The San Francisco Call. Newspaper, November 4, 1898, Page 1

§v‘ This Paper not % to be taken from the Library. v ++? SAN FRANCISCO, FRIDAY, NOVEMBER 4, 1898 " PRICE FtVE CENTS. 5 VOLUME. LXXXIV.—NO, 1 THE McDONALDS STOLE ONE HUNDRED AND FORTY-TWO | THOUSAND DOLLARS BY A SCRATCH OF A Gigantic Crime Revealed in the - Secret Records of the Pacific Bank. BENT BEN‘EATH THE CRUSHING BURDEN OF SHERMAN The Cohsp‘irato_rs Watched Every Movement of the Bank Commissioners With Dread-—-A Plot to Ruin “Captain Jim.” HE PEY | morning there is another important fea- | The organization of a gigantic Mc- one occasion Frank | Donald Company was urged, Frank de- | liberately expressing the hope that the in safety | brothers would succeed in robbing the | bank and save their own private for- The startling:secret ‘history of the pirdcy that ruined “the .McDonald ank has -excited jntense’’ interest among the thousands of dépositors ‘who | ture. On more than | McDonald writes that he is glad that brother has escaped his ngs-through the ruin of | through the ordeal of examination by | tunes. .Excerpts from the letter are as s. ‘This interest'has in- | the Bank Commissioners. This is the | follows: r. than-diminished by the | first indication that the conspirators | NEW YORK, Sept. 17, 1892. | My Dear Brother: I fully appreci- | ate the enormous strain under which | you have long been laboring, and it | drives me nearly wild to think I can bring you no moneyed relief. It does seem as if everything was at sixes and sevens. In regard to Dyer I have nothing further to advise, as I wrote you before. Get all the security you can consistently with your plan and then do as you think wisest. act. that the schemers may | sought to control the official acts of the brought " to" J under the | Bank Commissioners. this State-and through proper | .The fact is important, as it is the some part of ‘the.stolen |presentation of the first steps of the y-be recovered.: It was | conspiracy to tie the hands of the Com- | that. the statute of limitation | missioners. It will be shown later what ted against the prosecution of the| part M. H. Sherman, D. S. Dorn and J. ders, but this is-not so in the case | £, Farnum played In this conspiracy fraud which The Call 18:n0W €xpos- | to silence the Commissioners. In this| Now, in regard to what you have to - connection Sherman had one duty to| P ()a;‘;nm“‘finm‘)!g&“‘;a’;‘ L b ng the:letters.of*Frank :McDon-.| perform, Dorn another and Farnum a | even if years hence.” Place on him the are published to-day ‘aré thé |third. There are few letters In the long | responsibility of disaster in demand- f a gigantic crime committed | ¢orrespondence that are of more im-| g oo a’;g3'_“,‘)"‘;0;;‘(;‘*;'1‘0}_2‘%0;2;“;?5 McDonald and his twd®sons. ] portance to the depositors of the two | can get it nowhere else, make him e of Frank V. Mc- | banks thaa those published this morn- | take his county bonds and borrow from of .the Pacific | ing. They wire written, as indicated be- RECORD OF THE CRIME OF R H McDONALD AND HIS TWO SONS. In all the secret correspondence of the Pacific Bank there is no more startling or important letter than that which Frank McDonald vrote commanding his brother Richard to falsify the books of the Pacific Bank and thus save their father from being a debtor to that institution to the aimoint of $142,000. This letter proves the coneeption of the crime and the records of the Pacific Bank establish its accomplishment. Fac-similes 6t the bank books and the checks neces- Frank commanded his brother Richard to take the record of their father's enormous debt out of the old pond in the b the savings bank for yuu,t Ir {le proofs of the theft of | wishes us to close, let him force it. transaction dishonest w concealed. by Frank M¢Donald, who wrote that he.feared that the Pa- c'Bank could i'not bear up.much the: crushing load of the | Electric . Railway bonds | upon’ the institution by M. H. anticipation of the Impending In crash Frank McDonald instructed his brother Richard to -falsify the books and clear.their father’s name of & debt of $142,000 to the Pacific Bank. The in- | structions were explicit. Dick was to take the debt out of the regular bond account of Dr. R. H. McDonald, create a special bond account for the old man and then sweep away the debt by a| falsification of the books. Not satisfied | with cheating the depositors out of this | enormous sum of money, Frank | planned a double ‘stroke of rascality | and sugegsted that the barden of this | enormous debt be taken off the Pacific | Bank and thrust upon ‘the People’s | Bank, thus robbing the poor depositors of that institation. SR Under this plan A. F. Johns, who had | no money that either institution ‘could | command, was to‘give his noté for $100,- | 000, and A. L: Jenkins was to give his | note for $50,000. .Frank.then briefly re- | marked . that the “debt: of