Who's Afraid of the Whiskey Trust?

So the context for this Eve of All Hallow's Eve blog post is the Whiskey Trust, a monopolistic coalition of alcohol distilleries that accounted for nearly all the alcohol produced in the US in the 1890s, and the relationship between the industrial production of alcohol and the manufacturing of synthetic flavoring additives. But there's so much more. This story's got it all. Congressional hearings! A ruthless corporation! The virtuous and honest traveling salesman who helps bring it down, only to be later exposed as an unscrupulous villain! A million dollar lawsuit! Naked short selling! Lots of and lots of alcohol!  

Just a little reminder of the importance of moderation, from the prints & photo collection of Library of Congress. 

Just a little reminder of the importance of moderation, from the prints & photo collection of Library of Congress

Before I get into the story, though, I need to explain some things about whiskey and how you'd make it, if you were in the business of making whiskey, rye, or bourbon, circa 1893. First, you'd get some grain: most often corn and rye here in the US. Then you'd malt it, to convert starches to sugars; then, allow it to ferment, converting sugars to alcohols with the assistance of some hungry yeasts. You'd then distil this odorous slurry, to separate the alcohol from water and other materials in the fermented mash.    

What you've got at this stage is a solution that is mainly ethyl alcohol, but also a mixture of higher alcohols that goes by the name of "fusel oil." The concentration of fusel oil in this "raw" distilled product not only gives it a nasty flavor, it has some pretty nasty effects on the human body. These are the chemical compounds that trigger hangovers, and worse — blind by bathtub gin, dead by moonshine.

How do you turn this somewhat grody distillate into something drinkable, desirable — into whisky? In the late nineteenth century US, you've basically got a choice between two processing methods. You could call them rival methods, as each associated with different interests, technologies, economic calculations, and forms of labor.  The products of these methods are sold under different names: "straight" whisky or "rectified" whisky.

Option one: the distilled grain can be aged in charred oak casks, typically for one to ten years. Chemical changes during this period convert much of the objectionable fusel oil into pleasant tasting, less noxious compounds — organic ethers, mainly. Tannins and other compounds also leech out of the oak casks, adding flavor. This is known as "straight" whisky.

Technologies such as Coffey's Continuous Still greatly facilitated large-scale alcohol manufacturing.

Technologies such as Coffey's Continuous Still greatly facilitated large-scale alcohol manufacturing.

Alternately, you can put your raw whisky through further distillations and through a process known as rectification to eliminate the higher alcohols, resulting in increasingly pure ethyl alcohol. By the 1890s, various material and design improvements in distillery equipment have made this process faster, cheaper, less labor-intensive than ever before, and more efficient at producing large quantities of near-pure ethyl alcohol.

The problem is that in removing these harmful and undesirable impurities, you're also removing the molecules that contribute to flavor and aroma, not only the fusel oil but also essential oils and other compounds from the grain and malt. You end up with neutral spirits — pellucid, insipid — which have a market in manufacturing, medicine, and scientific research, but which are decidedly not recognizable as whiskey — and not a consumer product. So how do you get your whiskey back?

This is where a group of people known as "rectifiers" come in.  Licensed rectifiers, who often acted as liquor wholesalers, were permitted to blend neutral spirits with aged whiskey or rye, to produce a swill that was often cheaper, and sometimes also better in some regards, than the "straight" goods. (Witnesses at the Whiskey Trust hearings testify that blending produced a smoother, more consistent product, and one that caused fewer headaches — because of the lower concentration of fusel oil. Kentucky Rye and Bourbon, one Whiskey Trust distiller says, "remain too high flavored for use" even after aging, "and the use of spirits which is absolutely pure is what makes them more palatable.")

Or, instead of mixing spirits with straight whiskey, rectifiers had another option: they could add flavoring, coloring, and other additives to the neutral spirits to give it the desired taste, aroma, and appearance.

