DUER CONSIQUENCES

I can't seem to find anyone who was not certain that William Duer (above) was destined to die broke. and even a few who told him so - even some while helping him bankrupt themselves.  At forty-five Duer was a slight built man with “sharp features and a receding hairline”, a man of “...dashing personality...with both talent and wit...” and “Making schemes every hour and abandoning them as instantaneously”.  At its peak in 1794 his fortune was between $250,000 and $375,000  - over $4 billion today.  But more, William Duer was the founding father who put the manic in America's first and succeeding economic depressions. Thomas Jefferson called him “The King of the alley”, meaning both the back alley, and "The Street", as in Wall Street,. He suckled at the breast of that most self destructive American midwife, Madam Laissez Fair.  His bipolar greed added the purge to American gluttony.  He was the American fingers on Adam Smith's invisible hand, always reaching for his partner's wallet. Let me give you an example.

The United States officially came into existence on 1 March, 1781, when the Articles of Confederation were finally ratified after four years of bitter debate. But economically America would not be a nation until all thirteen states shared a currency. Paper money was considered too risky to be legal tender, but coins had intrinsic value - in those days. In 1786 the Treasury Board accepted a bid from the firm of Jarvis and Parker to supply copper “Fugio” pennies (above), named for the Latin word meaning “I fly” stamped on their obverse.

Winning bidder, James Jarvis (above),  suggested speeding up the process of issuing the coins by melting down the 30 tons of British copper pennies the Treasury already had on hand, and proposed paying for the copper out of his profits. And that little bit of economic legerdemain was the opening that William Duer needed to grab a little something for himself. You see, Duer was the head of the Treasury Board, appointed to that post by his friend and business partner, Alexander Hamilton.

According to James Jarvis, when they met in William Duer's New York City mansion to discuss the copper trade, Duer bluntly demanded a share of the business as a bribe. Jarvis says he was offended and ready to walk out, but then agreed so long as Duer remained a silent partner. Duer countered with a demand for a straight $10,000 bribe. Jarvis agreed to that too, but only if the business was successful. And that was what Jarvis thought he had agreed to, “relying on his (Duer's) honor”. Unfortunately Duer had no honor. Only few hundred “Fugio”'s were ever minted. Jarvis returned the unused copper, and that should have been the end of it. . But like a bad penny, William Duer turned up again, still demanding his $10,000 bribe.

Jarvis insisted he was not bound to pay Duer so much as “ten pence”. He insisted, Duer's “share... was conditioned on the success of the contract.” Duer simply ignored Jarvis' arguments and relentlessly demanded to be paid. And Jarvis simply refused. Finally, at the end of September, 1788 Duer turned up the pressure, using his friends in Congress to demand Jarvis pay for the copper used in minting the few hundred “Fugio” pennies. The government already had the pennies. Now they wanted to be paid for the copper that was in them. Given the criminal treatment for debtors in those days, Jarvis was looking at some unpleasant jail time.

And just at this moment, Duer suggested that Jarvis might want to invest in another one of his schemes, an Ohio land speculation called the Scioto Company.  Two shares were available, at $5,000 each. Anxious to be rid of the Duer, and reasoning that this way he at least got land that might some day be worth something, Jarvis gritted his teeth and sold off his coin stamping equipment, using the cash to pay a premium price for two sections of land in the “Scioto Company” Ohio reserve. Finally free from the villain (he thought), Jarvis left on a business trip to Europe.

A year later Jarvis returned and found he had no shares and no cash. He wrote to Duer's lawyers, “I demanded of Mr. Duer, the Ohio rights he was to have purchased for my account....He told me they were in the name of Doctor. J. Ledyard, and should be transferred to mine, in the company's books. I applied to...the treasurer, who informed me there were two shares in the name of Doctor Ledyard, but that he could not transfer them to me.....I have more than ten times applied to Mr. Duer, and...I could get no satisfaction....” It was a favorite tactic of Duer, to stubbornly refuse to admit he had stolen money, no matter the evidence or the law or common sense.  Poor Mr Jarvis was so worn down by now, and so confused by Duer's shifting arguments, he seems to have forgotten they were arguing over the payment of an illegal  bribe!  Jarvis complained, “I have been three years amused in this business, it appears that he (Duer) should at least allow me interest (on his $10,000)..." 

