SYVERTSEN Would you tell me about your earliest connections with the liquor
industry and how you became associated with several distillers?
SHAVER I was in public accounting in Louisville with a firm known as Humphrey,
Robinson and Company and in 1928, or late 1927, a group of pre-prohibition
distillers got together to organize, to merge and organize a company to be known
as American Medicinal Spirits Company. There was some 15 distillers went into
this merger. The firm of Humphrey, Robinson and Company, my employer, was
engaged to work out all of the details of this merger and to supervise the
merger papers and install an accounting system to operate the business. One of
the partners in the accounting firm Mr. Henry C. R. E. Wathen was elected
Treasurer of the new corporation with the understanding that he would serve for
one year to perfect the organization. He was an income tax specialist, and they
were greatly concerned that they would do everything to avoid paying extra
income tax yet, of course, to comply with the tax law. Mr. Heimerdinger took me
as his deputy to the office to do all the work. The office was then at Delre
Whathman Company office out on Bernheim Lane. I spent the entire year then of
1928 developing, working out all of the material and calculations preparatory to
the creating of this new company.
SYVERTSEN Were you a CPA at this point?
SHAVER No, I was not a CPA at that point at all. I didn't get my CPA until 1932.
This deal involved a determination of, as closely as you could paint it, of the
contents of all the barrels of whiskey that were in bond were being turned into
this merged company. In other words, a company, we will just take as an example
Old Grandad Distillery which was one of the Wathen companies. They had so many
barrels of whiskey in bond. They had the government to run a test regauge on
this whiskey. A regauge is simply taking a barrel of whiskey, weighing it,
proofing it, and calculating the amount of whiskey in the barrel. And when I use
the term gallons, I am speaking of proof gallons, one hundred proof whiskey.
When I use the term gallon, I always refer to it, it means proof gallons.
SYVERTSEN That was the only legal whiskey during prohibition, right?
SHAVER That's right. This was, had, all this whiskey had been made prior to the
fall of 1917. Because in 1917, other, in World War I on the Conservation of
Grain Act they stopped distillation. The government stopped distillation. It was
never resumed until repeal, prohibition came in 1920, but they never resumed
distil ling. These test gauges were made, I don't recall what per centage, but a
very small percentage of the barrels were gauged. Maybe 10 barrels out of 500 or
1,000 or something, I don't remember now. They just, they did more than that,
maybe 5 out of a 100. Anyway they had the government regauge sheets and my job
was to calculate all these, the contents of the barrels gauged and then project
that into the total that company had in that ware house. To determine the total
gallonage in all of these barrels, say it was 10,000 barrels, just as an
example. That gallonage formed a basis for them to receive so much stock in
American Medicinal Spirits Company. This was quite a task. There was, as I
recall, generally 200,000 barrels involved altogether. So I spent many months
starting in early '28 until in the summer of 1928, and I had one or two
assistants working with me doing, making all of these calculations. And in those
days we didn't have computers. We had some hand-cranked calculating machines is
the only thing we had to work with. Mostly paper and pencils. So that was my
first obligation on this task.
SYVERTSEN Did you know anything about the quality of these 200,000?
SHAVER No. We knew nothing about the quality. It was all assumed to be good and
bad. Maybe I should say good and better. The question was how much was in the
barrels. How much had evaporated, how much had leaked out? You see at this point
a lot of this whiskey had been hauled around from one warehouse to the other.
Prior to that date there had been a Concentration Act passed by the government
and because too many of the little distillers out in the country were stealing
their whiskey and bootlegging it.
SYVERTSEN They did that in Louisville too, I understand.
SHAVER Some in the city. It was more difficult for the government to supervise a
lot of little distillery warehouses scattered all over the state. So they could
see the idea of bringing this whiskey into larger centers, larger warehouses. It
wasn't all in Louis ville. Most of it was brought into warehouses and stored in Louisville.
SYVERTSEN How many approximately were there in Jefferson County or the
Louisville area in general?
SHAVER I really don't remember. I just can't remember, but there was a lot of
whiskey brought into the, what was then, Kentucky Distil leries and Warehouse
Company's warehouses up on Lexington Road. There was a big warehouse up there
that, I think it was supposed to hold 75 or 100,000 barrels of whiskey. Which
was then con sidered the largest whiskey warehouse in the world. It would, all
kinds of whiskey had been brought and stored in there from out in the state.
Whiskey was stored at Sunnybrook warehouses down at 28th and Broadway. There was
some big warehouses there and there was whiskey brought in from out in the state
and stored at those warehouses.
SYVERTSEN Did distillers have any choice which warehouse their product would go?
SHAVER I presume they did, I don't really know. There was either whiskey stored
up at Old Taylor and Frankfort, and different warehouses around. But this
whiskey had been hauled around and some of it had been moved more than once. And
that was always suspected it would absorb more getting on the dry stays and all
would lose more. But this was calculated and we arrived at how much stock
everybody was supposed to get out of this deal in exchange for the barrels of
whiskey that they were turning into the merger. My next task then was to unify
the accounting system. Up until then we had been operating in the office with
about four or five different groups. Everybody running his own show like he had
been running it before. There was no coordination between Old Grandad and Hale
and Hale from Owensboro and K. D. & W. And everybody was over in this one corner
running his business and other gang was over in the other corner running his
business. Everybody was going along like they always had. So it fell my lot to
unify the accounting system and to get one person in charge to keep the records.
SYVERTSEN Wasn't the tax collection somewhat in a shambles as well?
SHAVER No, I wouldn't say that was in a shambles. That was, of course, at that
point as I remember the federal excise tax was 90 cents a gallon. I believe it
is ten dollars and a half today.
SYVERTSEN Going up.
SHAVER Going up some more. But as I recall it, it was 90 cents or $1.10. It
became $1.10 about that time. Maybe it, I guess it was $1.10 by '28. They were
bottling for medicinal purposes. Shipping, there was a bottling plant running
out at the R. E. Wathen plant. There was one running at the Kentucky
Distiller's and Warehouse plant on Lexington Road. And possibly in some of the
others, I don't remember. Bottling whiskey, selling it in medicinal trade.
SYVERTSEN Was there much, let me inject for a second, to your knowledge was
there much glass produced locally for bottling or was it primarily glass say out
of Owens, Illinois?
SHAVER Well I think it was all out of Owens, Illinois. If there was any glass
bottles produced in Louisville, I don't recall it at all. I think all the
glassware was shipped in here from some other, I think Owens, Illinois probably
had the line share of it, as I remember. I didn't, that was just not quite my
job to keep up with. But anyhow, late in 1928, I succeeded in getting the
records in what we considered a acceptable condition. Put a young man who had
been, came up here from Owensboro, Jim Waylon in charge of the accounting and
the bookkeeping. I selected him. There was some, most of the distillers had
horrible records. They had just been noted for their horrible recordkeeping.
SYVERTSEN Did they do it rather intentionally?
SHAVER No, I don't know that, well you see they didn't, as independents, really
as operators, they didn't go too, hadn't been in business too long beyond the
advent of the first federal income tax in 1912. Prior to 1912, nobody bothered
about keeping records anyhow. The tax law forced a lot of recordkeeping and they
hadn't gone far enough along to really greatly improve recordkeeping, but, from
the advent of the first federal income tax law, March 1, 1912, I believe it was.
