The U. S. Attacks

Above the roar of City Hall Park, Manhattan, in the big, musty room of the Federal District Court, famed Judge Julian William Mack rapped for order. There was a polite pandemonium caused not by expectant gum-chewers but by 50 lawyers who were trying to find seats on the Defense side of the case. United States v. Sugar Institute, Inc. They filled the jury box (for there was no jury). They flowed over into the spectator rows, squatted on rickety benches. The only one who was sure of a seat was John C. Higgiris of Sullivan & Cromwell, for he was leader of the Defense. Lawyers know him for his defense of New York Life Insurance Co. against Russian policyholders. On the United States side the prosecuting attorneys had all the seats they wanted for they were only two: James Lawrence Fly, 33. and Walter Lyman Rice, 28. Tall, blond, assured, these two young men, both Harvard Law School graduates, eyed the weighty defense counsel with unruffled composure.

As for the public there was none. The public would not understand. Without question the most important case since the indictment of Alphonse ("Scarface Al") Capone, which the public understood very well, this involved the most complicated, jumbled, uncertain set of legal volumes in the U. S.: The Anti-Trust laws.

The Charges, Of no simple and direct crime did the Government charge the Sugar Institute. The accusation filled a 5.000-word booklet, three pages of which were needed to name the 16 companies and 27 individuals whom Lawyers Fly & Rice desired to restrain from further combination in restraint of trade. For four years, said the United States in Fly-Rice words, the Institute had been operating an elaborate and far-reaching scheme to fix high prices for refined sugar. On 44 counts the Institute was guilty, said the United States, of conspiracy, monopoly, coercion. Item: its members have blacklisted certain warehouses, wholesale grocers for refusing to cooperate; they have forced brokers and others in the sugar trade to open their books to the Institute's detectives and accountants; they have induced or compelled beet sugar refiners (none of whom belong to the Institute) to adopt many of their rules, thus restricting their competition. Item: these lawless practices helped sugar refiners to increase their margin of profit 30%, take it out of the public's pocket. To prove their point Lawyers Fly & Rice compared two refiners' profits for 1928, the Institute's first year, with 1927. Biggest, American Sugar Refining Co., jumped from $3,585,000 to $6,568,000; next biggest, National Sugar Refining Co. of New Jersey, from $292,000 to $3,372,000.

On the grounds that all the defendants have been guilty since the Institute was proposed in 1927 and intend to carry on with the "conspiracy." the United States prayed the Court "to dissolve and forever discontinue the Institute," to forbid any further combination of the members . . . and to make the Institute pay all the trial's costs.

The Defense. When the Government filed its suit, sugarmen were amazed. Their denials of guilt were sweeping, explicit. Much of their defense depended on the events that led to the Institute's founding.

In 1927 sugarmen's tempers were short and ruffled. Cut-throat prices, rebates, allowances to favorite customers had demoralized the refiners' business. To make matters worse, there was a steadily smaller consumption, result of a growing public determination to keep down the national waistline.

In this same year, the Coolidge adminis-tration was urging industries to organize into trade associations. "In them," said no less a personage than Secretary of Commerce Herbert Hoover, "lies a road for the elimination of vast waste . . . without destroying competition."

Under these circumstances, Sugar Institute, Inc., got tacit government approval to come into being. It was formed "to establish the cane sugar refining industry upon a basis of sound business practices, to eliminate trade abuses, to promote the consumption of sugar by advertising." Assistant Attorney General William Joseph Donovan said then in a letter to the sugar lawyers that the Government believed the Institute was a bona fide trade association but the Department of Justice would continue to watch it and call upon it from time to time for further information. This the Government did regularly, and apparently all was well. Then suddenly and without warning, President Hoover's Attorney General Mitchell filed suit in March, 1931.

The Institute's leaders have been men whose names are famed to sugar. Earl D. Babst of American Sugar Refining Co., great & good friend of Herbert Hoover. was its first president. Rudolph Spreckels served one term, James Howell Post of National Sugar Refining is now president. Often called Brooklyn's first citizen, Mr. Post is a smallish man, stooped, white-haired, interested in missionary, charity work. Representative of the late Henry O. Havemeyer, head of the sugar trust which was dissolved in 1922, he has been National's president since 1900. Under such men the Institute has accomplished its purpose. Marketing of refined sugar has become uniform; $2.000,000 has been spent advertising sugar's food value; researchers are busy at Mellon Institute in Pittsburgh looking for industrial uses.

The Trial, Lawyer Fly opened the case by gloomily reminding Judge Mack that in the past few years he had been called upon to jail several humble citizens for restraining trade but the defense hardly winced for this suit is civil, not criminal. Lawyers Fly & Rice are not new to trust busting. Besides sugar, Mr. Fly has been after the Asphalt Shingle and Roofing industry. Before that he broke up a combination of rivet, nut & bolt makers. Mr. Rice won his anti-trust spurs against a chicken combine.

Significance. Almost every industry in the land has an association and almost every association is, so far as a layman can see, a legal replica of the Sugar Institute. If Lawyers Fly & Rice, who are directed by Attorney General William De Witt Mitchell and U. S. District Attorney George Z. Medalie, win their case, a victorious Government is likely to proceed, hammer & tongs, against dozens of associations. Thus the case may disturb a larger proportion of industry and commerce. It is in no way similar to many of the anti-trust suits pending which in-clude criminal actions against racketeers charged with intimidating competitors .

Not to be confused with these major issues are the suits brought by many a small company, low in cash, against a rich competitor. Suits under anti-trust laws have developed into a well recognized form of business blackmail. With its last few thousand dollars (or a lawyer on a contingent fee) the small company threatens the big one with a suit for damages because of unfair competition. If a settlement is not forthcoming the racketeer sues for some staggering sum, the victim gets publicity bad for any business, possibly a government investigation.

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