the’Pacmc] Bank to the People’s Bank would thus be reduced to the - extent of $150,000. | Nothing more necessary.to show | How the robbers: of the Pacific. Bank | made the People’s ‘Bank the feeder to replace their thefts. This phase of the correspondence’ 6f Frank McDonald is of vital importance and’ demonstrates for the first-time to the public, beyond any possible question, -the ‘gigantic rob- | beries that were perpetrated in the sav- | ings institution established by the Mec- | Donalds. In the letters published this is. fore, by Frank V. McDonald to his brother Richard. THE PLOT TO DECEIVE THE BANK COMMISSION. Frank’s hopes of money did not ma- terialize. Gold was as hard to find as | what should have been his own senti- ments of personal honor, and on Sep- tember 11, 1892, he telegraphed to his brother an instruction that he foolishly believed would deceive the Bank Com- missioners in reference to the true con- dition of the Pacific Bank. This tele- gram was as follows: b NEW YORK, Sept. 11, 1892, R. H. McDonald Jr. 813 Sutter street, San Francisco, Cal.: Neither father nor I approve of closing up D. until he has had more show here. His pros- pects now being good for his institu- tion now to issue to us larger certifi- cates or large bill payable would be unwise for all concerned. If you will send on immediately those two hun- dred thousand renewed papers we think we can so fix matters by Octo- ber 1 that Examiners will find little to criticize. D. says we are abun- dantly secured in notes we have, but if you wish I will try to get his per- senal note to secure overdraft which we can keep all confidential. I leave to-morrow night for Norfolk to attend to matters for father. Hope to return within week. Address Atlantic Hotel. FRANK. FRANK'S SCHEME TO RUIN HIS UNCLE, JAMES McDONALD. On September 17, 1892, Frank McDon- ald wrote a most remarkable letter to his brother, Richard. In this epistle Frank clearly discussed the impending ruin of the Pacific Bank and shame- lessly suggested to his brother a cow- ardly scheme in which he hoped to throw the odium of disaster upon his uncle, James McDonald. Frank went farther than that and discussed the probabilities of his own father's death and the prospect of realizing from that death the best possible financial terms. He must know we are safe enough, only our money is tied up, and if he is not willing to help us then let the public blame him for it. 1 have been down to Norfolk and I tell you while things there in real es- tate are suffering from a reaction from 2 big boom, yet Norfolk is grow- ing and is going to be a big city, and father's property is getting valuable rapidly, and If we have nothing left us but this property and can hold it a few years we shall have all we need. I went to Norfolk at father's re- quest to get deeds to his Norfolk property made out for his three chil- dren for acknowledgment by him now and to be placed on record at his death unless otherwise disposed by him previously. I found the laws of Virginia different from ours in that respect, and had to return to consult rnszer for further instruction. Now he will make a codicil to his will pro~ viding especially for his Virginia prop- erty, and making you and me his ex- ecutors without bonds with power to sell for all three of his children equally. I have been urj r\% him to do better than that, viz.: To form now in his lifetime a stock company to be cailed the R. H. McDonald Company. Let it be stocked for $5,000,000 and let the company issue to him all the stock in exchange for his property, which he will deed and sell to the company. Then you see his estate will all be %ept together, each of us will receive so much stock and whatever bequests he makes will be carried out by the company. You see at once the high character this would impart to every- lhlnFA In the event of his death it would be a shame to see his property slaughtered by some heir wishing a division at once, whether the time was ripe or not for such, and then you know that Mattie is not over happily married, and if real estate came to her there might be endiess complica- tions, while with nothing but stock for her share her position would be prac- tically independent. The company would be a close corporation consist- ing of pa, you, myself, Mattle and no others. he more I think of this, the more it seems to me to be the thing. If we wait until his death to form such an assoclation some helr may not be willing or other difficulties may arise, and so far as I can see no ad- vantage is galned and heavy probate sary to conceal the gigantic iaeft are given above. man's bond account, create a special account, and in that account rel bank books show how successfully this was done. extent of $142,000. By a dishonest scratch of the pen lease their father from his obligation to the institution, T Dr. R. H. McDonald was made by his sons dishonestly "richer. to