It was like speaking Greek to an Italian donkey. Duer (above) insisted he had sold two shares of the Scioto Company to Doctor Issac J. Ledyard. He (Duer) had been paid. He no longer had the shares. The company was supposed to transfer the shares to Mr. James Jarvis. So if Jarvis had a problem, it was with the company, not with Duer. It was perfectly logical as long as you forgot that the Scioto Company treasurer took his orders from William Duer.  If you did remember that, Duer's arguments would eventually drive you insane. When the Scioto Company finally failed some years later, two shares were still on the companies' books as belonging to Doctor Isaac J. Ledyard. And there is no hint how many times Duer used Dr. Ledyard's two shares to bilk other partners. But for William Duer all this was a mere distraction to his tour de fraud with the Bank of New York.

The BNY was America's only private bank large enough to have its shares traded on the brand new New York Stock Exchange. Many people expected Alexander Hamilton, as Secretary of the Treasury Department, to eventually take over the BNY. And that was what William Duer assured his neighbor and new partner, Alexander Macomb. Blindly following Duer's instructions, Macomb bought 290 shares of the BNY, expecting to make a tidy profit as soon as Hamilton announced the Federalists were taking over the bank.

Of course, word that Alexander Macomb (above)  was buying BNY stock sent the price climbing, which so impressed Macomb he wrote to a friend in London praising his partner. “Duer's genius assures him it can be done without any further capital farther than can be raised beyond our joint credit at the bank.” Of course, “joint capital” meant Alexander Macomb had co-signed Duer's loans, which meant the money had been raised on Macomb's reputation, not Duer's. By 1792  few people  trusted William Duer enough to do that   Macomb was one, and Walter Livingston, of the large and wealthy and powerful Livingston family, was another.

While in New York City, Alexander Macomb and William Duer continued borrowing and buying BNY stock (eventually $100,000 worth), in Philadelphia Walter Livingston (above)  and William Duer were buying $160,000 shares of BNY futures, and buying them short. In other words Walter and William were betting against Alexander and William. Of course, Walter Livingston had also co-signed William Duer's Philadelphia loans. So without risking a penny of his own money, William Duer had bet both sides of the coin - heads he won and tails at least one of partners lost. It was predictable. .

Other members of the Livingston clan certainly predicted it, and Duer's involvement made them nervous. They began to withdraw the gold and silver they had on account at the BNY. That forced the directors of the bank to tighten their loan levels, and to raise the interest rates as high as 1% per day on just the sort of risky loans that Alexander Macomb and Walter Livingston had recently made. William Duer (above)  tried to calm his New York partner, assuring Macomb, “I am now secure from my enemies, and feeling the purity of my heart, I defy the world.”

The world did not share the feeling. First Macomb and then Walter Livingston defaulted on their loans and were confined in the Manhattan debtors prison (above) . The financial panic spread and quickly caught up Duer as well.  By the summer, William Duer was also in debtors prison, partly for his own protection, flat broke but not broken, claiming he could save his fortune if the banks would just let him free to repeat his old mistakes. The American economy teetered briefly on the edge of its first collapse, the recession of 1792, or what was called "Duer's Panic". 

Five hundred of Duer's victims laid siege to the jail, chanting, “We have Mister Duer. He has our money.” Benjamin Rush, Congressional gadfly and gossip, went down to take a look, and described the victims as,  “merchants and tradesmen, dray men, widows, orphans, oyster men, market women, churches, and even common prostitutes.” A lively trade developed on the streets around the jail in Mr. Duer's IOU's, and fights even broke out. One night a man broke into the jail, and confronted Duer with a pair of dueling pistols, demanding he pay what was owed or choose a weapon right there. Duer handed over what he had on him and the would be duelist left..

The end, when it came, was long and drawn out. Confined in jail for seven years for debts he could never pay,  William Duer died, probably of kidney failure, in April of 1799. He was only 57 years old. He left behind a widow unprepared for a life without wealth, and eight children. Alexander Hamilton wrote the first   epitaph for William Duer,  when he insisted, “There must be a line of separation between honest men and knaves, between respectable stockholders and dealers in the funds, and mere unprincipled gamblers.”.

