Before Madoff: The Forgotten Frauds of American History - Volume I

By Edson Black

Taken from the all but forgotten pages of American history, Before Madoff brings alive the extraordinary rogues who perpetrated the most astonishing swindles, frauds and embezzlements of their day.

In this first volume of Before Madoff, you will meet:
-The clever young man from Baltimore who in 1890 singlehandedly swindles the U.S. Senate
-The respected Vermont bank president who in 1834 was discovered to have stolen the pensions of the American Revolutionary War veterans
-The crazed but brilliant Scottish aristocrat, who in 1730 was crowned “emperor “ of the Cherokee Indians while simultaneously defrauding the good citizens of colonial Charles Towne, South Carolina
-The dynamic young politician from Ohio, rising star of the “Jacksonian” Democratic party, who in 1845 was found to have embezzled from the U.S. House of Representatives
- The first American diplomat who, after being sent to France in 1776 by Benjamin Franklin, saved the American Revolution by shipping arms back to George Washington’s army, but was then summarily brought back home from as an accused embezzler

Drawing on comprehensive archival research, as detailed in the extensive bibliography, and filled with marvelous illustrations for these wonderful entertaining tales, Edson Black, a Certified Public Accountant, Certified Fraud Examiner, experienced investigator and lover of history, has constructed a stunning chronicle of fraudsters and their crimes, weaving these fascinating stories into the retelling of some of America’s most important historical events.

• Language: English
• Publisher: Edson Black
• Release date: Jan 21, 2016
• ISBN: 9780989094436

Edson Black

Edson Black is a Certified Fraud Examiner, Certified Internal Auditor, and Certified Public Accountant, with four decades of experience investigating frauds across the United States and in Western Europe. Although Ed was educated as an accountant and received a bachelor’s in business administration from Adelphi University (Garden City, Long Island, New York), he has always immersed himself in American history, from his days as a youth reading American Heritage magazine to his current membership in the American Historical Association. Professionally, Ed now spends his time writing his second volume of Before Madoff, managing his Web site, “WWW.FraudHistorian.com,” and tending to his ongoing professional accounting and investigative work. On the personal side, Ed regularly patrols his hometown as a sergeant in the local police reserve. He also spends most weekends with his grandkids, Osvaldo and Octavia, “making things” out of Lego blocks and Play-Doh.

Book preview

BEFORE MADOFF

Volume I

BEFORE MADOFF

THE FORGOTTEN FRAUDS

OF AMERICAN HISTORY

Volume I

Edson David Black

Tavaldo Publications

Before Madoff – The Forgotten Frauds of American History - Volume I

Published by Tavaldo Publications. 74 Linmouth Road, Malverne, New York 11565.

www.TavaldoPublications.com

Copyright © 2016-by Edson David Black

Manufactured in the United States of America.

All rights reserved. No part of this book may be reproduced in any form or by any electronic or mechanical means, including information storage and retrieval systems, without permission in writing from the author, except by a reviewer, who may quote brief passages in a review.

Although the author and publisher have exhaustedly researched all sources to ensure the accuracy and completeness of the information contained in this book, we assume no responsibility for errors, inaccuracies, omissions, or any other inconsistency herein. Any slights against people or organizations are unintentional.

For information about special discounts provided to bulk purchasers of paperback and hardcover editions please go to: www.TavaldoPublications.com

For more information on the nature, background and history of fraud, please go to: www.FraudHistorian.com

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ISBN 978-0-9890944-0-5 Hardcover edition

ISBN 978-0-9890944-1-2 PDF edition

ISBN 978-0-9890944-2-9 Paperback edition

ISBN 978-0-9890944-3-6 eBook edition

Library of Congress Control Number: 2014916296

Edited by Rachel Hockett [e-mail]

The paper used in the paperback and hardcover editions of this publication meets the minimum requirements of the American National Standards for Information Sciences - Permanence of Paper for Printed Library Materials, ANSI Z39.48- 1992

Acknowledgments

To friends and family, my deepest appreciation for your never-ending encouragement and enthusiastic support (and good humor), throughout the many years of my researching and writing this book.

Special Acknowledgment and Thanks

To my daughter, Jessica ,and her husband, Steven, who surprised me one recent Christmas with a printed book of the rough drafts of the stories before you. They realized that I had been lingering over the writing of these tales for much too long a time and that if I saw my stories in print that it might provide the nudge I needed to complete the writing and bring this book to publication. And they were right.

To Lyne Jubinville, my Quebecoise friend and brilliant manager of time and resources, who guided me to a realistic writing and research schedule and never allowed me to float in the clouds when there was work to be done on the ground.

À Lyne Jubinville, mon amie Québécoise, qui sait brillamment aménager temps et ressources; qui m’a guidé sur la voie d’ une écriture réaliste et de la recherche organisée et, surtout, qui m’a bien gardé d’avoir la tête dans les nuages, alors qu’il y avait tant à faire sur le plancher des vaches.

