William P. Wood had been rounding up counterfeiters since 1863 when the Secretary of the War Department had asked him to tackle the problem. Wood's efforts produced successes, but his position as Keeper of the Old Capital Prison did not allow him to devote his full attention to apprehending counterfeiters.
He had the reputation of being a man without fear, and a man who defied authority. Wood approached his war and crime-fighting work using methods that would be questionable today. But, he was a competent investigator and his experience made him the unanimously-chosen candidate for Chief.
Structure of the Original Secret Service
Chief Wood established district offices in Boston, New York City, Newark, Philadelphia, Detroit, Cleveland, St. Louis, Nashville and San Francisco. A district office and the Service's headquarters were set up in Washington, D.C.
Wood rounded up a team of men and dispatched them to the various district offices. The first Operatives, as they were then called, were mostly private detectives or friends of Wood, some whom had served under him during the war. The Operatives were given only handwritten letters of appointment; no badges or uniforms announced their authority.
In their book "United States Secret Service," authors Walter S. Bowen and Harry Edward Neal list the original six general orders that Wood's men had to follow:
1. Each man must recognize that his service belongs to thegovernment through 24 hours of every day.
2. All must agree to assignment to the locations chosen by the Chief and respond to whatever mobility of movement the work might require.
3. All must exercise such careful saving of money spent for travel, subsistence, and payments for information as can be self-evidently justified.
4. Continuing employment in the Service will depend upon demonstrated fitness, ability as investigators, and honesty and fidelity in all transactions.
5. The title of regular employees will be Operative, Secret Service. Temporary employees will be Assistant Operatives or Informants.
6. All employment will be at a daily pay rate; accounts submitted monthly. Each operative will be expected to keep on hand enough personal reserve funds to carry on Service business between paydays.
The young Secret Service quickly proved itself. In its first year, operatives arrested more than 200 counterfeiters. The Service grew, hired more Operatives and established more district offices.
"Mysterious Bob" and "The Flying Dutchman"
Some counterfeiters ran their illegal businesses like well-run companies. Among them was Lewis M. Roberts, alias "Mysterious Bob."
Roberts had a trade route across Pennsylvania, Ohio and Indiana where he sold roughly $50,000 in counterfeit money each month. This was an enormous salary in the 1860s and Roberts was a wealthy man.
Ultimately, his competition did him in. One competitor was known as "The Flying Dutchman." The Secret Service nabbed The Flying Dutchman in Pennsylvania and he spitefully informed on his rival, Lewis Roberts. Roberts was caught so quickly that both men were prosecuted at the same time. The two men then implicated about 30 other criminals, a major bust for the young Secret Service.
Mysterious Bob and The Flying Dutchman were each sentenced to 20 years in jail and a $10,000 fine.
"King of the Counterfeiters"
One of the most famous counterfeiters was William E. Brockway, the "King of the Counterfeiters." As a teen, Brockway served as an apprentice to Ezra Becker, an aging printer in New Haven, Connecticut. To keep up with his competition, Becker sent Brockway to school to learn the new printing processes of the day. Brockway returned with knowledge of lithography and electroplating and convinced his employer to enter into a counterfeiting scheme.
When the New Haven City Bank needed money printed, they turned to Ezra Becker. The bank retained the plates and paper for all their notes. Each time they placed an order, bank officers would bring the plates and currency paper to Becker's shop and closely supervise the printing process.
On one occasion, the bank placed an order for $5 notes. As usual, the bank's president and cashier supervised the printing process. To divert their attention, Becker summoned the men to a window and pointed out flaws in the paper. Meanwhile, Brockway quickly pressed a thin sheet of lead onto the bank's $5 plates and hid the impression under his apron.
Using an electroplating process, Brockway was able to make copper electrotypes from the lead plates. The result was engraved impressions identical to the bank's official plates. Brockway and Becker made between $10,000 and $100,000 counterfeit five dollar bills, many complete with Brockway's forgery of the bank officers' signatures. The counterfeit notes were circulated and unknowingly cashed by the New Haven City Bank.
Then one day a bank teller noticed a signature did not appear correct and the bank determined it was forged. The note's design, however, showed no flaws and the bank was forced to honor the counterfeit bills. They reported the forgery to the police who then investigated the crime.
The police made a routine inquiry at Becker's shop. Although they did not find anything immediately, Becker was scared and fled town. Brockway also split, taking with him his plates and some equipment. The police then assumed the men guilty and offered an award for their capture. Becker's fate is unknown but Brockway ended up in Sing Sing Prison and served less than a year of a six year sentence.
After his release from prison, Brockway moved to Philadelphia and assumed the name of Colonel William E. Spencer. He became a middleman between counterfeiters and buyers of the fake bills and his commissions made him a wealthy man. In 1862, Brockway formed a partnership with another counterfeit merchant and they invested in legitimate business ventures. Unaware of his nefarious income, neighbors considered "Col. Spencer" a respectable member of the community.