By 1893, rectifiers were using flavoring additives to transform spirits into a full range of alcoholic beverages, not only whiskies but also "domestic" gins, brandies, and rums. A late nineteenth-century catalog and manual from Alexander Fries & Brothers, Cincinnati chemists who were one of the largest domestic manufacturers of flavoring additives for spirits, lists seven variations on "Bourbon Essence": Bourbon Essence no. E, Bourbon essence no. 2, Cynthiana, Harrison County, Kentucky, Paris, and sour mash. The catalog lists a similar number of Rye Essences, including Pennsylvania, Pittsburgh, Monongahela, and Robertson County. Likewise for various gins (Old Tom, Holland Gin, Schiedam Schnapps, London Dock), Rums, Brandies, and wines.

These lists of flavorings gives a sense of the variety of liquors that were available, and of the distinctions that had some commercial significance. Because these flavorings claimed to reproduce the particular sensory qualities that distinguished each of these varieties, they allowed rectifiers and wholesalers to tailor their offerings to local tastes and drinking preferences — and also to quickly shift the character of their inventory when necessary.    

Different whiskey labels from Jack High and Clayton Coppin's article, "Wiley and the Whiskey Industry: Strategic Behavior in the Passage of the Pure Food Act," Business History Review, Summer 1988.

Different whiskey labels from Jack High and Clayton Coppin's article, "Wiley and the Whiskey Industry: Strategic Behavior in the Passage of the Pure Food Act," Business History Review, Summer 1988.

So, whether flavored with aged whiskey or with whiskey essences, the spirit-based product was known as "rectified" whiskey, or sometimes as blended or compounded whisky. By the beginning of the 1890s, rectified whiskey comprised about half of the whisky consumed in the U.S.

Which brings us to the Whiskey Trust investigation. In 1893, the House Judiciary Committee launched an investigation into the business practices of an Illinois corporation known as The Distilling and Cattle Feeding Company.  The Distilling and Cattle Feeding Company (aka and henceforth, the Whiskey Trust) produced only neutral spirits for rectified whiskey — not "straight" whiskey. By the time of the investigation, they dominated the market. More than ninety percent of the alcohol sold in the United States was manufactured in their distilleries.   

The main question before the House Judiciary Committee was whether the Whiskey Trust was engaging in anti-competitive practices. I won't go into the details here, but basically, the Trust controlled a large network of distilleries, and was using a system of rebates to compel wholesalers and merchants to buy exclusively from them in order to drive competitors out of the market and exert a monopolistic control over prices. The Congressional inquiry had little effect — it was unclear whether they had the authority to break up the corporation — though the Trust itself filed for bankruptcy in 1895, and subsequently reorganized in a less market-dominant form.       

But inextricable from this investigation of commercial practices was an inquiry into the substance of the product they were manufacturing, whether there was something suspect or against public interest inherent in the very nature of rectified whisky. Indeed, many in Congress wondered repeatedly whether it could rightfully be called whiskey at all.  

There appeared to be a connection between the (allegedly) illicit profits of the Whiskey Trust, and the specious flavor of ready-made whiskey — both seemed unearned, dubious, untethered from solid virtues and values.  

The Judiciary Committee hearings kicked off with a bombshell witness, James Veazey. Born in 1854, in Hamilton County, Ohio, Veazey had worked as a traveling liquor salesman since 1878, peddling whiskies, brandies, gins, and other spirituous liquors for a half dozen companies in Ohio, Kentucky, and Illinois. This included three years working for Alexander Fries & Brothers, chemists, of Cincinnati, where, he became privy to "what is known as the 'secrets of the liquor trade.'"  He assures the Judiciary Committee: "I became acquainted with its entire manipulation."

But after ten years of this, as the 1880s drew to a close, he had some sort of crisis. "Broken health compelled my return to Cincinnati," he testified. He was off the road for two full years, and appears to have only worked intermittently, resigning his most recent position on the first of January.

Over two days of testimony, Veazey let Congress in on the "secrets of the liquor trade," showing them exactly how a dealer could produce "any kind of liquor that you want" with "five minutes' notice." The transcripts record a man unspooling an easy, confiding patter:

"Say an order comes in for any class of goods, say Jamaica rum; Jamaica rum essence is put into [spirits] and it is colored with burnt sugar and the name branded upon it as the law requires it shall be stamped, and away it goes. Say another order comes in for gin, and the spirits is filled out of the same tub, flavored with gin essence, colored with sugar, sirup, or glucose, and away that goes. Yes, sir; anything you want, and it is generally in use, and represents to-day one-half of the liquor business of this country."

