Counterfeiting crime was pervasive in the early years of Michigan. This paper describes and analyzes the environment of currency counterfeiting and the causes and effects of counterfeiting in Michigan in the early- and mid-nineteenth century. The laws and changes to the laws of Michigan relating to counterfeiting are also summarized. This is the first state-level historical narrative of nineteenth century counterfeiting in the United States, allowing us to investigate the economic environment and the counterfeiting and counterfeiting law outcomes of a particular state with its particular circumstances. This will give future researchers a basis for state-to-state comparisons of causes and outcomes of counterfeiting and counterfeiting law. In our conclusion, we provide a lengthy example list of future state-to-state counterfeiting comparisons that can be made.
1. Introduction and Background
Currency counterfeiting was rampant in the United States from the early nineteenth century through the mid-1860s, impacting all of commercial society. As Stephen Mihm writes in A Nation of Counterfeiters: Capitalists, Con Men, and the Making of the United States, “Few of us question the slips of green paper that come and go in our wallets….The money is in our hands and is universally accepted at face value…It was not always so. In the years between the Revolution and the Civil War, money inspired not careless faith and trust, but nagging doubt and scrutiny.” (Mihm 2009).
Though counterfeiting was an important part of American nineteenth century commercial history, there are no narratives that provide in-depth, state-level detail of the relevant circumstances. The present paper on counterfeiting and Michigan is the first state-level examination of nineteenth century currency counterfeiting. We describe the conditions in the state, allowing the reader to understand the Michigan counterfeiting environment. We also begin the process of investigating how and whether differing counterfeiting conditions by state led to differing counterfeiting outcomes by state. In this way future state studies can be compared to the case of Michigan. In the Conclusion we give many examples of such state-to-state comparisons that might be made to help in understanding the environments, causes, and effects of nineteenth century counterfeiting.
Paper money became first known in Europe through the accounts of travelers, most notably Marco Polo. His book The Travels of Marco Polo (circa 1300), contained a chapter titled “How the Great Kaan Causeth the Bark of Trees, Made Into Something Like Paper, to Pass for Money All Over His Country.” Although money certainly made trade more efficient, paper money was, and to a lesser extent can still be, relatively easy to counterfeit. Counterfeiting and forgery evolved and increased as the banking and business worlds used more paper in their operations. (Davies 1994 172, 339).
Evidence exists of wholesale counterfeit operations in the American colonies as early as 1717 when counterfeiters sold counterfeit paper money through the mail. (Johnson 1994, Chapter 2 fn 1). Michigan did not become a separate organized territory of the United States until 1805, but already by 1794 the Wayne County justice of the peace wrote to the River Raisin justice of the peace regarding the arrest of a member of a counterfeit passing gang, “As this is the first discovery of a conspiracy so dangerous for society in general, it is of the greatest importance to suppress it in its commencement….” (Talcott 1890, 102-103). By the mid-nineteenth century, counterfeiting was a common enterprise in the United States. Nathan Dane, in his treatise, A General Abridgment and Digest of American Law published in 1823 states about forgery and counterfeiting, “It is a crime so often committed in the United States, that the cases of forgery in which alone law questions have been made, have been numerous in the last ten or fifteen years….” (Dane 1823, 7:145). The national experience with counterfeiting during the years up to and through the Civil War was mainly associated with state banks and the paper bank notes they issued. Bank note counterfeiting peaked in the mid-1800s before subsiding in the post-Civil War era with the introduction of federally produced paper money and of federal law enforcement.
General banking in nineteenth century Michigan has been characterized in several volumes, including Hinchman in Banks and Banking in Michigan (1887) and Wendell in History of Banking and Banks and Bankers of Michigan (1902). Additionally, John Jay Knox in A History of Banking in the United States (1900), gives an overview of banking nationally, including some information regarding Michigan. These various banking accounts, however, contain little state-level detail on counterfeiting, whether for Michigan or another state.
This paper contains parts as follows:
Introduction and Background
Types of Counterfeit Bank Notes
Counterfeiting and State Banks
Counterfeiting Sentences in Michigan
Counterfeit Technology and Detection
Counterfeit Business Chain
Counterfeit Manufacturing in Michigan
Economic Costs of Counterfeits and Usefulness of Counterfeits
General Usage of the Word “Counterfeit”
Counterfeiting Law of Territorial Michigan
First Counterfeiting Laws of the State of Michigan
State Counterfeiting Law Revisions and Cases
End of the Counterfeiting Era
2. Types of Counterfeit Bank Notes
Bank notes could be counterfeited in a number of ways. The most common bank note counterfeiting tactic of the time was to fabricate fraudulent notes of existing banks. An example of a bank note issued by a Michigan state bank can be seen in Figure 1. A second tactic was to fabricate notes of non-existent banks, as the following quote illustrates. “The public are cautioned against taking any bills purporting to be issued by the Bank of Ann Arbor. Several bills have been passed upon unsuspecting persons in the interior, and may possibly be offered to some of our own [Detroit] citizens. There is in fact, and has been, no such bank in existence.” (Democratic Free Press, March 7, 1838, 1). A third tactic was to alter the denomination of a genuine bank note. Another warning: “The editor of the Toledo Blade has been shown a one dollar note of the Erie and Kalamazoo Railroad Bank, altered to a five. The ‘one' was entirely extracted by some chemical process, and the ‘five' inserted [emphasis in the original].” (Detroit Daily Free Press, March 4, 1854, 2). A fourth counterfeiting tactic was to alter worthless bank notes from failed banks to make them appear as genuine money. “A friend showed us yesterday, a $3 bill, purporting to be on the Farmer's Bank of Genesee County, N. York. – There is no such Bank. The bill is on a Michigan Bank, a real wildcat affair – but has been changed for the purpose of deception.” (Democratic Free Press, December 23, 1843, 2). In a related way, counterfeiters were sometimes able to acquire bank note plates of failed or expired banks as a basis for making their counterfeit notes. (Banker's Magazine and Statistical Register. 1855 4:709-710). A fifth counterfeiting tactic was to obtain genuine bank notes that had yet to be signed and issued by the bank. “Charles Freeman was … charged with passing a counterfeit $1000 bill on the Lancaster Bank, Mass. The accused, by some means or other, procured one of the blank bills, and, as is alleged, forged the names of the president and cashier.” (Detroit Daily Free Press, January 28, 1858, 2).
3. Counterfeiting and State Banks
High Michigan counterfeiting crime rates occurred (i) during the weak and chaotic financial and law enforcement conditions of early Michigan (1839-1842), and (ii) with a large number of state banks nationwide (1850-1860). The counterfeiting rates can be seen in Figure 2, Michigan Counterfeiting and Forgery Charge Rates. The Figure 2 counterfeiting data is compiled from Michigan counties as found in the Annual Reports of the Attorney General of the State of Michigan. (1839-1878). Appendix A compiles the many actual terms used by Michigan county prosecutors for the charges of counterfeiting and forgery and used by us in gathering the data for Figure 2. County population data comes from U.S. Census Reports (U.S. Census Bureau) for the federal censuses of 1830, 1840, 1850, and 1860 and the Michigan state censuses of 1837, 1854, and 1864. County populations are interpolated between census years. The counterfeiting data is compiled for the reporting counties by year (with some counties not reporting in some years). The reported counterfeiting crimes are often not specific and can include the manufacture, wholesaling, or passing of counterfeits. Both counterfeiting and forgery charges declined in the early 1840s, shortly after a sharp decline in the numbers of Michigan state banks.
Michigan was founded as a state in 1837 and in the same year the state passed a General Banking Act, permitting the easy establishment of state banks, leading to a flood of new banks in the state, each of which could issue its own bank notes. (Dunbar 1995, 223). According to Warren Weber's (2008) extensive state bank database, the number of state banks in Michigan exploded from one bank in 1834 to 18 banks in 1837 and to 57 banks in 1838. Their numbers then declined just as rapidly, falling to just four in 1840. (Weber 2011). The chaotic financial conditions, the many failed banks with their many failed bank notes – which were frequently modified for counterfeiting purposes – and possibly the infant state law enforcement processes, led to elevated counterfeiting and forgery criminal charge rates in Michigan.
From the mid-1830s to 1840, there was a national increase in the number of state banks, with an associated national rise in counterfeiting, including in Michigan. By 1840, Bicknell's Reporter, Counterfeit Detector and General Prices Current described 1,930 kinds of counterfeit bank notes, (Detroit Free Press, October 27, 1840, 2). The Detroit Free Press (September 19, 1840, 2) reported “Goodman's Counterfeit Banknote Detector” claimed 1,200 kinds of counterfeit notes in existence in 1840.