In 1865, the United States Government issued special bonds to replenish assets drained by the Civil War. Brockway hired Charles H. Smith to create counterfeits of the $1,000 bonds. Smith's work was so convincing that the Government redeemed 85 of those bonds--it paid out $85,000 for worthless paper! The counterfeit bonds were eventually discovered because they had identical serial numbers to official bonds printed by the Government.
The Treasury Department first suspected the duplicate serial numbers were the result of a mechanical error or a dishonest employee of the Printing Bureau. In fact, Treasury Secretary McCulloch instructed Secret Service Chief William P. Wood to determine which was the culprit--a mechanical error, or a dishonest employee. Chief Wood recognized that the bonds were counterfeit and McCulloch ordered an all-out investigation. He also offered a $20,000 reward for the successful capture of the counterfeiters.
Chief Wood was familiar with Brockway's work and suspected him immediately. Wood's search led him to Sing Sing Prison. Brockway, of course, was no longer there and it took Wood 12 days to track him down. Wood found Brockway at a hotel in New York City preparing for a European vacation. After five days of questioning, "Col. Spencer" admitted he was Brockway and eventually turned over the fake bond plates.
The Treasury paid Wood only $5,000 of the $20,000 reward, promising the remainder when the government collected the $85,000 it lost from cashing the counterfeit bonds. In 1869, Wood resigned as Chief of the Secret Service so he could concentrate on reclaiming the $85,000 for the government and, ultimately, the remaining $15,000 of his reward money. The government did reclaim its money, but all of Wood's attempts to collect his $15,000 were unsuccessful.
Chief Herman C. Whitley
Chief Wood's resignation in 1869 was filled by Herman C. Whitley, an imposing figure who stood 6 feet 10 inches tall. Whitley had worked as a detective for the Internal Revenue Bureau before becoming an Assistant Tax Assessor in Lynchburg, Virginia. He also performed impressively under Major General Benjamin Butler during the Civil War. It was Butler that remembered Whitley and recommended him for the job.
Chief Whitley immediately set about reorganizing the Secret Service. One of his first actions was to replace many of the operatives. He also established merit-based promotions and abolished the practice of $25 rewards for each convicted counterfeiter.
The new Chief devised a system to keep track of all known counterfeiters and increased the reporting responsibilities of all operatives. Previously, they submitted general reports to Secret Service headquarters four times each month. Whitley required them to report weekly and to account for their location and daily activities. As information about criminals was reported, Whitley's staff disseminated it to field offices.
Much of the counterfeiting activity was happening in and around New York City. Whitley considered it prudent to move the Secret Service headquarters there. The Assistant Chief and two clerks remained in the Washington, D.C. office.
Under Chief Wood, a Secret Service operative held no badge, wore no uniform and carried a gun only if he purchased it himself. He was supplied only with handcuffs and an official Treasury Department letter announcing his appointment; however, it was not standard practice to carry this letter. Not surprisingly, operatives were often viewed with suspicion by bankers and others who could offer clues for the operatives' investigations.
Whitley initiated plans to issue badges and credentials to all Secret Service employees and in 1873 the first Secret Service badge was produced. It was a five-pointed silver star with the engraved inscription: U.S. SECRET SERVICE. In 1875, the Bureau of Engraving and Printing prepared the first credentials, called commissions, and also produced a new badge.
Whitley's reorganization created a more effective Secret Service. During his first three years as Chief, the Service arrested 1,200 counterfeiters and seized 90 counterfeit plates. The Service was also being called upon to handle other cases. Evidence they collected resulted in the prosecution of approximately 2,000 criminals who committed offenses other than counterfeiting.
Investigation of the Ku Klux Klan
In 1866, a group of white men formed a social organization in Pulaski, Tennessee. They wore white robes and white hoods. The group soon discovered that some superstitious African Americans were terrified by the costumes.
At the time, the South was struggling to recover from the Civil War; many white southerners were disgruntled and sought revenge on the North and on the former slaves.
The men in robes, known as the Ku Klux Klan, began terrorizing African Americans and white sympathizers. They threatened, beat, maimed and even lynched their victims.
On December 5, 1870, Congress condemned the Klan in a special message to President Grant. Then, in 1871, they authorized the Federal courts to punish violations of civil liberty. The Secret Service was the only official investigative agency of the Federal Government, so the United States Attorney General requested the Service to investigate the Klans in Alabama, the Carolinas, Florida and Georgia.
Chief Whitley assigned eight operatives to the case. Within three years, they prosecuted 1,000 offenders. Klan activities declined sharply, but were unfortunately revived many years later. However, this was the only time the Secret Service was called upon to investigate the Ku Klux Klan.
Secret Service Investigated
The Secretary of the Treasury demanded a thorough investigation of the Secret Service. On July 27, 1874, the Solicitor of the Treasury filed a report requesting several changes. He found that the Service had 32 capable operatives, but recommended the force be reduced. The report did, however, recommend that the operatives be given pay increases. Headquarters, it said, should be moved from New York City back to Washington, D.C. And, U.S. Attorneys and U.S. Marshals, the report suggested, should take on a share of the field work. All but the last recommendation were instigated.
