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  PENGUIN BOOKS

  A COUNTERFEITER’S PARADISE

  Ben Tarnoff has worked at Lapham’s Quarterly, and his writing has appeared in the San Francisco Chronicle. He graduated from Harvard in 2007 and lives in New York City.

  Praise for A Counterfeiter’s Paradise

  “This tale of counterfeiting is a treat for everyone.…A delightful history lesson in American financial customs.…Admirable and altogether charming.”

  —The Washington Post

  “[A] rollicking good read…Tarnoff is an engaging writer who has a fine eye for detail and the relevance of larger, historical forces.”

  —The New York Times (Business Section)

  “Tarnoff, a first-time author, expertly sketches biographical vignettes.…What elevates A Counterfeiter’s Paradise from the novelty shelf is Tarnoff’s skillful interweaving of the counterfeiter’s work and America’s revolving enchantment with and disapproval of paper money.”

  —The New York Times Book Review

  “Ben Tarnoff writes about three Houdinis of money: men who made it magically appear, and were celebrated and beloved for it.…Highly entertaining…A thoughtful…economic history of Americans and money.”

  —San Francisco Chronicle

  “Tarnoff has a more sophisticated understanding of economic matters than many historians.”

  —Gordon Wood, The New York Review of Books

  “A colorful tale.”

  —ABCNews.com

  “Engrossing…fascinating.”

  —The Wall Street Journal

  “Informative and entertaining.”

  —Washington Monthly

  “The book is Ben Tarnoff’s first, and in it he has parsed through what must have been only intermittently charming primary sources. He’s extracted the gold from the ore and presented it with narrative panache and an eye for fun historical facts.…[Tarnoff] tells a distinctly American story, studded with facts that not only dazzle but recontextualize the current state of our economy.”

  —NPR’s Books We Like

  “[A] most entertaining romp through the anarchic monetary universe of early America…[Tarnoff is] brilliantly adept at creating atmosphere and suspense.”

  —Simon Winchester

  “Intriguing…Tarnoff fills the book with many little-known facts and stories that will please anyone interested in the ‘story behind the stories’ in American history. VERDICT A fascinating read for devotees of the history of American crime and law enforcement agencies.”

  —Library Journal

  “What an ingenious idea for a book and what a rousing story! A truly gifted writer, Ben Tarnoff has brought to life three unforgettable characters while at the same time providing a window onto the tumultuous financial situation that characterized early American life.”

  —Doris Kearns Goodwin, author of Team of Rivals

  “Ben Tarnoff’s tales of financial skullduggery in early America are fascinating. A Counterfeiter’s Paradise is history as it should be written, brimming with the sort of vivid details that makes the past come alive.”

  —Liaquat Ahamed, author of Lords of Finance

  “Ben Tarnoff captures the wild early years of America’s financial system through a delightful angle: the escapades of three counterfeiters. It’s a colorful tale but also an enlightening one. It helps us understand our financial culture back then—and even today.”

  —Walter Isaacson, author of Einstein: His Life and Universe and Benjamin Franklin: An American Life

  “I’ve always had a soft spot in my heart for counterfeiters, ever since my father, a Secret Service agent, told me stories about how hard it was to catch them. Tarnoff tells the story of three colorful and almost lovable practitioners of the trade, in prose that is always accessible and sometimes downright lyrical. Along the way he drove me to the conclusion that all paper money is sorta fake. Tarnoff himself strikes me as the genuine article. I welcome his voice to that tiny chorus of writers who can make American history come alive without dumbing it down.”

  —Joseph J. Ellis, author of Founding Brothers and First Family: Abigail and John

  “Lively and insightful, A Counterfeiter’s Paradise makes the most out of the entertaining tale of three master counterfeiters, using their careers to open an unexpected window on the making of the American economic imagination.”

  —T. J. Stiles, author of The First Tycoon: The Epic Life of Cornelius Vanderbilt and Jesse James: Last Rebel of the Civil War

  PENGUIN BOOKS

  Previously published as Moneymakers

  PENGUIN BOOKS

  Published by the Penguin Group

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  First published in the United States of America as Moneymakers by The Penguin Press,

  a member of Penguin Group (USA) Inc. 2011

  Published in Penguin Books 2012

  1 3 5 7 9 10 8 6 4 2

  Copyright © Benjamin Tarnoff, 2011

  All rights reserved

  THE LIBRARY OF CONGRESS HAS CATALOGED THE HARDCOVER EDITION AS FOLLOWS:

  Tarnoff, Ben.

  Moneymakers : the wicked lives and surprising adventures of three notorious counterfeiters / Ben Tarnoff.

  p. cm.

  Includes bibliographical references and index.

  ISBN: 978-1-101-57483-6

  1. Counterfeits and counterfeiting—United States—Case studies. 2. Counterfeits and counterfeiting—United States—History. I. Title.