The second, more permanent epitaph to William Duer was delivered on Thursday, 17 May, 1792 when 24 traders signed an agreement under a Buttonwood tree in front of 68 Wall Street. The two regulations they committed themselves to were, one, the signers would only trade with each other, and two, they would charge a ¼ of 1 % fee on each transaction. Like all practical market systems the New York Stock and Exchange Board was created by and survived because of regulations, designed by and for the majority of "respectable stockholders and dealers in funds",  and not the manic gamblers flaming across the horizon.  

Despite having only the Bank of New York and 4 other stocks to trade, a year after it was founded the New York Stock Exchange was successful enough to build itself a home, The Tontine Coffee House (above, left) on the corner of Wall and Water Streets. John Lambert would describe the Tontine as “filled with underwriters, brokers, merchants, traders, and politicians; selling, purchasing, trafficking, or insuring...Everything was in motion; all was life, bustle and activity...”  But the attraction of the dramatic manic was there as well, even with  the wreckage of William Duer still scattered about.  Noted an observer in June of 1793, “There was an affray at the Tontine...(a fight) between...aristocrat and democrat.” A few months later the newspaper “Columbian Gazetteer” would complain, “only persons of the same party” remained at the Tontine."   Wall Street, on its way to the panic of 1798, was again becoming addicted to the dramatic manic depressives in its nature, and likely always will..    

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THE BELLE OF BEDLAM

I wonder what was going through the mind of lawyer M.E. Leliter, on the afternoon 27 April, 1908, when he was told Mrs. Belle Gunness was in the anteroom of his Main Street office in La Porte, Indiana (above). Still, you never think the worse, do you?  

Belle was a genial and pleasant, 48 year old church-going woman, but substantial - and at 6 feet, taller than most men.  Community gossips said that Belle had been seen carrying two 100 pound hogs, one under each arm.. Still, "M.E." thought he could detect the aura of hidden pain behind Belle's sharp blue Nordic eyes.

In Chicago, the stout young Belle (above) had buried two of her children -  not an unusual tragedy in the nineteenth century.  But then,  in 1900,  her husband Anton Sorenson, had died of heart disease. 

With the proceeds from Anton’s two life insurance policies,  Belle and her three daughters had purchased a farm (above) on the northeast outskirts of La Porte Indiana, out on McClung Road past Pine and Fish Trap lakes. 

It was there a year later, on 1 April, 1902 Belle had married widower Peter Gunness.   But tragedy seemed to have followed Belle from Chicago.  That very summer, Peter’s young daughter (above, on Belle's knee)  had died after a short illness. And then in December, Peter himself had been struck on the head by a falling sausage grinder, and killed. Well, life on a farm was hard, and dangerous.  

"M.E". forced a smile as he stepped out to greet the lumbering,  280 pound now middle aged woman.  But this day Belle was not interested in pleasantries. Someone, Belle announced,  wanted to murder her.

Her tale had a tinge of unreality to "M.E,"'s ears.  He was one of the most prominent of the 14,000 citizens of La Porte,  Indiana. Fifteen passenger trains a day passed through La Porte (above) on their way to and from Chicago, 60 miles to the northwest.  Perched atop the prairie, the town was surrounded by farms, including the one owned by "M.E.", and, of course,  Belle's.  

But it was also home to the Meinaid Rumely Factory (above), whose 2,000 employees assembled steam powered thrashers  and were rushing to manufacture one of the world’s first internal combustion farm tractors, the “Kerosene Annie”.

As befitted a prosperous middle class community, just down the street from "M.E."’s office stood the new red sandstone Romanesque Court House (above), with oak paneled court rooms and stained glass windows. But Belle's accusations seemed more fitting to the lurid crime ridden alleys of Chicago than the small, quiet, proper and hard working Victorian style, La Porte, Indiana.