To John G. Organ, Jr., my one-man kitchen cabinet, to whom I turned again and again for the counsel of a wise old friend.

To my son Edson M. Black who provided encouragement when needed, and to his mom, Wynne Black, whose friendship, judgment (and great coffee), were and are much valued and appreciated, and to my sister Eileen Gail Black Plunkett, my lifelong friend, who from beginning to end, gave unwavering support to my writing this book.

In addition, I would like to thank the following individuals (unpaid volunteers all), who read the drafts of my stories and whose review comments and suggestions were invaluable in showing me how each story could be improved upon:

Frederick Bevelaqua, MD, Lisa Colacino, Genevyève Delorme, Joan Mattarocchia, Tony Mattarocchia, Andrea L. McNeill, Karen sky Miller, Maureen Organ, Dottie Pearlman, Brenda Praga, Lawrence Praga, Mary Rickey, Vincent Rickey III, Christopher W. Shishko, Esq.

I would like to extend special gratitude to my editor, Rachel Hockett, who made this work so much better by her deft skills.

Sincere thanks to the staff of the U.S. Library of Congress, the U.S. National Archives, the National Archives of Britain, the British Museum and the Royal Society for the assistance they provided.

And, last but not least, I owe a special debt to the writers and researchers of past and present day on whose shoulders I have stood to bring to you the stories in this book.

Preface

Although it exceeded 200 pages, it was not a very imposing book, and it was barely visible to me on the dimly lit book shelf crowded with larger more important-looking volumes. It was the fall of 1991 and I came across it by chance as I was casually browsing the shelves of Columbia University’s Butler Library.

In those long gone days, I was in the habit of visiting Butler on my lunch breaks from my nearby office where I held the position of associate director of internal audit at Columbia. As was my custom with other books on other days, I carried it to a small reading desk nearby. I made myself comfortable, opened the hard cover, and read the title, Papers in Relation to the Case of Silas Deane. It had been published in Philadelphia 1855 by the Seventy-Six Society. Intrigued by the title, the date of publication, and the name of the publishing group, I began to read, and discovered a narrative by Silas Deane, America’s very first diplomat, which he had written, while in much distress, to the U.S. Congress.

In his narrative, Deane detailed how he, a small-town colonial Connecticut lawyer and merchant, had been sent to France in March of 1776 by the Second Continental Congress; how he had been instructed by his friend Benjamin Franklin to approach King Louis XVI for arms, money, and diplomatic alliance to support the American rebellion against the English crown; how he had worked in league with a flamboyant playwright named Beaumarchais, author of The Barber of Seville (and a secret agent for the French king), and how these two men of vast differences in origin, temperament, and abilities, had successfully obtained and shipped to America the arms and men desperately needed by George Washington to defeat the British; and then how he had suddenly been recalled back to America in 1778 under suspicion of having embezzled his country’s funds.

However, to my disappointment, Papers in Relation to the Case of Silas Deane did not reveal the end of the fraud investigation against Deane. But I was now hooked and was soon devoting my lunch hour to researching the rest of the Deane story. Was he convicted? Did he go to jail or was he found innocent and perhaps lauded by his peers as one of America’s greatest Revolutionary War heroes?

My unplanned investigation into the Silas Deane story, a tale which I’ve fully told in this book, aroused my curiosity as to what other frauds, embezzlements, scams, and schemes—famous in their day—had occurred in the center of great historical events but had been forgotten as time turned its pages. I did this research initially just out of curiosity. Later, however, as I came across one interesting story after another, the idea for a book on these forgotten frauds began to simmer in the back of my mind.

Still, in a way, writing this book might have been a bit of my destiny. Although I had pursued a professional career in audit and investigations, my abiding lifelong passion has always been for history. These days, I avidly read the American Historical Review, but I can think back to my early youth when I was thrilled to receive at the ripe age of 10 my very own subscription to American Heritage magazine. I also recall one day, at roughly the same young age, sitting in the living room of my Uncle EJ and Aunt Joan’s Moodna Hollow, their century-old family homestead in upstate New York. Knowing that I loved history, they had entrusted me to hold and read the bound original 1860s editions of Frank Leslie’s Illustrated Newspaper. There I discovered the American Civil War as I had never seen it portrayed in my school textbooks, with the vividly written descriptions accompanied by the detailed photograph-like illustrations of the Northern armies in battle. It was as if I had been transported back in time, a feeling I have always held while reading history.

This first volume of Before Madoff, and the volumes that will follow, took decades of research. To a degree, perhaps a great degree, a good portion of this time resulted from the immense enjoyment I receive from discovering old lost stories of fraud, coupled with my almost irrepressible investigator’s quest to keep digging deeper until I can uncover all the facts. However, with a modicum of self-management and the vocal encouragement of friends and family to get on with the writing, I stopped the research after gathering over 200 fraud stories, the oldest taking place in the fifteenth century and the last in the mid-twentieth century. From this inventory I have selected thirty that I think are the best, which I will offer to you in multiple volumes. The book in your hands is the first of these.