  HG336.U5T37 2011

  364.1’334092273—dc22

  2010029617

  Printed in the United States of America

  DESIGNED BY STEPHANIE HUNTWORK

  Except in the United States of America, this book is sold subject to the condition that it shall not, by way of trade or otherwise, be lent, resold, hired out, or otherwise circulated without the publisher’s prior consent in any form of binding or cover other than that in which it is published and without a similar condition including this condition being imposed on the subsequent purchaser.

  The scanning, uploading, and distribution of this book via the Internet or via any other means without the permission of the publisher is illegal and punishable by law. Please purchase only authorized electronic editions and do not participate in or encourage electronic piracy of copyrightable materials. Your support of the author’s rights is appreciated.

  ALWAYS LEARNING

  PEARSON

  For my parents

  Blest paper-credit! last and best supply!

  That lends corruption lighter wings to fly!

  —ALEXANDER POPE

  CONTENTS

  Introduction

  PART I. The Confidence Man

  PART II. The Populist

  PART III. The P
atriot

  Conclusion

  Acknowledgments

  Notes

  Index

  INTRODUCTION

  ON A NOVEMBER NIGHT IN 1876, two men passed in silence under the granite obelisk that rose a hundred feet above the tomb of Abraham Lincoln in Springfield, Illinois. Below the obelisk stood a statue of the slain president, the bronze silhouette glistening in the moonlight as the men moved swiftly by. Trying to make as little noise as possible, they entered Lincoln’s burial chamber and approached the marble sarcophagus. The men drew their crowbars and, straining against the handles, managed to push the large tablet that covered the coffin over the side. Inside was the cedar casket that held Lincoln’s corpse. Reaching into the sarcophagus, they began lifting the wooden box.

  Suddenly a gunshot sounded outside. The men froze: the first shot was followed by another, then another, until the volley seemed to come from every direction. They dropped the casket and darted out of the tomb, fleeing the cemetery as bullets whistled past Lincoln’s final resting place.

  The men were caught several days later. They confessed to trying to kidnap Lincoln’s body, which they planned to exchange for the freedom of their gang leader, a counterfeiter named Ben Boyd. The Secret Service, which had nabbed Boyd a year earlier, learned of the plan, and sent agents to lie in wait for the grave robbers. The officers sat watching the tomb for hours before the two men arrived. But before they could arrest the criminals, one of their pistols went off by accident. The others, thinking they were under attack, started firing wildly and the robbers escaped in a hail of bullets.

  The irony of the scene was surely lost on the raiders of Lincoln’s tomb. The robbers hoped to exchange a counterfeiter’s freedom for the remains of a man who had done more than any other president in history to eliminate counterfeiting. Maybe they didn’t know enough history to make the connection; the Secret Service agents lying in the bushes nearby certainly did. Before the war, state-chartered banks across the country printed notes of various designs and denominations, which made counterfeiting fairly easy. Under Lincoln, the government began phasing out these banks and creating a uniform national currency. A few months after Lincoln’s death in 1865, the Secret Service was created to crack down on counterfeiters. Over the next several decades, the agency aggressively pursued its task, and by the end of the century, counterfeit cash amounted to just a slim fraction of the currency in circulation. The counterfeiters who flourished in the nation’s infancy and adolescence would almost entirely disappear, victims of an unprecedented centralization of federal authority. The golden age of counterfeiting was over.

  FEW COUNTRIES HAVE HAD as rich a counterfeiting history as America. In the centuries before the Civil War, the absence of a strong central government, an anarchic economic system, and the irrepressibly entrepreneurial spirit of its citizens helped make the country a haven for counterfeiters. Counterfeiting gave enterprising Americans from the colonial era onward a chance to get rich quick: to fulfill the promise of the American dream by making money, literally. Stories of their rise and fall thrilled their contemporaries, who traded tales of these criminal adventurers in taverns and devoured the reports that appeared in the pages of local newspapers. Although the memory of early America’s moneymakers was preserved in local legends, by the twentieth century they would fade from public view, relics of an unrulier era in the nation’s history.

  American counterfeiters had an early advantage over their European counterparts for one crucial reason: the British colonies in North America were the first governments in the Western world to print paper currency. Paper notes appeared in response to the severe shortage of precious metals that was a persistent problem of colonial life. The British government limited the export of gold and silver to the colonies, and although an array of foreign coins circulated—pieces of eight, reals, doubloons, mostly of Spanish and Portuguese origin—there weren’t enough to meet the demand. Colonists developed a range of different strategies to deal with the problem. Starting in the seventeenth century, American settlers tried using an Indian currency called wampum that consisted of beads of shell strung together on a thread, but widespread counterfeiting soon made it worthless. Since blue wampum was more valuable than white wampum, -Indians often dyed their shells to sell them at a higher price, and diluted the threads with pieces of stone, bones, and glass. Colonists also tried using food commodities as money: in the seventeenth century, Massachusetts adopted corn as its official medium of exchange, and in Virginia, tobacco circulated as the common currency.

