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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 1:00merger papers and install an accounting system to operate the business. One of the partners in the accounting firm Mr. Henry C. Hymandinger 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. Hymandinger took me as his deputy to the office to do all the work. The office was then at Delre 2:00Whathman Company office out on Burnheim 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 Whatham companies. They had so many barrels of whiskey in bond. They had the government to run a test regauge on 3:00this 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 4:00never 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 5:00recall, 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 6:00a 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?

7:00

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 8:00would 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 9:00unify 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. Whatham 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.

10:00

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 Owings, Illinois?

SHAVER Well I think it was all out of Owings, 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 Owings, 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.

11:00

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 12:00piece 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. Whatham 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 Hale and Hale in Owensboro, he had been the bookkeeper at Hale and Hale 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 13:00of 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. Whatham. 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.

14:00

SHAVER Well, there were practically none. 'Cause none of these companies had had audits made much. Now R. E. Whatham had had audits made by Mr. Escuit _____ Escuit's father, Escuit 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. Amle Schwurtzoff and Leo Grungross. F. S. Ashbrook and Company in Cynthiana was another one that came in. It was the, owned by Lester GeCoby, who later on became president of Chandly Distillers. Sunnybrook Distillery joined in 15:00this 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 Wisecoff 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 16:00I 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, Wisecoff 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 Wisecoff, number one. The Whatham family were very charming people and Mr. R. E., Mr. O. H. and Mr. J. B. Whatham were 17:00brothers. 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 Burnheim 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 18:00business. 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. Schwurtzoff and Mr. Grungross. They were both vice presidents. American Medicinal had more vice presidents than a 19:00New 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 20:00Spirits 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, 21:00and 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 22:00gallons. 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. Whatham plant on Burnheim 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 23:00that 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. Whatham 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 24:00I 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. Whatham 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. Whatham 25:00and my old friend Dan Wisecoff were there. They were the two that were there. Mr. Whatham 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 26:00and 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. Whatham 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 Burnheim Distilling in Louisville who had gone in 27:00business 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. Burnheim 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 28:00around 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 Haddes and I happened to know Mr. Haddes concluded that the Prohibition _____ Act did not prohibit the manufacture of whiskey, but prohibited the sale for beverage purposes only. So they started up their 29:00distillery 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.

30:00

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 31:00Amil Schwurtzoff and Leo Grungross who were vice presi dents 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 Sailinger and Company at 17th and Breckinridge Street. One known as Aster 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 32:00in. That they had hauled all their whiskey to Mexico. I also understood that a number of other small distilleries in Kentucky, particular ly 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 Burnheim Distilling Company which had long since abandoned all of their properties and they owned as I recall about 6,000 33:00barrels 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 Burnheim family so far as I know had long been out of the Burnheim 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. Burnheim. I am positive that by that time Mr. I. W. Burnheim 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 34:00time, 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. Burnheim, but when Mr. Schwurtzoff and Grungross 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 35:00remodeling 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 Aster 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 36:00whiskey 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 Whathams. Mr. O. H. Whatham and Mr. R. E. Whatham 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. Whatham. He had been 37:00quite 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 38:00burned 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 in 39:00the 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. Whatham'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 Schwurtzoff and Grungross had an office, at that time, National Distillers was at 52 William Street, just off of 40:00Wall 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. Grungross was in Louisville and he called me and he said, "Mr. Shafer, vhen you vas in New York you told Amle and 41:00me and that you vould like to vork for us. Vas you serious?" I said, "Very serious Mr. Grungross." "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 Burnheim 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 42:00day. 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 43:00Louisville 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 ovate the tax on the 44:00whiskey that was unavoidably destroyed. They ovated 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 Burnheim, 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 45:00floated 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 Burnheim 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 Burnheim.

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 46:00keep 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 47:00believed 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.