Veazey dutifully and colorfully answers the Congressmen's questions, providing documentation at times, but drawing dramatic authority from his personal experience. For instance, asked whether the flavoring essences are poisonous, he replies: "I am not a chemist, but I have been warned when in the employ of these people not to take the crude material in my mouth."

On his second day of testimony, Veazey added some show to his big tell. He brought in two demijohns of spirits, as well as "a number of bottles containing essential oils, essences, etc." and stirred up a full bar's worth of libations for the Judiciary Committee.

Beginning with neutral spirits, he added a drop of Jamaica rum essence, some coloring, some simple syrup, and passed out tumblerfuls for the members to sample. "Does it smell like rum and taste like it?" he asked. I picture the tippling congressmen nodding in affirmation, all except the most teetotal of the bunch, who perhaps deigns only to stick his long and disapproving nose into his tumbler to take a long and disapproving sniff. Veazey then demonstrates the effect of another additive ("bead oil") that doctors a watered-down rum to make it run thicker, like full-strength liquor. He mixes up some rye whiskey, then "ages" it with other essences, prune juice, and raisin oil, to imitate successively older bottlings — three year, five year, and even "velvet" whisky, aged 30 years in oak casks.  

Throughout his testimony, he underscores that the ultimate dupe is the consumer. "The average man... is unable to protect himself, not understanding these imitations... at the time of purchase... falsely represented to him."

But what, really, makes the imitation so deplorable? Consider that the persuasiveness of Veazey's demonstration depended on the undetectability of the imitation, on the high quality of the flavoring. If whisky, rum, cognac made from alcohol and flavoring essences were bad imitations, then they would be less of a problem; frauds could be sniffed out, unscrupulous agents and manufacturers driven out of the market if substantially inferior to the real thing.

From the perspective of the chemists who manufactured flavoring essences, their products were directly related if not chemically identical to the compounds that gave "straight" liquors their flavors. Entered into the Congressional Record of this investigation is the complete text of a Manual for Compounders, published by Fries & Brothers — a handbook for users of their flavoring essences — which I've already quoted from above. "All natural old liquors (straight goods) contain certain odorous compound ethers arising from fermentative processes and slow oxidations," instructed the manual. But these sluggish processes can be abbreviated by chemical reactions, producing ethers that are "the synthetical reproduction of those manufactured in nature's laboratory." Moreover, chemists who manufacturing flavoring essences often began with a raw material sourced from alcohol distillation — fusel oil, those higher alcohols, removed during distillation and otherwise a waste product. The question is whether the transformation of an undesirable waste material to a pleasant and valuable one would be effected by the oxidative effects of time, or the directed and deliberate efforts of the manufacturing chemist.

When mixed with high-quality pure spirits, Fries & Brothers claimed that its flavoring essences would give "the most perfect imitation of the natural products." "Say Fina... Exactly As Good As the Best!" From Ed Ruscha's Twenty Six Gasoline Stations. 

When mixed with high-quality pure spirits, Fries & Brothers claimed that its flavoring essences would give "the most perfect imitation of the natural products." "Say Fina... Exactly As Good As the Best!" From Ed Ruscha's Twenty Six Gasoline Stations. 

In other words, if the way that whiskey changes as it ages in the barrel can be comprehended as a chemical process, then why not reproduce that process more efficiently, and thus more cost-effectively? Is this not one of the imperatives toward improvement that drives innovation? Yet this argument failed to be persuasive to many of the Congressional inquisitors and witnesses, who seemed to accept that there was something inherently inferior about whisky produced this way.

But you may be asking — Hold up, wasn't the problem here that these flavoring additives were perceived as harmful or dangerous? While this was certainly an issue of concern to some, the investigation concluded that they were not harmful, based on the testimony of none other than Harvey Wiley, chief of the Bureau of Chemistry and one of the driving forces behind the Pure Food & Drugs Act. Wiley gave a lengthy account to the Judiciary Committee about the chemistry of whisky production and flavoring essences. He stated repeatedly, and pretty conclusively, that the compounds used in flavoring essences are unlikely to be harmful in the quantities they are used: "All ethers employed by manufacturers of essences are undoubtedly not poisonous in the quantity so used. In fact, ten to fifteen times the amount employed could have no harmful influence." Coming from the man behind the "poison squad," this means quite a bit. (He would later take an explicitly oppositional stance against rectified whisky, but his shift in position was likely due to the coalition politics of getting his act passed.)

