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Any photos not otherwise credited are from the personal collection of Frank Passic, Albion Historian.
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ALBION BANK SCANDAL From "The Numismatist," January, 1998, pgs. 38-45, 95-97 The acquisition by the Smithsonian Institution's National Numismatic Collection of the thousands of "certified proof" notes of Federal paper money prepared by the Bureau of Engraving and Printing and the subsequent cataloging of the same have opened up a gold mine for historical research. Collectors can now order photographic copies of National Bank notes from their own home town. These notes not only compliment local histories, but are sometimes the only remaining examples of notes issued by a local national bank.  Albion National Bank
One such example is the town of Albion, Michigan, where the small national bank in this southern Michigan community issued National Bank notes until it was closed in an incredible banking scandal on New Year's Day, 1912. The recent discovery of the certified proofs of the Albion bank at the Smithsonian have provided historians with an example of the only known notes of the bank, which serve as a reminder of the series of misfortunes and crimes that plagued this local financial institution. Albion is a community of 10,000 persons located along Interstate-94, 100 miles west of Detroit, and 200 miles east of Chicago. It is the home of Albion College, which brought home the 1994 NCAA Division III football national championship. The town's brick main street was relaid in 1993 and has provided an attractive setting to complement the historic downtown buildings which line the central business district. The National Exchange Bank of Albion was the successor of the private banking firm of Mayhew & Irwin, and received its National Charter No. 1544 on August 30, 1865. The bank commenced business on January 1, 1866, with a starting capital of $50,000. President of the bank was Samuel V. Irwin (1823-1890), a New York native who was involved in a variety of local enterprises. The cashier was Gardiner W. Davis (1829-1876), another native of New York. The banks misfortunes began in 1875, when employees arrived one morning and found burglary tools on the floor--the bank had been robbed of $5,000 during the middle of the night. The following year, the cashier, Gardiner W. Davis committed suicide in an event that was quite graphically reported in the newspaper, a portion of which is quoted here (portions may not be suitable for young children) "Thursday afternooon [April 6, 1876] at about three o'clock, it ws reported on the streets of Albion that G. W. Davis, cashier of the National Exchange Bank, had committed suicide by shooting himself. The entire community was astounded and shocked beyond measure... For some years Mr. Davis has been in poor health, suffering greatly from neuralgia, dypepsia, and severe headaches, to relieve which he had been in the habit of taking morphine. Of late the state of his health gave him great uneasiness, and being naturally of a despondent turn of mind, preyed constantly upon his spirit. He saw himself in the near future, an invalid with a family on his hands, for whose support he would be unable to provide, and, as he imagined, reduced to penury. This fear haunted him, as was well known to the officers of the bank, and his associates. Monday morning he determined to abandon his morphine, if, as he expressed it, it killed him, referring to the pain which he was accustomed to alleviate by its use. That same day was the last he spent at the bank. Thursday morning he sent for Mr. Fox, one of the directors, and told him his fears and apprehensions. Mr. Fox came back and related the result of the interview to Mr. Irwin, president of the bank. Mr. Irwin told Mr. Fox to go and tell him he need have no fears. If he should be sick, his salary should go on, and they would see his family provided for. Mr. Fox again saw him and told him what Mr. Irwin had said. Half an hour later after this he [Davis] went upstairs to his room, and soon after the report of a gun was heard. The family, alarmed, rushed upstairs and found the door of the room fastened. It was forced open, and there lay the unfortunate victim of his own act, upon the floor, his head covered with blood, and presenting a frightful scene. The ball [bullet] had entered the side of the head, making a terrible wound, from which blood and brains were oozing...." 1 The tombstone in Albion's Riverside Cemetery was provided by the bank, upon which this inscription was etched: "Erected by the National Exchange Bank to the Memory of a Faithful Officer." The National Exchange Bank of Albion issued National Bank notes in denominations of $5, $10, and $20. 