Anyhow the bookkeepers that they had were usually old fuddy duddies and didn't
know a debit from a credit. They would put a pink piece of paper here and a blue
piece here, and that's about all they knew. I was supposed to use the bookkeeper
for the R. E. Wathman Company. He was a hopeless character. He didn't know
anything about bookkeeping at all in my books. Of course, Mr. R. E. Wathen was
the president of the combined company and his feelings were rather strong that
his people should get the good deals. And I had my problems to negotiate to
bring this young kid, Jimmy Waylon was in his late 20's I guess. He had come up
from Hill and Hill in Owensboro, he had been the bookkeeper at Hill and Hill in
Owensboro, one of the smaller units that went into the merger. But I become
convinced that he was the most capable and a young man that could learn and
would listen to me. And through the help of Mrs. Bockman who was the secretary
of the corporation and had been executive with Kentucky Distilleries and
Warehouse Company, I first sold Mrs. Bockman on what I wanted, and she helped me
sell this to R. E. Wathen. So we put young Waylon in charge of the accounting.
Much later on, he went to New York with National Distillers and continued, I
suppose, I don't know whether he is still alive or not. At least I ever heard of
him many years ago he was in New York with National Distillers, one of their top
assistant con trollers of National Distillers or something of that nature. But
that was my first connection with the distillery business.
SYVERTSEN True accountants were apparently pretty rare at this point in the industry.
SHAVER I beg your pardon.
SYVERTSEN True Accountants.
SHAVER Well, there were practically none. 'Cause none of these companies had had
audits made much. Now R. E. Wathen had had audits made by Mr. Escott, Hap
Escott's father, Escott Barnett and Company. But they weren't what I considered
very good books anyhow. And nobody else had very good books. I don't know
whether any of the other companies had ever had an audit made. There was a group
of people Old Taylor was one of the larger units that came into this. It was
owned by Mr. Emil Schwartzkopf and Leo Schenley. F. S. Ashbrook and Company in
Cynthiana was another one that came in. It was the, owned by Lester Jacoby, who
later on became president of Schenley Distillers. Sunnybrook Distillery joined in
this merger and it was owned by a man named Rosenthel in Chicago, Joe Rosenthel
owned it. And it was in Chicago, he was in Chicago. There was a lot of
interesting characters among these old time distillers that I met in this
process down there, out there.
SYVERTSEN Are you going to give us a couple of character sketches?
SHAVER Well, Dan Weiskopf was probably the biggest character in the bunch
** Side 2 **
SHAVER The Kentucky Distillers and Warehouse Company had been known as the
Whiskey Trust. It had been involved in anti-trust litigation at one time in
pre-prohibition days. It had gone to Kentucky and bought up all the little
country distilleries at some time, I don't know just when that occurred. It had
been gradually slimmed down in 1928. It still had a lot of whiskey, probably
more, they had more I guess, than anyone else that went into the merger. And as
I remember, it was owned by U.S. Industrial Alcohol at that time. Which was a
company engaged in producing commercial alcohol out of black strap molasses.
They were not in Kentucky. They were, I don't know where they operated
obviously, the headquarters was in New York at least. Through these, Weiskopf
was a very interesting old character. I couldn't say anything too good about
him, so I better not talk about him.
SYVERTSEN Not even a ticket?
SHAVER He was out looking out for Weiskopf, number one. The Wathen family were
very charming people and Mr. R. E., Mr. O. H. and Mr. J. B. Wathen were
brothers. They had been our clients in the public accounting firm and I
personally handled a lot of their income tax returns and material like that for
them. They were very charming genteel, gentlemen all of them were. Mrs. Bockman
was a very interesting person. She had started as a teenager working for
Bernheim Distilling Company and then went to Kentucky Distilleries and Warehouse
Company and had continued there until this merger took place. She was, I don't
know her age at that time, but she was probably in her fifties. And she
continued with National Distillers until she retired. So she spent her entire
lifetime in the liquor industry.
SYVERTSEN If I recall right, you told me on another occasion that she somewhat
tutored you in the business.
SHAVER Oh, yes she was my tutor in a lot of the technical aspects of the liquor
business. I relied on her to gain a lot of knowledge, the technical knowledge
that I gained through this engagement. On taxes and how you, the government
regulations that you had to comply with and a great deal of that, I obtained all
of that information, nearly all of it from Mrs. Bockman. I spent many hours in
her office just talking with her to gain information. She was a very delightful
person and was a great friend of mine in those days. So that got the
SYVERTSEN Any other characters that I could, any other character sketches you care?
SHAVER Well, no, this is where I met Mr. Schwartzkopf and Mr. Gerngross. They
were both vice presidents. American Medicinal had more vice presidents than a
New York bank. Everybody from all these distilleries, they ended up as a vice
president. I don't know how they did it, they had so many of them. Well they
gradually started falling by the wayside and getting out one way or another, but
that was the situation. Now as I say, they controlled the vast majority of the
whiskey in the United States, this company did. I suspect 75 or 80 percent of
all the whiskey in bond in the United States, they had it under control. I
don't, at the time, I had figures that I could have been certain of that number,
but I can't, I am quoting somewhat from memory and that's many years ago now.
Then following my completion of this engagement, I continued for the next few
years making an annual audit for my accounting firm for American Medicinal
Spirits Company. Always accumulating more information regarding operations in a
distillery, what the terms and all of these things were. When, in 1929 I believe
it was, the fall of '29, the prohibition administrator in his wisdom decided
that if they didn't make some more whiskey and get it aged that the pneumonia
patients would suffer without any medicine. They would run out of whiskey and
there wouldn't be any good pneumonia medicine left. So there was an authorization.
SYVERTSEN Definitely on the side of the consumer's health, right?
SHAVER Taking good care of the consumer's health. So he authorized a production,
and as I recall the number of 2 million gallons, I may be wrong on the quantity,
but my best memory is it was about 2 million gallons to be made which is just a
drop in the bucket today, but that was considered a pretty good lot of whiskey
at that point. And he allocated it out to various existing companies based on
their current holdings of whiskey and having a facility available to make
whiskey. You mind, these plants hadn't been run since 1917. They had been
sitting in moth balls for 12 years there and most of them had been torn down. A
great majority of the plants had actually been physically wrecked and most of
the machinery was in Carl Nusbom's junk yard here in Louisville. He had more
distillery machinery than anybody else in the world. But American Medicinal,
because of their dominant position received the largest share of this 2 million
gallons. I don't remember the quantity, but I am sure that it was more than 1
million of the 2. That whiskey was distilled, as I recall, at the R. E. Wathen
plant on Bernheim Lane. Then a couple of years later, Dr. Doran who was then
prohibition administrator in Washington was consider ing whether he had better
make some more whiskey. This was probably about 1931, I think it was, late '30
or '31.
SYVERTSEN There were real shortages though, right? To your knowledge. I mean
there was a real need to make some more in terms of the demand of the times.
SHAVER Maybe.
SYVERTSEN Maybe, okay.
SHAVER Anyhow, my good client, American Medicinal Spirits Company, didn't see it
that way. They saw their opportunity controlling the great bulk of whiskey in
the United States in their control. They saw the opportunity to put the squeeze
on everybody else, I'm sure. So they opposed Dr. Doran in issuing this
additional quota of production. Now I received a, my boss rather, Humphrey,
Robinson and Company received a call one morning from Mr. R. E. Wathen who was
in Washington D. C. and I had from all of my studies that I had made in '28 of
the contents of these barrels, it was always, that was always suspected as to
what was left in the barrels. Dr. Doran didn't have any idea whether these
barrels were a third full or a quarter full or half full or empty. He knew how
many barrels there were, but he didn't know what was in the barrels see. Now I
had this great pile of statistics on them, this '28 regauge in calculations. And
I had in my office probably the most authorita tive information in the United
States on what the barrels con tained that were in bond. So Mr. R. E. Wathen
was in Washington, called my boss and asked him to have me get all these
statistics and come to Washington as soon as I could to meet him at the Willard
Hotel where he was staying. And he would have reserva tions at the Willard Hotel
for me and we were to be prepared to combat Dr. Doran if he came up with wanting
to make whiskey, we would be prepared to say, '"Dr. Doran, there's x millions of
gallons of whiskey already in bond. You know what's being used and that will run
an awful long time at the present consumption levels. And I was to help bat this
down. Well I did as I was instructed to do and got to Washington. Mr. Wathen
and my old friend Dan Weiskopf were there. They were the two that were there.