A state bank's paper money could be used anywhere a recipient was willing to take it, though recipients generally preferred local money. Local money was typically both more known and more valuable (i.e. less discounted, as it was easier and cheaper to redeem notes at the issuing bank if it were local). Unfortunately, during the banking frenzy of the early statehood years, Michigan residents would not have been familiar with the vast numbers of new banks and bank notes appearing in their state. Thus, they commonly would not have known whether many of the purported banks actually did exist or if they still existed, when they were asked to accept a particular bank note. This murky situation provided a fertile ground for counterfeiters. For example, “Before the St. Joseph County Bank had been presented with a single note of its own for redemption, counterfeits were passed over its counters, and into its ‘till.'” (History of St. Joseph County, Michigan 1877). During this time, “Every merchant and business man kept a ‘counterfeit detector' in his money-drawer for both coin and paper, and even then he was a most remarkably lucky individual who did not get a fair percentage of counterfeit or broken bank-notes.” (Durant 1877).
In the subsequent lean economic years of 1840 to 1842, the number of banks nationwide dropped, from 712 in 1840 to 644 in 1842. The existence of fewer banks, both in and out of the state, meant the existence of fewer bank note types, especially of Michigan banks, and counterfeiting rates dropped in Michigan, see Figure 2. Through 1848, the number of state banks both in Michigan and nationwide remained low. Michigan had five state banks in 1842 and three in 1848. Nationally, there were 644 state banks in 1842 and 622 in 1848. These years with relatively few state banks were also years of low counterfeiting charge rates in Michigan, with an average rate of 4.5 criminal charges per 100,000 state residents.
In the following decade, the number of banks in Michigan remained low, with five in 1850 and four in 1860. However, a different nationwide trend emerged, along with a higher counterfeiting crime rate in Michigan. The number of state banks nationwide nearly doubled from 696 in 1850 to 1345 in 1860. During this span, Michigan counterfeiting rates were high, averaging 6.9 charges per 100,000 state residents, see Figure 2. Presumably, with many banks nationwide issuing their own currency, it would be difficult for inexperienced money handlers to know if a given alleged bank or bank note were genuine or not, and it would be difficult for them to recognize counterfeits from among all the genuine bank note designs in existence.
With the introduction in 1862 of federally issued Legal Tender notes, the introduction in 1863 of national bank notes, and a federal tax on state bank notes in 1866, state bank notes disappeared and were replaced by federal bank notes. Counterfeiting investigations of Legal Tender notes and national bank notes were transferred to the federal level with the founding in 1865 of the federal Secret Service. Counterfeiting charge rates by Michigan county prosecuting attorneys declined dramatically after 1865, see Figure 2.
4. Counterfeiting Sentences in Michigan
The “Abstracts of the Reports of Prosecuting Attorneys” data reveals that receiving a jail or prison sentence was the most common punishment for counterfeiting. As seen in Table 1 - Counterfeiting Punishments, between 1848 and 1880 only 28 known cases resulted in fines, while 377 known cases resulted in jail or prison sentences. (Data from the years before 1848 and for 1851 do not report the outcomes per crime, so are not reported in the tables.) A few convictions or guilty pleas do not include sentences, possibly because no sentence had yet been handed down at the time of the report. Tables 1 and 2 exclude suspended sentences, which are not expanded upon in the reports. The average actual length of sentences (of those with a stated length) decreased over the years, see Table 2 - Sentence Lengths. Thus, as the magnitude of the counterfeiting problem diminished, jail sentence lengths also fell. Finally, a few unusual counterfeiting and forgery case outcomes are listed in Table 3 - Unusual Counterfeiting and Forgery Outcomes. One such unusual outcome was insanity. The Michigan Asylum for Insane Criminals opened in 1885 and those acquitted on grounds of insanity were sent there.
5. Counterfeit Technology and Detection
Steel and copper plate engravings were the most commonly used both by bona fide bank note makers and by counterfeiters. However, it was not uncommon for counterfeiters to make and use simpler plate types, such as wood plate. For example, “We have, now, counterfeit 5's on the State Bank of Indiana….In this counterfeit, the vignette is very coarse, and looks more like a well finished wood, than steel engraving.” (Detroit Free Press, May 21, 1850, 2). Lithography, a cheaper alternative to engraving, was another printing method used to produce counterfeit bank notes. It was noted as early as 1834. “An ingenious Yankee has contrived to copy a bank note on a stone, and then lithograph the notes to any quantity by a chemical process.” (Democratic Free Press, June 25, 1834, 3). By 1860, the use of lithography in counterfeiting currency was minimal, but a case involving a Michigan bank occurred as late as occurred in 1867. “A quantity of lithographic plates, intended for striking off one dollar and five dollar notes on the People's National Bank, of Jackson, Mich., and a number of counterfeit notes printed from the same were seized….” (Detroit Free Press, May 2, 1867, 1). The fives were from an 1865 series and were considered to be of poor quality. (Dickerman's United States Treasury Counterfeit Detector and Banker's and Merchant's Journal. 1899, 16:1 20).
Photographic counterfeits began appearing about 1855. (Banker's Magazine and Statistical Register. 1855, V:152). “Counterfeit two dollar bills on the Bank of Upper Canada have recently made their appearance, and the public need to be on their guard against them, as they are well calculated to deceive. They are produced by the photographic art, and are of course facsimiles of the genuine bills in everything except the quality of the paper, and the dingy blackness of the coloring.” (Detroit Free Press, December 10, 1858, 2). Despite being a close or exact copy of the original, “no persons who had ever examined a genuine bank note could have been led astray by them….” (Detroit Free Press, November 21, 1862, 1). Thus, by the start of the Civil War, the threat of the photographic counterfeiting technique had mostly receded, as it was difficult to colorize the black and white photographs. (Dickerman's United States Treasury Counterfeit Detector. 1889, 16:17). Various photographed counterfeit bills did surface for decades, but the quality was generally less than good. (Dickerman's United States Treasury Counterfeit Detector. 1889, 16:28- 35).
By the 1860s, the electrotyping copy process was used by counterfeiters for copying engraved plates. If original bank note plates could be temporarily procured, facsimile bank note plates could be produced via electrotyping. (Detroit Free Press, September 23, 1865, 3). Counterfeit manufacturers would also use this method to copy their own plates. (Detroit Free Press, December 3, 1880, 8). In an related episode, a sheet of lead was used to make an impression from a steel roller used in printing genuine $100 compound interest notes. A counterfeit plate was then made from the lead sheet. (Detroit Free Press, March 16, 1866, 1).
Over time, counterfeiters became increasingly technologically sophisticated. In 1855, it was reported that, “The skill, talent, ingenuity and industry of the gentlemen engaged in making and circulating false notes keep steady pace with the improvements of the legal bank issues – and the counterfeits, in some parts of the Union, are often found to be worth quite as much as genuine notes.” (Detroit Daily Free Press, May 27, 1855, 2).
In a desire to reduce counterfeiting, bank note production technology became increasingly sophisticated as well. By 1866, it was reported that “It requires over $20,000 of machinery and from fifteen to twenty-five artists to produce genuine bank plates….” (Detroit Free Press, February 4, 1866, 3). In addition, by 1869, U.S. bank notes were produced using silk fiber paper. (Blake. 1908, 10).
Counterfeiters again responded. Many tried to cheaply imitate the silk fiber paper technology. “The paper crumples with a snap when handled, and the dark fiber lines, instead of being worked into the paper as in the genuine bill, are simply printed on the face in imitation of the correct thing.” (Detroit Free Press, March 2, 1880, 1). An older technique reappeared and was occasionally successful, as when in 1879 it was reported that, “The Treasury Department service has gathered in a large number of counterfeit notes so skillfully made as to be accepted by banks. The fiber paper has been the principle protection heretofore, because counterfeiters have been unable to procure it; but the photograph reproduces it and the plate-work almost with perfection, and very rapidly. The red letter numbering is the weak point. It is photographed black and the washing of red over it may be detected with a glass.” (Detroit Free Press, October 25, 1879, 6). Counterfeiters could also buy or produce their own fiber paper. “The engraving is good, and paper, a silk fiber, almost identical with the genuine notes, but a comparison with the genuine shows many defects that would not be detected by anyone but an expert…” By the late 1870s, an ersatz fiber paper began to be produced, “The paper is a little too thick, is in two or three pieces, and glued together. The silk fibre is inserted between the front and back before gluing together…” (Detroit Free Press, June 17, 1879, 2). In later years, pen and ink drawings were used to imitate the fiber lines, as in a counterfeit $5 of the Citizen's National Bank of Niles from the early 1890s.(Dickerman's United States Treasury Counterfeit Detector and Banker's and Merchant's Journal. 1899, 16:1 21).
Bank note detector publications, such as “Thompson's Bank Note and Commercial Reporter” flourished during the era (Smith 1942, 371 – 386). However, the reporters and detectors generally contained just a scant description of the counterfeit at best, a description that was often difficult to use to actually detect counterfeits. An 1849 description for money handlers to detect $10 counterfeit bank notes purporting to be issued by the Farmers' and Mechanics' Bank of Detroit read as follows: “vig. female, sheaf of wheat, cows, &c; TEN across the right end, and a female standing on the left. Signatures and filling up seem to be in the same hand-writing,” see Figure 3 - Sample Text from Thompson's Bank Note Detector.
