Indiana. General Assembly.

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DECEMBER 6, 1841.

By Authority.





I Si

$5 So





Doc. No. 1 . ;AT£ LIBRA Senate.







To His Excellency, Samuel Bigger.

Sir : — The last legislative enactment on the subject, requires
of the Fund Commissioner a report to the Governor, and it is in that
character I now address you. Before I proceed, I beg to excuse my-
self from a seeming disregard of law, in the omission to comply with
that requisition, directing the annual report to be delivered by the first
of November, by saying I could not return in time for its submission
at the appointed period without an injurious delay in my attention to
claims, only to be recovered through the courts, whose Fall terms were

From ar, intercourse last winter with members who had means of
being informed, and from concurring information from other quarters
since, I am aware that <t full and unreserved exposition of every thing
connected with our eastern money matters, arising from the previous
sales of our stocks, is not only desired but expected at the hands of
the Commissioner. Whilst, therefore, I communicate fully, and with-
out concealment, all the information obtained, I will see that I do not
over estimate nor underrate our securities, nor indulge in a spirit of
complaint and fault-finding of others, for the sake, merely, of com-

Connected with the subject of the report are certain documents in
my possession, to print which, (though they are of much interest)
would swell this report to too great a size. Besides these, I have pa-
pers and opinions that may with propriety be given from a public


agent to the legislature, but which could not be published without an
injurious influence upon our claims on individuals and corporations, in
•whose success those claims are dependent. .Such papers and any
opinion I may venture to offer, will be found in a manuscript appen-
dix, which will be subject to the inspection of members of the legislature.
After accepting the appointment bestowed at the eve of the adjourn-
ment of the legislature, I hastened to bring up the unfinished bu-
siness that devolved on me, and place the files of the state board of
internal improvement in a condition as intelligible as possible to a suc-
cessor, and then repaired to New York.

The State Treasurer having to share in the first duties, by preparing
the new bonds authorized by law for the payment of our interest and
for the redemption of the treasury notes ; his co-operation, it was
thought, would be more efficient, less productive of delay, and less ex-
pensive, if given in New York : he therefore afforded the aid his pre-
sence and service would render, by accompanying me.

Before leaving home there were signs of a decline in the market,
value of stocks, not known at the time of the adjournment of the le-
gislature, which was supposed to arise from some temporary cause that
would abate ; but before reaching the great market, New York, in
March, its aspect was so permanent as to threaten the defeat of the
object of the legislature in authorizing the issue of seven per cent,
bonds. The new bonds, were, however, executed, in readiness for
any improvement that might take place in the market price.

The months of March and April passed off without realizing any
thing from our large suspended debt to meet the July interest, and see-
ing nothing to encourage the hope of a prospective improvement in
stocks ; and withal, having reason to dread troubles, not very distant,
from the unexpected number of outstanding hypothecated bonds, I
thought it advisable to return and take counsel of the state officers,
and make a trial to procure from the branches of the State Bank, funds
for the payment of the interest then nearly due, and to extricate the
pledged bonds. The President consulted the representatives of the
branches attending the State board of directors, but without getting
encouragement, for the reasons that the branches had not been noti-
fied — that there had been no legislative request or authority- -and be-
cause several of the branches had not realized advances made in the
produce business the winter before.

Disappointed in my wishes, T returned to New York without find-
ing much change in the price of State Stocks, but having no other de-
pendence than that of negotiating the new seven per cent, bonds, to
protect the credit of the State in the payment of the July interest,
the attempt was made, guided by the advice and influence "of experi-
enced individuals, but without success.

Having failed in the attempted sale of the seven per cents, at par,
and not having the money to offer in discharge of our obligations, two
year bonds were advised and subsequently proposed to the holders of
our stocks, through the house of M'Alister te Stebbins. Appendix L

Of the bonds left with that house, only about 30,000 dollars have

been delivered in exchange for July coupons, and there is no prospect
of effecting any further exchange to any amount.

The duty next in importance, claiming my attention, after being re-
leased from the attempt to vend the new bonds for the July interest,
was that of looking to the great number of pledged bonds; and in do-
ing so, the apprehended troubles alluded to before I returned to the
west, were fully realized.

