Waggoner's Gesture

Into Manhattan's Chase National Bank last fortnight walked an undistinguished-looking little man who identified himself as Charles Delos Waggoner, President of the Bank of Telluride, Col. He had with him drafts on his Telluride bank. He filled out these drafts for large, round figures, presented them to the Chase bank for Chase certification. Inasmuch as a certified check has always been considered the closest possible relative to actual coin of the realm, the certification of these drafts was a matter of no small moment. But the Chase cashier did not hesitate, for only the day before the Chase bank had received from six other Manhattan banks instructions to hold for the Bank of Telluride credits amounting to $500,000. The six Manhattan banks, in turn, had received wires from their six Denver correspondents asking them to put the $500,000 to the Bank of Telluride's credit. So, since the Bank of Telluride was Chase's correspondent, and the man with the drafts was readily identified as Telluride's President Waggoner, his drafts to the extent of $495,000 were quickly honored. Thus the man from Colorado had in his possession nearly a half-million dollars in the form of paper bearing the Chase certification.*

A routine matter appeared this transaction until the six Manhattan banks advised their six Denver correspondents that their telegraphed orders had been executed. Promptly the six Denver correspondents informed the six Manhattan banks that they had sent no such telegrams, had ordered no credits for the Bank of Telluride.

What had happened evidently was that in Denver some person or persons unknown, having knowledge of the confidential code through which bankers transfer money, had written six coded wires, had fraudulently added the six Denver signatures. Banks customarily act upon these coded telegrams without checking back on them. Given a knowledge of the code and a willingness to misuse it, there was no great difficulty in working the $500,000 fraud. Sole precaution on the part of the defrauder was that the money should be collected before the trickery was discovered.

Resulted confusion, clamor and a search for Banker Waggoner. There resulted also the taking over of his Telluride bank by the Colorado banking department. Banker Waggoner was traced to Lincoln, Neb. There his trail vanished.

But while detectives were still searching for the missing banker, the half-million fraud produced another surprise. For what had Banker Waggoner done with his $495,000 drafts? Cashed them and gone to South America? Not at all. He had used the money to pay to other banks money which his Bank of Telluride owed them. He had robbed Peter (the six Manhattan banks) to pay Paul (three banks which were creditors of his bank).* Thus Waggoner had apparently not engineered his scheme for any personal profit, but had sacrificed himself for his bank, which for a long time had been faced with dwindling deposits and threatened collapse. The Bank of Telluride was gainer by almost a halfmillion; the six Manhattan banks were losers by a halfmillion.

At first sight it might seem that Mr. Waggoner had made an empty gesture, that so soon as the fraud was discovered the $500,000 would be returned. Unfortunately, however, no such simple solution appeared likely. For, fraudulent as the transaction undoubtedly was, its execution had been unquestionably legal. So soon as the Chase bank certified the drafts they acquired virtually the sanctity of banknotes. Two of the drafts, indeed, were cashed before their illegitimate origin was discovered; on the third--the $225,000 draft to the Pueblo bank--the Chase bank refused payment in order to make a test case, go into court and turn the problem over to the law--or rather the lawyers-- of the land. Certainly the defrauded banks were sadly tricked. On the other hand the innocently profiting banks have legally collected a legal debt and, considering the Bank of Telluride's condition, they perhaps received their money in the only manner that it could ever have been obtained. Should they consider it their duty to their depositors to keep this money, many a fine legal mind will soon be struggling with the problem of whether a certified check is credit or money--whether it is a promise to pay or an actual payment.

* The six banks and their respective contributions to the $500,000 credit were: Chemical National Bank (on order of the First National of Denver), First National (on order of Denver National) each $100,000; Guaranty Trust Co., Harriman Trust Co., National City Bank (on order--respectively--of U. S. National, American National, Colorado National) and Equitable Trust Co., each $75,000. * The three banks and the amounts he sent them were Hanover National of New York, $200,000; First National Bank of Pueblo, Col., $195,000; Continental Bank of Salt Lake City, Utah, $30,000. He also used $60,000 to pay off personal obligations to the Hanover National.