disclosure of tax information. The agency said it decided to make the memos public because Capone never filed a tax return.

The five documents, totaling 90 pages, "are of historical significance and of interest to the public," the agency concluded. They are posted on the IRS website.

The Freedom of Information Act request was made by Jonathan Eig, author of "Get Capone," to be published next year.

Eig said in an interview that he was "casting a wide net" for Capone records with federal agencies and was "shocked" that the IRS complied, especially since the agency had won lawsuits seeking access to them in the past.

In 1989, the US Court of Appeals for the Fifth Circuit denied access to the Capone records in a lawsuit by James Calder, a professor at the University of Texas at San Antonio. The court said Calder didn't have a right to the records under the Constitution or other federal laws.

Calder said in an interview yesterday that he was researching a book about President Hoover that alleged Hoover "orchestrated" the Capone investigation.

"The whole thing is irritating the hell out of me, frankly," Calder said of the IRS's decision to release the records now. He said a law firm represented him in his legal challenge at no charge.

Eig said the decision is probably because "there are new lawyers at the IRS taking a different view of this." He added that the agency probably considers their release to be good publicity. The Capone case, he said, "is one of the few things connected to the IRS that people have a warm and fuzzy feeling about."