California Treasurer Impeached After Losing $200,000 in 1856 and 1857

Kevin Knauss

4 years ago

Dr. Henry Bates was impeached and convicted as California State Treasurer for losing $200,000 destine to pay interest on California bonds in New York in 1856 and 1857.

Dr. Henry Bates was a young physician when he travelled from Massachusetts to California during the Gold Rush. He found himself practicing medicine at Sutter’s Mill in Coloma in May of 1849.[1] Dr. Bates made his way up to Shasta in Northern California where he went into practice with Dr. E. B. McLaughlin.[2] While living in Shasta, Dr. Bates met the acquaintance of Edwin Rowe who bought gold dust in Weaverville and expressed it to Shasta on behalf of Adams and Company.[3]

By 1854, Dr. Bates was in Shasta practicing medicine in partnership with Dr. E. B. McLaughlin.

In addition to medicine, and perhaps dabbling in gold futures, Dr. Bates was also interested in politics. He ran for the Assembly in 1854 as a member of the American Party, which was the official political organ of the Know Nothing party. Dr. Bates was elected and in 1855 he was appointed to a Joint Special Committee to investigate potential corruption of the State Marine Hospital. Under Dr. Bates’ leadership, the committee uncovered rampant corruption by the doctors who inflated invoices to pocket the difference, and ordered numerous personal items – cigars, champagne, housewares – paid for with hospital funds.[4]

From Doctor To California Treasurer 1855

It was evident that Dr. Bates understood bookkeeping and accounting practices if he was able to uncover such government corruption. Based on his notoriety for saving public money and his M. D. credentials, Dr. Bates was nominated by the American Party in 1855 for the position of State Treasurer. He won the election and became California’s Treasurer in January 1856 at the age of 32.

Dr. Henry Bates was elected California Treasurer in 1855 under the American Party, aka Know-Nothing Party.

In March of 1856 there was a little hiccup with the bookkeeping in the Treasurer’s office. The County of San Francisco said they deposited money with Palmer, Cook & Co. to be forwarded to the State Treasury for taxes collected. For some reason, the San Francisco funds were not accounted for at the Treasurer’s office.[5] Dr. Bates said he was amenable to have anyone inspect the books of the Treasurer’s office and he was confident everything would be in place.[6]

Palmer, Cook & Company Squander $100,000

The little irregularity with Palmer, Cook & Co. would foreshadow and even larger headache for the physician turned Treasurer. News broke in late July that California had missed the interest payment on their bonds to bondholders in New York that was due July 1^st.[7] Once again, the blame was placed on Palmer, Cook & Co. for not forwarding $82,558 in State interest and $19,600 interest due from the City of San Francisco.[8]

While the credit rating of California was dropping like a rock in a muddy pond, Dr. Bates was not in Sacramento. Edwin Rowe, now a cashier in the State Treasurer’s office, released a statement to the newspapers on August 2^nd that the interest due on the bonds should have been paid by the 20^th, and if not, the Treasurer’s office would forward money on August 5^th. Rowe emphasized that a bond was taken from Palmer, Cook & Co. as security for the payment, so there was no cause for concern.

For their part in the debacle, Palmer, Cook & Co. blamed one of their principles in New York. Palmer, Cook & Co. told newspaper reporters that Mr. Wright in New York said he had sufficient funds to cover the bond payments and there was no need to forward the gold coins to the East Coast.[9] Mr. Wright said he never had the funds, Palmer, Cook & Co. had no credit in New York, and it looked like they could not make good on the bond they put up as security for the interest payment.

It quickly became apparent that Palmer, Cook & Co. did not have the gold coins in their possession in California. Instead of suing Palmer, Cook & Co., Dr. Bates begins a mad rush around California to bandage up what looked like a self-inflicted wound, not only to himself, but California as well. The Marysville Herald reported on August 22^nd, that Dr. Bates was in town to raise money to pay the State debt. He was only able to secure $27,000. He then trekked back to Sacramento and then to San Francisco. He was able to get Wells, Fargo & Co. to lend him $50,000. This put Dr. Bates $6,000 shy of the balance owing.[10] He is able to pull the rest of the money from an advance from Palmer, Cook & Co.[11]

While California is being financially ridiculed, another election is held. Amos P. Catlin, who had served in the Senate in 1854, was elected to the Assembly in 1856 as a representative from Mormon Island for part of the greater Sacramento region. Catlin would be tapped to lead an investigation into Treasurer Bates. Also, in the autumn of 1856, Edwin Rowe left his position as Cashier at the Treasurer’s office and assumed the presidency of the Pacific Express Company.[12] The Pacific Express Company was not a bank, but a company that delivered items of value, like gold coins to banks.

