“About ten o’clock Friday morning a squad of soldiers marching in front of a wagon and a squad in the rear, followed by four men in a wagon were seen marching east on the south side of the depot and turned north towards the capital. Everybody turned out to see the sight. It was an extraordinary sight; it was unprecedented in this state at least. The military parade and seeming care of the wagon’s contents were soon explained. The wagon contained over $200,000 in cash and was part of Treasurer Phillips’ state funds sent to be counted by the legislative committee and the governor.”
-Dakota Farmers Leader, January 29, 1897
The extraordinary sight found on the streets of Pierre on January 22nd of 1897 was actually the denouement of a drama that had begun two years earlier, at the commencement of the legislative session of 1895. It was then that the governor and legislature learned the shocking fact that State Treasurer W. W. Taylor had absconded to Mexico and the state’s bank accounts were short an astonishing $367,000 ($11.2 million in today’s dollars).
The early days of South Dakota’s statehood were a mad scramble of balancing budgets with newly created state offices and officers. When South Dakota was admitted to the union in 1889, it began its government with $1 million in debts (nearly $28 million in today’s dollars) and had very little cash on hand. The first governor of South Dakota, Arthur Calvin Mellette, was tasked with meeting the state’s budget of $617,000 for 1889 with tax receipts of only $330,000 with a state constitution that stated he could have a maximum indebtedness of only $100,000…a tall order for any statesman.
However, by the last year of his governorship in 1892, Mellette had made some headway with the new state’s money woes and when leadership of South Dakota was turned over to Governor Charles H. Sheldon in January of 1893, the coffers had enough dollars for that legislature to consider an expenditure of $75,000 ($2 million today) to create an exhibit at the World’s Fair. Later that year, however, the Panic of 1893 caused a nationwide financial depression and weakened farm commodity prices. In his 1894 addresses to the legislature, Governor Sheldon made state finances a major priority. Little did he know the crisis he was about to face.
During the fall of 1894, rumors about the outgoing State Treasurer William W. Taylor had begun swirling. It was known that the financier had personally lost money to bank closures stemming from the Panic of 1893 and that he had also been putting off turning over the depository notes for the state’s money prior to the Treasury leadership change in January. The loose parameters around the state’s finances meant that the State Treasurer was in sole charge of the state’s money, with no official oversight – he personally held the accounts in which the state’s money was kept and was not required to make regular reports.
A bill to limit the power of the Treasurer had been introduced and failed in early 1894, much to the consternation of Public Examiner Meyers who realized the dangers of placing hundreds of thousands of dollars at one man’s disposal. To make matters worse, the State Treasurer was also allowed to personally collect interest given on the state’s money once deposited (as a supplement to his $1,000/year salary). The Argus-Leader points out “He, of course, desires to get the highest possible interest and it is well shown that the weakest banks pay the highest rates.” A dangerous scene was set as the country plunged into a nationwide financial depression with hundreds of bank failures in its wake.
As it stood on January 8, 1895, nobody had asked Taylor for the balance sheets since April of 1894 and during the ensuing months, bank failures across the US had obliterated the personal fortune of W. W. Taylor. And now, suddenly, Taylor was nowhere to be found.
Taylor had left South Dakota for New York in mid-December, ostensibly to recover cash deposits made in the East. He failed to return by the date the final deposit paperwork was required to be delivered to the new State Treasurer, Kirk G. Phillips. By January 8, 1897 the reason for the delay was known: The state’s coffers were short to the tune of $367,023.84.
Naturally, panic ensued in Pierre. Just the day before the news came out, Governor Sheldon had in his official address complimented Treasurer Taylor for “Mr. W. W. Taylor, our efficient and faithful outgoing treasurer is entitled to the thanks of the people for the zeal and energy which he has at all times displayed in the management of his office, and it is a matter of pride to him, as to the state officers with whom he has been associated for the past two years, that he leaves the public service carrying with him the unbounded respect of those who have known his business methods and his desire to preserve the credit of his state.” Governor Sheldon now appeared at the state house asking for his comments regarding Taylor to be stuck out from the official record.
To make matters worse, Taylor’s official actions as Treasurer were bonded by some of the leading men of the day including former Governor Mellette, who held $50,000 of the $250,000 bond required, which represented most of his personal wealth. Suspicion and doubt were being cast on a wide swath of the leading men of South Dakota.
It transpired that Taylor had lost most of his personal fortune to bad investments and for some time been using state funds to cover his losses. In one example, he used $130,000 of state school money to cover a deficit at the bank he owned in Redfield, hiding the bank’s actual financial position from state auditors. Those funds had been made available by a failure of the Commissioner of Schools and Public Lands, Colonel Ruth, to apportion (pay out) the money on a July 1 deadline. He was reportedly “absent” from his office for much of that summer and that is why the money was still on account for Taylor’s use…a statement which raised many eyebrows during Taylor’s later trial. By the end of 1894, when Taylor was due to turn over state financial records to the new Treasurer, he had failed entirely in his efforts to recover the funds he had personally used. And so rather than face the consequences, he left the state and liquidated all remaining state bank accounts.