Mr. Wathen said, '"Mr. Shaver, Dr. Doran isn't ready to talk yet. He's still
gathering statistics. So, I'll keep in contact and you keep in contact with me.
You just go ahead and have a good time. It may be several days before he's
interested in talking to us.'" He said, '" Check with me everyday and I'll keep
you up on the progress.'" So I would check with him and he would say, '"No,
nothing doing today. Go ahead and enjoy your self.'" So I had an expense-paid
sightseeing tour of Washington, D. C. and all the interesting sights in the
radius of Washington. I stayed about ten days, rode all the sightseeing buses
and went to Arlington, went out to Washington's birth place, you name it, I went
everywhere. And every day I was checking and finally on one Saturday morning I
called Mr. Wathen as I did early in the morning and he said, '"Come up to my
suite and lets have breakfast together. I'm ready to talk with you about
something.'" So I did and I got up there and he said, '"Dr. Doran decided late
yesterday afternoon that there was sufficient whiskey in bond and he would not
authorize another production. So we won without having any problems, so you just
get on the train and go back to Louisville.'" Which I did, so that stopped it,
there was no more production. The next production that was authorized was in
1933 when they authorized Bernheim Distilling in Louisville who had gone in
business and remodeled the distillery at 17th and Breck and in October of 1933,
they received a permit from the Alcohol Tax Unit to start distilling whiskey.
That was so far as I know, the first whiskey that was distilled just in the
United States, just preceding repeal on December 5, '33. Bernheim made its first
whiskey on October 31, 1933. It was distillery Number One. There was two
distilleries at that sight, the registered distil lery Number One and Number Two
in the United States. Number Two made its first run on December 12 which was
seven days following repeal.
SYVERTSEN Very interesting.
SHAVER Now I want to back up a minute and I suspect that there's not many people
around here in Kentucky that knows this story. And I found out this in 1928 and
this is one company that merged in the American Medicinal Spirits, known as
Hannes Distilling Company in Maryland. They had made whiskey and as I had
recalled about 10,000 barrels after repeal in 1921 or '22. Probably some in '21
and '22. The owners of this company and their attorneys and incidently the
president's name was Hannes and I happened to know Mr. Hannes concluded that the
Prohibition Volstead Act did not prohibit the manufacture of whiskey, but
prohibited the sale for beverage purposes only. So they started up their
distillery in Maryland making whiskey. I think it was ryes I remember, rye
whiskey before the government and they quit fighting in the court house over
whether they could or could not they had made about 10,000 barrels. They lost
the suit and the government made them close down. Now
I Did they make them pay tax?
SHAVER They was made in bond like anything else, sure, it was all legal. This
wasn't bootlegged. It was made in bond just like any other whiskey was made and
when it was taken out of bond, the prevailing tax was paid at that time of
course on it. But so far as I know that's the only whiskey that was legally
distilled in the United States in the fall of 1917 until this allocation was
made by Dr. Doran in 1929.
SYVERTSEN That is an interesting story.
SHAVER If there was any other I never heard of it at least. Now I'm talking
about legal. Now there's lots of it made back in the woods around through
Kentucky, but they were hauling this whiskey in, but it was not legal whiskey.
This was legal under law. A short time before repeal as I recall it American
Medicinal Spirits Company merged with National Distillers and became National
Distillers. I also based on the best memory I have is that National Distillers
** Tape 2 **
SHAVER Shortly after the American Medicinal merged with National Dis tillers
Amil Schwartzkopf and Leo Gerngross who were vice presidents resigned from
National Distillers and decided to go into the liquor business on their own.
They came to Louisville and first bought the two distilleries owned by Max
Salinger and Company at 17th and Breckinridge Street. One known as Astor and
one as Belmont. These old, this old, these two old distilleries had been idle of
course since 1917. There was no whiskey left in the warehouses. I am not sure
what became of the whiskey that had been there, but based on my memory, I think
I was told that they had taken this whiskey to Mexico before prohibition came
in. That they had hauled all their whiskey to Mexico. I also understood that a
number of other small distilleries in Kentucky, particularly over around
Lawrenceburg, Kentucky took their whiskey to Mexico. What they did with it then,
I don't know. Anyhow there was no whiskey at the plant at 17th and Breckinridge
Street. Old buildings that had been sitting there idle and accumulating dirt and
mess since 1917. They immediately entered into agreements and contracts to
remodel these two plants, this plant and get it back into production to make
whiskey again. Then they bought the Bernheim Distilling Company which had long
since abandoned all of their properties and they owned as I recall about 6,000
barrels of whiskey that was stored in the K. D. & W. Warehouses on Lexington
Road. The K. D. & W. Bottling Plant was bottling whiskey, I. W. Harper for them,
and they were selling it into the medicinal trade. The Bernheim family so far as
I know had long been out of the Bernheim Distilling Company. I don't know
whether they owned any of it or not, I wasn't in on that. The president was
Lewis Cole who was a nephew of Mr. I. W. Bernheim. I am positive that by that
time Mr. I. W. Bernheim was living in Denver, Colorado. He had had a falling out
with his, the Jewish community of Louisville. And he made the statement at one
time, I am told, that he was shaking all the Louisville dirt off his feet and
would never come back again. And I don't think he ever did.
SYVERTSEN Do you know the nature of his dispute with the community?
SHAVER I don't know. Anyhow I never saw I. W. Bernheim, but when Mr. Schwartzkopf
and Gerngross made this move to Louisville, they came to Humphrey, Robinson and
Company and inquired whether I was still on the staff, and I was. They had
remembered me from the work that I had done in 1928 at American Medicinal
Spirits Company. They asked my boss if they would assign me to handle their
accounting in Louisville and make a monthly audit of their records and give them
a monthly financial report on their operations in Louisville. Which I began to
do in mid 1933, I presume it was. They proceeded with the modernization and
remodeling of the old distilleries at 17th and Breckinridge and then they were
ready to start. They obtained registry number one and number two in the whole
United States. The Astor plant was re-registered as Distillery Number One and
the Belmont was re-registered as Distillery Number Two. They were ready to start
and operate Number One before the effective date of repeal. So in October of
1933, they obtained from the prohibition administrator, a permit to distill even
though prohibition was still in force. And they started Number One and the first
whiskey was drawn on October 31, 1933. Number Two was not quite ready to resume
operations at that time, but it did resume and the first whiskey was drawn from
that distillery on December 12, 1933, or seven days after repeal of prohibition.
In the spring of 1934, in my professional duties in public accounting, I had to
prepare income tax returns for the Wathens. Mr. O. H. Wathen and Mr. R. E.
Wathen had both moved to New York with National Distillers. And I had to go to
New York to prepare the income tax return for Mr. O. H. Wathen. He had been
quite successful that year, because the market for National Distillers stock had
sky rocketed during 1933. Early in 1933, the stock was selling, I don't know
just how low, I know at one time it was seventeen. And within about three months
it was $125.
SYVERTSEN That was quite a turn around for that period.
SHAVER Then it dropped back pretty rapidly to settle down pretty steady around
$80 or $85 a share. I failed to make any money, because while I knew what was
going on and I was often in their National Distillers' Office here in
Louisville. And my good friend Mrs. Bockman told me that said, '"Shaver I know
you lost your money in the stock market crash in '29. If you've got anything
left buy our stock and you'll get the money back that you have lost.'" Well a
burned child dreads the fire and I had been in the fire and I hadn't cooled off
very well. The stock at that time was selling at $17, the day she told me that.