Dr. Bates let it be known that he would no longer be working with Palmer, Cook & Co. Wells, Fargo & Co. would handle interest remittances to New York in the future. Even though Dr. Bates made the agreement with Wells, Fargo & Co. in April, he met with Louis McLane, an agent for Wells, Fargo & Co. at the end of December with a different proposition. Edwin Rowe was also at the San Francisco meeting on December 31^st. Rowe proposed that his Pacific Express Company give Wells, Fargo & Company a bond for the delivery of the July 1, 1857, interest payment. The implied plan was that Pacific Express would take control of the gold coins interest payment and at some date in the future, transfer the money to Wells, Fargo & Co. McLane declined the offer.[13]

The proposed transfer from Pacific Express to Wells, Fargo & Co. was not the only odd event to transpire under the supervision of Dr. Bates. Mr. Bunker, one of the clerks in the Treasurer’s office, recounted how Dr. Bates instructed him to leave Sacramento between December 27^th and January 4^th. Bunker thought it had something to do with a Grand Jury investigation into the Treasurer accepting warrants from counties as payment for their tax receipts.[14] Regardless, this left only one clerk in the office at the beginning of January, 1857.

Dr. Bates Conspires With Edwin Rowe

On January 3, 1857, Dr. Bates authorized the payment of $124,000 to Edwin Rowe of the Pacific Express Company for interest due in New York on July 1^st.[15] In sworn testimony, Dr. Bates confesses there was no Controller’s warrant for the disbursement.[16] Dr. Bates left the Treasurer’s office at 1:30 PM while Rowe took charge of the gold coins. Dr. Bates told the clerk to drop the key to the safe at his hotel room later that evening. The clerk, Mr. Bunker, left the office at 3:30 PM while Rowe was still in the office counting the money.[17]

Dr. Bates was testifying in an action brought by the Attorney General to force Bates to increase his bond from $100,000 filed with the Governor in 1855. One of the witnesses in the court action against Dr. Bates was missing. Edwin Rowe was no where to be found in early February. Rowe finally showed up to Judge Monson’s Sacramento Courtroom to describe the transfer of gold coins into his possession. Unfortunately, he declined to state who helped him move $124,000 in gold coins from the Treasurer’s safe, who he deposited it with, or where the money might be.[18]

Similar to the credit rating of California, Dr. Bate’s credibility as an honest, ethical, and competent Treasurer was rapidly deflating. Word of the extremely early payment of the bond interest to Edwin Rowe caught the attention of the State Legislature in mid-January. Some legislators contended the State Treasurer Dr. Bates was an honest man and Pacific Express would eventually transfer the money to Wells, Fargo & Company by June 5^th to be shipped to New York by July 1^st.

In the Assembly, a resolution was offered to appoint a committee to investigate the transfer of money to Pacific Express. Amos Catlin, recently sworn in as an Assemblyman, was incredulous at the weak resolution. He wanted a full investigation including why Palmer, Cook & Co. have never returned the missing interest payment from 1856. In an address to his fellow Assembly members,

Also, why it was that the Treasurer of the State did not institute a suit against this company, or in some other mode attempt the recovery of the money ; for I have been creditably informed that no action whatever — except, perhaps, such as lay in the persuasive powers of the Treasurer himself, had been taken until a very few days before the assembling of this Legislature. Now, this fact seems very strange to me. After what I have been made cognizant of, it seems very strange to me that this House will placidly sit and listen to eulogies upon the personal character of the Treasurer. We are told that he is very polite, a gentleman of the utmost integrity, and members sit here and take this and say no more about the whole matter.[19]
Sacramento Daily Union, Volume 12, Number 1812, 17 January 1857

Catlin was rather shocked at how sanguine so many legislators seemed to be over the situation. He was puzzled why so many other Assembly members were not as alarmed as he was over the missing money. Catlin tried to rally the senses of his fellow Assembly members,

Gentlemen, you may draw your own inferences. These bonds [provided by Pacific Express and Palmer, Cook & Co.] may be perfectly good; but I say that it is contrary to law and policy to establish this mode of doing business. It is a simple operation, by means of which we are to pay so much for taking care of the funds. For five months they will have this money, which will bring them $20,000. I can bring a man forward who will pay that amount in hard cash for its use. But these bankers enjoy it for nothing. Nay, the Treasurer gives them 3 per cent, for the privilege of taking charge of it! There was some purpose in sending out this money so long before it was necessary some purpose not manifested.”[20]
Sacramento Daily Union, Volume 12, Number 1812, 17 January 1857