9,700 $5 notes were issued for circulation, as well as 3,000 $10 and 1,000 $20 bills. The subsequent "Series of 1875" notes produced saw 1,650 $10, and 550 $20 denominations. A search of the numismatic literature including auction catalogs, museum collections, and private collections reveal that none are known to have survived today. Photographic copies of the bank's certified proof notes at the National Numismatic Collection at the Smithsonian reveal the national signature combination of John Allison (Registry of the Treasury), and A. U. Wyman (Treasurer of the U.S.), and a date of October 2, 1865. A Specimen oval seal stamp of the Bureau of Engraving and Printing bears a date of July 6, 1891, which obviously was added years later.  Albion National Bank Exchange Currency, July 6, 1891
On the 10-10-10-20 combination certified proof sheet, the bank's Charter No. 1544 appears printed in block letters just outside the bottom margin of the $20 note, with a hand-written version in the lower left corner. The proof sheet contains four small punched holes in the national signature area on each denomination. As was the case with the First Charter series, the $5 denomination features Christopher Columbus on the left, an Indian princess on the right of the face, and the landing of Columbus on the back. The $10 denomination illustrates Benjamin Franklin drawing lightning on the left, with Liberty soaring on an eagle on the right, and DeSoto discovering the Mississippi River on the back. The $20 features the 1775 Battle of Lexington on the left, and Columbia on the right, with the baptism of Pocahontas on the back. Upon the expiration of the bank's charter, it was reorganized into the First National Bank of Albion on March 2, 1885, with an original capital of $100,000. Irwin continued as president of the institution until his death in 1890, upon which he was succeeded by Dr. Willoughby O'Donoughue (1832-1915), a civil war veteran and surgeon who had become vice-president of the bank in 1870.  Henry M. Dearing
Cashier of the bank was Henry Montgomery Dearing (1839-1927), who took over the position a year after the suicide of the first cashier, Gardiner W. Davis. Athough he was a man of many talents and was quite involved in community affairs, Dearing was a poor manager of bank funds. Through mis-management on the part of the cashier, the bank ran up several large debts and was forced to reduce its capital by $50,000 in 1897. The reduction was approved the the U. S. Treasury Department with the stipulation by the Acting Comptroller of the Currency that Henry M. Dearing be removed as cashier. Only a petition drive by Albion merchants kept Dearing in office in 1897. Dearing was quite popular in town, and well liked. One local historian wrote at the time, "Henry Montgomery Dearing, cashier of the Albion National Bank, came to Albion in 1853. His life has been spent here. He needs no introduction to anyone in the city or surrounding country, all know him. His business life has been an open book, clean, honorable, honest. We could say much more--we cannot say less." 2 The mis-management continued, however, and in subsequent years, Dearing erroneously overpaid depositors and stockholders a higher interest rate and dividends amounting to $40,000. The bank also invested heavily in a failing windmill company. In addition, Dearing approved a $21,000 loan to a fraudulent hay dealer who defaulted. Fearing to tell the bank directors about the mistakes, he committed the crime of forging bank loan notes on the names of bank depositors. It was his intention to pay the money back secretly over a period of time out of his own pocketbook, rather than to confess his mismanagement. It was under these financial conditions that the bank found itself when its Charter No. 3316 expired in 1905, although only the cashier knew it. As one newspaper observed in 1912, "Practically the whole business of the bank was entrusted to the cashier, and the confidence in him was so implicit that whatever he said went. The president and directors agreed without investigation or criticism to whatever he said or did. Instead of being directors they appear to have been mere followers." 3 The First National Bank of Albion issued 16,275 $10, and 5,425 $20 Second Charter "Brown Back" notes. A search through the numismatic literature reveals that two $10 examples in "Fine" condition turned up in the great 1945 Albert A. Grinnell auction 4, cataloged by Barney Bluestone. Their whereabouts are unknown today. Lot No. 1752, even then described as "a rare note," realized $15, while lot No. 2978 brought $14.  First National Bank $10 Bill