Without more of detail than is usual, this subject of the pledged
bonds will not be satisfactorily understood; but as it proved a most
disastrous one for the State, it will be necessary to give all the partic-
ulars belonging to its history.

The first thing necessary, explanatory of the subject, is the official
report made by the late Commissioner in answer to a call of the House
of Representatives on the 10th of February last, of which the follow-
ing are extracts :

Indianapolis, February 10, 1841. $

" Hon. Samuel Judah,

Speaker of the House of Representatives .
"Sir: — The following questions have been propounded to me
by the House of Representatives, over which you preside, in a reso-
lution as follows :

" Resolved, That Milton Stapp, Esq., Fund Commissioner, be re-
quested to lay before this House, at as early a day -as convenient, — •'

" 1st. A table showing the amount of State bonds sold, to whom
sold, and on what terms, that have been paid for according to contract.

"2d The amount of bonds parted with, to whom, and on what
terms, which have not been paid for according to contract.

" 3d. The amount of bonds that have been hypothecated, to whom,
and on what terms, how much has been received on the hypotheca-
tion, and to what use it has been applied.'

" These questions I proceed to answer from the best light before me.

61 1st. The amount of State bonds issued by the State of Indiana,
to whom sold, and on what terms sold, and which have been paid for,
will be found in the accompanying abstract A.

" 2d. The amount of bonds' parted with, &c, which have not been
paid for will also be found in abstract A.

u 3d. During the Summer and Fall, and for the payment of July
and January interest, I hypothecated §600,000 of bonds, to borrow
$300,000, and have since paid $30,000, and redeemed §60,000 of the
hypothecated bonds. The bonds now out were hypothecated,

" 1st. Through Drew, Robinson & Co. for ■ §134,000

" 2d. Through John J. Palmer, President, for 45,000

" 3d. Through M. B. Sherwood, President, for 91,000

'« The amount still due is §270,000

on the hypothecation of $540,000 of bonds. It is understood,
that the bonds hypothecated by the first are in the American Exchange
Bank : by the second in the Merchants' Bank ; and by the third in the
Leather Manufacturers' and Lafayette Bank ; all respectable banks in
the city of New York.

•' Very Respectfully,


From this answer of Gen. Stapp, it will be seen he states the money
borrowed to be 270,000 dollars, and the bonds pledged to be 540,000
dollars ; all of which he represents to be in certain banks, meaning
that they are there for safe-keeping. Shortly after my arrival at New
York, I was surprised to learn from my predecessor that he had
pledged the " Iron bonds" for §300,000 to Nelson Robinson, and that
he had pledged bonds to a very large amount to the same individual
and to others. I requested him to give me a written memorandum of
the bonds pledged, to whom, for what sum, at what rate of interest,
when due, &c. In compliance with that request, he presented me
with the brokers' receipts for the bonds in the following table, and at
the same time handed me a written memorandum in his own hand
writing, which follows the account of bonds, making the sum borrow-
ed about $'290,500.


Nelson Robinson's receipts for
fii. B. Sherwood's.receipt without date
Left with Caman & Whitehouse to se-
cure .$18,500





" J. S. Hunt & Co. (Sherwood)

1st Loan,


2d Loan,


3d Ix>an,


4th Loan (from Palmer)



Nelson Robinson —

1st Loan

S'50,000 00

2d Loan

50,000 00

3d Loan

17,132 62

4th Loan

14,000 00

-$131,132 62

Caman & Whitehouse

18,500 00

Merchants' Bank sav

5,000 00

$289,632 62

Note — The money to Merchants' Bank or to J.
J. Palmer, the President, exceeds the
$5,000 by over 900 00

$290,532 62

Upon further inquiry I was informed the receipt of Drew, Robin-
son & Co. for the first loan had been given up, and that Nelson Ro-
binson alone was to do the business — that the firm of Drew, Robinson
& Co. were not willing to deal in bonds, but that they had guarantied
the faithful performance of the trust committed to Robinson by an en-
dorsement on his receipts — that Sherwood had taken up 2-1,000
dollars of the 45,000 borrowed of Mr. Palmer ; and that Caman &
Whitehouse had loaned money supplying the place of that from Mr.
Palmer. Gen. Stapp at the same time handed me the receipts of
Messrs. Hunt & Co. for 270 bonds, saying he had taken the loans from
the hands of Sherwood, and put them in the hands of Hunt & Co.,
and that the bonds in their hands to secure the loans taken from Sher-
wood were part of the bonds named in Sherwood's receipt.