Newspapers regularly ran notifications of counterfeit currency found both locally and out-of-state. The simplest notices were extremely general. “We have been informed that counterfeit half dollars and two shilling pieces are becoming quite plentiful in the country.” (Detroit Free Press, July 28, 1837, 2).
A very common notification announced the dollar amount and the alleged bank of issue: “Counterfeit fives on the Merchants' Bank, of St. Louis [Missouri], were recently passed at Chicago.” (Detroit Free Press, December 30, 1860, 2). Occasionally, newspapers would include descriptions given in bank note detector publications. Another common type of newspaper notification included some method of counterfeit detection. “The counterfeit is well calculated to deceive. It has the goddess of liberty on the lower right hand corner, a careful inspection of which shows one foot to have but four toes. The imprint of the engraver's name is imperfect. The bill is dated Nov.1, 1855. One of these bogus notes was passed at a dry goods store yesterday afternoon….” (Detroit Daily Free Press, January 13, 1857, 1).
As counterfeiting grew more sophisticated, so did counterfeit detecting, as illustrated by Dye's Bank Mirror and Illustrated Counterfeit Detector. By 1850, it was publishing lists of broken and fraudulent banks, from which money should not be accepted, as well as lists of solvent banks (Detroit Free Press, May 23, 1850, 3). Shortly thereafter, the Detector contained engravings of good and bad bank notes (Detroit Free Press, November 22, 1852, 2). As magnifying glasses were sometimes used in spotting counterfeits (Detroit Free Press, June 19, 1862, 1) the Dye's detectors of the early 1850s also came with magnifying glasses. However, as an 1866 newspaper column suggests, counterfeit detectors had their limits.
Others depend much upon a bank-note reporter, and after taking some few counterfeits by consulting that, throw them away in disgust, when in fact the reporter is not at fault. Reporters are good for all they pretend, viz.: to warn you of the failure of the banks, and also to warn you of counterfeits after they are in circulation; they cannot before, and if they are a good imitation, they say, better refuse all on that plate (Detroit Free Press, February 4, 1866, 3).
John Dye, among others, published general rules for detecting counterfeit bank notes (Dye 1850). Money handlers were advised to (i) examine the clothing and hair of human figures to check for naturalness and fineness of work, (ii) examine the lettering of the title of the bank and the engravers' names for great skill and perfectness, (iii) check for even and perfect background shading, and (iv) check the bank, town, and state names to see if they had been altered. It was advised to not accept any suspicious bank notes (Detroit Daily Free Press, April 7, 1857).
Shortly after the introduction of photographic counterfeits, a chemical method to detect photographic counterfeits was published. “A reliable means of detecting photographic counterfeit notes … is the application of cyanide of potassium…. If it should be a photograph, the paper will turn white …. If the note is not photographed, this operation has no effect.” (Detroit Free Press, May 27, 1859, 2).
As they did with counterfeit bank notes, counterfeit detectors and newspapers also addressed the detection of counterfeit coins. “Counterfeit half dollars and quarters are in circulation, made of pewter, and silvered over by the galvanic process. They are so well executed that the only mode of detecting them appears to be to ring them against a hard substance, when their dull, flat sound is heard.” (Detroit Free Press, September 11, 1843, 3). The following striking example claimed to allow anyone to discover counterfeit silver coins, via the galvanic action of zinc and silver. “Take a clean slip of common sheet zinc, about two inches by one-half, and lay it upon the tongue; place a genuine silver coin upon the tongue, and on bringing the silver and zinc together, a pungent and disagreeable taste will be perceived. Substitute, now, a coin suspected to be counterfeit, in the place of the genuine coin, and a very slight, if any taste will be perceived.” (Detroit Free Press, April 16, 1839, 2).
Those not experienced in handling money were considered the most easily duped by counterfeits. “A large amount of counterfeit money has been found secreted near this village [Adrian] … : $3 bills on the Farmers' and Mechanics' Bank, Burlington, Vt; $10 bills on the Farmers' Bank of Troy, N.Y.; $50 bills on the Merchants' Bank, N.Y…. It would be well for farmers and others not well skilled in detecting counterfeit money, to be on their guard.” (Democratic Free Press, November 27, 1839, 1). Experienced money handlers were considered harder to fool. “This part of the plate is coarsely executed, and if examined will satisfy any one accustomed to handle money that the bill is a counterfeit.” (Democratic Free Press, August 1, 1842, 2). However, some counterfeit bank notes were acknowledged as difficult to detect.
We saw on Saturday several ten dollar bills on the Wisconsin Marine and Fire Insurance Co. Bank of Milwaukee. They are absolutely the most perfect counterfeits ever yet put into circulation, and it is almost impossible to detect them. The paper is excellent and the signatures identical with the original. Indeed so accurately is the counterfeit executed that the two bills exhibited to us were taken upon the [Michigan] Central Railroad after a notice to the conductors that such counterfeits were in circulation, and passed also through the hands of the treasurer without detection (Detroit Free Press, April 7, 1851, 2 [emphasis in the original]).
And so even experienced money handlers could be fooled.
Beginning in the late 1860s, the federal government used a serial numbering process on bank notes that could aid in detecting counterfeits.
A rule by which counterfeit greenbacks or national bank notes may be detected, has been lately discovered…. It is this: Divide the last two figures of the number of the bill by 4, and if 1 remain, the letter on the genuine will be A; if 2 remain, it will be B; if 3, C; should there be no remainder, the letter will be D. For example, a note is registered 2461: Divide 61 by 4, and you have 1 remaining. According to the rule, the letter on the note will be A. (Detroit Free Press, December 7, 1867, 1).
Though this rule was not infallible, it was considered useful, (Dickerman's United States Treasury Counterfeit Detector and Banker's and Merchant's Journal. 1899, 16:1 28) presumably until counterfeiters learned the rule as well.
Bank officers were considered knowledgeable in detecting counterfeits and were engaged at trial as experts. “Walter Ingersoll sworn – ‘I am the assistant cashier of the Michigan Insurance Company Bank; I have been connected with that bank for twenty years. I am able to tell the difference between good and spurious coin…. These are not good coin; they are too light.'” (Detroit Free Press, August 17, 1859, 1).
Once detected, counterfeits were often voluntarily marked as such. And as Massachusetts did in 1860 (Banker's Magazine 1859-1860, IX:708). Michigan passed a law in 1865 requiring any bank or banker to stamp the word “counterfeit” or “worthless” or “altered” on the counterfeit bank notes they detected, to prevent their further circulation (Detroit Free Press, March 4, 1865 1). The federal government passed a similar law in 1876, (Banker's Magazine 1875-76, 31:150) which applied to U.S. government officials who received or disbursed public moneys and to officers of national banks.
In rare cases, banks took additional steps when it was revealed their bank notes were being counterfeited. “Counterfeit tens on the Girard Bank of Philadelphia are in circulation. No more ten dollar bills on the old plate will be issued. Next week a new plate will be procured.” (Detroit Daily Free Press, February 13, 1857, 2). The U.S. Treasury could request the return of all notes of a specified denomination from the national bank that had issued the notes (Detroit Free Press, July 10, 1875, 4). Also, unusually, an entire issue of a bank note could be recalled. “Treasurer Spinner has stated that he never saw a better executed counterfeit than the $500 legal tender note [federal issue of 1869] made public yesterday, and that the whole issue of $35,000,000 will have to be called in….” (Detroit Free Press, September 3, 1873, 4).
Over the course of the mid-nineteenth century, genuine bank note producers and law enforcement innovated in attempting to overcome counterfeiters. Meanwhile, counterfeiters innovated in attempting to overcome genuine bank note producers and law enforcement. Ultimately, the genuine bank note producers and law enforcement were the more successful side.
6. Counterfeit Business Chain
During the period of state bank money – essentially though the end of the Civil War – the market barriers to entry were low for counterfeiters. First, there was relatively little interstate policing of counterfeiting, mainly consisting of U.S. Marshals working sporadically on cases of counterfeit specie (coins). Second, the detection of counterfeits, given the vast number of bank note types, was not elementary.
Both former (Detroit Free Press, March 18, 1859, 2) and employed (Detroit Free Press, December 3, 1880, 8) engravers were involved in counterfeit manufacturing. (The case of the former engraver noted here was a serving Methodist pastor who produced counterfeit bank notes in his basement. He was arrested in the course of a funeral service he was administering.) Engravers who became unemployed because of mergers of bank note engraving companies were thought to engage in counterfeiting (Detroit Free Press, January 1, 1859, 1). Given the wide assortment of legitimate banks and bank notes, counterfeiters were reportedly also able to dupe honest engravers into making banknotes for non-existent banks. (Detroit Free Press November 5, 1859, 1) and active counterfeiters could even win banks' engraving contracts. (Detroit Free Press September 28, 1867, 1).