In this author's own personal collection is the only known circulation example of an Albion national note of any type, a $10 Second Charter Brownback. This particular note has a pedigree which dates back to one of the bank directors, Warren S. Kessler (1845-1933) who served in that position briefly in the 1890s. Kessler was the founder of Albion's largest industry, the Albion Malleable Iron Company, and would often spend summers at his Duck Lake cottage north of town. Mrs. Otilega Schumacher (1870-1933) and her husband Carl, both German natives, would host an annual dinner in honor of Mr. Kessler at the Duck Lake cottage. Carl served as plant superintendent at the Malleable. On July 6, 1926, Kessler presented Mrs Schumacher with this $10 National note from the First National Bank of Albion in appreciation of her many years of service. The note was kept in the family through her son Harold (1904-1999) for 67 years until it was purchased by this author in 1993. The funds from the sale were donated by Mr. Schumacher to the Albion Civic Foundation, which funded the publication of this writer's book, Albion's Banks and Bankers (1985) upon which the $10 note is picture on the cover. The note, a "Series of 1882" variety, also grades "Fine." It came from the "B" or second position on the sheet from which it was cut. It bears the national serial number of E 5494 E and a local serial number 1240. The note features the national signature combination of Blanche K. Bruce as Register of the Treasury, A. U. Wyman as Treasurer of the U. S., and is dated March 2, 1885. The local signature of president Willoughby O'Donoughue appears on the lower right, while that of cashier Henry Montgomery Dearing is found on the lower left. The bank's charter No. 3316 appears in large numerals on the back.  Smithsonian Albion certified proof
The certified proof sheet at the Smithsonian bears a lower left outside margin hand-written date of March 23, 1885. Approval initials are found in the outside margins of the $20 note, and a purple oval stamp of the Bureau of Engraving and Printing bears a date of May 29, 1891, which as before, was obviously added later. Each note bears two punched holes in the national signature area. When the bank was reorganized into the Albion National Bank on January 11, 1905, Charter No. 7552, it was secretly forced to assume the continuing financial losses. The cashier Dearing, who was placed in charge of liquidation matters, stalled on payments of dividends to former stockholders, especially if they lived out-of-town or out-of-state. A letter bearing an omen of bad news to come was written in 1909 by Harlen J. Miner, son of Lyman B. Miner, who succeeded Gardiner W. Davis as cashier of the bank for a year before Dearing was hired. Harlen lived in International Falls, Minnesota, and made a sustained effort to obtain his shares in the bank. After stalling by Dearing, Miner wrote the Comptroller of the Currency in Washington, D. C. about the matter. He stated, in part, "Now, to explain to you why I am addressing you regarding this matter. Sometime during the summer of 1907 I mailed proof of my inheritance to the stock herein before mentioned to Mr. Dearing, and requested him to have transfer made on the books of the bank....Several months elapsed without reply, and growing impatient I addressed Mr. Dearing several times regarding the matter but was still unable to rouse him....I am growing suspicious." 5 Cashier Dearing had apparently received several threatening letters from several persons people wondering what happened to their stock money, but kept their contents secret from the bank president and its directors. In the 1912 investigation of the bank of its 1905 organization papers, the Comptroller of Currency wrote, "Here is a report on a bank which shows that some examinations amount to nothing. It also shows how to organize an insolvent national bank." 6 The bank's investment in the windmill factory continued when the Albion National Bank was organized in 1905, which ultimately resulted in its downfall. In a 1912 interview, Dearing himself relates the scenerio of events which occurred over a 13-year period: "Well, I have known that this crash was coming for the past eight or ten years. It [the windmill company] went to the wall to all intents and purposes and Dr. I. C. Foster, then president of the bank [in 1897 only] purchased or bid in the worthless assets of the institution for the bank. They were then compelled by the banking law to change the assets after a time, and they simply re-organized under the title Albion Wind Mill & Improvement Company. They were losing money to the bank then. It was a losing venture from the start. After a time it again became necessary to change the worthless assets for the company, which was on the rocks." 