Even though he has a chemist's outlook on these matters, Wiley can't shake the belief that there's just something better about cask-aged whisky. Asked by a Congressman whether a doctor's prescription for whisky (remember, whisky was not just fun, but also medicine!) would be as effective if filled by "six-minute-old whisky" as the "real article of whisky," Wiley begins: "Well, I should say it would produce the same physiological effect." But then he hedges. "If I was a patient I would not like to have the spurious goods given to me, and in fact, I should want to be treated in a better way, but as far as the physiological stimulating effect is concerned, I do not think there is a difference, provided, of course, it is a good imitation."

Setting aside the question of what makes a "good imitation," Wiley did not manage to produce any solid evidence for his preference. His final explanation relies on the persistent uncertainties of medicines, whiskies, and their modes of therapeutic action. "While the mixed goods" — ie, the flavor-added spirits — "do not contain injurious bodies, they may not contain and do not contain all the beneficial bodies which the natural goods do contain." What these beneficial bodies might be is left unstated.   

Back to Veazey, though. Reading his testimony, I became increasingly intrigued by the man. Who was this guy? What was he all about? What were his motives?

I imagined the life circumstances of an itinerant liquor salesman in the boom-and-bust late nineteenth century, going from town to town in Ohio and Kentucky, with each little town looking like a Currier & Ives print: clear and mellow weather, a horse-drawn carriage, a forest, a smokestack or steam engine to indicate the recent arrival of the future. In order to sell his wares, a salesman must first sell himself; trustworthiness, reliability were precisely the qualities that he had to persuade his customers that he possessed in order to make the sale. Smooth-talking Veazey, on the stand before the Judiciary Committee, seemed a natural-born salesman. But yet there was something amiss, as well, and not just because of his (unelaborated) pang of conscience, or whatever it was that caused him to reveal the secrets of his erstwhile business. Why did he change employers so frequently? What was behind his "broken health"?

Digging further through the documents, it turned out that Veazey was selling Congress a story. His testimony was not a total sham, but an inflationary account, and one designed to provoke a market recoil from which he had schemed to skim some profit.

The backstory began to unfold in newspaper headlines almost exactly seven years after Veazey showed Congress how simple and quick a job it was to turn plain spirits into old whiskey.

"J.M. Veazey's $1,000,000 Stock-Jobbing Congressional Tip Suit Thrown Out," ran the headline on the front page of the February 20, 1900 Washington Weekly Post. "Persecutes Trust for Gain: Plaintiff Loses Action to Recover Share in Stock Exchange Profits," read the Omaha Daily Bee's headline of his subsequent loss on appeal in February 1903.

The articles explained that Veazey had lost his suit to recover $1 million dollars from Henry Allen & Company, New York stockbrokers. In his court filings, Veazey laid out the whole racket. He claimed to have instigated the Judiciary Committee investigation of the Whisky Trust in collusion with Allen & Company, as part of a short-selling scheme to cause the price of Distilling & Cattle Feeding Company stocks to plummet.

In the 1890s, Veazey seems to have been way, way down on his luck. He'd only just gotten back on the road again, only to find the viability of his traveling salesman gig hamstrung by the Whisky Trust's practices. He seems to have been grumbling widely about how the Trust did business — this was a moment when Americans were extremely anti-monopoly, riled up against the depredations of large corporations, vast new capitalist entities. Fatefully, in the autumn of 1892, Veazey met a certain Mr. Flagg in New York, who listened to his gripes and saw a business opportunity. Flagg told Veazey that there would be "an opportunity to make considerable money out of the decline of the Distilling and Cattle Feeding Company's stock" if the practices Veazey described were publicly exposed, "and he thought it would be well for [him] to see and consult with some broker here in New York."