American counterfeiters would also counterfeit foreign currency. The well-known Johnson family of counterfeiters sometimes operated in eastern Michigan and frequently manufactured and passed Canadian currency. When the head of the family, Charles Johnson, was arrested in Toronto, authorities collected four counterfeit plates for U.S. $5 legal tender notes and 14 plates for Canadian bills (Detroit Free Press, December 7, 1880, 6).
Counterfeit bank note manufacturers sold their production to wholesale dealers, with the wholesale price for new, good quality counterfeits typically varying from about 30 cents (Detroit Free Press, November 19, 1880, 2) to 40 cents (Detroit Free Press, December 12, 1880, 2) on the dollar. Counterfeit wholesale dealers, in turn, sold their product to passers, or “shovers” in the lingo. Counterfeit shovers were the equivalent of traveling salesmen, buying their stock from wholesale dealers. In a Detroit trial, a Deputy U.S. Marshal testified, “[I] found in the defendant's possession a paper showing where to buy ‘sporting greenbacks.'” (Detroit Free Press, April 16, 1869, 1).
Purported counterfeit dealers were not always honest. Circa 1869 and 1870, Wogan and Company employed a common confidence game found in counterfeiting. The firm “flooded the United States with its circulars, offering to sell counterfeit greenbacks, ‘sure of passing without detection.'” (Detroit Free Press, December 18, 1870, 2). Thousands responded by mailing in payments to buy the undetectable counterfeits, to receive nothing in return except sawdust and the like. One Port Huron resident received a miniature photograph of a $500 bill, some tin foil, and a caution reading, “This is done to mislead the detectives….For God's sake keep cool or the dog is dead” (Detroit Free Press, November 20, 1869, 3).
A Detroit merchant in 1875 was caught in a second confidence game of the counterfeiting field (Detroit Free Press, July 15, 1875, 1). A purported counterfeit wholesale dealer showed the merchant a very deceptive “counterfeit” $1, allegedly printed from a stolen U.S. Treasury plate, only differing, it was said, in the perfection of the fiber paper. After watching the “counterfeit” $1 bills being passed successfully numerous times, and with an enticing retail price of just 10 cents on the dollar, the victim paid $500 up front for $5000 of counterfeits to be received at a later meeting. The purported dealer left the city without handing over any counterfeits, and the “counterfeit” ones that had been “passed” were later determined to be real Treasury bills. The hopeful counterfeit buyer claimed he got involved in the counterfeit purchasing affair to earn government reward money. The buyer consulted an attorney to try to recoup his $500 from the “counterfeit” seller, but no further outcomes of the case were reported.
During the state bank note era, genuine out-of-state bank notes were typically lower valued (for a given dollar denomination) than were genuine in-state bank notes. However, counterfeit shovers preferred using out-of-state bank notes. From Detroit Free Press (including with its alternate names) newspaper accounts, we assembled a set of 363 counterfeit bank note cases. These are both in-state and out-of-state counterfeit reports and mainly involve notes of northern state banks, in which the state of the alleged issuing bank is known, as well as the state where the passer was arrested or where the counterfeits were found circulating. Of these 363 cases, 219, or about 60%, were on out-of-state banks, while a substantial majority of the in-state bank notes were on out-of-town banks. Our data set indicates that, in the counterfeiting arena, the lower inherent value of using out-of-state bank notes was dominated by the reduction in the risk of detection and by their convenience when traveling. Money recipients would be less familiar with the non-local notes and counterfeit shovers were often on the move.
Counterfeit passers “sold” their product to unwilling “buyers,” usually store, saloon, or hotel owners, to obtain genuine money as change, or less commonly, to pay for living expenses. Counterfeit passers were often enterprising. “One of our citizens, while footing it from our town [Allegan] to Otsego, was met by another footman, and by him bantered to wrestle for $2.50 stakes. The stranger managed to lose, or rather win for the time being. Pulling out a $5 bill he received from the victor in the match $2.50 in change. The bill proved to be counterfeit; the counterfeiter was pursued and caught in Allegan; the bill was redeemed by him without going to trial, and he was allowed to proceed on the journey – to victimize other individuals in like manner, we presume.” (Detroit Free Press, July 29, 1859, 2). Criminals in general would often shove counterfeits when the opportunity arose. The sham Northwestern Detective Agency was established in Detroit in the late 1860s. It tracked down criminals in order to blackmail them or to demand a share their loot, while at the same time also passing counterfeit currency (Detroit Free Press, June 22, 1870, 1).
7. Counterfeit Manufacturing in Michigan
Little manufacturing of counterfeit bank notes took place in Michigan. New York City was the center for large scale bank note counterfeit production in the U.S. (Johnson 1995, 16). For the United States as a whole, coins were counterfeited at much lower rates than bank notes (38) but the known manufacture of counterfeits in Michigan was mainly of coins. Producing counterfeit coins fit the rural capabilities of the state in that it did not require the laborious training that engraving did. The common production process involved a molding technique based on a genuine coin (49) usually resulting in counterfeits of a low quality (Dickerman's United States Treasury Counterfeit Detector and Banker's and Merchant's Journal. 1899, 16:1 47). An underground coin counterfeiting instruction manual was even sold to “members” of the so-called “Mystic Circle of Alchemy,” (Detroit Free Press, March 19, 1859, 1) so they could learn the counterfeit coin manufacturing trade. Table 4 – Michigan Counterfeiting Production, 1833-1880, presents data for known counterfeit production in Michigan during the period. Twenty-nine cases of counterfeit coin production were reported as compared to three cases of counterfeit bank note production or preparation for counterfeit bank note production. (See “Appendix B – Michigan Counterfeiting 1833-1880” for the sources of this data.) Four of the twenty-nine instances of coin counterfeiting involved the counterfeiting of Mexican coins, a form of valid legal tender in the United States before 1857. A prison convict, with the aid of a prison keeper, was even able to manufacture counterfeit coins in the Jackson State Prison in the mid-1850s (Detroit Daily Free Press, January 31, 1855, 1). We expect that the lack of trained engravers in the rural, relatively less commercialized state of Michigan accounted for the rarity of bank note counterfeiting and the predominance of coin counterfeiting in the state.
8. Economic Costs of Counterfeits and Usefulness of Counterfeits
The economic costs of counterfeiting were varied and substantial. First, there was the time, money, and effort exerted of the counterfeiters. Second, the receivers of counterfeit currency lost revenues when they ended up with worthless currency that they could not or would not pass along. Third, commercial exchange was made more difficult when sellers were unwilling to take unknown or suspicious – but genuine – bank notes and coins. And for the best counterfeits, it was advised to refuse a whole class of bills. “They are the best counterfeits we have ever seen…. The only safe way is to refuse all bills of this denomination on that bank.” (Democratic Free Press, June 23, 1845, 2). Less commonly this advice to reject money occurred with coins, too. “Thompson's Bank Note Reporter cautions the public against receiving Spanish silver coins. Spanish dollars are in circulation, which are such excellent counterfeits that the ordinary tests with acid are of no avail. They are of copper, thickly coated with silver, and can only be detected by filing.” (Detroit Free Press, January 1, 1851, 1). Fourth, there were the numerous costs of counterfeit detection. Fifth, over time more sophisticated and expensive means of bank note production were employed to try to reduce successful counterfeiting. Sixth, the added money creation from counterfeits caused more inflation. Seventh, governments incurred law enforcement, judicial, and prison costs. Data from the Wayne County Superintendents jail reports are available from 1853 to 1861. This data shows that among the reasons for jail confinement in Wayne County (which includes Detroit), counterfeiting crimes were typically about the seventh most common crime type of 40 listed (Detroit Daily Free Press, June 3, 1853, 2; Detroit Free Press, November 16, 1854, 3; Detroit Free Press, May 10, 1855, 1; Detroit Free Press, May 27, 1857, 1; Detroit Free Press, November 14, 1858, 1; Detroit Free Press, November 23, 1859, 1; Detroit Free Press, May 19, 1860, 1; Detroit Free Press, November 17, 1860, 1; Detroit Free Press, May 16, 1861, 1). At the state level, Jackson State Prison held 7,071 inmates from its inception in 1839 to 1880; of these, 549 were imprisoned for counterfeiting or forgery (M.A. Leeson. 1882, 114 History of Macomb County, Michigan).
Because little local money was available in Michigan from the early 1840s to the mid-1860s, using counterfeits could benefit the flow of goods and services and thus the economy. From an Oakland County history, “In 1842, Samuel Phelps opened the first store in the village [Oxford]. Money being scarce, most of the trading was done by a species of exchange called ‘dickering.'” (Durant 1877, 246).