7 About this time Mr. Cook came over from Homer which his engine patents and plans...There was never a dollar of capital stock paid into the company, and they had no money to begin business with. The bank opened its treasury and started the thing going. The Cook Manufacturing Company suceeded the windmill firm at the location, and produced small gasoline engines. Manager of the firm was Palmer Montgomery Dearing (1865-1932), son of cashier H. M. Dearing. The company ran up a huge debt, and the bank directors ordered the debt be reduced. Had the debt been legally reduced, the company would have been forced into bankruptcy. Remembering how easy it had been to forge bank loan notes, H. M. then introduced his son Palmer to his forgery scheme, and the two men began forging loan notes of the Cook Manufacturing Company on the names of people throughout the country. The plan snowballed into huge amounts of money, as the Dearings pumped money into the Cook firm in order to save it. As Henry confessed in 1912, "We hoped to pay back the money then, but within a few years we saw that it was hopeless. After that it was just waiting for the crash to come. We knew that sooner or later we would be found out." 8  Palmer M. Dearing
Eventually the Dearings had to invest and mortgage their own personal property, savings, and even suppress deposits of the ANB by tearing out deposit ledger sheets. Although statements showed that the ANB was Albion's smallest bank, in reality the bank should have been Albion's largest. Dearing used the funds from the torn ledger sheets to pay depositors and stockholders both interest and dividends on profits which the bank never earned. Assisting the Dearings in their crime was Palmer's secretary, Miss Addie Hollon (1855-1925) who filled out the loan notes. In a 1912 interview, she confessed, "At first there were not many of the notes, but later they began to come in in great numbers. H. M. would usually bring the blanks over from the bank...Then P.M. and I or usually I alone, would make them out, using what amounts we pleased, only so we kept within the limits...At first we used actual names, always disguising our handwriting on the signatures. We took these names from a bank directory, using people who lived far away from Albion. Later we had used most of the available ones in the directory and H. M. said to split them up, using the give name of one man with the surname of another. Of late years we have made them up out of our own heads and it has been a great task, somedays, to think of any new ones." 9 The scheme was discovered by the U.S. Bank Examiner Herbert E. Johnson in a routine inspection on December 29, 1911 after he noticed that the signature of a local merchant did not match on a forged note. By that time, the forgeries and other losses had climbed to a ghastly $325,000, making it one of the biggest forgery schemes in U.S. banking history at that time. The bank was closed on New Years day, 1912, and the shocked Albion community learned that their life savings were lost forever. Eventually, depositors were able to recover about 30% of their funds in the failed bank when the receivership ended in 1916. The receivership of the old First National Bank was finally settled in 1918--13 years after the bank had closed. Stockholders there received about 42% of their investment funds. Both Dearings and their secretary were subsequently found guilty and sent to prison. Addie Hollon received a pardon from President Taft after serving only three months in prison. Another Dearing son, George Vail Dearing (1868-1927), was found guilty of "complicity" in the the bank failure, and was also sent to prison. George had served as assistant cashier of the bank. On the very last day the ANB was open (December 30, 1911), at just before 8 o'clock in the evening one hour before the bank closed, George became suspicious because the Bank Examiner was staying too long. He therefore withdrew the funds of his wife, his son, and the money of the Methodist Brotherhood of which he was the treasurer. When the bank was closed, citizens became suspicious that George was the secret recipient of the thousands of embezzled dollars of the bank. In his investigation, the Bank Examiner uncovered incriminating evidence against George, concerning the time he had earlier worked for the People's National Bank of Jackson (20 miles east of Albion). George had embezzled funds in Jackson, and borrowed money from his father H. M. Dearing in Albion to pay it back. The implication was that the funds illegally came from the