Walkabout: The Great Defalcation, Part Three

Thomas Worth, Central Park, Ephemeral NY 1

In April of 1873, when the warming breezes of spring caressed the sideburned cheeks of wealthy male Brooklynites, they, as one, turned their attentions to their favorite pastime – racing their fancy horses and carriages along the roads leading to Coney Island. It was the place to be seen, and anyone who was anyone could be viewed on a fine weekend day, taking in the fresh air. Some of these swells rode their pedigreed ponies, but some were content to be driven, sitting comfortably in their carriages and cabs, racing along the road with a controlled abandon. For the most part, this was a man’s show, and wives did not usually come along for this show of male preening. Some men drove their own rigs, but many more content to be driven by coachmen, while they waved and nodded at their peers.

One of these was Cortland A. Sprague, a wealthy Brooklyn Heights merchant. His preferred mode of Promenade to the Sea, according to the Brooklyn Eagle, was to ride in a “one-horse park phaeton driven by his colored coachman.” From there he could pretend to read his newspaper, or just watch the scenery go by, content that all was well in his world.

For aside from his lucrative business, Mr. Sprague was also the City Treasurer of Brooklyn, a political appointment that had lasted, in the spring of ’73, into its second term. He held the strings to the purse of a growing and prosperous city. But had he really been reading his paper on his ride to the ocean, by the summer of that year, he would have been a very nervous man, as skittish as a thoroughbred in a field of gopher holes. Because Cortland Sprague’s world was about to come tumbling down around him.

The last two chapters of the story of the Great Defalcation of 1873 outlined the major players in a game of high stakes embezzlement, which is what a defalcation is. Chapter One told the story of Ethelbert S. Mills, the president of the Brooklyn Trust Company, one of the wealthiest banks in Brooklyn. In 1873, with the looming inevitability of his long-time embezzlement about to come to light, Mills took a long swim off the shore of Coney Island, into the judgment of a Higher Authority. When his death did indeed spark an investigation, it soon became apparent that Mills could not have stolen today’s equivalent of $377 million without some inside help.

That help came from the Secretary of the Brooklyn Trust, a man named M.T. Rodman, the focus of Chapter Two. He was the man who kept the books, and logged the money coming in, and going out of the Trust. He helped loot the Brooklyn Trust by allowing Mills to make large loans to himself, and rubberstamping other investments that Mills made for the Trust, some very poor investments that lost the bank money. Since Mills was helping himself, then Rodman didn’t see why he shouldn’t avail himself as well, so he also made loans to himself for the modern equivalent of about $37 million. Small potatoes compared to his boss.

When Mills took that last swim, the defalcations of both men were soon brought to light. Mills was dead, and Rodman soon found himself under arrest, friendless and locked in jail. Investigations showed that Rodman had a shady financial past, but that didn’t prevent him from being hired by Mills. It also didn’t matter to the third player in this game, City Treasurer Cortland A. Sprague. He had appointed Rodman to the position of Deputy Treasurer, while Rodman still worked at the Brooklyn Trust.

This dual position enabled Rodman to take money from the city coffers, log it in the city books, turn to the other side of his desk at the Brooklyn Trust, the city’s bank, where he would log that money into the Trust’s books, and deposit it. Is it any surprise, especially given his proclivities, that over the years, vast amounts of money never made it into the City of Brooklyn’s account in the Brooklyn Trust? It wasn’t like Mills was paying attention, and who’s going to notice? Rodman kept both sets of books.

Someone should have noticed, and that would have been Cortland A. Sprague. It was his job to periodically check his underling’s work. He never did. And it turned out he had a very good reason. Rodman was helping Sprague embezzle millions of dollars of the city’s money, too! The foxes were not only guarding the henhouse, they were having barbequed chicken every night, and no one smelled a thing, until Ethelbert Mills had to go off and kill himself.

Cortland Ashley Sprague made his money in the hardware business. He was a partner in a wholesale hardware company called Mulford & Sprague, and at the time of this scandal had been in the business for over 25 years. He was a comfortably wealthy man, with a home in Brooklyn Heights, and money enough for his hobbies, which included fine horses, as well as memberships in the best clubs.