the The two entsies in the taxes will have to be pald which in thls way may all be avoided. issue his stock intended for his chil dren in certificates in- dorsed to them, and hold these certifi- cates with Instructions in an envelope for each to -be opened at his death. ‘When we take these certificates under a contract to carry out his instruc- tionis then there fs o will, np probate and each receives his stock and every- thing moves along smoothly. What do you think of this plan? Consult some lawyer about it and see if there is any hitch in the plan, for I may telegraph you to tend to the execution of it. You see the very fact of the existence of such a company of patd up capital of five million dollars would be a great help to your credit. Al- though if the Lord permits us to weather this winter and unioad some of our burdens I hope we shall never again need credit. I think we shall have some little peace of mind and not be eternally struggling for daily breath and existence. Your loving brother, FRANK. P. S—While father has been ver sick, still with care he ought to puil through and live a good long time yet, but he must be careful of himself. Keep all matters concerning his health religlously to yourself. LOOKING FORWARD TO THE TREACHERY OF A. F. JOHNS. On October 17, 1892, Frank McDonald gave in a letter another evidence of his strangely treacherous character. With a premonition that was subsequently developed into a reality he expressed a distrust of A. F. Johns, the confidential agent and shrewd manipulator, who knew the plots and carried out the schemes of the McDonalds. Frank wrote in part as follows: I have taken Johns’ name out from the trustees of the Madera proposition and substituted my own, making you, Edminster and myself the three. Johns can be superintendent and so forth, but a trustee is for ten years, P as2C ifmu. e ‘. .4"./} 2.4.., oty w,f?l I,'l o0 ‘af M’ FRANK McDONALD COMMANDS HIS BROTHER TO STEAL The above fac-similes ire excerpts from the letter of Frank V. McDonald to his brother Richard. In thid letter Frank commands Dick to falsify the records of the Pacific Bank so as- to save their father from the payment of his just obligation of $142,000. At that time Frank momentarily expected that the banks would crumble, and he wished tu save his father from the actions of a prospective receiver. The young banker declared his belief that the banks could not hold up much 1onger unier the crushing load placed upon them by M. H. Sherman and the bonds of his Los Angeles Electric Rallway. In anticipation of disaster, Frank McDonald commanded ‘Dick to steal $142,000 for their father’s sake In all the secret History of the Pacific Bank conspiracy there is no more shameful crime than this which is pressnted in all its ugliness iy the very handwriting of Frank McDonald Hlmselt 2 P " 4 and you do not know what his rela- tionships may be to us in that time. Besides, it is unfair to tle him up in any such long undertaking where he has no capital of his own invested. THE CONSPIRATORS ESCAPE THE BANK EXAMINERS AGAIN. A few days later Frank McDonald, 'n writing to Dick, indicated with studied clearness that he was a fool. A certain transaction in which M. H. Sherman was Involved gave Frank a splendid opportunity to show that he did not possess common sense. He believed that he had imposed on Shermaun, but the latier, as a matter of fact, had de- ceived the young banker and had taken the first step toward foisting upon the People’s Home Bank another practical- ly worthless security. In this letter Frank discusses incidentally his evi- | d=at satisfaction of the fact that Dick and the insolvent Pacific Bank had again escaped the scrutiny of the Bank Cemmissioners. The bank was again insolvent and had been for ovar a year. The elder McDonald, his two sons and the parasites that fed upon them knew that fact and congratulated themselves that another period of robberv had been insured. The letter was as fol- lows: N. Y., Oct. 31, 1892. My Dear Brother: I am so glad you are through with the B. C. orgeal, and now we shall have a breathing spell in which to wonk harder than ever, but not under t}ul!e the same nervous strain. I hope in the next few weeks to get you in some money,from one source or another, but things move slowly, Those around me of little use now. I am flad those thieving Millers ‘were not able to block us entirely, al- though they had delayed us several weeks. As you will see from inclosed letters from the United States Na- tional, I have been tending to that matter, but they are rather fussy and finicky, and in the long run will not be a correspondent you will wish to keep. Their cashier is not cut on 2 broad enough gauge, although in many re- spects a ver% nice young man. first took him $100,000 in Electrics, but he seemed not to wish any bonds that were not listed in the market here, and sald he would prefer our bills receivable. He said he did not know and could not inquire about what was at the basis of a bond value, so as to explain the same to a bank examiner, but that bills receivable spoke for themselves and were divided risks, and etc., etc., as you will readily understand. 