Walkabout: The Great Defalcation, Part 4

Read Part 1, Part 2, and Part 3 of this story.

In the fall of 1873, the great city of Brooklyn had been “Rodmanized.” No, not taken over by the ancestor of a second-rate, cross-dressing basketball player, but by the actions of one M.T. Rodman, the Deputy City Treasurer, who used his position to rob the City of Brooklyn’s bank account of what would today be millions of dollars.

The reporters of the day prayed to the newspaper gods for a story like this, and their prayers were answered, as the scandal spread wider and wider, and more and more important people in high places were implicated in the looting of the Brooklyn treasury.

One witty individual from the Brooklyn Eagle came up with this new verb, “Rodmanize,” and it soon captured the imagination of a populace that had good cause to wonder where their tax dollars and city revenue were really going.

The story of this great embezzlement, this great defalcation, began in Part One with the death of the president of the Brooklyn Trust bank, Ethelbert S. Mills. His suicide opened the investigation, which brought to light some of the actions of M.T. Rodman, in Part Two.

Rodman was the Secretary of the Brooklyn Trust, and Mills was his boss. Rodman had two jobs, he was also Deputy Treasurer of Brooklyn, in a unique and tempting position to take money from the City’s coffers and deposit it into the Bank’s vaults. If not all of the money made it into the vault, was that his fault?

Watching over the city’s money was City Treasurer Cortland A. Sprague. He was Rodman’s boss on the city side. He never reported that the city was missing money because it turned out he was also helping himself.

Part Three of our story introduced us to this wealthy hardware merchant-turned-politician and functionary, who seemed to have been too tempted by the proximity of all that money, and the relative ease involved in stealing as much of it as would go unnoticed for years.

So here we are in September 1873. Mills was safely dead, and Rodman was at home, recovering from having languished in jail until his very high bond could be secured.

All of his wealthy friends had disappeared upon hearing the charges, and Rodman made bail only because he was becoming quite sick in the stinking public prison.

The District Attorney, the police and state investigators had been on him for weeks trying to get answers, and on Sept. 16th, District Attorney Britton announced that Rodman had finally confessed.

The Brooklyn Eagle reporter who got the exclusive asked the D.A. if he had gotten a confession in writing, to which the D.A. answered affirmatively. He then announced that based on this confession, he had ordered the arrest of Cortland A. Sprague, the Brooklyn City Treasurer.

“Mr. Sprague was the chief culprit in purloining the city’s money,” he said. “It [the confession] has confirmed my belief that Mr. Sprague is the most culpable, and that Mr. Rodman, although culpable in a degree, has been in the main an instrument not an actor.

The City Treasury funds have been used by Mr. Sprague for speculative purposes, and loans for the benefit of himself, Rodman and Mr. Ethelbert S. Mills, since a very short time after Mr. Sprague was elected City Treasurer.”

D.A. Britton continued to explain how the trio stole the money. If, for example, the city had a deposit of $100,000, the paperwork would show that the entire amount transferred from the city to the bank, so $100K left City Hall and $100K went into the bank.

But what only these three knew was that only $70K went into the Brooklyn City account. The remaining $30K went into one or more dummy accounts they had set up for their own use. On paper, everything was fine, but in reality, they had skimmed off 30%. This took place over and over, netting them millions over the years.

Mills had initially taken some of the money and paid off bad investments he had made. For a banker, his investment track record was really awful, and his losses, which he made in the bank’s name, were offset for years, the money coming out of one account to cover the losses, and then removed.

He also did the same with personal loans for himself. The books showed he made good his loans, but it was all an elaborate shell game. He was paying off his bank loans with the bank’s own money.

Sprague was just out there stealing for himself and looking munificent in the process. He made several sizable loans to his business, Mulford & Sprague, and never paid them back, burying the debt with dummy payments. He did the same for a couple of friends, much smaller loans, of course. They did not know he wasn’t loaning his own money.

He bought a new racehorse with Brooklyn Treasury money, and loaned money to several social clubs that he had membership in.

He even used the city’s money to invest in Prospect Park’s creation, by purchasing bonds, paying for them with Treasury dollars. He “donated” money to fund the building of the Brooklyn Theater, as well as several other high profile “gifts” to worthy civic causes.

Once Rodman started talking, he just couldn’t stop. Lately, he told the D.A, the trio had started to get concerned that they were not going to be able to hide their activities for very much longer.

They were robbing Peter to pay Paul, moving money around between the City Treasury and their dummy and personal accounts, but because they had spent so much, it was getting harder to cover the holes. They started “borrowing” money from the Trust’s wealth customers to cover their losses.

Rodman, as an accountant, was the lynchpin in the operation, as he was the only one who really knew how to cook the books, the other two only knew how to spend.

They were starting to panic, and Sprague, at one point, offered Rodman $50,000 to get out of town and disappear. Sprague and Mills might face some difficulties if the defalcation came to light, but without Rodman to detail the activities to investigators, they would not be able to prove anything, and the two head men could feign ignorance of what a subordinate was doing.

They would look like idiots, but that was better than prison and social disgrace. Rodman refused. Sprague upped the offer, and Rodman refused again. Mills couldn’t take the pressure, and committed suicide.

As told last time, when Rodman was arrested, Sprague had magnanimously and very publicly divested all of his interests and fortunes, including his Brooklyn Heights home, to pay off Rodman’s debt to the City Treasury.

The payment was to the tune of over $300,000, a tidy fortune then, close to $6 million today. The Brooklyn Eagle had gushed that Sprague was a man among men.