Many of Brooklyn’s wealthy men at this time were Republicans, and they had nothing but scorn for the Democrats, who were the party of the hated Tammany Hall across the river, and by extension, poor immigrants. Sprague was a Democrat, and was a vocal party member. In 1870, he and a few of his well-connected Heights friends formed their own elite Democratic Club to compete with the very organized Brooklyn Republicans.

Like many wealthy men, Sprague had a taste for politics, and was appointed a city supervisor. In 1868, his name was placed on the ballot for City Treasurer, and he won, serving one full term, and was re-elected for a second, all under a rare Democratic mayor. He was in the middle of that second term when the scandal hit the front pages. Times were different back then, and there was far too much trust in the doings of the upper classes. Upper class gentlemen and their ladies did not commit crimes, and they certainly did not do anything as common as steal. That was just so low class.

Consequently, a lot of simple checks and balances that we would take for granted today were just not followed. Sprague was allowed to hire Rodman as Deputy Treasurer, even though Rodman’s similar position at the Brooklyn Trust was a clear conflict of interest, and a temptation too enticing to resist. He was also not vetted by any outside entity. On top of that, Sprague did not have an office in City Hall or in the Municipal Building. He was told to find an office, so he established the City of Brooklyn’s Treasury office at the Brooklyn Trust. He probably thought that it would be the most convenient place, as the city’s money was there in the vault downstairs, anyway. Here he could literally be the guardian of the city’s money.

When the first defalcations became known, the Comptroller’s office figured out that Rodman had stolen $153,000 from the city. About $53,000 had come from the school fund, and the rest from the city’s general funds. At the order of the D.A., the police arrested M.T. Rodman, who had been fired quite loudly by both the bank and the city. He languished in the Raymond Street Jail for quite a while, until he became quite ill, and two people were finally found to secure his bail, which was set at over $50,000. Treasurer Sprague held a press conference and announced that the missing money from the school fund had been paid back from Rodman’s bond, and that the remaining $100,000 would be made up by the city from other sources. The finances of Brooklyn were in good hands.

Cortland Sprague expressed his shock and horror that a viper was in the bosom of the city, wrapped around its financial heart. He told reporters he felt personally responsible. The Brooklyn Eagle said of Sprague, “The whole thing is rather severe on Mr. Sprague, but he stands it like a man.” On August 29th, 1874, Cortland Sprague sold every piece of property and cashed in every stock and bond to reimburse the city treasury for the money that M.T. Rodman had stolen. The Eagle exclaimed that “Financially, Mr. Sprague was said to be completely ruined by the nefarious course of his dishonest deputy.” What a man this was!

The case against M.T. Rodman was still in investigation. Rodman was under house arrest and was being grilled by investigators from the District Attorney’s office and State banking officials. His trial was coming up, and they wanted answers. It was a foregone conclusion that he was guilty. A certain amount of money was missing; the exact same amount of money had been in his account. It was going to be a short trial, followed by a long prison sentence. They wanted to know how he and Mills had gotten away with it all these years. How was it possible that no one at the City Treasury had ever missed the money, or noticed the discrepancies?

Rodman was desperate. His reputation was ruined, he was sick, now he was broke, and he didn’t want to go to jail. On top of that, his old boss Courtland Sprague was all over the newspapers bad mouthing him, and being praised for becoming a pauper to pay off Rodman’s theft. It was more than he could take, and Rodman began talking. For immunity from prosecution, he would give them the REAL thief. The money Rodman had taken was nothing. Someone else had been stealing a lot more, and for a lot longer than he had. If the DA cut him a deal, he would give them prosecution gold. He would give them Cortland Ashley Sprague on a silver platter.

Next time: All of our players have had their back stories told. It’s now time for the final act: the trials and the aftermath.

(Illustration by Thomas Worth, of riders in Central Park. Ephemeral NY)

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