ANB. The failure of the ANB had statewide repurcussions. Banks throughout the state of Michigan were ordered to check their books to see if any similar forgery schemes had occured in their financial institutions, and the failure of the ANB made headlines for months following the failure. Some peculiar situtations resulted in the failure of the bank. The local Baptist Church lost its entire funds, totalling $900. The treasurer of the church from the time it was erected was H. M. Dearing. For a time there was a controversy whether the City Treasurer, who had deposited $7,000 in year-end city tax monies on December 30, 1911, would be held personally liable for the losses. The same held true for the treasurers of Albion and Sheridan Townships, who also had deposited tax monies on the last day the bank was open. It took special action by the Michigan State Legislature to absolve the treasurers of any guilt in the matter. Enraged depositors of the bank held a massive meeting at the Albion Opera House on December 4, 1912, demanding their money back from the Comptroller of the Currency, since the bank was a National bank. A photograph of the 500 person-plus irate group was sent to the Comptroller, and the Department of Justice--accompanied by a fifteen page petition signed by the impoverished depositors.  Irate Depositor Meeting at Opera House
The Albion National Bank issued 2,400 $10 Third Charter Red Seal banknotes and 800 of the $20 denomination; and 1,764 $10 and 588 $20 bills of the 1902-1908 Back variety. Unfortunately, none are known to have survived, and the printer's proof specimens at the Smithsonian are the only examples known from the bank today. Their historical significance is paramount, and it was a thrill of this writer to learn of their existence from National Numismatic Collection co-curator Richard G. Doty at the American Numismatic Association Summer School of Numismatics in July, 1996.  Albion National banknote proof sheet, 1905.
The proof's bear a signature combination of Judson W. Lyons as Register of the Treasury, and Ellis H. Roberts as Treasurer of the U. S. The $10 denomination features U.S. President William McKinley, while the $20 pictures Hugh McCullough, a former Comptroller of the Currency and U.S. Treasurer. The specimens bear a printed date of December 17, 1904. In the lower left outside margin of the $20 note on the sheet is found a handwritten date of January 20, 1905. No holes are punched in this particular specimen sheet. While the printer's proof specimens of National Bank notes of banks across the country are now attracting the interest of collectors, the Albion specimens are especially attracting and significant on account the incredible forgery scheme and the misfortunes which beset the bank throughout its history. Readers might like to write the Smithsonian Institution to learn more about possible proof notes of their own community in the National Numismatic Collection. For more information, write: National Numismatic Collection, Museum of American History, Smithsonian Institution, 10th and Constitution Ave, N.W., Washington, D.C. 20560. A more detailed account of the history of Albion's National banks may be learned in this author's book, Albion's Banks and Bankers, published in 1985, and available at the ANA library. Remaining signed copies are available from the author. 1. "Terrible Tragedy in Albion," Homer Index, 12 April 1876, pg. 3. Return to story 2. Palmer, Dr. Elmore. "Biographical Sketches. Albion Mirror, 6 November 1908, pg. 1. Return to story 3. "National Bank Fails," Albion Leader, week of January 2, 1912, pg. 1. Return to story 4. Bluestone, Barney, cataloger. Catalog of the Original Celebrated Albert A. Grinnell Collection of the United States Paper Currency, Part III. Syracuse, N.Y., 1945. Lot #1752. Return to story 5. Miner, Harlen J. Letter to the Comptroller of the Currency, 9 December 1909. Return to story 6. Murray, Lawrence O, Comptroller of the Currency. Letter to Organization Division, 18 January 1912. Return to story 7. "Total Losses of Albion National Bank are Accounted for by the Dearings." Jackson Citizen Press, 29 January 1912, pg. 1. Return to story 8. "Both Dearings Plead Guilty but They Smile With Relief at the Thoughts of Prison," Detroit Tribune, April, 1912 clipping. Return to story 9. "Miss Hollon Tells Story," Albion Evening Recorder, 6 January 1912, pg. 1. Return to story ADDITIONAL SOURCES: Friedberg, Robert. Paper Money of the United States, 12th edition. (Clifton, N. J.), 1989. Passic, Frank. Albion's Banks and Bankers (Albion, Michigan, 1985).
All text copyright, 2009 © all rights reserved Frank Passic
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