  Coins would have been more convenient, but the paucity of precious metals in North America made coinage difficult. Unlike Latin America, whose gold and silver deposits provided the Spanish and the Portuguese with more than enough raw material to mint their currency, British settlers in the Atlantic colonies found little to work with. Even when colonists acquired precious metals through trade, the idea of a coined colonial currency met with opposition from home. Massachusetts began minting silver coins in 1652, but by 1684 the British government had ordered the colonists to stop, citing their violation of the royal right of coinage.

  A growing colonial population and an expanding continental market demanded more credit, and with precious metals scarce and the home government hostile to coinage, paper money offered a solution. In 1690, the Massachusetts legislature started printing bills of credit to pay its debts. The authorities promised to retire the bills by levying future taxes payable in the new notes. But the colonists weren’t concerned: relieved to have something resembling a functioning currency, they treated the notes like money, and Massachusetts kept the credit engine going by printing new issues to supersede the old ones.

  The colonists had discovered a loophole in British regulations. Paper money didn’t infringe on the home government’s monopoly on coinage, and since the Massachusetts bills of credit were not redeemable by the British Crown, they weren’t officially considered money. South Carolina started issuing bills of credit in 1703, followed by New Hampshire, Connecticut, and the remaining nine colonies over the next several decades. By 1764, the colonies had become so dependent on paper money that when the British Parliament passed legislation prohibiting bills of credit, it sparked an uproar, further souring relations between the colonists and their transatlantic rulers.

  Paper money may have satisfied the colonial craving for credit, but it also exposed the economy to new vulnerabilities. Unlike gold or silver, which can be traded as commodities, notes have no market value aside from being a medium of exchange. Without anything “hard” to fall back on, paper can become worthless overnight, more useful as wallpaper or kindling than as money. Bills are only pieces of paper inscribed with a promise—the promise to be received for public debts like taxes, to be redeemed for a certain quantity of precious metals, or, as is the case today, to be accepted for all debts, public and private.

  Paper money had other disadvantages. Excessive printing of paper caused inflation, which became an endemic problem in the colonies. The crude quality of most colonial currency also made counterfeiting relatively easy, and since many colonists were illiterate, spelling errors on fake bills often passed unnoticed. But in spite of its drawbacks, paper money became an indispensable part of the American economy from its debut in seventeenth-century Massachusetts through the Revolution and beyond.

  When the Continental Congress needed to generate revenue to fund the war against the British, it printed paper notes called continentals, whose value fluctuated with the public’s confidence in the promises of the new political leadership. In the early days of the Republic, debates over paper currency preoccupied prominent people like Benjamin Franklin and Alexander Hamilton, who tried to shore up the finances of a country that had few natural resources and little political or economic leverage. The decades before the Civil War saw the rapid proliferation of different currencies, as banks and a host of other state-chartered companies like insurance firms and railroads flooded the country with paper that constantly o
scillated in value. By the time the federal government began regulating the money supply, there were more than ten thousand different kinds of notes circulating in the United States.

  Paper helped entrepreneurs secure capital on credit and catalyzed commerce, but it also made the economy highly volatile and vulnerable to periodic fits of inflation. Perhaps the biggest beneficiaries of this financial chaos were counterfeiters, who thrived in a virtually unregulated economy that ran mostly on faith. These moneymakers were characters worth remembering—people like Mary Peck Butterworth, a housewife from Rehoboth, Massachusetts, who during the early eighteenth century ran a counterfeiting operation out of her kitchen with the help of a hot iron. Butterworth would cover a note with a strip of damp muslin and run her iron over it, transferring the bill’s design to the fabric, which she then imprinted onto a blank piece of paper. She made a fortune selling the notes to her husband’s friends. When the authorities learned of Butterworth’s activities and came to arrest her, they couldn’t find a shred of incriminating evidence, just an ironing board and a few burnt scraps of muslin in the fireplace. Another counterfeiter named Peter McCartney had less luck eluding arrest but earned a reputation as a talented escape artist. According to one story, he once bet the chief of the Secret Service that he could break out of an Illinois jail. When McCartney showed up at the chief’s hotel room that evening, he told the astonished detective that he was calling to pay his respects and would return to his cell presently. “I merely wished to show that some things could be done as well as others,” the counterfeiter explained. McCartney eventually went to prison for twelve years. “He was not an ordinary man,” wrote Allan Pinkerton, the founder of the country’s first private detective agency, “and when he disappeared suddenly, it was as if some great wreck had gone down at sea.” The counterfeiter died in an Ohio penitentiary in 1890 at the age of sixty-six, having forged more than a million dollars.