In 1874, despite his accomplishments, Herman C. Whitley resigned as Chief of the Secret Service under a cloud of accusations. Whitley was accused of being involved in one of the most sensational conspiracies of the time. No evidence ever proved him guilty, but the Secretary of the Treasury still requested that Whitley resign.
On October 2, 1874, Elmer Washburn became the third Secret Service Chief. Washburn served as Chief for two years, until he resigned voluntarily in 1876.
James J. Brooks became the fourth Chief of the Secret Service, having served as Assistant Chief under both Whitley and Washburn. One of Brooks' accomplishments was the compilation of "General Orders No. 4," the first formal manual of instructions for all Secret Service agents.
After President Rutherford B. Hayes was elected, the new Secretary of the Treasury, John Sherman, believed the Secret Service was operating improperly. He demanded a thorough investigation and a special committee searched through all phases of the Service's work. When the investigation was complete, however, the committee did not suggest one change or site any criticism.
Chief Brooks' Fight For Money
Each year, the Secret Service's budget was spelled out in the Appropriations Act. Congress determined how much money should be set aside and what it should be used for. Money for Secret Service expenses was appropriated to the Treasury Department for "suppressing counterfeiting and other crimes." Then in 1883, the Appropriations Act earmarked the money specifically for the "Secret Service Division" of the Treasury Department.
But James J. Brooks served as Secret Service Chief during a time when the government was tightening its fiscal belt. His tenure as Chief was marked by frustrating attempts to increase the annual budget of the Secret Service.
Brooks could neither afford to hire an Assistant Chief nor hire additional agents. In 1875, the year before Brooks became Chief, the Secret Service spent $11,500 on administrative costs. Brooks had to make do with only $3,500.
Frustrated with trying to maintain a first-rate investigative organization on a limited budget, Chief Brooks offered his resignation to the Secretary of the Treasury. But it was refused and Brooks hung on for another few years.
John S. Bell stepped in as Acting Chief in 1888 and officially became Chief in 1889. Bell inherited Brooks' under-funded operation and continued the efforts of lobbying for more money. Meanwhile, counterfeiting was on the rise and the help of the Secret Service was being requested more and more by other government departments.
When Bell stepped down in 1890, the Treasury Department picked Andrew L. Drummond, Agent in Charge of the New York District, as the sixth Secret Service Chief.
Chief Andrew L. Drummond
Chief Drummond fought successfully for more stringent currency protection legislation. In trying to convict counterfeiters, the Secret Service had often come against Federal legislation that offered loopholes. Drummond worked toward broadening the scope of statutes affecting Secret Service work. During his short administration, he also drafted 14 amendments. These all eventually passed, some requiring resubmission by his successors.
During Drummond's administration, Congress appropriated money for the Secret Service to investigate frauds in the National Banks (the Federal Bureau of Investigation now handles these investigations). The appropriation was inadequate and within a few months the money ran out. In those few months, however, the Secret Service made considerable headway. When investigations stopped for lack of funds, newspapers printed articles calling for their continuance. A remarkable thing then happened. A citizen's group called the "Committee of Fifty for a New Philadelphia" provided a voluntary loan to the Government so the Secret Service could continue the bank investigations.
In 1894, Drummond resigned so that he could return to his son's detective agency.
1894: Counterfeiting on the Rise
William P. Hazen became the seventh Secret Service Chief. Hazen got his start in investigative work at his father's detective agency. He became a Secret Service Operative in 1893 and less than a year latter was chosen to be Chief.
Chief Hazen's principal task was to curb the rise of counterfeiting. The size of the Secret Service had not kept pace with the population growth; counterfeiters were realizing that the Service simply couldn't cover the entire country.
Both paper and coin counterfeiting were on the rise. Stamps also began to be counterfeited. Furthermore, new counterfeiting methods, including lithography and photoengraving, were producing better quality counterfeits.
The "Monroe Head Hundred" appeared in Philadelphia in 1898. This $100 counterfeit bill was considered so great a threat that the Treasury Department deemed it necessary to recall the entire issue, the only time a counterfeit bill necessitated this act. The Treasury Secretary requested that Hazen devote his full attention to locating the "Monroe Head Hundred" counterfeiters. Fred Bracket, Chief of the Appointment Division of the Treasury, then took over the administrative duties of the Secret Service Chief.
At this time, the Treasury Secretary also called for an investigation of the Secret Service. Newspapers had reported that the Secret Service had assigned agents to protect the President and his family on a vacation in Massachusetts. The articles claimed this was unauthorized and improper, since the Secret Service's appropriation was earmarked specifically for suppression of counterfeiting, not presidential protection.
The investigation found this to be accurate and Chief Hazen was demoted to the rank of field operative. He remained with the Secret Service until 1891.