1 then walited until the Dyer matter was ad- Justed, at father's request and to suit father's idea of what was the best that you could do under the circum- stances, and took down such collat- eral as I have already advised you to the United States Natlonal, and the cashier accepted it. He asked me Dyer's financial _strength, and I told him I ebnsidered him worth $500.000. It may be I can work 'in $10,000 of Gage notes, and if so I will return you the difference. Sherman is here—ar- rived yesterday—but he has been so busy with some matter cabled for by Mr. Murphy in London that I have had hardly a glimpse of him, but ex- pect to see him to-morrow. I hope you will tell Crank nothing. He has been false to us in every particular, and you must_be very cautious of him and ms ally Woodard. They are neither of them fair-minded or honest in thefr dealings. I am very Sorry you ever let them know anything of these af- fairs, as it will make it that much harder to work out. I congratulate you on the Califor- nian. It is fmw!nf to be an Institu- tion in the land. also congratulate ou on getting b?' the B. C. so well. Fifts & great load from my mind. 1 am sorry I have nothing but talk so far to send you, but with D.'s affairs forever hl"i’d‘.‘g 80 in the balance and pa sick and ttie's affalr, besides tha ‘eternal delay, I have been almost sick and crazy. The hundred thousand Electrics that T first Jeft with the U. S. I took and jeft with the Chemical. T thought, in view of the tight market here now, it would look good to bring in a lot' of collateral of our own accord. Your loving brother, RANK. SHERMAN AIDS O. T. DYER, AND THEN WANTS TO KILL HIM. A few days later Frank attempted to frighten O. T. Dyer, the manager of the Riverside Bank, and threatened to force him to the wall. The result was natural. The incident cost Frank Mc- Derald a large sum of money, forced fromi M. H. Sherman a desire to mur- der Dyer and thrust upon the Peovle's ‘:Heme Bank another poor security. Frank wrote as follows: N. Y., November 3, 1882. My Dear Brother: These last days have been most painful ones with D. and his bank matters, and have re- vealed another mine of his secrecy and duplicity. It seems all along the Water Company has h: a deposit in his bank of $40,000, which has been held as a trust fund, payable at order of the trustees and is now, that fhey are refunding the bonds available for payment of the company's debts; therefore they now ask that D. pay their notes out of this fund and as we had them, either he had to surrender the notes, or the knowledge he could not would have closed him up. I would . not surrender them without substan- tial payment, as I told him that I had taken enough blame on his account and these notes were the only things we saw any early money in and the only thing we had we could look to for coin relief. I asked him for at least twenty thousand dollars, but ten thousand was all he was able to raise, and that he got from Reynolds after & hard struggle. I refused to deliver up the notes for that amount, and then Sherman, who happened to be here in connec- tlon with the electric matter, said if D. went overboard it would hurt all our trades, and D. must be kegt up if possible. M. H. went out with D. to try and raise more, but they could not make it. D. is the principal one in handling this New York Electric syn- dicate that wish to purchase our elec- tric interest, and M. H. feels it would be ruinous to have D.’s disaster come now, and Johns and the doctor feel the same way, and so do 1. But I sald the money was not enough, so finally H. said that the crash would ruin him, too, by undermining. his credit, and he would rather Bay five thousand dollars himself on D.'s account, although he, M. H., was so terribly hard up and money poor. So I took his check, five days’ sight, on Valley Bank of P., for five thousand dollars, and promised to hold it five days until he could make arrange- ments with Christy to have it met. I thought it better to haye D. get an- other fellow houndln§ him for $5000, as well as ourselves. made Sherman take D.'s note and an assignment of 5000 of our term certificates to be is- sued to M. H. as collateral on that note. I also took from D. and assignment back to us of 30,000 of the 60,000 coupon term_certificates to_be issued to him. 1 had to go to the Republic Bank and Fet 10,000 of the water notes there, eft as collateral, and as I had noth- ing to put in their place I had Johns make a note of $15,000 to the Pacific Bank and I put up the Marble Com- pany’s stock with it, and put that note and stock in the place of the water