Not having attained my object of ascertaining what sum was bor-
rowed of each party — the rate of interest — when due — and how ma-
ny bonds were pledged, I renewed my request to Gen. Stapp, and
asked him to furnish a written memorandum from each broker.

Within a day or two, Messrs. Hunt & Co. sent in their written re-
ply, stating their account fully and satisfactorily. Nelson Robinson,
in reply, addressd the following note :

New York, April Ttk, 1841.
N. Noble, Esq., Fund Commissioner.

Sir: — At the request of M. Stapp, Esq. I will state, that I hold
on account of the State of Indiana, 544 bonds of $1,000 and £225 each,
which bonds are held by me as collateral security for §131,175 ad-
vanced as follows :

Oct. 9th. 6 months at 6 per cent., due April 9th, §50,000

Dec. 4th. On demand 50,000

Jan. 1st. On demand 17,175

March 1st. On demand 14,000


The above loans, excepting the first of §50,000, have been made at
such rates as the market for money would admit of, varying from 1 to
\% per cent, per month, exclusive of any charge by me. I have
bought 190 bonds on account of the State of Indiana (at rates report-


ed to M. Stapp.) Some part of the above bonds should be considered
as held to insure the taking of the bought bonds.

Yerv respectfully,


Seeing the large number of bonds put into Robinson's hands for so
small a sum, I expressed my fears to Gen. Stapp, for their safety. I
was assured, that Robinson was perfectly good, and could safely be
relied on. From this note of Robinson it will be noticed, that all his
money was due on the 9th April.

The 190,000 dollars of " bought bonds" spoken of in Mr. Robin-
son's note will need some explanation.

Soon after I joined Gen. Stapp, in New York, I asked for the noted
" Iron Bonds," of 300,000 dollars. He replied, before he went home
in the winter, he saw that the market was pressed by the frequent
sales of our bonds — that he had thought it best to buy up some 200,-
000 dollars, at 15 cents to the dollar, to lay away until the market
would improve, and that he had authorised Robinson to make the
purchase, which had been done, except a small number he named, for
which a forfeiture had been paid; — that the Morris Canal Company,
would pay the debt to Robinson on the " Iron Bonds," and then take
the purchased bonds at cost, and receive a credit on their debt by a
return of the bonds, the State thereby losing nothing on the bonds
bought by Robinson. All this transpired before I left for home in the
month of April.

When I returned to New York in June, I found large sales of In-
diana bonds. hod been made, and suspecting Mr. Robinson for dispos-
ing of his, I enquired of him if such were the fact. His answer was
unsatisfactory, and therefore the inquiry was urged from day to day,
until, at last, it was met with a refusal to state fully his account of
sales, or the number sold; at the same time, claiming the right of
carrying the loans longer. He said he had Gen. Stapp's written au-
thority to sell — that he had the privilege of carrying the loans over to
January or March next, in his contract with Gen. Stapp — that it was
part of his agreement to sell the bonds, and buy them again to re-
turn — that he held Gen. Stapp's written authority to buy up the two
hundred bonds and hold them six or twelve months, which time was
not out, and that the 294,000 dollars of bonds named in his receipt of
the same date of Gen. Stapp's letter, were left as his security for rais-
ing the money to buy the two hundred bonds, and therefore he would
not then give them up*

Subjoined are Gen. Stapp's letter of authority, and N. Robinson's
receipt for two hundred and ninety four bonds.

*Note. — He at the same time held the "Iron bonds" of $300,000 as security in the
purchase of the "bought bonds."

New York, January 13, 1811.
Mr. Nelson Robinson,

Dear Sir — There appears to be a set of floating Indiana Dol-
lar Bonds, constantly- floating in the market. It appears to me, that
if one or two hundred thousand dollars of them were taken out of
the market, and laid away with some strong house, that it would so
reduce the number of floating bonds that it might cause a rise in the
market, and prevent their frequent exposure to sale; this would be a
very desirable thing to Indiana.

