The Charleston daily news. [volume] (Charleston, S.C.) 1865-1873, 1872-08-10
THE BOGUS CONVERSIONS.
C4RDOzO MAKES 4 CLE.IN BREAST
OF 1T.

CARDOZO Makes 4 CLEAN BhEaSI
OF 1T.
The First Doubt-An Appear tor Ao-
vlce-The Great Seal Goes 10 New
York-Si1 Million State Bonds Fraud
uIently Issued.
Secretary of State Cardozo has addressed the
following letter to his counsel, Messrs. Melton
d Corbln:
SECRETARY OF STATES OFFICE,
COLUMBIA, 8. c., August 6, 1872.
Messrs. c. d. Melton and D. 7. Corbin, Auor-
neus and otlnsellors-at-La1o:
GENTLEMEN-Having been able to retain
your valuable services to show cause why q
peremptory mandamus should not be issued
BY his Honor Judge s. W. Melton on Wednes'
day next, August Z, 10 compel me to seal con-
version bonds, desire to submit few reasons
why Think such q mandamus should not be
Issued. - .'t-',,-5--s--
In November, 1870, began to suspect that
the conversion bonds that had been sealed by
me were not being used for the purpose Tor
which they were intended. viz: In exchange
Tor any OF the other various bonds that had
been Issued, or certificates OF stock, which
were to be cancelled as soon as exchanged,
and kept in the treasury as evidence OF the
conversion bonds issued in their stead.
item endeavored to learn from the treas
urer the purposes tor which so many CONVEX
sion bonds were declared to be needed. he
replied that the finances OF the State were
under the control OF financial board, con-
sisting of the Governor, treasurer and attor-
ney-general, and that 1t was not my province
or right to know their action, except 30 far as
I could learn them from the public reports
they might make through the treasurer and
financial agent, and that he thought IL was
simply my duty to seal as many bonds as they
required.
then communicated with the attorney
general, requesting from him written opln-
Ion as to whether had the power to require
frcm the financial board knowledge OF their
transactions before should take the RESPONSE
bility of sealing any more bonds The sttor-
ney-general gave the opinion that my duty
was simply nainistertdl; that had no right to
know the transactions of the financial board;
and that 1t was my duty to seal as many bonds
as the treasurer, instructed by the nnanclal
board, requested; that the financial board had
issue and sale or hypothecation OF bonds, and
the disbursement CT the proceeds of such sales
or rhypothecstions.
Though I believe this opinion to be accord
ing to the letter Of the law, 1t did not entirely
satisfy me or convince me that had no re-
sponslbility In the matter, and therefore de-
termined to use my utmost exertions to learn
to be the mlsapplication of conversion bonds,
were correct or not.
During the legislative session of 1901, q
law was enacted to create what is known as
the s'sterling funded debt" of South Carolina,
and board of five officers, called the "Ster-
ling Fund Board, }" was authorized to manage
the negotiation of these bonds, which board
consisted of tho financial board referred to,
viz: the Governor, attorney-general and
treasurer, with the addition of the comptroller
general and myself. I then felt In better
position to remove or confirm my suspicious
with regard to the use being made of the con-
version bonds, and determined TO use my op-
portunity to the utmost. This loan, as those
whoare acquainted with the law are aware,
was TO consist of 100000 oil bonds, which
were to be negotiated in London, and the
proceeds of the sale used In the purchase OF
other bonds at lower price In New York.
and thus prove a great saving to the State.
This was one OF the reasons given to the
Legislature to secure the passage OF the Dill:
In accordance with this law, sealed S.. 800
600 of these bonds during the summer OF 1871.
then refused to seal any more OF these Donds,
as I Inferred Jfrom a. conversation with the
treasurer that an effort would be made 70
execute this law contrary to what conceived
to be the true purpose and intent of the law.
The treasurer informed me that they, the
s.Sterling Fund BOARD, }" had the authority 10 use
the proceeds OF the sale Of these bonds 10 pay
any existing public debt OF the State. further
learned that the existing public debt would
probably be very large, perhaps IN me entire
amount of the loan, $4,000 900. This slate
ment astonished me hey ond measure. i'm.
mediately informed the treasurer that nothing
should be done with the sterling loan bonds
except at full meeting called BY the presl.
dent of the board through me, the secretary.
was determined 10 prevent, II possible, what
conceived to be diversion of the bonds TO q
purpose entirely different from what was In
tended by the law.
On INQUIRY from the treasurer, by what
method iL was Intended to apply the sterling
loan bonds to such purpose, l was told by
him that he proposed Issuing sufficient con-
version bonds to cover not only all 0tner
bonds and stocks that had ever been issued,
but also the ''sterling loan bonds and then
that they had been converted by the holders.
The conversion bonds could then be
hypothecated for loans by the financial board,
independently of the sterling fund board, as
they (the financial board) claimed that they
had right to do, under the law permitting
ury, or In the hands of the financial agent,
where these bonds were, and the moneys
thus obtained used to pay off all debts
hitherto authorized by law. And thus
instead of the sterling loan bonds being sold
in London at higher price than they could
bring IN New YORK, auQ Tue proceeds Oh Inc
sale applied to the purchase Of our other
bonds here, they would have been simply eX-
changed for conversion bonds, which CONVEX
sion bonds would have been hypothecated for
loans, aud then forfeited and sold, and The
moneys thus obtained applied to the paymeat
of all debts hitherto authorized by law, and
they (the sterling loan bonds). would thus
have been an addition TO an alleged debt OF
between SIG, 600, 900 and SIG, 600, 900.
It perhaps would not be amlss here 10 state
that the treasurer, or financial board, who had
possession of the sterling loan bonds. amount
ing to Sc, 600, 600, meant TO hypothecate these
bonds even as late as last March, without the
knowledge OF the sterling fund board, as such,
for/loans, and was only prevented from 30
dsing by the timely repeal OF the act and can
Eellstion of the bonds by authority OF the
From November, 1870, to this period, (Au-
gust, ls7l,) sealed, under the advice given
by the attorney-genoral, sufficient conversion
bonds for converting the one million OF seven
per, cent. relief of the treasury bonds, and
100000 of the land commission bonds, as the
treasurer positively informed me that he de-
sired them for this purpose only.
was coolly Informed by the treasurer, last
September, that these same ''reliei of the
treasury bondsn and "land commission bonds," {"
for which i had sealed conversion bends for
the purpose of exchange, and which were 80
exchanged, had neuer been cancelled, but had
been reissLed from the treasury, and are now
kkann t1l FN,,I INoy, sf,.1o