A few weeks later I was in her office and she had a telephone conversation while
I was sitting at her desk and I knew she was talking to a broker. When she
finished her conversation she pulled out the draw of her desk and drew a
certificate for a 100 shares of National Distillers Stock out on the top of her
desk and she said, '"Shaver did you do what I told to you to do and buy any of
our stock?'" I said, '"No.'" She said, '"Well why didn't you? I just sold that for
$25 a share.'" I said, '"Well I missed it then.'" A month later, it was $125. I was
back out there after that and I said, she said again, '"Did you ever buy any of
this stock?'" I said, '"No.'" She said, '"Well why didn't you?'" And I said,
'"Why inthe devil did you sell it at $25 when I was sitting here at your desk?'" Then she
confessed that she had bought and sold several times on the way up and really
hadn't made much money herself. Well that's sideline, but in the spring of '34,
when I went to New York to prepare Mr. O. H. Wathen's income tax return for
1933 and that was quite a chore, because he was not known for keeping many
records. And he had traded with brokers all over the United States that year. I
found a broker, even in Salt Lake City he had bought some stock from. He didn't
even know he had ever been in Salt Lake City. In the process, I finally got a
tax return made up for him and ______. But Schwartzkopf and Gerngross had an
office, at that time, National Distillers was at 52 William Street, just off of
Wall and they had an office at 52 William Street in the same building. Naturally
they were my client and it was another direction and I visited them and went to
their office several times to have conversations. And in the process before I
was coming back to Louisville, I told them that they were building up and
starting to get a big business built and they had no accounting personnel, and I
would like to work for them. They were Germans and spoke with very broken, very
accent, and they said, '"Oh, vell, vell, Mr. Shafer.'" They never called me
Shaver, they called me Mr. Shafer. '"Oh, vell, vell, Mr. Shafer, we vould so much
like to have you vork for us. Ve vill talk about it.'" '"Thank you sir.'" So I came
back to Louisville and a few weeks later Mr. Gerngross was in Louisville and he
called me and he said, '"Mr. Shafer, vhen you vas in New York you told Emil and
me and that you vould like to vork for us. Vas you serious?'" I said, '"Very
serious Mr. Gerngross.'" '"Oh, vell, vell, ve have discussed it and ve vant you to
come to vork for us just as soon as you can.'" As a result of that conversation,
I became employed as the Chief Accountant of Bernheim Distilling Company on July
15, 1934. I continued in the liquor business until July, 1942 with that
organization. We grew rapidly, highly successful financially, built the
buildings, warehouses, bottling plant and all that is now at 17th and
Breckinridge Street.
SYVERTSEN Could you tell me something about the production at that plant roughly?
SHAVER Yes, we had a production at that plant, as I recall about 450 barrels a
day. When I left the company in '42, we had something like 350,000 barrels of
whiskey in bond in the warehouses at that point. We had not, in 1937, they sold
the business to Chandley Distillers, the deal was closed during the great flood
of 1937, the spring of '37.
SYVERTSEN Did the flood precipitate the?
SHAVER No it had nothing to do with it. The deal was all really signed and
sealed before the flood. The flood did not do us too awful much damage. There
was something like 30,000 barrels of whiskey in the water. Some of it floated
out of the racks and got a lot of oil and stuff on the barrels, varnish. The
Louisville Varnish Company was just a couple of blocks away that burned during
the flood and varnish got mixed up in the water and boats and things running
around got oil in the water. So one of our biggest troubles was, we had a lot of
barrels that had a combination of oil and varnish on them. We got the water out
of the warehouses, that was alright if, we salvaged it. We had to do a lot of
clean up, it cost us a lot of labor to clean these barrels.
SYVERTSEN But this did not penetrate the barrels?
SHAVER It did not penetrate the barrels, so far as we knew, we never determined
that. We lost, there were a few barrels floating around and ran into things and
broke up and lost the contents. I don't think we lost the contents of over 8 or
10 barrels. And there was something like 30,000 barrels in the water, but only 8
or 10, as I recall, we actually lost the whole contents. Again there, because of
the accident and all, we were able to get the government to abate the tax on the
whiskey that was unavoidably destroyed. They abated the tax and we were not
penalized for having to pay tax.
SYVERTSEN I understand that some barrels were used as pontoon bridges back then,
do you know anything about that?
SHAVER Oh yes, oh yes, oh yes, I know a lot about it. That was, none of those
came from Bernheim, but 'cause we didn't have a bottling house. We didn't start
to build a bottling house until after we sold out to Chandely in 1937. But the
whiskey being bottled in all the other bottling houses around Louisville were
emptying barrels and during the great flood, there was a pontoon bridge built on
Baxter Avenue where the L & N crosses Baxter Avenue at the Baxter Avenue
station. There was a long pontoon bridge built, because the river was not up at
Main Street or down there as high, nobody realized it, but then the water was in
Beargrass Creek and along the railroad station it was very deep there. So there
was a bridge built on Baxter Avenue out of whiskey barrels, a pontoon bridge
floated on old emptied whiskey barrels. And those barrels, I am quite sure, came
from the K. D. & W. Bottling House which is up on Lexington Road, 'cause that
was a big bottling house then. I am sure that that is what happened. Going ahead
with my story, I went with Bernheim at that point, we were distilling whiskey. I
studied and worked on all the, set up what I considered and still consider, what
was considered by people that knew it, as one of the best accounting systems
that anybody had seen in a distillery, at Bernheim.
SYVERTSEN Can you tell us about that system? The format for the system?
SHAVER Well I don't know of anything in particular that I could tell you about
it. We didn't have computers, they hadn't been invented. All those things, and
all these records were hand-kept. There was one basic record that you had to
keep whether you wanted to or not
** Side 2 **
Blank Side.
** Tape 3 **
SYVERTSEN But some people say that it, the fact that there was a five cent
production tax actually chased out the development of other liquor distilling
like vodka and so forth. So that it had a long term, according to this
allegation, a long term adverse effect upon total distilling in Kentucky. What
is your opinion?
SHAVER Of course, this is just one man's opinion, I don't think so. I don't
think the people who were engaged in the distilling industry in Kentucky
believed in making anything, but bourbon whiskey. Nobody else took the bourbon
whiskey away from Kentucky really. It was still controlled, the bourbon whiskey
distillation. Nobody was, I don't think the people in the industry here was the
least bit interested in making, well vodka was unheard of at that point
practically, it's nothing but grain alcohol to begin with. Gin, they, the people
that were in the whiskey business here were not interested in gin in those days.
They were considered a bunch of dogs. And nobody would fool with that kind of
slop. The old time people that were in the whiskey business here considered
nothing but bourbon as an acceptable beverage. I doubt if they would have gone
into any of these others at that point. Now later on, maybe so. I don't when
they repealed the production tax. I understand there is no production tax today.
SYVERTSEN It occurred on, in the mid '60's. It was repealed, phased down over a
number of years.
SHAVER Well I lost, well since 1942, it was still a nickel in 1942 and I don't
know what happened since then. A higher tax probably would have hurt worse. Ten
cents probably hurt ten times as bad as five cents. But I don't think it really
did. I don't believe these people were, they were too steeped in the idea of
bourbon whiskey. You know bourbon whiskey by definition is 51 percent corn. You
can, at Bernheim we made what we call 40 percent small grain. We used 60 percent
corn, 40 percent barley malt and rye. I have forgotten the breakup between rye
and barley malt now. But they varied anywhere around in that neighborhood. Some
of them ran higher corn and lower small grain then we did, but basically that's
what was a going on.
SHAVER I think another copy was filed with the Alcohol Tax Unit of the U. S.