If you will go into the market and purchase at a sum not exceeding
seventy-five cents to the dollar, we will furnish a margin* of bonds
sufficient to keep them on hand six or twelve months, and in the end
see that you lose nothing in the operation.

Very Respectfully,

Fund Commissioner of Indiana.

Received January 13, 1841, of Milton Stapp, Fund Commissioner,
for the State of Indiana, two hundred and ninety four Indiana five
per cent, sterling bonds of two hundred and twenty five pounds ster-
ling each, (irregular) for safe keeping, which bonds are numbered
from 701, to 932; 934 to 961; 967 to 972; 973 to 1000.

These bonds may be used if necessary as an enlarged margin to
continue the Indiana loans, or to carry out the request of the Fund
Commissioner of this date, and to save me harmless in any operation
for the State of Indiana.


Perceiving a settled determination on the part of Mr. Robinson to
hold on to the bonds and their proceeds, and finding that his partners
denied any agency or responsibility, I saw no remedy left but to ten-
der the money borrowed, make a demand of the bonds, and then
bring all the parties before the Chancellor, which course was pursued.

When comparing all the conversations had with Gen. Stapp, and
Mr. Robinson, in reference to the pledged and " bought bonds" and
the money raised on them, connected with other information from
another source, it was impossible to resist the conviction that the let-
ter of the 13th of January, and the receipt of the same date, were
prepared — for some purpose not fully explained — after Gen. Stapp's
return to New York in March. I also ascertained that Mr. Robinson
was in possession of 60,000 dollars of bonds not reported to me, on
which he was making some operations for private purposes of Gen.

* "Margin" is a broker's term for security.


Stapp. I moreover saw, that Gen. Stapp was sustaining Robinson in
the privilege he claimed of selling the bonds and buying them again
to return in the Spring, and that he had assented to the sales Robin-
son made when I was gone home. Acting from the information re-
ferred to, I made my predecessor a party to the bill, and called on
him and Robinson to say, under oath, whether the letter and receipt
relating to the purchase of the bonds, were not prepared after their
date, and at a time when the market value of the bonds was below the
seventy-five cents to be paid by Robinson.

The service of the injunction upon the parties brought about a
conference, (Gen. Stapp having returned home during my visit to Al-
bany to see the Chancellory) the object of which was to agree on
terms of compromise. The rational and prudent views of the partner
of Mr. Robinson, soon lead to the following terms:

The State of Indiana, *y

vs. I In chancery before the Chan-

Samuel Drew, Nelson Robinson, T cellor.
Eli Kelley and others. J

Memorandum of agreement entered into this 8th day of September
1841, between Noah Noble, Fund Commissioner of Indiana, in behalf
of the complainant, and Daniel Drew, and Nelson Robinson, on be-
half of themselves and others, defendants for the settlement of the
matters of controversy herein.

1st. This negotiation is in no wise to affect the prosecution of this
suit. The suit is to proceed without delay, and this negotiation not
be urged in any manner by defendants to obtain delay, or to hinder or
obstruct the prosecution of this suit longer than a. postponement to
Monday week.

2d. Noah Noble, Fund Commissioner, will credit Drew, Robinson
& Co., with the moneys advanced, and interest, and charges to 1st
March 1811, as stated in memorandum account of N. Robinson,
without date, in possession of Noah Noble; and also with moneys sub-
sequently advanced, and interest and usual commissions to be liqui-
dated he'reafter, and interest to be calculated to such time as the pro-
ceeds of sales of bonds made by Drew, Robinson & Co., as herein-
after stated, will equal the amount so to be credited to Drew, Robinson
&: Co., by Noah Noble, Fund Commissioner, as aforesaid.

Drew,*Robinson & Co., are to credit the State of Indiana, with
proceeds of bonds sold and interest, at like rate as above, from time
of sales respectively, until the amount of such proceeds and interest
shall equal the amount above stated on the other side of the account.
And it appearing that more bonds have been sold by Drew, Robinson
&, Co., than will be sufficient to cover the advances made by them to
the State, the average price of all sales made by them, is to be taken
at the price of sale of each bond, and all the remaining bonds are to
be returned by Drew, Robinson &. Co., to Noah Noble, Fund Com-
missioner, as hereinafter stated.


