Evening star. [volume] (Washington, D.C.) 1854-1972, 1871-09-16
THE HODGE DEFALCArION.
The Fai lure 10 Discover Ii Earlier
who Is Responsible For It2-Waat
Paymaster General Brice Says
What the Assistant Treasurer SAYS.

to detect the deficit in the public funds entrusted
to Major Hodge, the defaulting army paymaster,
is provoking a lively contest
General Brice, in letter 20 the Adjutant
General of the Army reporting the defalcation
and the arrest of Major Hodge says: THE first,
| and TO me the most important, inquiry sug-
| gested is: How could these frauds be perpe-
| Gated and continued through a succession OF
| years without a knowledge or suspicion of their
| existence being disclosed in the Paymaster
GeneraIs office through his accounts and state
| ments The answer is, first, an unwavering
| confidence in the man. But that confidence
| was not the sole or the fatal cause of failure
| TO detect his crimes in their very inception.
| Inc accounts and statements rendered by paw
| masters TO this Office do not prove their own &C
| curacy as TO the real amount of their deposit
| balances. That can only be arrived at by
| comparison OF the statements with their deposit
| accounts in the various repositories. Without
direct information from the depository this Office
| can nave no means of knowing the accuracy OF
| paymaster's certified balance in that deposit
| tory.
To remedy this and guard carefully against
the possibility OF such fraudulent returns OF pay
| masters, in May, 1850, the Secretary of War,
after comforting with the Secretary OF the Treas
ury on the subject, instructed me to issue circu-
| lar orders to all pay masters to forward TO the
Treasurer OF the United States direct, at the end
OF each week, state ment of his balance on hand
| and where deposited. The plan vas that as ali
the deposiiori;S in the country were required to
make TO the Treasurer weekly statements of
their deposits on hand, with list of the deposit
tors, tdisbursing officers,) and the credits 10
each, a comparison of those weekly statements
| would show any material discrepancy between
depository and paymaster; and where any such
was FOUND, of course IL necessarily became the
DUTY OF the Treasurer, or some one in his office
designated Tor that duty, TO notify the Paymaster
General of the fact. So too, il any paymaster
| neglected to forward his weekly Statement at
| an, me Paymaster General could only know the
| Inc Treasurer of the United States, in a let
| ter TO me dated May 9, 1866, after a previous
conversation on the subject, writes in these
4 Ipnl h. r..
your once directing all pay asters to report to
tnis once the balance remaining to their credit
al the Close OF each week, designating the place
might be made to work safely"
did that very day issue the circular in pursu-
ance OF the Secretary OF Wars order, and in
compliance with the Treasurer's suggestion
That circular has been ever since, and is now.
| in force.
| Now, in regard to these weekly statements
| from Major Hodge, always rendered to this
| office, 1t is found, on comparing them with his
| accounts in the Treasury, that they have been
systematically false, reporting continually
deposit balance in the Treasury hugely in excess
OF his real balance, and by these statements and
| his periodical accounts current, made by forced
entries to correspond with them, his accounts
| have appeared entirely regular, and thus have
| escaped suspicion. Ii the duty were performed
In the Treasury of examining and comparing
statements, or if Hodge failed to render them,
| error in his statements or of neglect to make
them. as required, would have induced prompt
| investigation and undoubted discovery, and
have ayerted this Notifying catastrophe.
1t is found that the frauds have all been per
| Tetrated in and through the Treasury proper
none by means of his disbursing account with
| the Assistant Treasurer in New York, where
also he had large credits. i ascertain that the
| money used for his outside purposes, stock and
goid gambling, has been drawn in cash from the
treasury, and in large sums. Here again was
| failure in the Treasury to enforce require
| ments OF law and regulations. Major Hodges
disbursements required not dollar of
| each covering the amount of the voucher or
| vouchers to be paid, their nature stated, with
| the name Of the party to whom nayable. (See
| act of March 8, 1871, and circular instructions
| of the Secretary of the Treasury of November
| 70, 1862 But it is now ascertained that Major
| Hodge has received at the Treasury large sums
| bearer, on bis mere checks, payable to "cash or
| bearer" Cash checks, so paid, have been
| large and numerous-One of $50 600; others OF
various ACKNOWLEDGEMENTS 0 $50 goo, 81. 600
&c. These are the mysterious checks with
| which he has conducted his fraudulent trans
| actions. l can only say that, il any one of
| these highly irregular, unauthorized acts had
been made known TO me- it would have appr.sed
| me of fraud, and would assuredly have been
| visited with condign punishment. The actual
| amount or Major Hodges deficit as determined
| by a careful examination, is four hundred and
| seventy three thousand nine hundred and thir-
ty nine collars and seventy-seven cents, 49,
The largest sum paid Major Hodge, on a
| check in his own name, was $50 ,OOO on july
20, 1870, just before the memorable Black Fri
| day in New York.
The following statement in relation to the
| matter is authorized by the Acting Treasurer
of the United States:
The attempt of the Pay Department to foist
upon the Treasurers off &C the responsibility for
the failure to discover at an earlier date the mis-
appropriation of public funds by Paymaster
Hodge is regarded by the Treasury officials as
entirely unwarranted by the facts. The alb
surdity of the attempt is, it is claimed by them,
IN q Vbn 70 I;ox
OF dsbursing the public funds, and would rem
der the statements put forth unworthy of atten-
ton had they not been extensively circulated
and made the occasion of partisan attacks upon
the administration of the Treasury The
grounds for holding the Treasurer RESPONSIBLE
as presented in the Pay Department YER
sion, were, it will be remembered the follow
ing:-First, the letter addressed by the Treas
urer TO the Paymaster General on the 9Th of
May, 1896, in which he said :-'.If instructions
should be issued from your Office directing all
raymasteIs to report to this Office the balances
remaining to their credit at the close of each
wee K, designating the place of such deposit, /
think the present system mi ht be made to work
safely" In accordance with this suggestion the
Paymaster General forthwith issued a circular
requiring all paymasters TO report their balances
weekly to the Treasurer. 1t is claimed by the
Pay Department that proper comparison of
these reports at the Treasury with those from
The various depositaries, showing the balances
held by them to the credit OF disbursing officers
would have led to the speedy detection of any
defalcation. 49,
In the second place, the Pay Department al
leges that the payment by the Treasurer OF
checks drawn by Paymaster Hodge, PAYABLE to
leash or bearer" for large amounts afforded
him facilities for the improper withdrawal OF
money, which he would not have enjoyed had
the circular of the Secretary OF the Treasury OF
November Esd, 1869, concerning the disbuTse-
ment of the public money been complied with
To the first OF these allegations the Treasury
officials reply that the letter OF General Spinner
was never intended 10 be construed as ASSUMING
| for the Treasurer the responsibility for the
proper dsburse ment of the funds intrusted 10
officers Of the pay department., or as absolyinp
that department. from the responsibility of Keen
ing all proper checks upon its officers Experi-
ence soon demonstrated thatthe reports required
OF paymasters were no protection whateyer
against fraud. Even in the case of honest OFF,
GERS the balances reported by them would ALWAYS
pc less than the amounts reported by the depos-
itaries, by just the amount of their Outstanding
checks. In the case Of an officer like Col HODGE
who disbursed half a million or more ever
month, the discrepancies arising from this cause
between the two balances reported would be 30
great as to render the reports utterly useless as
checks upon each other. If the officer were dis
honest and had mis- appropriated money nothing
would be easier for him than to make his repor1
agree with those of the depository which ta,t bis