A Genesee County history reported that circa 1842, “Settlers could get very little for their produce, and never were paid in money except at Detroit, and even at the latter place they were obliged to take half in store pay. … At Flint, which was the nearest market, it was utterly impossible to get money, and bartering was the only system of trade.” (Ellis 1879, 358). Later in Grand Rapids local bank notes were still uncommon, “In 1852 … Mr. Wells put out his modest sign, and offered to our merchants and business men his [bank] drafts on New York, Detroit, and Chicago, in exchange for the different sorts of currency then offered, most of which, however, was George Smith and Co.'s Georgia money, and South Western Plank road currency.” (Leeson. 1881, 458-459. History of Kent County, Michigan).
With the disappearance of most state banks in Michigan, Michigan bank notes also became scarce, as seen in Figure 4 - State Bank Money Circulation. Annually from 1842 to 1862, just three to six Michigan state banks had currency outstanding. During these years, either three or four of these banks were in Detroit, while the other banks were located near Detroit (Weber, 2011). The most distant bank, doing business in Ann Arbor for five years, was about 35 miles away. The rest of the Michigan population – mostly concentrated in the lower half of the Lower Peninsula – had no nearby currency-issuing banks. Neighboring Ohio also experienced a scarcity of its state's bank money in the early and mid-1840s but saw more issuance by the late 1840s. Michigan, however faced a dearth of local money until the introduction in the 1860s of federally-issued currency and of national bank notes. We can compare the dollar per resident amounts shown Figure 4 with per resident amounts in 1870. Federal United States money outstanding, principally Legal Tender notes, per U.S. resident was $9.94 in 1870 (Annual Report of the Comptroller of the Currency. 1876 LII (U.S. issued money); U.S. Census Bureau. 2009 (population)). Michigan national bank notes outstanding per Michigan resident was $3.33 in 1870 (Annual Report of the Comptroller of the Currency. 1870, XVI (national bank notes); U.S. Census Bureau. 2010 (population)). Together this was a sum of $13.27 per Michigan resident for 1870, considerably higher than the low in-state dollars per resident amounts of 1840 to 1860.
When money is scarce, transactions are more difficult to complete. So, while counterfeits were deemed to be the scourge of the banking system, the lack of legitimate money in Michigan implies that being able to use counterfeits for transactions was of use to residents of the state. In 1843, a character in a newspaper short story described this attribute: “As I am credibly informed, the whole circulating medium some years ago, was made up of counterfeit notes. Everybody knew they were counterfeit, but as everybody consented to take them, they answered the same purpose in trade that genuine notes did….” (Democratic Free Press, July 16, 1843, 3). In 1857, it was still reported that, “There is in circulation a vast number of counterfeit bank-notes, whose representative value cannot be computed, and which perform all the functions of money, the holders of each being, for various reasons, unable to distinguish the one from the other.” (Detroit Daily Free Press, April 12, 1857, 2).
Even known counterfeits could serve as a medium of exchange to accommodate commerce. Fraudulent fractional (less than $1) currency carried a low expected cost to holders of being stuck with unpassable money or of being arrested if they passed it further along. As an opinion writer wrote in 1877, “Is there any remedy for the passing of counterfeit nickels in the packages of money given out for change on the street cars? It is an everyday occurrence for the drivers to give out packages with counterfeits which no person of ordinary intelligence could put up without knowing them to be counterfeits.” (Detroit Free Press, March 18, 1877, 3). The lack of fractional currency was an acute issue during the Civil War (Blake 1908, 32). This lack led to a willingness to accept fractional (some of which was paper) currency to complete exchanges without concern as to its genuine or fraudulent status. “Some of the notes [passed by a Detroit saloon and grocery store owner] are such poor imitations as to deceive nobody who is on the lookout for counterfeits. But a great majority of people never stop to see if these fractional notes are good….” (Detroit Free Press, February 10, 1866, 1). In 1865, it was reported that of federally issued currency, “The most numerous counterfeits are of fractional currency.” (Detroit Free Press, August 12, 1865, 1). Eventually the federal government stopped issuing fractional paper notes in the 1870s.
9. General Usage of the Word “Counterfeit”
The usage of the word “counterfeit” by newspapers in the 1800s typically meant fraudulent currency. As Detroit was the banking center of Michigan, we use Detroit newspapers as an important source of counterfeiting news to the residents of the state. However, the word “counterfeit” was also used to describe financial instruments other than currency. Fraudulent checks were described as “counterfeits” by newspapers, “Some of our citizens … had taken checks of a doubtful genuineness, and on critical examination, they were found to be counterfeits.” (Detroit Free Press, July 27, 1839, 2). Negotiable land warrants used as a form of payment to war veterans might also be described as counterfeits. “In his possession … were found five large packages of counterfeit ‘Soldiers Land Warrants', about one hundred in all. Some of them were filled up, signed and even had a counterfeit seal of the proper office at Washington.” (Detroit Free Press, November 29, 1849, 2). Bills of exchange could be described as counterfeit (Detroit Daily Free Press, October 23, 1855, 1). Fraudulent Treasury bonds issued during the Civil War were often referred to as “counterfeits.” (Detroit Free Press, October 11, 1867, 1).
To review the legal usages of the word “counterfeit,” we begin with Blackstone ( 2016), who collected the common law of England into four volumes for use in studying and practicing the law. Priest (2008) writes, “Wherever the founding influence of English Common law is acknowledged, Blackstone's name appears on the walls of courthouses, legislatures, and university buildings.” For additional commentary see Stacey 2003. Blackstone's volumes would have existed in the law libraries of legislators and judges of the time, and they formed a basis for the planning of any systems of laws on the topics contained therein. Counterfeiting and forgery were considered public wrongs, or as it is called today, crimes. Counterfeiting the coin of the realm was considered an act of high treason as an infringement on the king's prerogative and an attempt to subvert the government. Blackstone did not agree that counterfeiting the coin of the realm should be a form of high treason, and in the United States counterfeiting was never considered treason. U.S. District Court Judge Ross Wilkins, Judge for the District of Michigan, wrote in 1851,
In the country, from which we derived our common law, the offence of counterfeiting was considered treason against the State. And, the conspiracy of several for that purpose, if the act was only performed by one, was held treason in them all. But, in the United States treason is defined by the [U.S. C]onstitution, and can only consist in the actual levy of war by arms, or in adhering to the enemies of the government in time of war and rebellion (Detroit Free Press, May 30, 1851, 2).
Blackstone reviewed the proclamations of the various monarchs (the “statutes”) that outlawed the forgery of bank bills, notes, securities, lottery tickets, pensions, and a host of other documents. Some forgeries, such as the forgery of bank bills or notes, carried a punishment of death. Other types of forgery, for example forgery of a will, had a lesser punishment such as “transportation” – that is removal to America or Australia.
A later work which likely influenced lawmakers, judges, and lawyers was Chitty's Practical Treatise on the Criminal Law in three volumes, with editions published in 1819 and 1836. In early common law it was debated whether forgery was related to just public (government) documents and not to private documents. This distinction was eliminated in decision in Rex v. Ward 1727, where it was held that forgery at common law might be committed in respect of any writing whatever, by which another might be defrauded. Neither the term “forgery” nor “counterfeiting” is defined in the later Chitty 1836 edition. However, the terms “forgery” and “counterfeiting” are not discussed as a unified concept, except in one footnote referring to a 1798 indictment (Chitty. 1836, 173). At all other times it seems clear the concepts refer to two different classifications of acts. According to Chitty's treatise any type of writing could be forged such as a will or receipt. When the term counterfeiting is used in the text, it always relates to the counterfeiting of “coin,” “seals,” or “bank notes.” (Chitty. 1819, 93, 247, 517, 781, 301; Chitty. 1836, 404, 643).
10. Counterfeiting Law of Territorial Michigan
The Territorial Government of Michigan was organized on July 4, 1805. The first Territorial code was known as the Woodward Code, (Michigan (Ter.). Vol. 1:xiii) printed in 1808, and was in effect for most of the first years of the Territory of Michigan. “An Act for the punishment of crimes and misdemeanors” in the Woodward Code contained two sections on counterfeiting. The first section made the counterfeiting, uttering (passing counterfeits with intent to defraud), or passing of counterfeit coins a crime. It also outlawed the making, possession, buying, or selling of tools for producing counterfeit coins. The second section made the counterfeiting, uttering, or passing of counterfeit bank bills and the making, possession, buying, or selling of tools for producing counterfeit bank bills a crime (Michigan (Ter.) Vol IV:20-21).
In 1816 the laws of the Territory of Michigan were revised and codified as the Cass Code (Michigan (Ter.). Vol. 1:xiii). “An Act for the Punishment of Crimes” in the Cass Code contained a single long section on counterfeiting (109). The list of items that could be forged was expanded from the Woodward Code. Forgery, as it was called, was very broadly defined to include the making of any false public or private document, with no distinction made between them. The section contained a very long list of potential documents that could be forged.