3d. Drew, Robinson & Co., will return one hundred and twenty
bonds of the sterling bonds pledged with them, with the coupons at-
tached at the time of the hypothecation, immediately.

4th. The balance of the bonds in any of the stocks of the State,
with the coupons attached at the time of hypothecation, are to be re-
turned by Drew, Robinson & Co., to Noah Noble, Fund Commis-
sioner, on or before the first of March, 1842. And to secure* such
return, the said Drew, Robinson & Co., are to give their joint and
several bonds with security satisfactory to N. Noble.

5th. Drew Robinson & Co., claim to have purchased bonds in
conformity to a letter of authority from M. Stapp, late Fund Com-
missioner, dated January 13, 1841, and claim that the State of In-
diana shall take such bonds at the prices named by Drew, Robinson
& Co., as paid; and shall also pay certain commissions to Drew, Ro-
binson & Co. These claims Noah Noble, Fund Commissioner rejects;
and the several parties hereby agree to submit the matters of that
claim to J. J. Palmer, J. W. Perkins and Elisha Townsend, Esqrs., as
referees, whose decision shall be final. Each party may introduce tes-
timony, and that there may be no delay, if either of these gentlemen
decline to act, then the other two shall select some respectable and ex-
perienced broker in the city of New York to fill his place ; the whole
matters herein referred, to be finally consummated immediately upon
the decision of such referees. It is the further agreement of the parties
hereto that of the 60 bonds alleged by the complainant to be in the hands
of the defendant for the benefit of M. Stapp, and not receipted to the
complainant, the defendants shall deposite in the Merchants' Bank the
thirty mentioned in an agreement between said Stapp and Nelson Ro-
binson, dated 13th April, 1841, being the same bonds which were re-
turned by Robinson to Stapp, and included at the foot of said Robin-
son's receipt for 100 bonds dated October 9th, 1840, No. as follows:
« 2-218, 2219, 2223, 2224, 2241, 2248, 2249, 2250, 2252, 2253, 2254.
2255, 2258, 2257 to 2266, 2272, 2767,2768,2769,2770, 2771, 2795,''
being thirty sterling bonds, which bonds are to be delivered to the
Fund Commissioner when M. Stapp relinquishes all claim to them or
upon a legal decision awarding them to the State.

N. NOBLE, Fund Comrn'r of Indiana,

The account necessary to be exhibited by Mr. Robinson of the sales
made of the bonds, was presented, giving the d;'ily sales during mv
absence from the city, on a visit home, and up to July ; a copy of
which will be found in the appendix marked A, By that account,
sales of 527,000 dollars of bonds were acknowledged, the proceeds
amounting to about $290,000, which included those on hand for Gen.
Stapp's private purposes. Besides this sum, Mr. Robinson had bor-
rowed 50,000 dollars at Albany upon a pledge of the " irregular"
bonds named in the receipt dated '* 13th January ;" by which opera-


ions he had realized about 340,000 dollars to reimburse his cash loan
to the State.

My refusal to acknowledge the validity of the contract for the pur-
chase of the bonds, and denial of its having been executed at the date
of the letter and receipt, caused a submission of that point to the per-
sons selected for referees. At the meeting of these referees, Mr. Ro-
binson was sworn, and admitted he received the letter from General
Stapp, authorizing the purchase of the 200 bonds, "in March, after his
return to the City !" — at which time our bonds were selling at 51 to
51 h cents to the dollar. He proved by his clerk that about the time of
the date of the letter of authority, Drew, Robinson & Co. had on
hands 80 of our bonds, and that Gen. Stapp had agreed to take them
at 75 cents to the dollar. The difference in his sales of the bonds,
and the 75 cents, the price to be given by Gen. Stapp, was allowed
by the referees on the 80, amounting to about 16,000 dollars — the
claim for a like difference on the balance of the 200,000 dollars alleged
to have been purchased, was abandoned.

Of the 60,000 dollars charged to be in the hands of Mr. Robinson
for the private use of Gen. Stapp, 30,000 were given up. The re-
maining 30,000 dollars were pledged by Gen. Stapp a year before, in
security for money to protect 30,000 dollars of Newburyport money
which he had received of that bank, or of Dodge, and had agreed, in

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