On January 6, 1913, the trail of David A. Sullivan began in Brooklyn Supreme Court. He was the former president of Union Bank, and its subsidiary, Mechanics and Traders Bank of Manhattan in 1907. Sullivan had been indicted five times by a Grand Jury, accused of using Mechanics bank as his own personal vault, setting in motion actions that would eventually cause both banks to fall. The Grand Jury investigation, carried out by a team consisting of the Brooklyn District Attorney, John F. Clarke, the Special Deputy Bank Investigator for the State of New York, E. L. Dodge, and New York State Assemblyman from Brooklyn, Lewis E. Goldstein, had interviewed countless witnesses. There were whistle blowers in the form of financially astute customers who didn’t trust the way the bank was operating. There were employees and former employees who testified to all sorts of funny business going on in the bank, directed by, or carried out by Sullivan, himself. And there were the outside officials who were offered chances to participate, or look the other way. It didn’t look good for Mr. Sullivan. Not at all.

In the last episode we learned of the former cashier for Mechanics Bank, Kenneth Southworth, who testified that he had changed entries in the Mechanics Bank’s books, in order to cover up the use of a depositor’s money to cover one of Sullivan’s bad loans. He had made these changes in the middle of the night, at a branch of the bank in Downtown Brooklyn, the night before a state inspector was to audit the books. When this and other malfeasance was made public, and the upcoming trial was made public in the papers, Sullivan’s lawyer asked for a change of venue, as he said that his client could not get a fair trial in Brooklyn. Justice Frederick E. Crane, the presiding judge disagreed, and in an almost unprecedented move for a non-murder trial, a pool of 150 potential jurors was drawn. This was going to be a big one.

With the story of the cooked books at midnight story pretty well known, the prosecution chose another example of misappropriation to try Sullivan on. He had five indictment charges to work with, three for grand larceny, and two for forgery. This indictment alleged that Sullivan had taken for his own use, a note for $20,000 made out by the Ashford Company. It was for a loan the Ashford Company was making to a Mrs. Gazelia Maske, the mother-in-law of a Brooklyn builder named Otto Singer. Here’s where it gets complicated. Mrs. Maske had a $10,000 loan out from the People’s Bank. Mechanics and Traders had acquired People’s Bank around 1908. Her loan was unsecured, and she went to Otto Reimer, the president of the Ashford Company for help. Reimer had founded the Ashford Company that year, to be a middleman in the loan processes between Mechanics and Traders and Union banks. Its purpose was to make loans with Mechanics’ money. The company had been founded under the direction of David A. Sullivan. Ashford had offices at the Mechanics and Traders Bank in Williamsburg, but kept its deposits in the Union Bank at 44 Court Street.

If this sounds familiar, it’s because Sullivan had done it before. In our last episode, Robert P. Orr, the president of another middleman, the Orr Contracting Company, also with headquarters at Mechanics and Traders Bank, testified at the Grand Jury that his company had also been co-founded by Sullivan, to act as a middleman in the loan process. Orr claimed total ignorance on what his company was supposed to do, or how it did it. But they were making a lot of money. What Reimer and his Ashford Company did was extend to Mrs. Maske a $20,000 loan, with four second mortgages as collateral. $10,000 of this money would pay back the People’s loan, essentially moving money from the right pocket to the left, and the remaining $10K would be paid out to Mrs. Maske.

At the trial Reimer testified that Sullivan objected to a 6 month’s note, because the money market was tight, and asked that a demand be sent out for full payment. Reimer said that he sent the $20,000 note down to the Union Bank offices, to Sullivan himself. This was in October, 1907. The District Attorney said the timing of this was important, as Sullivan was strapped for money, as he personally owed the Hamilton Bank of Manhattan $100,000, and a large payment was due. Yet another bank got involved in this mess. The Home Bank, and its former president, William Damron, lent Sullivan $25,000, in order for him to be able to raise money to pay back Hamilton Bank. Sullivan had secured this loan by presenting Home Bank with notes of his own, representing secured amounts of collateral to show that he was good for it. One note was from the Joralemon Security Company for $25,000. There was another note, also from Joralemon, for another $20,000, and the last note was the $20,000 note from the Ashford Company. Guess who had founded the Joralemon Security Company? It too was part of Sullivan’s Mechanics Bank.

The District Attorney probably would have loved to have had a computer and some relatively easy tracing of phony shell corporations. But even without the modern technology, he and his team figured it all out. Basically, Sullivan couldn’t pay his huge personal loans, and had been using other people’s money to rob Peter to pay Paul, and it was all smoke and mirrors. Bernie Madoff would have been proud. The District Attorney had chosen this particular aspect of Sullivan’s misbehavior to try for a conviction. In an interesting choice, he hadn’t gone for the sensationalistic and dramatic midnight bookkeeping party, or the evidence of Sullivan and his closest cohorts taking the bonuses from these bogus loans. He chose a convoluted, yet brilliant scheme of Three Card Monty to show that Sullivan had not just cleaned out the vault and caused two banks to fail, but he had eroded the sacred trust between banker and depositor. He had not only played fast and loose with the rules, he had used other people’s hard earned money to make money for himself, and to cover his butt, while living it up. It was unforgivable.

The trial lasted three days. It only took the jury thirty minutes to deliberate and come back with a guilty verdict. After the verdict was read, Sullivan was allowed time to speak to his wife, and then was led away to spend some more time in the infamous Raymond Street Jail. Grand Larceny in the first degree carried a penalty of a maximum of ten years in prison. Justice Frederick Crane sentenced Sullivan to the notorious Sing Sing Prison. Sullivan would spend the next two years there. He was disgraced, and fallen from public regard, forever after known in the papers as the “bank wrecker, David A. Sullivan.”

Does the Sullivan story end there, with Sullivan in jail, never to be seen again? NO! It’s just beginning! David A. Sullivan was at the center of one of New York State’s biggest prison scandals of the first half of the 20th century. And what happened to the money? Sullivan was thought to have extracted hundreds of thousands of dollars from Union/Mechanics before the end. When he was initially arrested, he told the court he didn’t own a thing and that everything was in his wife’s name. He couldn’t even make bail. So what happened to the money, which was owed depositors and creditors of the failed banks? And where was Anna Sullivan, anyway? The conclusion of this timely tale will take place on Thursday.

Photo: Old Kings County Courthouse. NY State Unified Court System.
Walkabout: Machinations at the Mechanics Bank, part 1
Walkabout: Machinations at the Mechanics Bank, part 2


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