A Saga of Shakedown

A chorus of frenzied cries wailed up from Capitol Hill as a House subcommittee continued to poke at the Internal Revenue Bureau scandals. Almost all the voices were raised in answer to the shrill tones of a sharp-eyed Chicago lawyer named Abraham Teitelbaum. Attorney Teitelbaum, who described his late client Al Capone as "one of the most honorable men I ever knew," is in tax trouble with the Government--a matter of at least $130,000 in unpaid income taxes. It looked as if this trouble would be settled without much difficulty, he testified last week, until two men named Frank Nathan and Burt K. Naster set out to help him. Nathan, of Miami Beach, is a gambler, chiseler and influence peddler; Naster, of Hollywood, Fla., is a former Chicago industrialist who once served a prison term as a tax dodger.

Demand: $500,000. Teitelbaum testified that the pair came to see him last April while he was visiting in Miami Beach. "Mr. Naster told me that--the substance of it was that I was going to have income-tax trouble unless I employed them . . . for $500,000. And I told him they were both crazy . . . They said there was a clique in Washington; that Mr. Charles Oliphant, Mr. Jess Larson, and there was a former collector of Internal Revenue by the name of Joe Nunan, and another who had just resigned, of the Internal Revenue department, Mr. Schoeneman, were all together with Mr. Larson. [They] comprised the whole--I wouldn't say a triumvirate, but a combine --for the purposes of looking around the country to see who are the soft touches, or words to that effect . . .

"Mr. Naster mentioned Mr. Theron Lamar Caudle's name, too; and Mr. Nathan exhibited to me an oil contract in which Mr. Jess Larson's name, Mr. Theron Lamar Caudle's name, and Mr. Frank Nathan's name appeared . . . and they further told me that if I don't go ahead and let them take care of my matter, I was going to be prosecuted and sent to the penitentiary ... I told them to go to hell."

That, said witness Teitelbaum, seems to have been the wrong answer. Not long afterward, he said, he learned that his case was scheduled for criminal prosecution.

The Teitelbaum testimony was backed by a glossy brunette divorcee named Mrs. Shyrl B. Menkin, described by Teitelbaum as a "family friend." She heard much of the talk about the Washington clique, she said, and often heard Mr. Nathan mention the name of Theron Caudle (who was fired last month as head of the Justice Department's tax division--TIME, Nov. 26). Mr. Nathan did this, she said, "to impress me with the fact that the Nathans were such good friends of such an affluent person in the Government."

Occupation: Deals. There were immediate and indignant denials from everyone named in Teitelbaum's saga of shakedown. "Ridiculous," said Joseph D. Nunan Jr., former commissioner of Internal Revenue. "Utterly ridiculous," said George J. Schoeneman, who recently resigned from the same post. Jug-eared Frank Nathan, the key man in the story, was summoned before the committee. He admitted that his chief occupation has been "just trying to find different deals" in Washington. He is "sixty or seventy thousand dollars or maybe more" in debt, he said, but he stops at the Waldorf in New York, at the Mayflower in Washington and plays the horses. He once made a $57,000 commission on sale of a war-assets aluminum plant. But he screamed with rage at what Mr. Teitelbaum and Mrs. Menkin said. "That man is such a vicious liar, and she too, that it ain't nowhere in the world a thing like that," he said. "I couldn't dream in a million years why this man is doing this . . . They're both such good friends of my family." Theron Caudle was his good friend, too, he said, but "I never asked Mr. Caudle for no help about no tax case at no time."

Caudle admitted that he heard four months ago that he had been used in a shakedown threat against Teitelbaum. Because he did not know whether the story was true, he did nothing about it, Caudle said. He admitted that he was a good friend of Nathan and had visited Nathan's family in Florida. "Many people have spoken highly of this family to me," he said righteously. Teitelbaum's Mrs. Menkin had testified that, in Nathan's Florida home, she saw Caudle throw an arm around Nathan and say: "Frank, you know there is nothing I wouldn't do for you."

Hide the Phone. General Services Administrator Jess Larson asked for and got an opportunity to come before the subcommittee to deny the Teitelbaum story. He finished with the Chicagoan quickly, then turned his fire on Nathan. The Larson name was on that oil lease, Larson said, along with Caudle's and 85 others. But he sold his interest when he found that Nathan was involved.

Larson had tried desperately to fend off Nathan's blatant name-selling and influence-peddling and was "chagrined" to hear that Nathan had made money on war-assets deals. "He's the kind of a fellow that when he comes in your office you have to put the telephone under the desk," said Larson. "If you don't, he will pick it up and call somebody and say he is calling from your office."

"Howaya Podner?" After the Teitelbaum act ended, there was a rousing performance by a haughty ex-convict named Larry Knohl. Millionaire Knohl has offices in California, Kansas, New York and Washington, dabbles in oil, real estate, restaurants and race horses. Icily, Knohl let the committee know that he was too big a man to keep small details in his head. Did he report as much as $100,000 a year income from gambling?

"I wouldn't know that, sir," he replied contemptuously, "you'd have to take that up with my tax attorney." Like many another witness, Knohl was called before the committee because of his dealings with Caudle. Knohl was an "investigator" for Samuel Aaron and Jacob Friedus, New Yorkers later convicted of income-tax evasion. With Friedus, he recalled, he met Tax Prosecutor Caudle at the Department of Justice. "Caudle said, 'Mr. Friedus, this office has no persecution complex,' " Knohl testified.

Then he ran into Caudle one day in the cocktail lounge of the Mayflower. Mimicking Caudle's North Carolina accent, Knohl said the Caudle greeting was: "Howaya podner; what yo' doin' heya?" "I told him I wanted to buy a plane," testified Knohl. "Caudle said he had a friend with two planes who needed money."

Knohl bought one of them and Caudle picked up $5,000 commission. Two weeks later, Caudle recommended no prosecution of Samuel Aaron on grounds of illness, although a Government physician said he was able to stand trial.

A Hollow Sound. Their heads spinning from the dizzy course of the testimony, subcommittee members asked the Justice Department to find out who was lying in the Teitelbaum case. Attorney General J. Howard McGrath ordered a grand jury investigation into all aspects of the case, not just the perjury question. Then, in an impassioned speech before the Federal Bar Association (Government lawyers and other attorneys who practice before federal agencies), he defended the honor of the U.S. Government's lawyers. He pinned on the first lapel button in the association's membership campaign, and said in a quivering voice: "Let this button on the lapels of the Government's attorneys be a symbol to all the Teitelbaums, the Nathans, the Nasters and the Menkins that we are unapproachable by their low and filthy position in society."

After the week's testimony, the Attorney General's stirring words had a hollow sound. Wildly tangled as they were, the scandal trails kept leading right back to the door of Theron Lamar Caudle, who was one of McGrath's well-beloved top assistants until a few weeks ago.

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