Broker, Trader, Lawyer, Spy by Eamon Javers Read Free Book Online Page B

sending coded information across state lines. But it also gave corporate crooks new avenues for thievery. * One case set a new standard for technological innovation—and financial corruption. In 1864, a stockbroker in California was arrested for conspiring to tap telegraph lines to intercept news before it hit the markets in order to arbitrage the insider information. The Sacramento Daily Union of Friday morning, August 12, 1864, detailed the scheme under the headline: “Tapping the Wires for Stock Operations.” A well-known stockbroker, D. C. Williams, checked into a hotel in the small gold rush town of Placerville, California, early that summer. The State Telegraph Company had offices in the same hotel, and Williams, an expert in telegraph technology, interceptedthe messages simply by hearing the clattering of the telegraph machine and mentally deciphering the long-dash and short-dash code. That gave him advance notice of the goings-on in the region. He used the information to develop invaluable insights into upcoming corporate events that would set off gyrations in the stock market. This was enough to let him make plenty of money through insider trading on the tidbits of information that came his way. But Williams had an even more elaborate plan in mind: to bribe the telegraph agent in exchange for help intercepting information on the outcome of a crucial mining lawsuit in the Nevada Territory.
    Williams planned to take over the telegraph controls when the news came through. He’d know the result of the case—and which company’s stock price would soon surge—and he’d be able to keep the news from being passed on to San Francisco long enough to buy and sell the appropriate shares before anyone else knew the outcome. With his finger on the telegraph key, Williams could send fake messages down the line as he wished.
    Meanwhile, the telegraph agent would help by cutting the lines to the east, preventing any messages from getting through that might tip off telegraph operators that something was up. Williams offered the man a healthy sum and an incentive bonus for his work: at least $300 if the stock scam failed, and between $700 and $1,000 if it succeeded. In today’s dollars, that would be a payment of more than $20,000 for a successful outcome.
    Unfortunately for Williams, the telegraph operator was an honest man who went to his boss with details of the plot. Alerted to the swindle, police investigators found letters from Williams to coconspirators in San Francisco and Virginia City, Nevada. In one missive, Williams predicted that the group could make more than $80,000 on the deal—a staggering sum in those days.
    “We ought to make enough on this one thing to lay by for years to come, if necessary,” he wrote. And there was no end to how many times the conspirators could pull off the scheme: “Whenever an important decision is hereafter to be given anywheres throughout thecountry, we can do the same thing.” The nationwide insider trading scheme never came to pass: Williams was arrested on misdemeanor charges, was unable to post bail of $2,000, and was put in jail. 1
    Williams’s telegraph swindle was a rare case in which the local police made the bust on their own. But it was just the sort of new, continent-spanning crime against companies and financiers that the Pinkertons were suited to detect. In most cases, local police forces were overwhelmed by the sophistication of corporate thieves, and couldn’t handle crimes beyond their jurisdiction.
    The Pinkertons, by contrast, had unprecedented access to rail travel through their connections at the railroad companies. They could move around the country in ways that no force before had been able to do. They hired female detectives, a progressive move for the day, and used them to infiltrate society salons where bumbling male detectives could not go. They collected detailed files on every criminal they came across, establishing physical descriptions, habits,