It was soon revealed that Taylor’s confederates had conspired with him not only to have embezzled and misused state funds for personal use but when about to be found out, they opted to remove as much remaining cash as possible from state coffers in order to put them in a better position to compromise to their own advantage when a final settlement was due, essentially holding the state’s money hostage in trade for leniency. Taylor and his wife ultimately disappeared with over $200,000 in cash, representing nearly 20% of the state’s budget at the time. Reports placed in his whereabouts in throughout Latin America. Ultimately, the state of South Dakota was forced to involve the Pinkerton detective agency to recover its missing Treasurer and he finally returned to stand for the embezzlement charges in April.
Taylor was found guilty of embezzlement and sentenced in August of 1895. Judge Gaffey, who presided over the final case, sentenced Taylor to five years in the state penitentiary (eventually reduced to only one year after some legal wrangling by Taylor's lawyers). The judge stated that he considered the fact that Taylor had used state funds for private purposes and had loaned the same to his friends as a lesser crime and that the worst crime was that of liquidating the remaining state funds and attempting to use them to force a compromise with state authorities after he fled. Taylor's politically connected sentencing even inspired a folk tune, called "Wanderin' Willie" and published in the Marshall County Sentinal. Lyrics such as "The boys, he hoped, would touch him light, for very well he knew; He's passed it round in elegant shape to pull the party through." (read the full song in SD musician Jami Lynn's 2010 USD Thesis on Early American Folk Music of the Upper Midwest here."
After sentencing, Taylor turned over $100,000 in cash and deeds to all his properties. His bondsmen were on the line for the balance due and ex-Governor Mellette voluntarily relinquished his property (including his home in Watertown) in South Dakota to meet his full obligation, which absorbed most of his personal fortune. By April of 1896, the state had secured a total of $255,922 of the $367,000 outstanding. Others who held Taylor’s bonds were from his hometown of LaFayette, Indiana and the Superior Court of LaFayette held that Taylor’s bond was good for $250,000 only and the additional $100,000 to cover the “misappropriation” was not recoverable. In this way, Taylor’s own father and other relatives paid nothing.
After the high drama of 1895, the legislature passed an act that put new strictures on the Treasurer and provide a means of checks and balances on the system. And it was this new system, a still not fully funded state budget and the atmosphere of suspicion that now pervaded Pierre that set the stage for a showdown between new Governor Andrew Lee and Treasurer Kirk G. Phillips in January of 1897.
One of the wealthiest citizens of South Dakota through his mercantile business with Charles Prentis in Vermillion, Andrew E. Lee was elected governor by the slimmest margin in state history, just 319 votes. Put into office by a “fusion” ticket supported by Populists, Democrats and a faction of Republicans supported by U.S. Senator Richard F. Pettigrew, he had campaigned on message of revenue reforms and the Treasury office and the Republican party was firmly in his sights. But nobody quite expected the action he took next.
In a surprise special message to the legislature on January 9, 1897, Governor Lee demanded they pass an immediate resolution requiring that Republican State Treasurer Phillips produce and have counted the state funds in his possession before his official bonds could be approved. While no suspicions of wrongdoing by the treasurer had been uttered to date, the new governor stated he had learned the treasury contained only $282 in cash to a written balance of $280,000 and while he himself did not have authority to count the money, the legislature did and so he requested them to do so. Governor Lee’s request was denounced as a political ploy by factions of the press and his Republican adversaries but nevertheless, Treasurer Phillips acceded to the request and began collecting the currency from accounts in Chicago, Pierre, Deadwood, Yankton, Spearfish, Lead and Rapid City.
And so began the strange march of money into the lobby of the Locke Hotel in downtown Pierre. The cash from within South Dakota was brought readily to Pierre but the great majority, over $200,000 had to be brought via train from Chicago. The press surrounding the movement of the money was so great and the area between Huron and Pierre so unpopulated that fears of robbery abounded. Therefore, Governor Lee ordered Company K of the Dakota National Guard to board the train in Huron and accompany the money for the final leg of the trip.
Upon arrival in Pierre on January 22, the procession formed at the Express office and marched through the streets of Pierre to be counted by a joint committee of the legislature. Much of the town turned out to witness the strange spectacle, which ended with the money being turned over to the counters in the lobby of the Locke. The drama ended as abruptly as it began when upon counting the stacks of money, the totals equaled to the penny what the Treasurer had recorded. “The count was completed, and the committee reported they found in the treasurer’s office the full amount of the state funds”—Press Cor. January 23, 1897. Treasurer Phillips had been fully vindicated and finally Pierre could get back to the actual work of governing.
The story ended with one more moment of drama, however, when the train carrying the money and the soldiers became stuck in a snow drift at Highmore. The winter of 1896-1897 was unusually rough (and would ultimately end with record flooding in the spring of 1897) and officials of the Chicago and Northwestern railway were unable to free the train for a total four days. A rotary plow had to be brought in from the south before the state of South Dakota’s money could finally make its way back to the safe depositories of the East.
Photos courtesy of the South Dakota Historical Society photo archive.