Fergus viewed liquor duties as tax on essential food

The following is a re-print of a past column by former Advertiser columnist Stephen Thorning, who passed away on Feb. 23, 2015.

Some text has been updated to reflect changes since the original publication and any images used may not be the same as those that accompanied the original publication.

Last week’s column recounted one of District Inspector Charles Romain’s raids on an illegal distillery in the north of Wellington.

Such operations consumed a great deal of Romain’s time, but he had other duties. Chief among them was the supervision of legitimate distilleries, making certain they kept proper records, paid the appropriate excise tax, and filled reports in a timely manner.

Of the distilleries in Wellington County, only that of David Allan in Guelph could be said to operate completely within the bounds of the law. By comparison with the others in Wellington, Allan’s distillery was a giant. One year it ranked third among Ontario’s distilleries in output, exceeded only by Gooderham & Worts in Toronto and Hiram Walker at Windsor.

District Inspector Romain became suspicious of the operation of the Fergus and Elora distilleries during the first year he held the office. These distilleries filed their reports and paid some tax, but Romain soon concluded that they were grossly under-reporting their output, and shortchanging the government of its rightful revenue. Charles Romain regarded the situation as a personal affront, as well as a violation of the law.

Changes in taxation immediately after Confederation were the main reason for the sudden boom in illegal distilling, by both moonshiners in the bush and the legitimate distilleries. The taxes more than doubled. The excise tax on Canadian whiskey jumped to 30 cents per proof gallon, and the import duty on imported spirits rose to 65 cents per gallon. At the retail level, cheap whiskey rose dramatically in price, in the range of 20 to 25%. Since the excise tax was based on the amount of alcohol, not the retail value, better whiskeys rose less on a percentage basis.

Small local distillers had been suffering through the 1860s, a result of inconsistent standards and abysmal quality. Increasingly, drinkers preferred the products of the large distilleries, even though the cost was two or three times as much as the local product. The tax changes put additional economic pressure on local distilleries. As well, many of their operators disapproved of alcohol taxes on principle. This was an old notion among the Scots, who viewed whiskey duties as a tax on an essential food.

This was the climate in which Charles Romain and his revenue officers had to work. With a small staff, Romain had to allow distilleries to operate partially on an honour system, with periodic announced inspections. When a distillery was expected to be idle, excise officers would put seals on the equipment, which they would remove when the distiller wanted to resume production.

One of Romain’s inspectors, John Whyte, had been eyeing the Fergus Distillery during the early months of 1869. The operator, George Wyllie, had himself in some minor skirmishes with revenue officials in late 1868. Foolishly, he thought he could outfox Charles Romain. He would fail, but would prove to be Romain’s most persistent and clever quarry.

The Fergus Distillery was located on the north bank of the Grand River in downtown Fergus, about 30 yards downstream from the dam (the area is now a parking lot). Originally part of the first milling complex in Fergus, it had been leased by Wyllie for much of the 1860s. Wyllie used grain rejected by the adjoining flour mill as his chief ingredient.

Wyllie filed reports at the beginning of January 1869, but nothing after, and seals had been put on the equipment and building. On May 11, Whyte was passing through Fergus and thought he could detect signs of activity at the distillery. He entered the building, and found some mash cooling in the equipment. When confronted, Wyllie shrugged his shoulders and said that he had no idea how it got there. Whyte didn’t argue the point. He immediately telegraphed District Inspector Romain.

Accompanied by his sidekick, excise collector James Gow, Romain arrived in Fergus by carriage some hours later. Romain immediately seized the distillery, and made a thorough inspection. All he found was a tub of yeast hidden among some empty barrels. He had better luck in a pigsty that adjoined the distillery.

Wyllie had been feeding the slop to hogs, which he fattened as an additional source of revenue. There were no hogs in the building when Romain investigated, but great heaps of pig manure covered the floor. Under one of them Romain discovered a huge mash tub containing 60 bushels of fermenting grain, its presence masked by the porcine scented zephyrs rising from the manure.

Sensing there was even more to discover, Romain continued to poke around the site. He found a hand pump and some piping which could be hooked up to connect the mash tub to the distilling equipment. Romain remarked sarcastically that it was a shame to break up such an ingenious operation. Still not satisfied, Romain decided to search Wyllie’s office a few days later. Here he found keys and other equipment that could be used to tamper with the official seals.

