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February 27, 2020

During most of the 19th century, when fines were assessed against those who tried to evade duties and customs, half would go to the Federal Treasury.  The other half would be split among the informant, who would get one-quarter of the total; and the collector, the naval officer, and the surveyor, who shared the remaining quarter.  Moiety, pronounced MOY-uh-tee, means “half,” and the bigger the whole, the bigger the half.  Until 1874 the fine could even equal the value of the entire shipment.

The moiety system was based on a 1789 law which was designed to increase revenues to the Treasury.  No one had anticipated the excesses which eventually resulted.  In 1872 Collector Chester Arthur notified the Phelps Dodge Corporation they were going to be fined $1,750,000.  The company negotiated the fine down to around $271,000 and paid this lesser amount.  Arthur received one-twelfth, which was equal to more than twenty times the annual income of the highest paid wage earners of that era.  As if this were not outrageous enough, it was later discovered that the total undervaluation amounted to $6,658.78, and the actual loss to the Treasury would have been only $1,664.68!

Congress did away with the moiety system in 1874.  Even Senator Conkling, the Republican boss of New York, voted for the bill which abolished it.  President Grant signed the bill into law.  Here was genuine reform that everyone supported.

Fast forward to 1877:  Rutherford Hayes is President, and Treasury Secretary John Sherman establishes the Jay Commission to further investigate the New York Customhouse.  What more were they expecting to discover?


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