Treasury Department, I don't know what became of all, how many copies there were
now. I have forgotten, but we
SYVERTSEN Storekeeper could gauge his entire salary with what's paid by the
federal government.
SHAVER Oh yes, storekeeper-gauger was an employee of the Alcohol Tax Unit of the
Treasury Department. He
SYVERTSEN Was he well paid?
SHAVER I don't know, haven't the slightest idea. I am sure they were overpaid
whatever it was. But they were pretty decent characters as a rule. But anyway
they carried the keys to everything. Everything was locked up and they carried
the keys to the ware houses. They carried the keys all the way through to the
cisterns where you were filling, they were present when you were doing anything.
So anyhow
SYVERTSEN They were tough?
SHAVER Yeah some of them could be awful ornery. Most of them were pretty decent
Joe's, but you filled your barrels and he prepared this, we got a copy and then
we proceeded to write the critical information in the crop book from this sheet
of paper which was about 16 or 18 inches long and 12 inches wide I guess, known
as a regauge form. And that was in by hand written into this crop book. The date
and the and it also showed in the crop book where we stored the barrels, the
location. That came into us from the warehouse people and we put on there where
the barrels were located in the warehouse. What warehouse and what tier and all
of this so we could find that barrel if we went out looking for it. The barrels
were then rolled to the warehouse and stored in the racks. We had a record in
this crop book. What ever happened to that whiskey we recorded it in this crop
book. If we at Bernheim, what we were doing we were selling green whiskey as
fast as it was made on the warehouse receipts. We sold all of the whiskey that
was made in distillery Number One and we kept all that was made in Number Two
for our own use. In the crop book, we recorded who purchased certain barrels and
the warehouse receipt number that it was issued on that whiskey. Now if later on
it was transferred to someone else and we had to change it over in the crop
book. But the crop book was the basic record of what was in the warehouses.
Every barrel was in there and we knew it. storekeeper-gauger kept this. We kept
the control sheet of how many barrels and how many proof gallons that we had in
the warehouses of course. What we sold and we knew what was left always. The
other just ordinary financial records, payroll records and general ledgers and
cash books and things were of my design which was rather advanced compared with
what these people had used heretofore. Because they hadn't kept much records
except the dear old crop book. It was the critical record in the distillery, the
crop book was.
SYVERTSEN So you provided a standard really for the industry at least locally.
SHAVER That's right. And I had also in my practice of public accounting had
worked on the audits for Frankfort Distilleries and other distilleries along the
way. So I presume that at the time of repeal that I had had more exposure to
distillery accounting than any public accountant in the United States. And more
experience in that field probably than any other public accountant in the United
States. But in continuing at Bernheim as we grew and prospered, I learned a lot
about the manufacturing processing which I hadn't known before. However, we had
a very fine dis tiller that was his prerogative. That was none of my business.
But Wathen Knebelkamp I learned a lot from a him about that, the government rules
for operating and all of these things. We were not going to bottle any whiskey
until it became four years old. Now we did some quick aging what was called
'"quick aging'" right after repeal. Our customers wanted to buy this green whiskey
and wanted us to quick age it and they would draw it out of the warehouse and
take it somewhere else and bottle it and try to sell it to people and we did
what we call goosenecking. Well it wasn't any good, it didn't do any good. It
was a failure actually. But it was better than nothing I guess. Anyway people
would buy the stuff. So we sold a lot of goosenecked whiskey.
SYVERTSEN Would you define that gooseneck please?
SHAVER Well, the barrel was the _____ up barrel and we had a copper thing you
screwed in the bung and you put steam in there and then there was a condenser on
there and you run the steam in there and the vapor would come up in this
condenser and you would stir it around in the barrel so it would turn brown a
little bit see. It would color it, it gets some color on it. It didn't improve
the taste of it a bit, but it
SYVERTSEN But it looked good.
SHAVER It really looked good. It made it look like whiskey. 'Cause you see when
whiskey is distilled its clear, no color to it. So you got it, this goosenecking
you've got it colored up a little bit so it would look like whiskey at least,
even though it didn't taste like it. We didn't do much of that. I remember one
time we had been in business, been running about 6 or 8 months and Mr. Gerngross
came down and said, told one of the men there in the office, send over to the
warehouse and get the storekeeper-gauger to get a couple of pints of samples out
of two barrels of that old whiskey we've got. It was six months old, that old
whiskey was six months old. He wanted to see how it was aging and whether he
could drink it. So we always laughed about him getting that old whiskey that was
six months old. But anyway we went on filling up warehouses selling warehouse
receipts. I got to know through, we didn't have a very big staff. Mr.
Schwartzkopf and Mr. Gerngross did all the selling practically. Schwartzkopf could
sell out of production, what we generally did, we would go to a dealer and we
would sell him so many barrels a month out of each crop, spring and fall crop.
We would put a company here in Louisville known as Kentucky Radford, Mr. Radfords
new business, we started selling him five barrels a month. He didn't have any
money. We financed it. The buyer paid us as I recall five dollars a barrel now
and then two dollars and a half every six months. We held the warehouse receipts
as collateral on the notes as security. Before he could take any whiskey out he
had to pay up any unpaid balance. Mr. Radford prospered and we got to producing
and selling him several hundred barrels a month. Finally when the whiskey became
four years old, we would bottle it under a brand known as Kentucky Par which he
sold at retail in Louisville as a wholesaler. And he made a substantial amount
of money out of it. But we accumulated a good many million dollars worth of
notes to finance this whiskey. We had adequate financing with banks in Chicago
and other places.
SYVERTSEN One distiller said there was a problem with local funding and financing.
SHAVER Well, the banks here in Louisville, none of them were near big enough to
handle a deal like this. Actually we had our principle financing with the First
National in Chicago, was where we had a line of credit of I think five million
dollars with the First National in Chicago. Wasn't a bank in Louisville that
could give you a line of credit for five million dollars.
SYVERTSEN Did you have credit also out of Cincinnati like some of the other distillers?
SHAVER I don't think so, as I remember, out at New York and Chicago, Chicago
principally. First National in Chicago was our principle account. But anyhow
this built up and then we sold out to Chandley Distillers in the spring of 1937.
And then we had made whiskey in '33 so we were getting at that fall we would
have four year old whiskey. So they then proceeded to build a bottling house
which is down there today. And we started bottling in, I guess the end of '37 or
early '38. I don't remember whether the bottling house was completed until early
'38, I think it was late '37 and we started our bottling operation then.
SYVERTSEN Can you tell me anything about the acquisition by Chandley? The terms
anything about the reasons for the acquisition?
SHAVER I don't remember the detail all of it, but Schwartzkopf and Gerngross were
not operating men honestly. They were traders. They'd started out trade during
prohibition trading in warehouse receipts for whiskey. Buying and selling and
trading in warehouse receipts. They were not by temperament or disposition
operating people they were traders. This business was growing beyond their
ability to operate it. They were worried about financing this great growth,
because at this time we were in debt five, six, or seven million dollars I guess
we had borrowed and that was a lot of money. The equity was getting thin and
Chandley wanted all of it. We had a lot of whiskey in this fine plant here. This
was one of the best, top quality plant. So they made a deal with Chandley and
took stock in Chandley Distillers as I recall at the time that deal was made
Schwartzkopf and Company then, they had a partnership known as Schwartzkopf and
Company. Schwartzkopf and Company owned one sixth of all the stock in Chandley.
