Federal tax official T. Lamar Caudle resigned after a Senate committee revealed that he had accepted bribes from a number of clients under investigation in exchange for postponing or preventing tax audits. Caudle’s subsequent admission before the committee eventually led to a reorganization of the U.S. Bureau of Internal Revenue, which later became the Internal Revenue Service.
On June 1, 1951, U.S. representative Cecil R. King, a Democrat from California, investigated alleged corruption originating in the tax division of the U.S. Department of Justice (DOJ). As chairman of the House Ways and Means Subcommittee tasked with uncovering the facts in the case involving the Bureau of Internal Revenue (BIR; now the Internal Revenue Service, or IRS), King looked into allegations of wholesale fraud from collectors in Delaware, Boston, New York, San Francisco, and St. Louis, Missouri.
T. Lamar Caudle reacts to testimony at a congressional committee hearing in early November, 1951. The committee was investigating corruption within the Bureau of Internal Revenue, which was headed by Caudle.
King’s findings led to the forced resignation of Assistant U.S. Attorney General T. Lamar Caudle on November 16, 1951. Caudle’s public display before King’s committee beginning earlier in November exposed the mismanagement that plagued the department, calling into question the leadership of Attorney General J. Howard McGrath.
Problems within the BIR first became evident in 1947, when first-term Delaware senator John Williams inadvertently stumbled onto criminal activity in his own state. Much to his disbelief, he discovered that an employee in the Wilmington collector’s office had stolen nearly thirty thousand dollars. Even more disturbing, the delinquent cashier,
Williams’s findings led to the King congressional hearings. King, like Senator Williams, wondered why high-level officials had not prosecuted many of these offender-employees. King soon discovered that many employees were protected from ouster by their local political machines. More alarming, the cover-up was authorized from the tax division office in Washington, D.C. At the same time, the Senate Special Committee to Investigate Organized Crime in Interstate Commerce, headed by Tennessee Democrat Estes Kefauver, disclosed that the BIR had been negligent in the prosecution of known mobsters who committed tax fraud.
Ironically, the assistant attorney general, Caudle, the root of the dysfunction, was a personable, seemingly harmless southern lawyer. Caudle was born in Wadesboro, North Carolina, on July 22, 1904, and had received a degree in law from Wake Forest College in 1926. He was a member of his father’s law firm until 1940, when President Franklin D. Roosevelt named him attorney for the Western District of North Carolina. Five years later, the new president,
However, the appointment of Caudle was, it would turn out, ill-conceived. Although it was Caudle’s duty to prosecute those who were in clear violation of the law, he was unable to resist offers of personal favors. As a result, wealthy business people and real estate agents under review by the BIR bribed Caudle and his associates with paid vacations, commissions, and other expensive gifts. Caudle would later reveal that he had received a number of enticements in exchange for favorable verdicts, exposing his own ineptitude and highlighting the level of negligence and corruption that permeated the DOJ. In the end, Caudle earned a handsome profit for his cooperation with various clients under investigation.
By the time Caudle was ousted in November, 1951, more than fifty employees of the agency also had been removed. This revelation did not bode well for the organization or for President Truman, who already was dealing with mounting scandal concerning the lending practices of the Reconstruction Finance Corporation (RFC), a body that was organized during the Depression to aid in the recovery of business, banking, and insurance companies. Although Truman had weathered the fallout from the RFC, the BIR scandals threatened to undermine the 1952 Democrat
As Democrat national chairman in 1948, McGrath played a major role in Truman’s upset victory over New York governor Thomas E. Dewey. Personally loyal to Truman, McGrath unequivocally supported the president. Therefore, when Protestant attorney general Clark replaced Roman Catholic Frank Murphy
Five months after Caudle’s ouster, Truman reluctantly ordered McGrath’s dismissal, the latest casualty in a string of ousters that would prompt a thorough reform of the DOJ. Following McGrath’s removal, a more cooperative atmosphere prevailed in the Justice Department, which paved the way for the president’s reorganization plan.
Calling for an end to patronage, the president outlined a plan that would change the BIR to the IRS, replacing the sixty-four local collectors with twenty-five civil-service employees. In a message to the Senate in March, 1952, Truman emphasized his commitment to good, honest government. After a difficult battle in the Senate, the president’s plan was signed into law in 1952. His victory on this front, however, did not erase the popular contention that his administration was scandal-ridden. While Truman was not solely responsible for the corruption in the BIR, since many of the problems existed before he became president, his insistence on rewarding political supporters with positions regardless of their qualifications only exacerbated the already troublesome situation in the DOJ.
For Caudle, his political future was destined for failure. Caudle’s public display before the King Committee and his criticism of the administration after his ouster appeared foolish and exaggerated before the news cameras. Following a similar destructive pattern after he left office, Caudle was convicted of tax fixing by a federal grand jury in 1956, along with President Truman’s trusted assistant,
In summation, Caudle had been unable to make the transition from North Carolina lawyer to high-profile Washington, D.C., bureaucrat. His poor judgment and general ignorance of the Washington political scene led to his inevitable fall in 1951. While Caudle will forever be linked to the tax scandals in Truman’s administration, his ouster inadvertently set off a chain reaction that led to a thorough reorganization of the Justice Department.
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Donovan, Robert J. Tumultuous Years: The Presidency of Harry S. Truman, 1949-1953. Columbia: University of Missouri Press, 1982. Second volume in a two-volume study by a distinguished historian. Thorough, lucid analysis of Truman’s relationship to his political appointees. -
Dunar, Andrew. The Truman Scandals and the Politics of Morality. Columbia: University of Missouri Press, 1984. Critical evaluation of the Truman presidency, with a concentration on the major scandals of the period. Thorough treatment of the Reconstruction Finance Corporation and Bureau of Revenue controversies. -
Ferrell, Robert H. Harry S. Truman: A Life. Columbia: University of Missouri Press, 1994. Quintessential analysis of Truman’s presidency and the BIR scandal. An authoritative study from a distinguished Truman biographer. -
Gosnell, Harold F. Truman’s Crises: A Political Biography of Harry S. Truman. Westport, Conn.: Greenwood Press, 1980. Standard Truman biography. Raises important points about the relationship between the executive and legislative branches of government regarding the investigations of scandal in the BIR and the president’s subsequent reorganization plan. -
Roberts, Robert North. Ethics in U.S. Government: An Encyclopedia of Investigations, Scandals, Reforms, and Legislation. Westport, Conn.: Greenwood Press, 2001. A comprehensive encyclopedia documenting American political scandals, ethical controversies, and investigations from 1775 to 2000.
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