The potential assassin was Ray Lamphere (above), who until recently had been Belle’s hired hand. Six weeks ago, said Belle,  she had fired Ray, and he had threatened her and her two youngest daughters. “I'm afraid he's going to kill me and burn the house,” Belle told "M.E.".   Thank goodness Belle’s eldest daughter, Jennie, was safely away at a finishing school in Los Angeles.  Yes, Belle had spoken with the police. Twice she had charged Ray with trespassing. But, explained the angry Belle,  the police had refused to grant her a protection order, and had dismissed her allegation that Ray was insane. Now, out of an excess of caution, Belle wanted to amend her will.  She wanted to be certain that her estate would to go to her children. And, if for some reason, they were deceased,  then Belle wanted all her property to go to a Norwegian orphanage back in Chicago.  "M.E." took down the information, and made an appointment for Belle to return in a few days to sign the completed document.

Then shocking news came with the morning light. There had been a terrible fire at the Gunness farm in the early morning hours of 28 April, 1908.  Despite the noble efforts of Belle’s new hired hand, and two passing men, no one had made it out of the house alive.  Eventually the beams and the furniture had crashed into the basement.

By noon the heat had retreated enough for workers to shift the ashes. There they found the pitiful bodies of Belle’s three children, Myrtle and Lucy Sorensen, and Philip Gunness, aged 5,  as well as the blackened, headless corpse of a woman presumed to be Belle. And when the cops arrested Ray Lamphere, he blurted out, “Did widow Gunness and the kids get out all right?”  It seemed an open and shut case. Except... when told of the bodies, and of the charges Belle had made against him the day before,  Ray was heard to ruefully say, “After all,  she wanted me killed because I knew too much..”  Was this the foundation for an insanity plea, or even self defense - from a woman?  But it did cause the police to pause for a moment.

And then there was the mystery of the woman’s body. When doctors examined the corpse they described it as belonging to a woman weighing no more than 150 pounds.  Neighbors who had sewn clothing for Belle were adamant that the corpse could not be Belle's   So back to the ashes went the searchers. And what they found raised even more questions; they found men’s pocket watches, rings and wallets. A lot of watches, rings and wallets.

While the police were still mulling over this perplexing development, a man named Ray Helgelien arrived in town,  looking for his brother.  Andrew Helgelien (above) had responded to a notice in a South Dakota lonely hearts column. “Wanted — a woman who owns a beautifully located and valuable farm in first class condition, wants a good and reliable man as partner in the same”.  The lady needed help paying off the farm's mortgage, and offered matrimony and love in return. After exchanging several letters, Andrew had left home with $300 cash in his pocket.  Ray had not heard from his brother for several weeks, and finally opened a final letter mailed to him, but arriving after he had left. It was post marked from La Porte. It read,  “My heart beats in wild rapture for you, My Andrew. I love you. Come prepared to stay forever.”  Having seen newspaper stories about the grisly finds in the burned out farm house, Ray suspected that Andrew may have done just  that.   Had Belle placed that notice?  The local post office confirmed that Belle had mailed and received 8 to 10 letters a day, for years. The searchers spread out across the farm and started digging.

First they found and disinterred the body of daughter Jennie,  who was supposed to have been away at school in Los Angeles.   Then, under the pig pen the searchers found the bodies of ten to fourteen men and women, many of whom had been last seen visiting Belle’s farm, or working  there as maids and cooks.

Included among these remains was a body identified as being that of Andrew (above). In his corpse, as is in many of the others, the medical examiner found cyanide. The police were now more than willing to think the worst. 

How many victims had been fed to Belle’s hogs, or buried in undiscovered graves elsewhere on the farm? When finally added up the list of known and suspected victims reached forty.  Belle Gunness could well have been the most prolific, and one of the most hard working serial murderess in American history.

The jury at Ray Lamphere’s trail found him not guilty of murder, but guilty of arson. The jury also issued a statement asserting that Belle’s body had been found in the ashes. That did not match what the medical examiner had to say about the body. And Ray insisted to the day he died that Belle had escaped.

For the next decade, sightings of Belle (above) were reported from all over America and Scandinavia. But the most intriguing story was that of Esther Carlson, who in 1931 was arrested in Los Angeles,  the location of Jennie's supposed finishing school.  Esther was charged with the murder of a Norwegian immigrant, which matched Belle's preferred victims.  Like Belle, Esther's motive was alleged to be theft of the victim's money.  Also like Belle, Esther's weapon of choice had been cyanide. But nothing was ever proved, and Esther died in jail  while awaiting trial.