They had one sixth of the Chandley stock as I recall the figures. And that was
200 and some odd shares as I recall. Chandley didn't have an awful lot of shares
outstanding then, but I think they owned about a sixth of all the outstanding
stock in Chandley. They nominally were, for a while were officers in Chandley,
but they pretty well they didn't stay as officers or operating people they
dropped out and just became investors. They had their office and they were
friendly with the Chandley people. They had their office then in the Empire
State Building where Chandley was, different floor, but within a floor or two of
where Chandley, they had a suite of offices there. But they were just traders,
they were really not operating people.
SYVERTSEN Can you give us a personality character sketch on
** Side 2 **
Tape 3, Side 2
Ben Shaver = Sh Interviewer = I
SHAVER Mr. Gerngross was a very quiet man, small, gray-haired man, soft spoken,
very quiet. Schwartzkopf was a husky, real dynamic fellow. Always just bubbling
with enthusiasm about everything. Spoke very loud, because he was deaf. He was
rather noisy, because of his deafness. But was a real gracious gentleman along
with it. He was always, always was very nice to me. He wasn't in Louisville very
often, Mr. Gerngross would usually come to Louisville. Mr. Schwartzkopf did not
come to Louisville very much. He was mostly stayed in New York. He would come
down for the Derby and he would have a lot of his followers to follow him here
to the Derby, because he would spend a lot of money. So these good customers, he
would bring their wives, and in those days there was gambling over in southern
Indiana and they would go to the gambling rooms at night. He'd give these wives
$1,000 to get in the crap game with and stuff like that I think. And I know he
would often come to me and he would say, '"Mr. Shafer, vill you please get me
$2,000. I'm running out of cash.'" So I would send our messenger to the bank and
get $2,000 for him and charge it to his account on the books see. He might do
that every day while he was here. Sometimes he'd get $8,000 or $10,000 on one
trip which he was passing around to his customers somehow. I don't what he did
with it. But anyway he was always spending a lot of money. He spent lots of
money and Mr. Gerngross was very reserved you didn't hear any of that out of him
at all. They were very different per sonalities, but close friends. Got along
together beautifully. I will side track just a minute to show you about their
personali ties. I mentioned the flood. During the flood Mrs. Shaver and I had
our first son, was a little fellow born in October and this was February. So we
went to Lexington, because my brother lived in Lexington and had an apartment.
And I took them to Lexington to get away from the flood here. I wrote, or wired,
or called, or something or other, I don't know how I got, I got in touch with
them in New York to tell them where I was. And immediately a special delivery
letter came to the address that I had given them in Lexington enclosing a check
for $250. A nice letter saying if I needed money they were sending me this
check. I didn't need money. I didn't ask for money. But I thought it was a very
gracious thing to do. They were that kind of people. Very gracious people.
Anyhow we sold out to Chandley. They got out from the day to day operations in
Chandley. Mr. Gerngross' nephew Adolph Hirsch who was here at this plant, became
the manager of the plant. The man Gabe Felsenthal who had been manager since we
started at one time had been a part owner of Chandley. And he and Rosensteil,
Lou Rosensteil had had a big falling out and there wasn't anything nasty enough
either one could say about the other one. Here Chandley bought Bernheim well
that was the end of Gab Rosenthel of course. The first thing Rosensteil did he
saw that Rosenthel was taken off the payroll. He was out instantly and Hirsch was
made manager. Rosenthel was a nice, big, noisy guy and I always got along with
Gabriel well. I had to cuss him occasionally because he'd cuss me, but I
wouldn't take cussing and he pretty well, he was my best friend even though he
wanted to pick on me sometimes. But I learned, I couldn't let him pick on me. I
fired back just as hot as he fired at me. So we had some pretty hot words at
times, but we always ended up friends. Hirsch became manager. A few years later,
they decided they wanted Hirsch to come to New York, Chandley did. Wathen
__________ who was a distiller then, became the manager. And Hirsch went to New
York and I commuted back and forth quite often to New York on business, because
I was running the accounting here.
SYVERTSEN Did Chandley adopt your accounting?
SHAVER A great of the ideas that I had. They valued, they found that I had some
very advanced ideas on accounting here that they didn't know anything about.
Their accounting personnel, their auditors, field auditors and people would come
in here and they would go back to New York and tell me that they were just
amazed at all this excellent records and knowledge that I had in the records
here that they didn't know anything about. And they would take it back to New
York and get me up there to help them incorporate it in other plants. I was then
asked by Sid Becker who was Sidney Becker who was then Treasurer in 1938 or '39
wanted me to come to New York and head up the, one of the top jobs in the
accounting department for Chandley which I refused to do. And I continued to
live in Louisville and then was made Assistant Manager for this region. Still I
was unhappy here, because accounting and finance is my life and it wasn't here
any longer. And I started making a move to get away and finally in 1942 I
resigned and became Treasurer of American Air Filter Company and left the
distillery industry. So I have been out of the industry now for 42 years. And
haven't kept up with what happened. There has been a lot of regulations changed,
a lot of laws changed, a lot of operations changed. I'm sure that today it
doesn't even resemble what I knew 42 years ago, but taxes were always a big
problem. Nobody understood taxes on whiskey. I had the experience before I went
in 1933, Frankfort Distilleries was trying to get reorganized and going, and
they were, had a big financing deal going on with a banking firm in New York.
They sent a New York accounting firm which was then known as which is now
Touche Ross and Company it was then Touched Kevin and Company then down here to make
an audit this New York banking firm. And one of the New York managing partners
Mr. Victor Stempth was in charge of the job. He later became president of the
American Institute of Accountants. I was working on the Frankfort deal and I
worked with the __________ and crew five or six men, because they couldn't
understand the records at all and couldn't understand anything about taxes and
that was a big boogaboo to 'em. So I spent a great deal of time with Victor
Stempth and __________ educating him on how you handle whiskey taxes and how you
reported them. And I went over all of that with him. He would think he had it,
and a week later he would come back and say Ben, I wish you'd go over this with
me again, I'm still confused. It was a very involved operation. The whiskey had
been moved around from warehouse to warehouse and county to county during
prohibition, the old whiskey I'm talking about now. And they had a law that
property tax did not have to be paid until the whiskey was taken out of bond and
had accumulated. So sometimes you'd take a barrel out of bond in a warehouse
here in Louisville. It might have spent a part of its life in two other
counties, so you had to know where all it had been residing, on what dates it
had resided where, so you could pay the county for the assessment date, on the
assessment dates when it resided in that county and this got to be a horrible job.
SYVERTSEN Were the counties usually pretty accurate in what they believed to be
the payments owed to them?
SHAVER They took whatever you gave them and didn't know anything.
SYVERTSEN I had that suspicion.
SHAVER They didn't have the foggiest idea whether it was right or wrong. I'll
tell you that.
SYVERTSEN So you were somewhat of a Santa Claus at times I imagine.
SHAVER The companies and all of my experience, the people I worked with were
honorable people and we tried to be absolutely honest. You see here was the
thing. This is dynamite if trouble came out whiskey was really like fooling with
dynamite. The social aspects of it and you had to be very, you wanted to be very
conscientious and very careful to not be involved in any scandals that the
public would pick on you with.
SYVERTSEN So this was very careful.
SYVERTSEN Were you approached frequently by politicians?
SHAVER No. I am not saying that there weren't, the top executives may have been.
I was not, no. I was never approached by anyone. Not at all. It was all on the
up and above board. Now a lot of, but this whole system went on like that. There
was a production tax of five cents a gallon levied by the state.
SYVERTSEN Under the first Chandler administration.
SHAVER No, it came in about the time, that was earlier than the Chandler I
think. Well yes, because he was governor right after repeal. I think it came in
just about the time of repeal in '33, the five cents a gallon. I believe that
probably even after I left the industry, it went to ten cents a gallon. I don't
know when.
SYVERTSEN During the second Chandler administration in the mid '50's.
SHAVER Well, I was out.