notes. This ends this new disgusting phase of these matters. I saw no other ‘way out of it. . H. is heartily disgusted that D. had to bleed him for that $5000, and he would like to kill D. Your loving brother, FRANK. |DR R H. McDONALD ONGE MORE DECEIVES COMMISSIONERS. ‘Wher the Pacific Bank finaily crum- bled and thousands of men and women found themselves robbed of their money, the claim was made that Dr. R. H. McDonald knew nothing of the rottenness of the Pacific Bank, nor of the thievery of his sons. There is now proof that Dr. R. H. McDonald knew every phase of his sons’' robberias. He was a party to their schemes. e de- manded one son to steal enough money to prcvide him for six months. He fed from the State to evade the Bank Cuem- missioners and to save himself from fulfiling his promise that he would give up his private fortune to 3ave ihe bank. As an indication of the elder McDonald’s deception, Frank sent the following telegram to Dick: NEW _YORK, November 15, 1892. R. H.McDonald Jr., Pacific Bank, San Francisco, Cal: B. C. have just tele- graphed father to know when he will return. He wired that it would be soon, that he would write particu- lars. FRANK. :\BSOLUTE PROOF OF A GIGANTIC THEFT BY DR. McDONALD AND HIS SONS. It seldom happens that a man over his own signature may be convicted a thief. It seldom happens that the clever rascality of a banker may be exposed to the public. The Call is en- Tahled to ‘say, however, that Frank V. McDonald is by.his own confession a thief. In a letter written on November 21, 1892, Frank McDonald instructed his brother, R. H. McDonald Jr., how to steal $142,000 from the Pacific Bank and through it rob the People’s Home Bank of that sum of money. This thieving operation was performed by R. H. MeDonald Jr. The records of the Pacific Bank constitute the proof of the embezzlement. In this case both sons stole the money for their father, to save the elder McDonald $142,000 that he owed to the Pacific Bank and should rightly have paid that institu- tion. Frank McDonald's letter on this subject is one of the most remarkable in the entire collection. In reading it, it should be remembered that the Mc- Donalds had already listened to the flattering schemers who preyed upon the Pacific and the People’s banks and led the managers in ruinously chimeri- cal projects. When the letter of No- vember 21, 1892, was penned, the Pa- cific Bank and the People’s Bank had been ruined. The money of thousands and thousands of depositors had been squandered in. worthless properties. The McDonalds and their coterie of manipulators were attempting to foist upon the: public practically worthless stocks and bBonds. The crash of the Pacific and People’s banks was im- pending, and the McDonalds, not satis- fied with-having 'squandered the funds in their care, determined also to steal. They knew that in support of apy sug- gestion they might make they would have the assistance of willing agents. Excerpts from this important letter are as follows: , My Dear Brother: This week will probably decide much. We hope to make the turn in Electrics by which .we shall get two hundred thousand to three hundred thousand in a loan at 6 per cent for six months, secured by 600,000 in Electrics and thirty- six hundred shares efectric stock. The lender is to have option of purchasing these six hundred electrics and stock for six hundred thousand dollars. This will make a loss of one hundred thousand dollars on our books, but better that and get out than bear this crushing load indefinitely. This is the way things look now. D. and M. H. have to guarantee to adjust all Chicago matters and effect the con- solidation with the help of the new parties. We to be paid if they elect to exercise option two hundred thou- sand dollars in six months, two hun- dred thousand dollars in twelve months and two hundred thousand dollars in eighteen months, but they advance us at least two hundred thousand dollars now and possibly three hundred thousand dollars. Since you seem to think D. must be closed up soon—although I hope if this electric deal goes through we may see some way in safety to our- selves to let him work out—let us make our position as strong as pos- sible. Although I feel assured the re- sults of the step you have no idea of, and I think you better put through all father and I agreed to until just ‘before you close him up in order that no overdraft may appear on our books to speak of. Furthermore, as the fall may car- ry us down too, I hope you will get everything in best shape to protect all our various interests as much as possible. And among other things I hope you will change at once from R. H. McDonald bond account that $142,000 to our own Pacific stock and bond account, for if an accident is to happen we do not want it to ap- pear on our books that father seems a debtor to the bank of that amount, as a receiver might attempt to make