What they didn’t know that he was desperately covering his own losses and involvement, hoping that investigators would not figure out his role in the Great Defalcation. His worst nightmare came true when Rodman was arrested. Sprague knew his time was coming.

They came for Sprague and took him away. He stood before the judge at the arraignment a broken and humble man. He told the judge that he had no money to bail himself out, he had sold everything to give back to the city when Rodman had been discovered.

He broke down and wept bitter tears. The judge was not moved, but Sprague’s wealthy friends did gather enough bond money to set him free for now.

The public liked Rodman for top thief; he better fit the profile. He was not charming or handsome, he did not come from wealth, was not in Society, and was not even from Brooklyn.

Mills? That was a shocker, but he was dead and out of reach. Cortland A. Sprague? Not just a thief, but THE mastermind thief of the City’s hard-won money?

The man who raced horses, helped build parks and theaters, and was a staple of the social pages and owner of a successful business? Could it be? The everyday people were thrilled, the rich were horrified, and the reporters were in heaven. This was going to be the Trial of the Century!

The papers compared City Treasurers of old and Cortland A. Sprague. Some of Brooklyn’s past City Treasurers had been men of such integrity that no corrupting influence would even waste its time trying to sway them from their sacred duties, the papers said.

But now? Tammany Hall was in full power across the river, and its influences had spread to Brooklyn, and made her weak and culpable, they editorialized. Men like Sprague, who was a Democrat, like the Tammany men, had been tempted and tested, and found wanting.

Truly, if a once respectable man like Cortland Sprague could be aided by clever “arithmeticians” like M.T. Rodman, and drawn down into his now depraved state, could any Democrat truly be trusted? For what it’s worth, after this, Republicans would rule Brooklyn for the next twenty years.

On April 28, 1874, the trial of former City Treasurer Courtland A. Sprague began. Over the course of weeks a series of witnesses came forward and testified that they had been given loans by Sprague, or had loaned Mr. Sprague money.

These witnesses included the Brooklyn Theater, the directors of several clubs, and the stable where he boarded his horses, and old customers from his hardware business. All testified that Sprague had paid them off, or loaned them money, with checks made out by M.T. Rodman, the Secretary of the Brooklyn Trust.

A detective testified that he had followed Sprague to several locations where he met Rodman, and money or papers were exchanged. There had even been a couple of late night clandestine meetings at the bank, according to security guards.

Subsequent witnesses included banking and accounting experts who outlined how the embezzlements had taken place, all noting that M.T. Rodman had been the facilitator of all paperwork and all entries in the books of both the Brooklyn Trust and the City Treasury.

The confession of Rodman was entered into testimony, and he was called to testify. Rodman had driven a hard bargain with the D.A. He would only testify against Sprague if he was granted immunity from prosecution.

The D.A. really wanted Sprague, and he agreed to the terms. Rodman told how he was in the middle, the subordinate to two powerful men, and he had only done what he had been told to do. Yes, he had also been greatly rewarded with stolen loot, but still, he couldn’t have done it without Mills and Sprague’s approval and participation.

They had been the masterminds, and they had stolen much more than he had, they were the truly guilty, and since Mills was no longer here, Cortland A. Sprague should take the blame.

You’re not going to like what happened next. The jury of Sprague’s peers, all men of similar backgrounds, found him innocent, and cast their votes for a not guilty verdict. They believed that Rodman was the real mastermind, and perhaps Mills a close second.

Sprague had merely been weak. But Rodman could not be prosecuted, so no one would pay for embezzling hundreds of thousands of dollars from the Brooklyn Trust and the City of Brooklyn. The money had been recovered, or had been made up by bonds, or was just gone.

On Jun 11, 1874, a Special Court of Oyer convened to decide if Cortland Sprague could be tried for the remaining charges against him after being found not guilty of embezzlement.

After the arguments on both sides were heard, Judge Daniels ruled that going ahead on the remaining charges amounted to double jeopardy, and was not allowed. There would be no more trials for Cortland Sprague.

The papers said “Sprague was then formally acquitted and warmly congratulated by his friends.” Since the city could not try M.T. Rodman, due to his immunity, it was all over.

As the NY Tribune said, “the result would be that while the city had been robbed of thousands of dollars, no one would be punished for the theft, and the city would have to suffer the entire loss.”

To add insult to injury, Courtland Sprague’s second acquittal by the Special Court of Oyer virtually assured that his lawsuit filed against the City of Brooklyn would be successful. Sprague had sued to get all of his money back that he had so unselfishly paid to the city to cover Rodman’s defalcation. He probably got it; court costs, too.

The Brooklyn Trust had to close for several weeks in 1873, due to this massive scandal. They reorganized, cleaned up their operations and set very strict standards for officers and employees. There were no more dual job holders like Mr. Rodman.

They regained customer confidence, and in 1913, they had a gorgeous new bank built on Montague Street, designed by York and Sawyer. They continued to grow, grew through several mergers, and in 1950, merged with Manufacturers Hanover Bank.

MHB was bought out by what is now J.P. Morgan Chase Bank, which still occupies the landmarked building at the corner of Montague and Clinton Streets in Brooklyn Heights.

Census records show that Cortland A. Sprague left Brooklyn soon after, probably not the most popular man in Brooklyn Heights, or anywhere else in Brooklyn. He and his family moved to Nyack, NY, where he went back into the hardware business.

He died in 1886, and he’s buried there. M.T. Rodman disappeared from the New York papers and was never heard of again. I have no doubt he managed to squirrel away a nest egg of ill-gotten gains, and he and his wife and family headed for new lives in parts unknown. He was a very smart man. Who says crime doesn’t pay?

(Postcard of the Brooklyn County Courthouse)

What's Happening