Flagg introduced Veazey to Allen, the stockbroker, on January 5. At the time, there was no investigation of the Whisky Trust pending or proposed. Veazey agreed to go down to Washington and "stir up this question," sharing damning information about the Trust to "any member of Congress who could introduce a resolution for an investigation of this." The goal was to provoke enough attention and outcry to cause a drop in the share price of the Distilling and Cattle Feeding Company. Astonishingly, Veazey does seem to have played a big role in making the investigation happen. He got Congressman Burrows of Michigan hooked on his story, and during the investigation, he actively conferred with the Judiciary Commitee chairman, provided witnesses and lists of questions, especially those that could most effectively undermine the Whisky Trust's president.

So how exactly was this supposed to net any money? Essentially, Allen & Co. would sell shares of the company's stock that they did not technically own on the bet that the price of the equity would drop in the future, when they would actually purchase the shares that they had sold — naked short selling. The firm's profit was the difference between the price of the shares at the beginning of the contract, before Veazey's provocation of the investigation, and after Congressional action caused the share price to fall. Allen & Co. contracted to share these profits with Veazey. The transaction involved 3000 shares, and Veazey received nearly $6,237.81 for his efforts.

But he felt that he had been defrauded out of much, much more. Hence the million dollar lawsuit, which was not for damages, but for his fair share of profits. Here's a good point to note that Veazey may have been a bit delusional, a bit unhinged.

Veazey appealed, twice — though Appellate Court and the New York State Supreme Court reaffirmed the earlier judgment, which declared the contract invalid because it was counter to the interests of public policy and public morality. The court rulings spared to harsh words in condemning Veazey's actions. He was a scoundrel, manipulating public policy for his own personal benefit, not that Allen & Co. was much better. Not only did Veazey not get his settlement, he was forced to pay all the stockbroker's legal fees.

So what can we learn from this tangle of conflicting interests, claims and representations?

A central, driving motif of life in late nineteenth century America is growth. Not only is the nation experiencing a tremendous economic, demographic, and territorial expansion, this is accompanied by a sort of hypertrophic elaboration of the material and social possibilities of life.  The world is crowded with novel technologies, consumer goods, sensations, pleasures, but also new ways of adding and extracting value, of deriving a profit, of making one's way in the world. But this growth and expansion is inextricably bound with concerns about fraudulence, adulteration, speculative bubbles, fake currencies. The verso of the self-made man is the confidence man. Is the growth all just illusory? Is it mere inflation, puffery, hot air? Are these multiple new pleasures empty, or worse, are they actual garbage?

Understanding the meaning of flavoring additives to American consumers in the waning years of the nineteenth and dawning years of the twentieth century means recognizing this prevailing context. This fretting over the relationship between apparent qualities and actual value. And in the case of whisky, what makes its flavor legitimate? Time or chemistry? Was the source of flavor the years the whisky spent mellowing in oak casks? Or was flavor a chemical effect that could be summoned from chemical reactions? And if the aged whisky, which gets its flavor "honestly," is reflexively valued above the "good imitations" of firms like Alexander Fries, then what grounds are there to value the skilled work of the manufacturing chemists, whose expertise is revealed and hidden by the undetectability of these imitations? 

Far from being settled in 1893, the fundamental questions here continue to be unresolved.

I'll close this with the earliest trace of James Veazey that I've found, from 1873, before his furious lawsuits, before his star-turn before the Judiciary Committee, before his broken health, before he went on the road peddling liquors. An article in the Pacific Rural Press from March of that year recounts a meeting with a man from Covedale, Ohio, at the previous summer's Cincinnati Exposition. This man had news of a remarkable new fruit: "a crystal white blackberry." It had a "peculiar and delicious flavor." It was "very juicy." And it grew on a hardy bush that never failed to produce a crop.

Luther Burbank's iceberg blackberry, perhaps related to that Ohio crystal varietal...

Luther Burbank's iceberg blackberry, perhaps related to that Ohio crystal varietal...

According to the Pacific Rural Press: "He found the fruit would sell for three or four times as much as the black kinds. When taken to the Cincinnati markets it created such an excitement on account of its beauty, extra quality and rarity, that it sold readily for one dollar per quart." Even better, it grew prolifically and dependably, on bushes unsundered by the blights that ruined other blackberries. 

The man touting the news of this remarkable, profitable, beautiful and delicious fruit was James Veazey, of course. And I'll let you decide: was what came after coherent with this first glimpse, or was it a departure?