Everyone’s favorite day is coming up—Tax Day! In its honor, let’s not forget about one of the most infamous tax evaders, Al Capone, and the financial due diligence investigations that eventually led to his demise.

As a book lover and proud Chicagoan, I knew I found my next read when I came across Scarface and the Untouchable: Al Capone, Eliot Ness, and the Battle for Chicago by novelist Max Allan Collins and historian A. Brad Schwartz. The book delves into Capone’s infamous bootlegging and gambling network, as well as prohibition agent Eliot Ness’ pursuit of justice for the gangster’s numerous crimes. At just 27 years old, Ness formed a group of prohibition agents dedicated to taking down Capone, a group that later became known as “the Untouchables” after its agents repeatedly rejected bribes from gangsters in an era (and city) notorious for corruption.

How Taxes and Other Financial Records Brought Down Al Capone – and Continue to Play a Role in Modern Investigations

To investigate Capone’s suspected evasion of taxes, the Bureau of Internal Revenue (precursor to the Internal Revenue Service) initially identified and brought forward witnesses and ledgers from local speakeasies, attempting to prove Capone’s lavish spending habits and his connection to bootlegging and gambling enterprises. However, none of these records or testimonies were conclusive enough to prove Capone’s actual income.

What ultimately led to Capone’s conviction was a statement made by Capone’s lawyers indicating their client was willing to pay taxes on an income of $100,000 for the years 1928 and 1929, a statement made during unsuccessful negotiations after Capone’s brother Ralph was convicted of tax evasion in 1930.

While tax records today remain private rather than public information, it is still possible to identify tax forms filed within certain types of cases, including divorces. During one financial investigation, we identified a Form 1040 within a divorce case that shed light on a subject’s reported income, expenses and profit loss pertaining to the subject’s real estate business. Other financial records that are publicly available, such as tax liens, civil judgments and mortgage loans, can help investigators better understand a subject’s or company’s financial situation, including money owed and assets.

The Search for Evidence Continues: Other Key Challenges in the Capone Financial Investigations

  • The use of aliases: Capone rarely used his real name to sign documents, often using aliases such as “Al Brown” or “Albert Costa” instead. This is why financial investigations should always include research regarding whether a subject goes by a nickname, has recently been married and changed their name, or legally changed their name for other reasons. If so, it is important to also research a subject’s alternative name(s), as it may lead to additional court cases, social media profiles or other records of interest.
  • The need for surveillance: Unfortunately for Ness and his fellow “untouchables,” Capone maintained his distance from the crimes to which he was allegedly connected. As such, Ness’ team often trailed trucks suspected of containing alcohol to locate illegal storage areas or potential witnesses—or in the hope one would lead them to Capone himself. In one instance, Ness’ team was able to trace a serial number of a brewery truck to determine it was purchased by none other than “Al Brown.” This helped the team strengthen its case and prove Capone’s connection to the bootlegging operation.
  • The use of shell companies: Yet another obstacle investigators encountered was Capone’s use of shell companies, or “fronts,” to hide assets and illegal business dealings. Capone allegedly purchased local laundromats to mix profits from illegal activity with those of legal businesses, making it much harder for federal agents to trace. This is one reason we have the term “money laundering” today. In addition, newspapers from the time indicated Capone’s syndicate created an entity called “World Service Motor Co.” to manage the transportation aspect of the business. However, once federal agents knew to look out for trucks with “World Service Motor Co.” painted on their side, Capone’s men repainted the trucks with “Donald Transportation and Hauling Service” and “Big Load Motor Service.” We often review corporate registrations and filings to better understand subjects’ business affiliations, and what those businesses’ day-to-day operations include. We even had our own case of illegally shipped alcohol!

Bringing Down Scarface – Capone’s Surprising Demise

Capone’s decline is nearly as famous as the man himself. It is still hard to believe that, for someone who was widely assumed responsible for the deaths of more than 30 people, Capone ultimately ended up behind bars for tax evasion. Capone and Ness’ dogged attempts to subvert and enforce the law, respectively, has taught us the importance of approaching investigations using a wide variety of tactics and records to paint as complete a picture as possible.

Indulge in tales from the Hillard Heintze Investigations team. Download ' The Due Diligence Diaries'.
Download