But two expatriates from La Porte identified photos of Esther Carlson (above) as Belle Gunness. The ages and time lines seemed to match,  Belle would have been 71 years old in 1931, and if Belle had lost weight,... Could they have been the same person?  Did Belle slaughter every human being close to her,  pin it on a simpleton fall guy, and escape to California, where she went on making a living by killing?   If that seems a far fetched a tale, remember that it is the nature of most people, that when they hear of a tragedy,  their first thought is sympathy,  and almost never of evil - even though sometimes that is exactly what a tragedy is.

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DUST TO DUST

I don't blame C.C. (Cadwallader Colden) Washburn for the tragedy of 1878. Forty years earlier, the ambitious 21 year old had arrived in Chicago with just $5 in his pocket. But by 1855 C.C. had passed the bar, had been elected to Congress from Wisconsin, and was worth at least half a million dollars. Not bad for a kid born with epilepsy. It was about then that his older brother Elihu wrote him, “I don't believe you will be happy until you could buy the entire world.” Elihu was teasing, because C.C. didn't actually have half a million dollars.  Yet. That was how much he had borrowed to buy the companies he had already bought. And now he was trying to rescue a cousin, Dorolus Morrison, who had invested in a money pit called the The Minneapolis Mill Company. The firm had water rights on the west bank of the Mississippi at St. Anthony Falls (above), and the idea was to lease access to mill owners. Within two years, the Mill Company was broke and going broker.

C.C. immediately saw the problem. There were nearly 4,000 people in Minneapolis, and space along the the falls was limited.  In 1856 C.C. bought a controlling interest in the Mill Company, borrowed more cash to build a dam across the falls, and dig a 50 foot wide 14 food deep canal (above) down the west bank, more than tripling the available access to the power of the falling water.  Then he brought in his younger brother William to run the company, while he concentrated on being a congressman. Older brother Elihu was already a congressman from Illinois and baby brother Israel, Jr. had been elected from Maine. They were a very ambitious family.

Within ten years the customers of C.C.'s Minneapolis Mill Company - grist mills, saw mills, cotton mills and woolen mills - were so profitable, that upon his return from service as a Union General in the Civil War, C.C. built his own flour mill. Against the advice of experts, who were predicting a post war recession, it was the largest flour mill in the world. And on William's advice, C.C. hired George Christian to run the Washburn “B” Mill.  Quickly the “B” Mill was a success, in part because of Christian's management and in part because there was no post war recession.

After two more terms in Congress, and a single term as Wisconsin Governor, C.C. returned to his home in La Crosse., Wisconsin.  But he did not retire. On the advice of George Christian, C.C. decided in 1874, to build a second, even larger flour mill in Minneapolis. This one he called the Washburn “A “ Mill.

The “A” mill was 100 feet wide and 147 feet long. Wheat entered on the ground floor and driven by the power of the falling water in the canal, a screw, powered by turbines in the basement  lifted the grain seven and one half stories. Here the grain was fed into a container, into which hot air was blown. 

Once dry, the wheat was carried by another screw down to the sixth floor and crushed between the first horizontal millstones, which cracked the hard center and released the bran. 

Floor after floor the bran descended, with each successive grindstone, 24 pairs in all, crushing the wheat ever finer, with shakers (above) repeatedly shifting the flour...

...until it was returned to the ground floor where the employees bagged the flour and loaded it into....

...railroad box cars waiting along the 32 tracks that then carried it to a hungry nation - half a million barrels of flour shipped in 1873, three quarters of a million barrels in 1874, a hundred thousand more in 1875, and one million barrels in 1876 .

Just like every other day for the previous four years, at six in the evening on Thursday, 2 May, 1878, 200 workers were released from their 12 hour day shift at the Washburn “A” Mill, leaving behind 14 men to clean up and ready the mill for Friday's shift. 

