IRS Tackles Capone: Crime Pays With Taxes

Federal prosecutors could not convict Al Capone for the St. Valentine's Day Massacre, the dozens of murders attributed to his organization, or the bootlegging empire that made him the most powerful gangster in America. They got him on his taxes. On May 4, 1932, Capone began serving an eleven-year federal prison sentence for income tax evasion, a conviction that demonstrated the government's willingness to use any available statute to dismantle organized crime. The IRS investigation began in 1927, when the Supreme Court ruled in United States v. Sullivan that illegally earned income was subject to federal taxation. Special Agent Frank Wilson spent years tracing Capone's spending patterns, connecting lavish expenditures on homes, cars, jewelry, and clothing to income that had never appeared on a tax return. Capone had not filed returns for several years, and the few he did file dramatically understated his earnings. Capone's trial in October 1931 lasted two weeks. His defense team initially negotiated a plea bargain, but Judge James Wilkerson rejected it and impaneled a fresh jury after learning that Capone's associates had been bribing the original jurors. The jury convicted Capone on five of twenty-two counts, and Wilkerson sentenced him to eleven years, the harshest tax evasion sentence ever imposed at that time. Capone served his first two years at the Atlanta Federal Penitentiary before being transferred to the newly opened Alcatraz in August 1934. His health deteriorated rapidly. Syphilis, contracted years earlier and left untreated, attacked his nervous system. By the late 1930s, other inmates reported that Capone was confused, childlike, and unable to follow conversations. He was released in November 1939 and spent his remaining years at his Florida estate, mentally incapacitated. The Capone prosecution became the template for federal organized crime strategy. The IRS's approach of following the money rather than prosecuting violent acts directly influenced the development of RICO statutes decades later and remains a cornerstone of white-collar criminal investigation.