[A]ny record, or other authentic matter of a public nature, charter, letters patent, deed, lease, writing sealed, will, testament, annuity, bond, bill, writing obligatory, bank bill or note, check, draft, bill of exchange, promissory note for the payment of money, indorsement or assignment of any bill of exchange, or promissory note for the payment of money, or any acceptance of a bill of exchange, or the number or principal sum of any accountable receipt for any note, bill or other security for the payment of money, or any warrant, order or request for the payment of money or goods or chattels, or delivery of goods or chattels of any kind, or any acquittance or receipt, either for money or goods, or any acquittance, release, or discharge of any debt, account, action, suit, demand or other thing real or personal, or any transfer or assurance of money….
The Cass Code did not outlaw the counterfeiting of coins, which as United States legal tender was presumably left to the responsibility of the federal government. Except for punishments, the Cass Code remained intact until Michigan statehood.
The maximum punishment in the Woodward Code for counterfeiting, passing, uttering or making or possessing counterfeit tools was whipping of 100 stripes plus standing in the pillory for not less than an hour a day for three consecutive days plus imprisonment for seven years with hard labor plus a fine of seven hundred dollars. (Michigan (Ter.) Vol IV:24-25). The Cass Code and an Act in 1827 both altered the maximum punishment, while an Act in 1833 reduced the punishment for counterfeit possession with intent to injure relative to that of “counterfeiting,” that is of counterfeit production. By the end of the Territorial period, counterfeit possession carried a maximum punishment of 10 years imprisonment with hard labor plus a fine of one thousand dollars. Counterfeiting carried a maximum punishment 14 years of solitary imprisonment with hard labor plus a fine of two thousand dollars (Michigan, and United States. “An Act for the Punishment of Crimes,” section 37, “An Act to Amend an Act Entitled ‘An Act for the Punishment of Crimes,'” section 2).
11. First Counterfeiting Laws of the State of Michigan
Michigan voters approved the Constitution of Michigan in October 1835 and the state was founded in January 1837. The overall territorial statutes were considered to be in a state of confusion at this time, so William Fletcher, later the first chief justice of the Michigan Supreme court, was appointed in March 1836 by Governor Steven Mason and the legislature to prepare and arrange a code of laws for the state, digesting and arranging the territorial laws for reenactment by the state legislature. This laborious task was eventually completed and presented to the governor and the state legislature in November 1837. With additions and amendments, the statutes were adopted by the state legislature during the adjourned (unfinished) session of 1837 and the regular session of 1838. (Michigan, and E. B Harrington. 1838). The name Revised Statutes of the State of Michigan is given to this work even though these are the first set of statutes adopted by the state government of Michigan. The statutes were considered a revision of the territorial statutes, hence the name.
Part Fourth, Title 1, Chapter 5 of the Revised Statutes, “Of Forgery and Counterfeiting” gives considerably more detail on counterfeiting and forgery than the territorial Codes and Acts (Michigan, and E. B Harrington. 1838. Part Fourth, Title 1, Chapter 5, “Of Forgery and Counterfeiting”.) Two circumstances may have led to this expanded detail of the Revised Statutes: (i) Michigan was transforming from a territory to a state, and (ii) the writing and approval of the statutes in 1837 and 1838 occurred when many new banks were springing up in the state and counterfeiting was problematic in Michigan. Section 1 of the counterfeiting laws of the Revised Statutes of 1838 contained a list of many of the documents that could be forged or counterfeited.
Every person who shall falsely make, alter, forge or counterfeit any public record, or any certificate, return or attestation of any clerk of a court, public register, notary public, justice of the peace, township clerk, or any other public officer, in relation to any matter wherein such certificate, return or attestation may be received as legal proof, or any charter, deed, will, testament, bond, or writing obligatory, letter of attorney, policy of insurance, bill of lading, bill of exchange, promissory note, or any order, acquittance or discharge for money or other property, or any acceptance of a bill of exchange, or indorsement or assignment of a bill of exchange or promissory note for the payment of money, or any accountable receipt for money, goods or other property, with intent to injure or defraud any person shall be punished….
While Section 1 covered the making or the altering of counterfeit documents, the next section involved the passing or uttering of counterfeit documents. Section 2 made it illegal to pass or utter false, forged, or counterfeited documents with the intent to injure or defraud. The maximum punishment under both Section 1 and Section 2 was 14 years in the state prison.
Section 3 covered the counterfeiting with intent to injure of notes and bills issued by the State of Michigan. Section 4 covered the counterfeiting of bank bills and notes with the intent to injure. Both sections carried a maximum punishment of life in the state prison. Section 5 involved having in one's possession ten or more counterfeit notes or bank bills with intent to injure, which is given as a separate crime carrying a longer maximum punishment than mere counterfeit possession. Counterfeit producers and wholesale dealers, rather than small-time shovers, were the ones likely to be netted by this section. The analogous statute for coins was Section 15, which required the possession of just five or more coins to trigger the longer maximum punishment. Section 6 for notes and bills and Section 16 for coins covered the uttering and passing of counterfeits with intent to injure. Section 7 regarding the passing and uttering of counterfeit notes and bills with intent to injure and Section 17 regarding the passing and uttering of counterfeit coins with intent to injure covered cases of multiple offenses of the same statute. Anyone convicted of a second offense of the given statute after a first such offense or convicted of three distinct such counterfeiting charges during a single court term faced a longer maximum state prison sentence.
The above statutes covered the counterfeiting of genuine documents such as bank notes and state treasury debt notes. But what about a document that looked like a bank note, where no such bank actually existed? It appears the legislature tried to cover this possibility in Section 8, on the possession of counterfeit documents, where the phrase “in the similitude” is used regarding bills and notes. This section reads:
Every person who shall bring into this state, or shall have in his possession, any false, forged or counterfeit bill or note in the similitude of the bills or notes payable to the bearer thereof, or to the order of any person, issued by or for any bank or banking company, established in this state, or in any of the United States, or in any of the British provinces in North America, or in any other foreign state or government, with intent to utter or pass the same, or to render the same current as true, knowing the same to be false, forged or counterfeit, shall be punished by imprisonment in the state prison not more than five years, or by fine not exceeding one thousand dollars and imprisonment in the county jail not more than one year.
Section 9 outlawed the making of tools and materials, such as engravings, presses, and paper, that were intended for use in the production of counterfeits and forgeries. It appears the legislature again wanted to include notes of fictional entities as a type of counterfeit by again using the phrase “in the similitude.” The section outlawed tools and materials “designed for forging and making any false or counterfeit note, certificate or other bill of credit in the similitude of the notes, certificates or other bills of credit...or any false and counterfeit note, or bill in the similitude of the notes or bills issued by any bank or banking company….” Section 18 covered the analogous situation for the tools and materials used in making counterfeit coins. Sections 10 and 11 involved court testimony, Section 12 involved splitting and reconnecting bank notes to produce an additional new bank note. Section 13 made affixing a fictitious and pretended signature of an officer or agent of any corporation a forgery, even if no such person ever was an officer or agent of a corporation. Section 14 involved indictments.
A comparison of the laws of the Territory of Michigan with the laws of the State of Michigan reveals the latter were much more extensive and detailed than the former. This may have been, at least in part, an attempt to curtail the widespread counterfeiting that was occurring at the time of the writing and approval of the new state laws.
The earliest Michigan Supreme Court counterfeiting case was Harlan v. People in 1843 and fell under the Revised Statutes of 1838 (Michigan, and E. B Harrington. 1838). The defendant was charged and found guilty at a jury trial of violating the prohibition against having tools, a press and other instruments, to make counterfeit coin and uttering and passing that counterfeit coin. The coins in the case involved Mexican dollars, a form of legal tender in the United States at the time. At issue in the case was whether or not the state court had jurisdiction over the offense given that the United States Constitution Art. I, § 8 gives the federal government the power “to provide for the punishment of counterfeiting the current coin of the United States.” The Michigan Revised Statutes in Sections 15 and 16 (Michigan, and E. B Harrington. 1838) outlawed the uttering and passing of counterfeit coins of “any gold or silver coin current by law or usage within this state” and in Section 18 outlawed the possession of tools used for counterfeiting of “any gold or silver coin current by law or usage in this state.” The state Supreme Court held that both the states and the federal government have concurrent jurisdiction over counterfeiting coin cases and that the defendant's crime was a crime against the sovereignty of the people of the State of Michigan.