It is unknown if they faced any difficulties or problems that night, but at approximately 7:20 a man walking across the tenth avenue bridge (above)  reported seeing a flash in the twilight and a “stream of fire” leaping from the basement windows of the Washburn “A”.

He continued, “Then each floor above the basement became brilliantly illuminated, the light appearing simultaneously at the windows as the stories ignited one above the other...Then the windows bust out, the walls cracked between the windows and fell, and the roof was projected into the air to great height, followed by a cloud of black smoke, through which brilliant flashes resembling lightening passing to and fro.” It was later reckoned the massive roof was thrown 500 feet into the air.

Most said they heard three distinct, massive explosions. Reported the Minneapolis Tribune, “...in a twinkling of an eye...the largest, the highest, and probably the heaviest stone structure in Minneapolis, the great Washburn mill...was leveled to the ground....Soon the burning buildings sent their messengers of flame on the wings of the merciless north wind on to other fields of destruction. ... the wonder is that the whole lower portion of the city escaped the fate with which it was threatened.” Great limestone corner stones landed in the back yards of homes eight blocks from the milling district.

The volunteer fire department reported all their alarms went off at the same instant, but if that was because some one near the “A” mill hit the alarm just after the first explosion, or if the blast short circuited the line, will never be known. Ten miles away, the explosions broke windows on Summit Avenue in St. Paul, whose Globe newspaper issued a special edition, saying, “"There is an 'earthquake’ was the expression and thought of hundreds ... and the word went from lip to lip, almost with the rapidity of lightning, that the Washburn mill, which has long and justly been the pride of Minneapolis, had exploded and was destroyed … It was a night of horror in Minneapolis.”

The 130 volunteers of the fire department dispatched every man, rig and horse they had, and quickly found an explanation to the three great crashes which had reverberated across the city. The exploding Washburn “A” mill had set off identical if smaller explosions in the adjacent Diamond and Humbolt mills. The horse drawn steam pumps of the fire department ran for ten hours, pumping over six million gallons of Mississippi River water onto the smoldering wreckage of six flour mills, a cooper shop, a lumber yard, a grain elevator, a machine shop, a blacksmith shop, a planing mill and dozens of railroad cars. The entire fourteen man night shift at the Washburn “A” mill was killed, as well as four men at adjacent mills. Said the Tribune the next day, “Minneapolis has met with a calamity, the suddenness and horror of which it is difficult for the mind to comprehend.”

C.C. arrived by train the next day, and immediately announced he would rebuild. That calmed the bankers and citizens in a city which had just had the majority of its industrial base blown sky high. But massive explosions still had to be explained. Those who favored conspiracies suggested a railroad car loaded with nitroglycerin had been parked next to the Washburn “A” mill, but that was quickly dismissed because even that much nitro would not have produced a blast that big.  A Mill owner from Indiana suggested the spinning turbines had spun so fast they had separated the hydrogen from the oxygen in the water, leading to a hydrogen buildup in the mill. But George Christian, respected operator of both Washburn mills, scoffed at the idea. The cause, he explained, was simple flour dust.

The flour dust did not explode, Christian explained, it just burned very, very quickly. And Professors Peckman and Peck, from the University of Minnesota confirmed this, by experiment. They also suggested the initial spark had come during the night shift's clean up. It was likely a worker was running two millstones in the basement without flour between them, as a shortcut to remove any residue. And like most shortcuts, this one eventually blew up in their faces. Stone sparking against stone had ignited the flour dust raised by the cleaning crew. That is what killed eighteen men.

C.C. made sure his workers were kept on the payroll, by finding them jobs in the old “B” mill. And he did rebuild. But he did not do so by himself. He brought in new money, John Crosby, and as a silent partner he added the technocrat William Dunwoody, who went to Europe as an industrial spy, and stole the best new ideas for milling, like getting rid of the horizontal grindings stones and using steel rollers instead. They gave off fewer sparks, lasted far longer, and by operating in sequence would allow the grain to be ground continuously. The bigger new “A” mill opened in 1879, under the name “Washburn Crosby “A” Mill”. With new dust scrubbers cleaning the air, it would run safely until 1965. under the company's new name, General Mills.  And what is left of that  building is today the “Mill City Museum.”

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