For all of Catlin’s passion on the topic, he was appointed as the committee chairman to investigate the Treasurer. The committee report was released on February 10^th by Catlin and characterized by the Sacramento Bee as, “…one of the most able, thorough and scathing reports ever read in that house.”[21] The committee interviewed both Dr. Bates and Edwin Rowe about the $124,000 transfer and some other short term loans from Wells, Fargo & Co. that they were involved with. The report stated, “The attempts of Mr. Rowe and the Treasurer to explain these facts are exceedingly lame. Their efforts to extricate themselves from the unfortunate dilemma in which the proofs place them, excite emotions of pity, so strong as to overcome any feelings of indignation which the fraudulent nature of the transaction are calculated to produce.”[22]

As he did in the court case involving increasing Treasurer Bates bond, Edwin Rowe refused to answer specific questions from the special Assembly committee about how he disposed of the $124,000 from the Treasurer’s office. Catlin and the other committee members surmised that a large portion of the money went to speculation with the Palmer, Cook & Co. and the failed Adams & Co. of California business.[23] The committee concluded that Dr. Bates as California’s Treasurer was guilty of malfeasance in office. They also determined he was guilty of a felony for allowing Edwin Rowe, in the form of short-term loans from the State coffers, to be used for his personal use.

Treasurer Bates Impeached and Convicted

The Assembly quickly resolved to impeach Treasurer Bates. Catlin was appointed with several other members to draft the articles of impeachment and then present them to the Senate in a trial.[24] On the day of the impeachment vote, Dr. Bates sent a letter to the Assembly offering to answer all their questions with his attorney present. This led some Assembly members to ask for a delay in the impeachment. After so much work writing the committee report with indisputable evidence, a delay in impeachment triggered Catlin to take to the floor of the Assembly.

I am opposed to this motion mainly upon the ground that a further delay in our proceedings is wholly unnecessary. The counsel for the Treasurer, who probably drew up this letter that we have just heard read, seems to have supposed that the Treasurer was to be tried by this Assembly. That trial will take place before another tribunal [Senate.] The House tendered to the Treasurer a usual act of courtesy, allowing him, if he saw fit, to make any exculpating statement here to-day. He has chosen to make the statement which we have just heard. I suppose we are to take that as his statement made to this body by virtue of the privilege granted to him. He asks to be tried before this Assembly — for that is what his communication amounts to — and states that urgent business requires his immediate attendance in the city of San Francisco.
I offered his attorney, before sundown yesterday, a printed copy of the evidence in the case, which he declined accepting. His [Dr. Bates] object in going to San Francisco is a matter of public notoriety, so I suppose I may have no hesitation in referring to it. It is for the purpose of procuring additional official bonds in the sum of $200,000, as demanded by the Judge of the District Court for this district. His absence will continue, in all probability, during the entire period of ten days. It matters not whether he is here personally or by attorney — that matter is quite immaterial. We certainly ought not to be delayed in such an important matter as this, by any excuses of this kind.[25]
Sacramento Daily Union, Volume 12, Number 1834, 11 February 1857

All the sound and fury of protestation against the Treasurer and for impeachment were for naught. Dr. Bates resigned as California’s State Treasurer the next day. While Bates had been impeached, he had not been convicted in the Senate. Until he was found guilty in the Senate, he could conceivably run for public office again. Catlin lead the prosecution of Dr. Henry Bates before the Senate.[26]

One of the reasons Catlin was recruited to lead the special Assembly committee investigation and the prosecution of Treasurer Bates was that they were both from the American Party. The American Party was a minority party in the legislature. Catlin was also seen as having a higher allegiance to the law than politics. As the Senate trial was commencing, they received a letter from Dr. Bates attorney stating he would not enter a plea of guilty or not guilty. The reasoning being that Dr. Bates had resigned his elected position and was a private citizen. In addition, Dr. Bates was also being tried in a criminal court for the same offenses as outlined in the articles of impeachment.

The argument in defense of Dr. Bates stopped Catlin in his tracks. While he was sure Bates was guilty, the refusal to plead in relation to current statutes and the larger realm of common law, put Catlin into a reflective mode. He then urged the Senate to pause and consider the implications of the situation. His thoughts before the Senate were paraphrased in the Sacramento Daily Union.