12. State Counterfeiting Law Revisions and Cases
The Michigan state statutes were revised in 1846, with the organization simplified (Michigan, and Sanford M. (Sanford Moon) Green. 1846). In the 1838 edition, the laws were divided into numbered “Parts,” with each Part having a Title 1, Title 2, and so forth and each Title having a Chapter 1, Chapter 2, and so forth. Ultimately there were 27 different “Chapter 1s” in the 1838 edition. In the 1846 edition, the laws were divided into Titles, but with all chapters numbered consecutively throughout. “Of Forgery and Counterfeiting” was found in Chapter 155 and only one Chapter 155 existed. The arrangement of the sections within Chapter 155 were the same as the 1838 statutes. The Revised Statutes of 1846 saw only minor changes in wording of the counterfeiting laws from the 1838 edition. The main changes involved punishments. Some sections of the chapter which had not included a stated length of maximum time in the county jail now included a statement of a maximum in the county jail of not more than one year in the 1846 edition, bringing those sections into agreement with other sections of the chapter that did already contain this statement. The most significant changes in the 1846 edition from the 1838 edition involved the maximum state prison length punishments for some of the crimes. For example, the Section 4 crime of counterfeiting bank bills and notes had a reduction of maximum imprisonment in the state prison from a life sentence to seven years. Table 5 compiles the maximum state prison sentence lengths for some of the counterfeiting crimes of the 1838 and 1846 Revised Statutes. From the table, we can see that coin counterfeiting carried harsher maximum prison sentences than did bank note counterfeiting, especially in the 1846 edition.
In 1838, the production of counterfeit bank notes and counterfeit coins carried the same maximum penalty of life in the state prison. The 1838 statute was written at a time when dozens of new banks were springing up in the state and were issuing their new bank notes. This situation likely led to a fear of counterfeit bank note production in Michigan at the time. By 1846 there were very few banks left in Michigan and the known counterfeit production that had occurred in the state was of coins. The legislature responded to this low threat of in-state bank note counterfeiting by reducing the maximum prison sentence length from life to seven years for counterfeiting bank notes, but it maintained a life sentence for counterfeiting coins, which were produced in Michigan. In a similar way, the maximum sentence for having in possession many counterfeit bank notes – as counterfeit producers and wholesale dealers were likely to be – was reduced from life in 1838 statutes to seven years in the 1846 statutes. However, the maximum sentence for possessing many counterfeit coins remained at life in the 1846 statutes.
The possession of and the passing of counterfeit coins carried longer maximum prison sentences than the possession of and the passing of counterfeit bank notes in both the 1838 and 1846 editions. Likewise, the maximum sentence for multiple offenders was greater for coin passing than for bank note passing. In addition, the standard to reach the many counterfeits possession condition was lower for coins (5 or more) than for bank notes (10 or more). Finally, there was also a special category for multiple offenders involving counterfeit coin possession, but not for counterfeit bank note possession. All of this points to the legislature responding more strongly to the coin counterfeit than the bank note counterfeit threat.
For the country as a whole, bank note counterfeits were far more common and a much bigger problem than coin counterfeits. Detroit newspapers also carried vastly more news concerning counterfeit bank notes than counterfeit coins. Why then did Michigan legislators appear more concerned about coin counterfeiting than bank note counterfeiting? Showing an intent to injure in passing or uttering by alleged culprits when they passed one or two counterfeits was often difficult, as the accused could claim to be unaware of the nature of the counterfeits and therefore blameless. Thus, prosecuting suspected shovers could be difficult. The Michigan legislature instead aimed most severely at counterfeit production and wholesaling. And the main counterfeit production that occurred in Michigan was of coins. Thus, a change in state legal action occurred in response to the counterfeiting that occurred in Michigan. (We do not currently know whether a change in the counterfeiting in Michigan responded to state legal action.) For a broader comparison of the counterfeit punishments over time, see Appendix C – A Comparison of Statutory Punishments for Counterfeit Crimes.
In 1849, Act 33 of the state legislature modified Chapter 155, Section 4 to include as a crime the counterfeiting of bank notes and bills of other countries and the British provinces of North America in addition to the counterfeiting of bank notes of banks in the United States (Acts of the Legislature of the State of Michigan. 1849, 25). This brought Section 4 into alignment with Sections 8 and 9, which already included the currencies of other countries and the British provinces of North America. In 1851, Act 136 amended Chapter 155, Section 10 so that in counterfeiting prosecutions the lawful existence of a bank was presumed upon evidence that the bank was actually engaging in the banking business (Acts of the Legislature of the State of Michigan. 1851, 169-170). In 1855, Act 77 amended Chapter 155, Sections 2 – 7, 12, and 13. This amendment stated that it was not necessary to set forth a copy of the alleged counterfeit instrument or writing. Instead, a sufficiently good description would sustain an indictment (Acts of the Legislature of the State of Michigan, 1855. 142).
At issue in an 1853 Michigan Supreme Court case was whether the defendant could be found guilty of the crime of uttering and publishing a forged draft when the defendant never actually received any funds (People v. Brigham). The defendant Jones presented a draft on the account of Ives & Co. to the Bank of Macomb County. The bank employee took the draft but then determined the account of Ives & Co. did not have sufficient funds to cover the draft and the draft was returned to the defendant and the defendant told he might try again later. However, the defendant and his accomplice, Brigham, were later arrested because the draft was a forgery. The court held that the defendant presenting the counterfeit instrument to the bank and confirming that he wanted it cashed, thereby asserting its genuineness, supported the crime. The crime of “uttering and publishing,” as distinct from passing, is presenting a counterfeit in payment or exchange and thereby asserting its genuineness. The crime of passing or delivering a counterfeit, is actually giving that counterfeit in payment or exchange.
In 1857 a new collection of the laws of Michigan was authorized. Thomas M. Cooley, a distinguished professor, lawyer, and jurist in Michigan in the mid-1800s, produced the updated compilation, called The Compiled Laws of the State of Michigan (1857). This title remains to this day and Michigan statutes are referenced with “C.L.M.” standing for “Compiled Laws of Michigan.” The Michigan Compiled Laws of 1857 did not contain new forgery and counterfeiting law. Instead, it consisted of the Revised Statutes of 1846 (Michigan, and Sanford M. (Sanford Moon) Green) together with the 1849, 1851, and 1855 Acts as described above (Acts of the Legislature of the State of Michigan. 1849. 1851. 1855). The 1857 compilation kept essentially the same organizational structure as the 1846 code, but used two different numbering systems. The first system maintained the old method, with each section given a number starting with “1” according to the chapter. The second (new) system numbered each section of the entire code consecutively. For example, the chapter “Of Forgery and Counterfeiting” in the Michigan Compiled Laws is Chapter CLXXXII. The first section of this chapter was numbered 5802 and could be referenced in any of the following ways, all referring to the same statute:
Chapter CLXXXII, Sec. 1
Chapter 182, Sec. 1
Cooley's 1857 compilation also expanded the case citations in the margins. Cooley pointed out that these “references to judicial decisions, are, for the most part, only such as the Compiler had preserved in the course of his practice. It was quite impossible, in the short time allowed for the work, to make these references by any means full and complete. What are given, it is hoped, will, to some extent, be found of service.” (The Compiled Laws of the State of Michigan. 1857, Vol. 1 iv). It is common for modern codes contain extensive lists of clarifying cases and cross-references.
In the case of People v. Stewart, Stewart was tried on the offense of passing counterfeit bills to one Armstrong. Stewart had met Armstrong and sold to Armstrong some counterfeit bank notes on the Bank of Rhode Island and told Armstrong he would have some counterfeit bank notes on a Canadian bank available for purchase at a later date. Both parties were aware the bills were counterfeit. Stewart was arrested and charged with passing counterfeit bills as true. He was also charged with a second count, having passed the bills as counterfeit. The charge of passing counterfeit bills as true related to passing counterfeiting notes to innocent parties, not to a buyer who knows the character of the counterfeits. The 1858, the Michigan Supreme Court ordered a new trial on this count. The case then disappeared from the record and the outcome is not available. In these situations, it is common for prosecuting attorneys to negotiate a plea or even drop the case rather than incur the cost of a new trial.
In 1871, a new set of Michigan Compiled Laws was authorized and published in 1872. The “Of Forgery and Counterfeiting” chapter was moved to Chapter CCXLVI, which is more commonly referenced today by the relevant section, beginning with The Compiled Laws of the State of Michigan. 1871 § 7631. The new compiled laws contained little change on forgery or counterfeiting from earlier statutes. A pesky comma was removed from the 1846 sections concerning passing, uttering, possession, producing, and multiple possession to make the non-state prison punishment clear: 1 year in county jail and up to a $1,000 fine and not one year in the county jail or a fine up to $1,000. Thus, the counterfeiting and forgery law of the Revised Statutes of 1838 remained more or less intact through the counterfeiting era of the young State of Michigan. The main change to the Revised Statutes of 1838 was in adjusting some of the maximum prison terms.