SYVERTSEN It went to ten cents per gallon. Can you talk about the impact of that
five cent production tax to the impact to the state, locally, and to the business?
SHAVER Well it produced an awful lot of revenue for the state of Kentucky I can
tell you that. When you take Bernheim when we were making say 450 barrels a day,
at for easy arithmetic I'll use 50 gallons its not quite that about 48 gallons
to the barrel. That's two hundred and some odd thousand gallons a day at a
nickel on 200,000 gallons is ten thousand dollars a day or so isn't it. That's a
pretty nice revenue for the state. We were paying the state at least something
over $10,000 dollars a day in production tax on that one distillery. Now we
weren't the largest distillery in the state by any means, but this was a big
revenue producer. No questions about that.
SYVERTSEN Do you believe that the five cent production tax largely took the
place of sales tax, __________ , Governor Chandler repealed
SHAVER No, he put in the income tax his first term. He replaced the sales tax
with an income tax. He's the father of the state income tax. I think he replaced
his sales tax that had been in exis tence, it hadn't been in very long.
SYVERTSEN No, no, he revised
SHAVER But he didn't believe in that. He believed in the income tax. And I think
it replaced income tax. And of course this came along the state, when he, well
this has not much to do with the liquor business, but I happened to also make
many audits around the state department in Frankfort in my accounting days, the
highway commission and other deals in the state. Before Chandler's first
administration, it was the most deplorable operation I have ever seen in my
life. Talk about bad records or no records, that's all there was up there. No
records, you couldn't find out anything. The state at that time the constitution
did not permit them to create debt, however, there was some unknown quantity of
debt outstanding. It was thought to be about $25 million dollars that if you
sold the state of Kentucky some merchandise, they didn't have money to pay your
bill. So they gave you a script an interest bearing script that would be called
and paid whenever they got some money. Now if you wanted your cash there was a
market for about 80 cents on the dollar for this script. So what you did if you
were a smart business man you raised your prices to the state, so you could sell
your IOU for 80 cents and get your regular price. And the state was paying
through the nose for everything they were buying. There was one of the state
treasurers, when they got some money, the state treasurer was supposed to reach
in the hat and get out a script to be retired. He was one of the buyers of the
script and somehow he would always get a hold of his script when he'd reach in
the hat. Along the way, the state entered, the federal government entertained
them at one of their country club establishments for two years or so, five years
for fraud or income tax fraud or something, anyway but it was really a terrible
mess up there. But that had nothing to do with the liquor business. Governor
Chandler came into the state, he was going to pay off the debt and leave the
state solvent. Nobody thought it was possible to pay off $25 million dollars in
four years. He not only paid it off, but he left a surplus for four years. I am
going to put in a plug here. In my way of thinking, that was the best four
years' administration Kentucky has ever had. I take my hat off to Happy
Chandler. I didn't think so much of his second term, but the first one was
fabulous. Okay, lets see where are we?
SYVERTSEN How about that five percent production tax for the industry as a
whole. Someone told me it was totally detrimental to the industry.
SHAVER I don't think it was at all. I don't think it chased distilling out of Kentucky.
SYVERTSEN What about the argument that it changed
Tape 4 Ben Shaver = Sh Interviewer = I
SYVERTSEN Maybe we should pick up where we had left off there about produc tion
taxes, we didn't really finish that. Could we go over that again? My question is
this, whether the fact there was a five cent production tax actually adversely
effected the industry, not so much in terms of bourbon, but in terms of other
alcohol distilled products?
SHAVER I doubt it very much. That's my personal opinion and I may be dead wrong,
but from my, the people that I knew, the old time people that went back in the
liquor business here, were dyed in the wool bourbon manufacturers. They weren't
interested in alcohol and gin. Of course, I never heard of any such thing as
vodka in those days. Gin was the only alcohol-based thing that I knew anything
about. The people that had been in the, what was known as the rectifying
business would buy bourbon and add alcohol to it and rectify it. And they'd take
a bourbon to add color and flavor to alcohol in what was known as rectifying.
Now the distillers didn't ordinarily rectify as I understand it, but that was
mostly done in liquor dealers in Chicago and San Francisco, Philadelphia, New
York all over the country. They were rectifying plants. They would buy the
bourbon from the distillers here and they would buy alcohol from someone else
and rectify it or put them together. Now there was some whiskey, what was known
as heavy-bodied whiskey made. At Bernheim one time we made a few thousand
barrels of pure malt whiskey all out of malt. It was real syrupy stuff. Wasn't
fit to drink, heavy, heavy, heavy. It was made for rectifying, because it worked
wonderful with alcohol to make a palatable drink and tasted like whiskey. I
don't know on what proportions you would mix it. We ended selling all of our
malt whiskey to Seagrams to flavor up some of their trash. I don't know what
they used it for, but we sold all of our bulk whiskey to Seagrams one time and
got rid of it.
SYVERTSEN Blends.
SHAVER For blends. Well rectify and blend are two different terms. A blend is,
as I always understood it, is a mixture of two whiskeys, two ages or two
distillations. Rectified is whiskey and alcohol. I think that's the technical
term. I think the blends are one thing and the rectified is something else. I
don't think rec tified ever, I don't know whether any of it is done anymore or not.
SYVERTSEN I just picked up that sometimes that the blending was very loosely
used as a term.
SHAVER That's right. No, I doubt if the production tax had any real dire effect
on the total liquor industry in Kentucky. Oh everybody yelled about it, of
course, you yelled your head off everlasting about it, but. Of course it was a
fairly significant part of your cost at one time. At one time at Bernheim, in
the later 30's, I think we were making whiskey for about 35 cents a gallon
including the barrel and the, now that did not include the five cent tax. That
was on top of that. But including a barrel. A whiskey barrel now costs 40, 50
cents a gallon, just the barrel alone. I don't know what a whiskey barrel sells
for today, but we bought 'em for five dollars and that was ten cents a gallon
for barrels.
SYVERTSEN I have been told over $60.
SHAVER Yeah, that's right. So that's over, that's a dollar and something a
gallon just for the barrel. We were paying five dollars for barrels and
producing whiskey for 35 to 40 cents a gallon. We were distilling corn for about
35 or 36 cents a bushel. And we used to consider a good operations would produce
about four and three quarter gallons per bushel of grain. That was a kind of a
seat of your pants standard, not real scientific or anything, but that was
considered a fair yield. About four and three quarter gallons per bushel of
grain mashed. So we were, now when we sold warehouse receipts at Bernheim, the
five cent production tax followed the whiskey and when they took it out we
collected the five cents back. From whoever bought the whiskey had to pay us the
five cents over and above the price we sold for. What else. Okay on that?
SYVERTSEN We've talked previously about Lou Rosensteil and I was going to ask
you next if you would care to share some of your Lou Rosen steel stories.
SHAVER Well, he might rise from the dead and smite me, I don't know. But Lou
Rosensteil was raised in Cincinnati. He had an uncle by the name of Johnson and
he had a distillery at Milton, Kentucky. It was a little distillery. Milton's
across, up the river here, across from Madison, Indiana. And Lewis Johnson, his
uncle owned a distillery at Milton, Kentucky. As a young man he worked for his
uncle and I am told all of this. These are stories that I didn't know, I didn't
know him then. I didn't know Lewis Johnson, but he worked down in the distillery
rolling barrels and as a laborer working around his uncle's distillery. It was a
very small operation apparently, probably making 10 or 15 barrels a day or
something like that. During prohibition, he was in Cincinnati and there was a
bunch of pretty big bootleggers operating around Cincinnati and he was always
suspect, and I don't know whether this happened in the group, that they went out
and bought several small distilleries and mysteriously the whiskey all
disappeared from those small distilleries. So he was always suspect of being in
the gang that stole their own whiskey from some small distilleries. So far as I
know including the one at Milton, Kentucky was involved in that deal. There were
a lot of small distilleries in Kentucky at one time and the best known gangster
in that crowd was named Remus, George Remus. And the government finally, I knew
one man by the name of Landon, he was right, appeared to be a right nice guy,
but the government at one time gathered 'em all up and had a big trial and
convicted 15 or 20 of 'em and sent 'em all out to Leavenworth Penitentiary. Sent
a train load of 'em, Remus and my friend Landon was on that train. Lou
Rosensteil, he didn't get caught in that crowd at least. He wasn't on the train
when it went to Leavenworth.