Things did not look good for the appropriately named Mr. Wyllie. The government had the power to seize and dispose of all the equipment, as well as impose a heavy fine. A popular man locally, Wyllie had the sympathy of the majority of Fergus residents.

As it turned out, Romain and the courts proved to be more lenient than they might have been. George Wyllie was assessed a fine of $2,200, and the government returned the distillery to him on July 15, 1869. This was an immense sum, sufficient to consume the profits of a couple of years of production.

Wyllie should have quit when he still had some of the distillery’s assets, or at least resumed production while remaining completely within the letter of the law. Foolishly, he assured Romain that he would not resume distilling, and he took out no licence after regaining possession of his property.

Wyllie did not realize that District Inspector Romain had built a network of spies and informers. One of them sent a telegraph message to him on Sept. 1, 1869. Romain immediately hired a carriage and picked up his trusty sidekick James Gow, as well as two excise officers. The group headed immediately for Fergus, arriving just before 2am on Sept. 2.

While Gow held a lantern and Romain gave a nod, the revenue officers smashed in the locked door of the distillery. Inside, Romain saw that the seals on the equipment were removed and tampered with. The door to the boiler room appeared to have an intact seal, but Romain and his men discovered that the door and its frame could be removed to gain access to the boiler. There were tubs of mash fermenting, and some mash in the distilling equipment.

Romain noted some changes to the interior since his previous visit less than four months before. The pipe that carried the slops to the yard and adjoining yard was gone. Romain found a replacement, partially buried in the ground, that carried slop and steam to the water wheel at the adjoining flour mill. The turbine mixed the slop with water and cooled it, thus avoiding telltale smells and rising steam.

Very clever indeed. Romain was impressed. So impressed that he seized the distillery again.

Commenting in the News Record, editor John Craig wrote, “We believe Fergus might claim to have the champion distillery for charges of revenue fraud, and defy the world to beat it!”

To the surprise of many, and particularly Inspector Romain, George Wyllie managed to squeeze out of his second major jam with another hefty fine, avoiding both a jail term and forfeiture of his whiskey making assets. Finally realizing that he ranked at the top of Romain’s suspect list, Wyllie reopened the distillery.

George Wyllie, in an attempt to improve his product by aging it, set up an outbuilding as a bonded warehouse. The building had seals, and could only be opened in the presence of an excise officer. Bonded warehouses allowed distillers to age their whiskey, and not pay excise tax until it was removed from the warehouse and sold.

Wyllie and other smaller distillers saw an increased market late in 1869 after the Gooderham & Worts distillery in Toronto burned down. G&W was then the largest in Ontario, with over 30% of the total market.

All apparently went well for George Wyllie, until September of 1870, when a fire destroyed his bonded warehouse. Firefighters removed 60 barrels of whiskey, but the rest, according to Wyllie, was totally destroyed.

Before the ashes had cooled, District Inspector Romain arrived in Fergus by train. He didn’t believe a word of the story about all the whiskey being destroyed.

He was sure Wyllie had broken the seal to the building, removed most of the whiskey, and then torched the building. He knew that most Fergus residents supported Wyllie in his ongoing disputes with Internal Revenue, and that Wyllie would have little difficulty in recruiting confederates.

Romain demanded that Wyllie pay the excise tax on all the whiskey recorded as being in the building, including that allegedly burnt. Wyllie adamantly refused.

Immediately, Romain seized the surviving 60 barrels of whiskey, and on Sept. 22, 1870 he sold the liquor at public auction. The proceeds failed to meet Wyllie’s outstanding tax bill. Had the warehouse been full, or largely empty, at the time of the fire? After almost 150 years, there can be no definitive answer.

This auction marked the end of George Wyllie’s distilling career in Fergus. He left town, presumably deciding that his scant remaining assets were best invested in a one-way ticket on the Great Western Railway.

The Fergus Distillery never reopened.

(Next Week: The continuing adventures of District Inspector Charles Romain. Part 4: It was just as bad in Elora!)

*This column was originally published in the Wellington Advertiser on Aug. 9, 1999.


Stephen Thorning - 1949-2015