01 May How Tax Evasion Landed Al Capone in Alcatraz
It’s most likely the most famous story about gangsters in the US, but you are probably not aware of how it all went down. Most of us know that Al Capone evaded the law for a very long time due to a lack of evidence.
You also most likely know that it was tax evasion that finally brought him down – it was the only thing, out of a plethora of illegal deeds, that they managed to prove.
But the whole story about how it happened is probably more interesting than the outcome.
The Illegal Empire
Al Capone was dubbed ‘the father of American gangsterdom’ by the chief of the IRS Elmer Irey. And Irey was right, as Capone’s empire was eventually making him some $60 million per year. It might sound like a low amount for someone so famous, but this is nearly $1 billion in today’s dollars.
That was only in the 1920s by the way. His earnings eventually topped $1.6 billion in today’s dollars. Plus, you have to take into account that this was the early 20th century US, which was a lot smaller, both economically and in terms of population at this point.
But how did he finally lose that empire?
The Story of Al Capone’s Demise
Al Capone famously stated at one point – ‘They can’t collect legal taxes from illegal money.’ But it seems that he was wrong, very wrong.
By 1927, Al Capone’s gang was killing all across Chicago, but nothing ever ended up being connected to him personally. The feds couldn’t manage to make anything stick. They even changed tactics at this point and tried to indict him for violating the Prohibition. However, he got out of that as well.
It seemed that nothing could stop Capone, until the Supreme court ruled on May 16, 1927, in the case of US vs. Sullivan, that all gains made in the illegal traffic of liquor are subject to income tax.
But it took almost a whole year for Elmer Irey to realize that he can use this ruling to land Capone in prison finally.
The feds started building a case. In the meantime, the violence skyrocketed, and Al Capone designated as Public Enemy Number One.
Special Agent Frank Wilson and other IRS ‘T-Men’ were collecting evidence through forensic accounting. It didn’t help Capone that he led a very lavish lifestyle, even though he had no income basically, and he thus had next to no taxes to pay.
However, the expert T-Men managed to follow the illegal money thoroughly, and they finally indicted Capone on 22 counts of tax evasion.
He was sentenced to 11 years in prison, he had to pay $811,904 in today’s dollars as a fine, and he also had to pay back taxes that amounted to $3,491,189 in today’s dollars.
His sentence started in an Atlanta prison, but he was quickly relocated to Alcatraz. During his time there his health worsened, and he was eventually sent to a mental hospital to serve the rest of his sentence. Due to advanced syphilis, his mental capacity reduced to that of a 12-year-old, and he eventually died in 1947, being only 48 years old.
If you find this story interesting, bear in mind that we have others like it on our blog. Also, feel free to take a look at our site and see how we can help if you have any IRS problems. You don’t want to end up like Capone!