48:00

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 Burnheim 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 49:00of 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 50:00cisterns 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 51:00were 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 Burnheim, 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. 52:00Every 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 53:00experience in that field probably than any other public accountant in the United States. But in continuing at Burnheim 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 Whatham ________ 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 54:00and 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 55:00the 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. Grungross 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 56:00six 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. Schwurtzoff and Mr. Grungross did all the selling practically. Schwurtzoff 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 Parfee, Mr. Rafferds 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. Rafferd prospered and we got to producing 57:00and 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 58:00dollars 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 59:00anything about the reasons for the acquisition?

SHAVER I don't remember the detail all of it, but Schwurtzoff and Grungross 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 60:00we 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 Schwurtzoff and Company then, they had a partnership known as Schwurtzoff and Company. Schwurtzoff 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 61:00stock 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. Grungross was a very quiet man, small, gray-haired man, soft spoken, very quiet. Schwurtzoff was a husky, real dynamic fellow. Always just bubbling 62:00with 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. Grungross would usually come to Louisville. Mr. Schwurtzoff 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 63:00$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. Grungross 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 64:00our 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. Grungross' nephew Adolph Hursh who was here at this plant, became 65:00the manager of the plant. The man Gab Rosenthol who had been manager since we started at one time had been a part owner of Chandley. And he and Rosensteel, Lou Rosensteel had had a big falling out and there wasn't anything nasty enough either one could say about the other one. Here Chandley bought Burnheim well that was the end of Gab Rosenthol of course. The first thing Rosensteel did he saw that Rosenthol was taken off the payroll. He was out instantly and Hursh was made manager. Rosenthol was a nice, big, noisy guy and I always got along with Gabriel well. I had to cuss him oc casionally because he'd cuss me, but I wouldn't take cussing and he pretty well, he was my best friend even though he 66:00wanted 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. Hursh became manager. A few years later, they decided they wanted Hursh to come to New York, Chandley did. Whatham __________ who was a distiller then, became the manager. And Hursh 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 67:00here 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 68:00haven'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 __________ and Company it was then __________ 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 69:00American 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 70:00property 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 71:00honorable 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.

72:00

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 Burnheim 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 73:00pretty 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 74:00it 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 75:00bill. 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 trea surers, 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 76:00for 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 in dustry.

SHAVER I don't think it was at all. I don't think it chased distilling out of Kentucky.

77:00

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 78:00about. 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 Burnheim one time we made a few thousand 79:00barrels 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 80:00term. 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 Burnheim, in 81:00the 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 82:00considered a fair yield. About four and three quarter gallons per bushel of grain mashed. So we were, now when we sold warehouse receipts at Burnheim, 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 Rosensteel 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 83:00Rosensteel 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 84:00suspect, 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 distil leries. 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 85:00Rosensteel, 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 Medi cinal and I got acquainted with him in 1928 out there. But anyhow Rosensteel 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 distil lery 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 86:00in 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 Whatham ______ was the manager and the races were here and Whatham had gone to the races. Lou Rosensteel blows in in a taxi cab, had the cab waiting out front for him. The switchboard receptionist called me and said Mr. Shaver Mr. Rosensteel is in the lobby. I said, "Oh, my God." So I went out to see Mr. Rosensteel and I covered up for Whatham. I don't whether I 87:00ever did tell him where Whatham 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 88:00of 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 Rosensteel 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 89:00every 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. Schwurtzoff's and Grungross' 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. Schwurtzoff and Mr. Grungross'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. Schwurtzoff's valet 90:00Clarence came in and said, "Mr. Shaver, Mr. Rosensteel wants to see you." I said, "Clarence, I don't know where Rosensteel'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 Rosensteel'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 91:00been with Gasenheimer all day, he knew I was there, and the credit man and the cashier who was one of Rosensteel'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. Rosensteel. 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.

92:00

SHAVER I was gone and that was my last encounter with Lou Rosensteel. 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 93:00the 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 94:00has 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 95:00know 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.