The 1873 civil case Atwood v. Cornwall involved the alleged passing of a counterfeit note, where the Michigan Supreme Court held that a person passing negotiable paper warrants the note to be genuine and is bound to make it good if it is found to be counterfeit and returned within a reasonable time. In the case, the plaintiff, Cornwall, alleged he received a counterfeit bill from one Atwood. Some five months later he attempted to return it to Atwood. No evidence existed that Atwood knew the bill was counterfeit and both appeared to have been innocent receivers of counterfeit bills in exchange. At issue was whether or not the counterfeit bill had actually been received by Cornwall from Atwood, as it had allegedly occurred some five months before the legal proceeding took place and neither had recorded the serial number until the end of the five month interval. Some five months after the initial alleged exchange, Cornwall passed the bill to Kellogg, who quickly returned it claiming the bill was counterfeit after having taken it to his, Kellogg's, bank. At that point, Cornwall received the bill back from Kellogg, recorded the serial number, and attempted to get reimbursement for the bad bill from Atwood. A factual issue existed as to whether or not the bill Cornwall gave to Kellogg was the same bill that Atwood had given to Cornwall some five months earlier. In addition, a factual issue existed about whether the note returned to Cornwall by Kellogg was even the same note Cornwall had given Kellogg. It was possible Cornwall gave Kellogg a valid note, Kellogg then keeping it, and later returning a different (counterfeit) note to Cornwall. No one had taken the serial number on the note until Cornwall attempted to get a reimbursement from Atwood after the Kellogg exchange. The court stated that while it is true that persons who pass negotiable instruments warrant they are genuine, the receiver must act with due diligence in determining whether or not the bill is genuine. The lower court's ruling in favor of Cornwall was overturned because, as a matter of law, he had not acted promptly in ascertaining the validity of the bill. Even assuming all of the factual issues (was it the same bill?) were determined in his favor, his failure to act with due diligence precluded him from recovering from Atwood, who was, at most, another innocent recipient of a bad bill.
13. End of the Counterfeiting Era
Although counterfeiting continued, it dropped off considerably in the late 1800s both in Michigan and in the United States overall. A number of factors contributed to this trend. Arthur Smith lists four reasons for the decline of counterfeiting: (i) Improved bank note production using expensive machinery; (ii) discovery of paper resistant to photography; (iii) currency production was consolidated at the federal level and state bank notes were discontinued; (iv) a simplification and uniformity of the currency (Smith 1942). David R. Johnson adds the important role of the Secret Service, with its dedicated anti-counterfeiting effort and its interstate reach, to the reduction in counterfeiting (Johnson 1995). Wendell attributes generally reduced counterfeiting to the establishment of the federal Bureau of Engraving and Printing in 1875 (Wendell 1902, 1:186) . Relative to the earlier state bank notes, the Bureau used paper more difficult to counterfeit and used more intricate plate designs, with each note requiring three or four printings.
Counterfeiting crimes were common in the territorial Michigan period and the statehood years through the end of the Civil War. We can wonder, though, if and why counterfeiting crime rates were high in Michigan relative to other states.
Some circumstances in Michigan are suggestive of relatively high counterfeiting crime rates. First, Michigan was a young state, with at least initially, a poorly-established financial structure and a poorly-established law enforcement structure. Second, Michigan had a dearth of local money, so that many bank notes circulating in the state might not be very well known – or perhaps, to allow commercial exchanges to actually occur – not too closely inspected. Third, Michigan was a free state, with a larger fraction of the population using money and thus more counterfeits per capita, than a similar slave state. Which, if any, of these circumstances helped induce high counterfeiting crimes rates?
A more complicated Michigan circumstance was that of being a mainly rural, less commercialized state. Relative to more commercialized free states such as New York, Michigan would have had fewer commercial transactions and used less money, consequently tending towards fewer counterfeits in circulation per capita in Michigan. By itself, this suggests the state would be less attractive to counterfeit shovers than more commercialized states. However, the state also would have had proportionately fewer experienced money handlers, who would have been most able to identify counterfeits, which by itself would be tempting for shovers.
We do not know if and why Michigan had an extensive counterfeit currency problem relative to other states. However, future investigations of counterfeiting of other states can be undertaken and comparisons made with the environment and counterfeiting outcomes of Michigan. There are many questions that potentially can be answered by comparing the Michigan counterfeiting experience with that of other states. We give some example questions for consideration and future investigation. 1. Which other states had similar counterfeiting crime rates as Michigan? 2. Did being a rural, relatively uncommercialized state tend to promote or suppress overall counterfeiting crimes? 3. Did more rural, less commercialized states tend to have more coin counterfeit production and less bank note counterfeit production than more commercialized states? 4. Did states with more well-established financial and law enforcement structures tend to face lower counterfeiting rates? 5. Did being a money-scarce state tend to promote or suppress counterfeiting crimes? 6. Did being a free state tend to promote or suppress counterfeiting crimes? 7. In which other states was counterfeit currency sometimes considered to be of some use in promoting an easier exchange of goods and services? 8. Do news reports of other states also show counterfeit shovers preferred out-of-state bank notes and out-of-town bank notes? 9. Were other states like Michigan, with its longer actual jail sentences in the pre-Civil War era – when counterfeiting rates were high in the state – than in the post-Civil War era? 10. Which states mainly used prison and jail sentences rather than fines as punishment for counterfeiters? 11. How did other states respond to their particular counterfeiting situations by changing maximum prison sentence lengths? 12. In the experience of other states, what caused the writing of detailed counterfeiting laws? Was it statehood? An abundance of counterfeiting? 13. Michigan had little change in the wording of its counterfeiting statutes after their approval with statehood in 1838. What type states had few changes and what type states had many changes in their counterfeiting laws from 1838 to 1872? 14. Which states required that counterfeit bank notes be stamped as such? 15. Did states that pursued different legal responses to counterfeiting than Michigan did tend to have different counterfeiting outcomes as a result?
This paper has examined and detailed the Michigan experience with currency counterfeiting, but there is still much to be learned about the counterfeiting of the early- and mid-nineteenth century United States.
Appendix B: Michigan Counterfeiting 1833-1880
This Appendix contains a list of sources from which Table 4 – Michigan Counterfeiting 1833-1880 was compiled.
Coin counterfeiting reports – Total 29:
“Counterfeiters and Blacklegs” Democratic Free Press, Jan. 2, 1833, p.2
“Broke Jail” Democratic Free Press, Oct. 14, 1835, p.3
[No title] Democratic Free Press, July 3, 1839, p.2
“Bogus Operations” Democratic Free Press, Dec 11, 1839, p.1
“Sentences” Democratic Free Press, Jul 6, 1844, p.2
“U.S. District Court” Detroit Free Press, May 30 1851, p.2
“From Lansing” Detroit Daily Free Press, Jan 31, 1855, p.1
“Arrest of Another of the Lexington Counterfeiting Gang” Detroit Free Press, Sep 13, 1859, p.1
“Supreme Court” Detroit Free Press, Oct 27, 1859, p.1
“Legal Intelligence” Detroit Free Press, Feb 17, 1860, p.1
“Legal Intelligence” Detroit Free Press, Mar 1, 1860, p.1
“Police Court” Detroit Free Press, Jun 28, 1861, p.1
“Wayne County Criminals” Detroit Free Press, Jan 1, 1862, p.1
“The Lapeer Arrests” Detroit Free Press, Jan 12, 1862, p.2
“Local Intelligence” Detroit Free Press, Mar 9, 1865, p.3
“The Courts” Detroit Free Press, Mar 13, 1869, p.1
“Counterfeiting Greenbacks” Detroit Free Press, Apr 16, 1869, p.1 (This concerns the production of coins in Michigan, not bank notes, despite the article name.)
“The Counterfeiting Case” Detroit Free Press, Aug 5, 1869, p.1
“The Courts” Detroit Free Press, Nov 27, 1869, p.1
“Counterfeiters Arrested” Detroit Free Press, Sep 5, 1878, p.7
“The Courts” Detroit Free Press, Dec 7, 1878, p.1
“Arrest of Two Men for Alleged Counterfeiting” Detroit Free Press, Mar 20, 1879, p.4
“Counterfeiting at St. Joseph” Detroit Free Press, Jun 25, 1879, p.4
“Caught Counterfeiting” Detroit Free Press, Sep 23, 1879, p.1
“A Technical Point Raised in a Counterfeiting Issue” Detroit Free Press, Dec 27, 1879, p.4
S.W. Durant and H.B. Peirce, History of Oakland County. (Philadelphia: L.H. Everts & Co, 1877), p.215 (Two counterfeiting instances occurred.)
Franklin Ellis, et. al., History of Shiawassee and Clinton Counties, Michigan (Philadelphia: D.W. Ensign and Co., 1880) p.53
John S. Schenck, History of Ionia and Montcalm Counties, Michigan (Philadelphia: D.W. Ensign and Co, 1881), p.207
Banknote counterfeiting reports – Total 3:
“Counterfeiters and Blacklegs” Democratic Free Press, Jan 2, 1833, p.2 (Bank note preparation only.)
“The Courts” Detroit Free Press, Dec 4, 1866, p.5
“Counterfeiting” Detroit Free Press, Mar 26, 1870, p.1
Unknown counterfeiting production – Total 2:
“Legal Intelligence” Detroit Free Press, Feb 5, 1861, p.1
“Local Intelligence” Detroit Free Press, Mar 9, 1865, p.3