And so, little did I know back in 1991 that when I opened Papers in Relation to the Case of Silas Deane, I would also be opening up a new chapter in my own life leading to the publication of this book. This has indeed been a labor of love, and often great fun to research and write, especially when I come across some fascinating tidbit of history that adds meat and bones to the one-dimensional images we are often given of the people, places, and events of days long gone by.

I hope the stories I selected for you in this volume and those to follow will be enlightening, intriguing, and entertaining.

Edson D. Black

Certified Fraud Examiner

Certified Internal Auditor

Certified Public Accountant

To my grandchildren

Osvaldo and Octavia (Tavi) Francisco

For who you are

And all that you will be.

CONTENTS

Introduction

The U.S. Senate And Its Baby

The Known And Honored

The Visionary

The Journey Of Caleb Jefferson McNulty

The Missing Million

Bibliography

Index

About the Author

Introduction

In this Volume I of Before Madoff: The Forgotten Frauds of American History, you will meet five men who, much like Bernard Madoff, were at the center of a criminal cause célèbre of their day.

In order of appearance, they are:

The clever young man from Baltimore who in 1890 singlehandedly swindled the U.S. Senate.

The respected Vermont bank president who in 1834 was discovered to have stolen the pensions of American Revolution War veterans.

The crazed but brilliant Scottish aristocrat, who in 1730 was crowned Emperor by the Cherokee Indians while simultaneously defrauding the good citizens of colonial Charles Towne, South Carolina.

The dynamic young politician from Ohio, rising star of the Jacksonian Democratic party, who in 1845 was found to have embezzled from the U.S. House of Representatives.

The first America diplomat who, after being sent to France in 1776 by Benjamin Franklin, saved the American Revolution by shipping arms back to George Washington’s army, but was then summarily brought home as an accused embezzler.

These are stories of sensational fraud drawn from American history, worthy of telling anew. Please read and enjoy them.

The U.S. Senate And Its Baby

Laughing at Washington

Salt Lake City, Utah, Desert Evening News,

December 23, 1890

But Few Escaped

San Francisco, California, The Morning Call,

December 23, 1890

Prologue

From the Congressional Record, the official government record of the proceedings and debates of the United States Congress

UNITED STATES SENATE

Monday, December 22, 1890

The Senate met at 10 o’clock am

The VICE PRESIDENT [Levi P. Morton acting in his dual role as President of the Senate].

Petitions and memorials are on order.

Mr. HARRIS [Senator Harris of Tennessee].

Mr. President, I do not think that we ought to proceed with business with only a dozen Senators on the floor. Let the roll be called.

The VICE PRESIDENT.

Thirty-two Senators have responded to their name. No quorum is present.

Mr. HOAR [Senator Hoar of Massachusetts].

I move that the Sergeant-at-Arms be directed to notify absent Senators to appear.

The motion was agreed to.

The VICE PRESIDENT.

The Sergeant-at-Arms will execute the order of the Senate.

Looking for the Duvall Family

On December 23, 1890, when Detective Hogan of the Baltimore Police knocked on the door of the Duvall home at 305 North Eden Street, he hoped to find young Mr. William Duvall as well as his wife and baby; he needed all three to clear up this most unusual investigation. But the tearful woman who answered promptly informed the policeman that young William, her darling son, had vanished without a trace.

It is not recorded if the detective smiled or frowned on hearing this news, but it could have gone either way, for apparently the brash young Duvall had escaped the law after pulling off one of the most brazen swindles in American history, by defrauding over half of the U.S. Senate.

A Simple Scheme

Duvall’s scheme was as embarrassingly simple as it was effective. Over the first three weeks of December 1890, he wrote an individual and very personal letter to each and every U.S. senator. In each letter Duvall wrote:

That the senator was the man that he admired above all men.

That he, too, was originally from that senator’s home state, having recently moved his family to Baltimore and therefore he was already aware of the magnificent character of the senator.

That his wife Mary was also a great admirer of the senator.

That he and his wife had just celebrated the birth of their first-born child, a boy they had naturally decided to name after the senator.

That he had recently broken his leg and as a consequence lost his job, so things were not going well with his little family.

That he had enclosed five $1 tickets, (worth a total of $120 in 2015 monetary value), which the senator could purchase for a fundraiser being held for the Duvall family.

Included with the letter, as a token of the sincere admiration the Duvall family had for the senator, was a gift of the original baptismal certificate as evidence that their dear baby son was indeed named after the beloved senator.

Senator Manderson Conducts an Investigation

Alas, as almost all schemes do, this one soon began to unravel. William Duvall’s undoing began when Senator Charles F. Manderson of Nebraska received his Duvall letter on December 22, 1890. The missive was dated December 20, and in the spirit of the Christmas season, Manderson would doubtless have responded liberally to the poor father’s appeal for his destitute family if he had not remembered having recently spotted a very similar letter addressed