Catching Counterfeiters

Prior to the 20th century, money in the United States came in an amazing of different forms. The federal government made little effort to adopt a standardized currency. Until the Civil War, the United States Mint concentrated its efforts on manufacturing gold and silver coins. Government paper currency was limited to "fractional currency" (denominations less than a dollar), Treasury notes, and postal currency valid for the redemption of postage stamps, but which was also used as tender.

During the Civil War, the government introduced "greenbacks," the first national paper currency. Private banknotes and gold and silver coins continued to circulate, creating a confusing plethora of monies. Individual banks issued their own currency, called banknotes, in all denominations. Banknotes were only as solid as the banks which issued them.

Since few banks of the period were actually sound. this paper currency varied in true value. The situation worsened considerably when President Jackson effectively destroyed the domination of the Second Bank of the United States in the early 1830's. Banks sprouted across the country, each issuing its own currency, each competing for business, and none regulated or held to standard practices.

Americans took their chances dealing with these banks, for they had no insurance for their deposits, no government control over how the banks did their business. The frequent recessions and depressions of the period wiped out many fortunes, large and small, leaving in their wake a profound distrust of bankers and banks, banknotes and paper currency. Gold and silver alone retained their true value and people tended to hoard these precious metals as much as possible.

Counterfeiters found their paradise. Over a thousand banks issued their own notes, a cornucopia of choices for anyone who wanted to forge his own currency. By the 1860's, an estimated one-third of the currency in circulation was counterfeit. Retailers subscribed to weekly papers showing drawings of the latest counterfeits, much like, in the late 20th century, store clerks checked lists of credit cards for bad numbers.

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Counterfeiters also produced fake coins. Since 'real coins contained the true value in silver and gold, the counterfeiters could turn a profit simply by withholding some of the gold or silver from the coin.

Generally, the counterfeiters. called "coneymen" in the vernacular of the day, specialized within the illegal trade. Printers and coiners manufactured the bogus money, which they then sold to passers. The passers exchanged the counterfeits for real currency or goods. Often, gangs of printers and passers worked together, generally infesting particular regions, but sometimes branching out into other parts of the country.

By the 1860's, an estimated one-third of the currency in circulation was counterfeit.

Detecting the fraudulent money was relatively easy compared to catching the people responsible for it. The Treasury Department relied on the Marshals to pursue the counterfeiters on a national basis. Detectives were occasionally hired as "Special Agents" of the Department, but this was usually on a case-by-case basis when the evidence warranted the expenditure. Allan Pinkerton, for example, got his start in detective work by breaking up a major counterfeiting bank in Illinois. But detectives were expensive.

Prior to the Civil War. the government did not want to spend the money on full-time investigators. Consequently. U.S. Marshals and their Deputies developed many cases against counterfeiters. They requested permission from the Department of the Treasury to hire local detectives to work the case full time only after the Deputies had uncovered enough evidence to give promise of a successful conclusion.

In conducting these investigations, the main problem confronting the Marshals and their Deputies was not the spurious currency, but the lack of real money to pay their time and expenses. Despite a recognition in Washington of the scope of the problem, the Treasury Department consistently hedged on paying the Marshals in advance for their efforts.

In April 1846, for example, Marshal John McLean of Ohio reported his suspicions concerning a gang of counterfeiters in his district. "The state officers, not being paid. will not act efficiently in this business," he advised Secretary of the Treasury R.J. Walker, "nor can it be expected that the Marshal shall seek information on which to arrest these violators of the law without compensation." The Treasury Department remained unsawed.

In 1860, the problem grew to such large proportions that Congress appropriated a special fund for the investigation of counterfeiting. Unfortunately, the appropriation was only $10,000 and the Secretary of the Treasury jealously hoarded it for major cases.

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With these meager resources, United States Marshals and their Deputies combated the legions of counterfeiters. They relied on informants and their own skills as detectives, sometimes working undercover, to conduct the investigations. The work of Marshal Daniel A. Robertson and his Deputies in Ohio exemplified how the Marshals pursued the illusive conmen. Ohio was a breeding ground for counterfeiters. Its rural areas provided perfect hideouts for the printers: its proximity to the major cities offered convenient markets for the passers.

Marshal Robertson, by the winter of 1847, had collected the names of "upwards of 50 counterfeiters in Ohio. Many of them are men of property. and apparent respectability." According to his information, most of the printers lived in "out of the way places: seldom in towns and cities." They never passed the bogus money themselves, but used passers who distributed it in areas far from where it was originally made. "In brief," the Marshal reported to the Solicitor of the Treasury, "they practice their offenses in the most adroit manner. It is only by great skill, stratagem, and resolution that this class of men can be detected and brought to justice."

Robertson understood the difficulties confronting the lawmen. The laws against counterfeiting. in his view, were defective. They provided no punishment for selling counterfeit as counterfeit, nor did they prohibit the passers from having the bogus money in their possession, even if they clearly intended to pass it.

The printers, too, were free to possess counterfeiting machinery and tools and to make the presses, dies, and other instruments of their trade. The law only punished those who actually made counterfeit or put the money in circulation. But of more immediate concern to the Marshal was the reticence of the Treasury Department to cover the expenses of the investigations. "

The law does not provide for reimbursing the officer for such expense." he pointed out. "This is the reason the counterfeiters of coin have been hitherto enabled, in a great measure, to defy the laws." Even after both Robertson and the U.S. Attorney in Ohio, G.W. Bartley. reported an extensive network of counterfeiters in Ohio, the Treasury Department hesitated to appoint a special agent to pursue the investigations. Finally, Robertson volunteered to undertake the work if the Department pad his expenses. which he estimated at $5 a day.

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Robertson must have turned to the next investigation. a case against against a gang of counterfeit coiners, with some trepidation. Nonetheless, the necessity of breaking up this band convinced him, once again, to dispatch his Deputies in pursuit. In Robertson's view. those who made and passed counterfeit coins were "the most-secret and successful perpetrators of crime in the country." Arresting them became his principal goal.

Fortunately. in this instance, the Department authorized the Marsha to reimburse his Deputies their out-of-pocket expenses; but it refused to pay the Deputies for their time and trouble Shortly afterward. Marshal Robertson pursued counterfeiters into Virginia and Kentucky, working assiduously to rid Ohio of its large population of coneymen.

The Marshals in Pennsylvania and New York were also plagued with bogus money. The problem continued to grow, overwhelming the limited time and resources available to the Marshals. In the mid 1860's, Congress finally recognized that the ease of counterfeiting money demanded special attention to prohibit it. In 1865, it created the Secret Service, placing it under the Secretary of the Treasury, as the federal government's first investigative agency.

Originally, the Secret Service was too small and too disbursed, its arrest powers too limited, to cope with the problem by itself. Marshals continued to assist in the investigations and in making the arrests. But the creation of the Secret Service effectively transferred responsibility for catching counterfeiters from the Marshals to the new agency. This transfer freed the Marshals to concentrate on other areas of law enforcement and court operations.