SYVERTSEN He was out of town wasn't he when the ________ took place?
SHAVER He was out of town or something. I don't know what happened. These are
just rumors. I don't know anything, whether there's any truth in any of this. I
do know that Landon went, I know Landon was on the train and went to Leavenworth
that I know for a fact, because he was a friend of some of the people in
American Medicinal and I got acquainted with him in 1928 out there. But anyhow
Rosensteil put together finally Chandley with a number of small companies, small
distillers. It wasn't a very big, it was a little when, up until repeal came
along it didn't amount to very much. And he had gotten in Pennsylvania and there
was a distillery at Chandley, Pennsylvania where he used the name, picked up
that name, but I don't know anything about the plant, I never was at the plant
in Chandley, Pennsylvania. It was built into a big plant later on, but it was a
small one. Everything was quite small and I don't think that they had very much
whiskey when repeal came on. I don't honestly know. He was a tough egg to deal
with. I saw him three or four times I guess which was as many as I cared to. He
was never in Louisville to my knowledge to our plant here, but one time. He came
in that one afternoon and we didn't know he was in Louisville even. We wasn't
looking for him at all and Wathen ______ was the manager and the races were
here and Wathen had gone to the races. Lou Rosensteil blows in in a taxi cab,
had the cab waiting out front for him. The switchboard receptionist called me
and said Mr. Shaver Mr. Rosensteil is in the lobby. I said, '"Oh, my God.'" So I
went out to see Mr. Rosensteil and I covered up for Wathen. I don't whether I
ever did tell him where Wathen was, but I just said he wasn't at the plant that
minute. He wanted to see through the plant, so I took him on a quick tour of the
plant for about thirty minutes and he got in the cab and left. And that's the
only time I ever saw him in the plant. I saw him a few times in New York.
SYVERTSEN He liked you then.
SHAVER Well, I don't know whether he liked anybody or not. He didn't fire me at
least. He liked me well enough not to fire me at least. That's all I can say. I
wouldn't say, he probably didn't know me well enough to know whether he liked me
or disliked me honestly. So that was fine with me as long as I didn't have to,
he ran a mad house in Chandley's Office in the Empire State Building. It was an
utter mad house. He would want to come in to the office sometime in the middle
of the afternoon and he would expect his executives to stay there until he got
ready to go home maybe at midnight. And they had been there since eight o'clock
in the morning and these poor boys in this accounting department, one reason
that I told Sid Becker I wouldn't go near the place, I knew what was going on.
Those poor guys in that accounting department, some of them stayed there all
night all the time, 'cause Lou Rosensteil would come in there and demand reports
at ten o'clock at night and things like that. And gradually a lot of those
people, a number of my friends ended up with nervous breakdowns and had to get
out. One of them being Sid Becker, who, he got promoted up to President and then
had a nervous breakdown over it. There was another nice friend by the name of
Earl Gasenheimer. He succeeded Becker as Treasurer and the same thing happened
to him. He had a nervous breakdown and had to get out, I think. So he ran a
thorough mad house. I never heard anybody in the office that didn't tremble at
every word he said and he was a dictator and, but this business of just totally
no regard for the comfort of the employees that worked for him at all, very
dictatorial. I saw him the last, only, the last time I saw him and one of the
last times I guess that I was in New York with Chandley was close to the time I
got out. I was up in Mr. Schwartzkopf's and Gerngross' office, I had gone up that
morning and worked all day in the accounting department on one of the problems
where I had to deal with and at normal quitting time, say at 5:00 or 4:30
whatever it was, I went up to Mr. Schwartzkopf and Mr. Gerngross's office for a
little social chat. And we were having a very nice chat, because I always
enjoyed sitting and chatting with those two men, when Mr. Schwartzkopf's valet
Clarence came in and said, '"Mr. Shaver, Mr. Rosensteil wants to see you.'" I
said, '"Clarence, I don't know where Rosensteil's office is even. I know its in
the Empire State Building, but this is a big building.'" He said, '"Well come on,
I'll take you, I know where it is.'" Clarence took me over to Rosensteil's office
and he had a table over in the conference room and all these people sitting
around it. My friend Gasenheimer was sitting there and when I went in the, the
guy I said was President earlier,
? Becker?
SHAVER No, not Sid Becker. Sid wasn't there. Anyhow, he had been President and I
had known him during the American Medicinal deal, he was sitting there and when
I walked in the door, he got up and he said, '"Ben I didn't know you was in New
York. So glad to see you.'" And very gracious to me you see. Gasenheimer, I had
been with Gasenheimer all day, he knew I was there, and the credit man and the
cashier who was one of Rosensteil's buddies. There was eight or ten of 'em
around the table and he had some questions about the notes, these notes that we
had taken for whiskey and who was collecting them and so forth and wanted to
know what I was doing about it. I said, '"I'm doing nothing, Mr. Rosensteil. I
was instructed about two years ago to bring them to New York and turn them over
which I did. Mr. Popkin, the cashier gave me a receipt for about five or six
million dollars worth of that paper, notes and warehouse receipts and I presume
that your organization here has been handling it. I don't know a thing about
what's happened to it sir.'" Well, of course, then some of those guys was hunting
the whole office. I put some of these guys in a hell of a hole, I'll tell you
that. But he said, '"Well, thank you Mr. Shaver. You can be excused.'"
SYVERTSEN Glad to get out.
SHAVER I was gone and that was my last encounter with Lou Rosensteil. I'd had
all I needed, right there.
SYVERTSEN Mr. Shaver would you discuss in some detail the regauging and the
taxation structure for the period that you were involved.
SHAVER When whiskey is being dumped for bottling, you take the barrels out of
the warehouse and the storekeeper-gauger again is in charge of everything. And
under the old Carlisle Allowance which was in existence up until the time I left
the industry 42 years ago, each barrel stood on its own. Lets take as an example
a barrel that started out in life with 48 gallons, 48 proof gallons of liquor.
Four years later you take it out and to bottle it. The store keeper gauger
weighs the content, checks the proof of the content, and based on the table, you
get an allowance of so many gallons for evaporation that has disappeared during
the four years that this barrel has been in storage. Now lets just assume that
here is a barrel that started out with 48 gallons in it. When we regauge it, it
has 38 gallons. The Carlisle Allowance Table says it should have 39 gallons. So
we're, you're assessed the tax on one gallon that you don't have. You've got to
pay as a minimum on 39 gallons. So you're assessed tax on this one gallon that
you do not have in that barrel. The next barrel you come to, when you gauge it,
its got 40 gallons in it. The Carlisle Allowance says that you can be down to
39, however, you have to pay tax on the 40 gallons. In other words, you cannot
offset the shortage of one barrel against the overage in another barrel. Each
barrel is a unit in itself.
SYVERTSEN So you lose both coming and going in that situation? Do you recall
when the Carlisle Allowance was stricken?
SHAVER No. It was after my day. You see, I don't know what's happened, I didn't
know what happened after 1942, any details at all. I had other big problems to
handle and I rubbed all of that out of my mind.
SYVERTSEN Well, thank you so much. I thoroughly enjoyed this.