The rule in common law pleading is, that if the party refuse to answer, it is equivalent to a plea of not guilty, but here the statute seems to direct that it is equivalent to a plea of guilty. But there is such a thing as it being possible that the provision of the statute may not be in conformity to the true intent and meaning of the Constitution. And if it be so it is our duty to disregard it. I think — indeed I have no doubt— myself now at this very moment of the correctness of the position that the refusal to answer is equivalent to a plea of guilty. Yet, I would suggest, as it is now no great object, that a temporary adjournment take place, in order to enable the managers to have a consultation among themselves, so that they may be unanimous upon what course they may take. I would suggest that an adjournment to this evening take place, leaving the proceeding to stand where it is now.[27]
Sacramento Daily Union, Volume 12, Number 1860, 13 March 1857

The elected members of the Senate did not have Catlin’s propensity to ponder over constitutional questions. They convicted Dr. Bates of the charges brought forth by the Assembly which forever disqualified Dr. Henry Bates from holding office again in California.

Dr. Bates Faces Criminal Trials

The troubles for Dr. Bates and Edwin Rowe did not end with his resignation and impeachment. Rowe would be housed in the Sacramento jail on contempt charges for failing to answer questions posed to him by the Sacramento Grand Jury. Several charges would be filed against Dr. Bates ranging from misuse of public funds to embezzlement. Both men would face a year long battle to get out of jail.

Initially, when Dr. Bates was arrested on charges in March, while watching a theatrical production in Sacramento, he was able to post bail. William H. Palmer of San Francisco put up $40,000 and Edwin Rowe, while in jail himself, offered $20,000 in bail security for Dr. Bates.[28] William Palmer died in early May, and unable to secure additional bail security, Dr. Bates was rearrested and put in jail.[29]

Ex-Treasurer Bates would be tried twice on multiple offenses in Sacramento. The first trial concluded on May 29^th with a hung jury.[30] His second trial commence in mid-November and was the subject of scorn in a Sacramento Bee editorial. The Bee felt the Sacramento County Sheriff had intentionally selected a jury pool biased in favor of Dr. Bates.

This jury, we feel satisfied now, will either not convict, or will refuse to agree! We don’t say it was intentionally packed, but if it had been, it could hardly have been more favorable to the defense. Public opinion, reflected by the press, has forced on the trial. But for the press, the trial would have been again postponed, yet it has been cast to eventuate in a farce. The managers have so managed it that it can hardly be otherwise than the veriest farce enacted in the temple of Justice. Let any of our citizens look at the jury, and try now whether they can pick out the men that will hang it. We think it can be done without making more than one mistake.
Sacramento Bee November 23, 1857

The Bee also accused the Judge of allowing the Sheriff to ignore the process to selecting unbiased jurors.[31] This brought a summons to James McClatchy, editor of the Sacramento Bee, to answer for possible contempt of Court charges before the Judge.[32] Regardless of whether the Sacramento Bee’s editorial was correct about the corruption of the jury pool, it was prophetic because the second trial also ended in a hung jury.[33]

Dr. Bates Escapes Criminal Prosecution

Based on Sacramento Daily Bee editorials, Dr. Bates claimed future jurors had become prejudiced against him.[34] Attorneys for Dr. Bates requested the trial be moved to another county. The motion for a new trial venue was granted and Dr. Bates was moved to Placer County for trial.[35] The result was the same. Dr. Bates was acquitted by a jury in Auburn, but more charges against him still remained.[36]

Perhaps because of the acquittal of his accomplice or growing weary of prison food, Edwin Rowe decided to answer the Grand Jury questions. Rowe tells the Grand Jury that he took the $124,000 he received from Treasurer Bates on January 3, 1857, down to San Francisco. There, he deposited the money with Edward Jones of the Palmer, Cook & Company. Rowe said that Jones left for New York a month later and he had not seen him since.[37]

Rowe’s admissions, whether truthful or not, was enough to get him sprung from the Sacramento Brig. He then traveled up to Auburn where Dr. Bates was to be tried on more charges. In early March 1858, Dr. Bates was arraigned on three additional criminal counts which involved lending money to Edwin Rowe and the failure to pay back State money unaccounted for.[38] The State’s case against Dr. Bates revolved around the bookkeeping entries in the books of Wells, Fargo & Co. Unfortunately, Judge Hale ruled that the Wells, Fargo & Co. books were not admissible as evidence.[39] On March 4^th, 1858, Dr. Bates was discharged from custody and walked with his wife to a hotel room in Auburn, a free man. Mrs. Bates had faithfully attended the numerous trials of her husband.

There were other attempts by California to recover some of the nearly $200,000 lost by Treasurer Bates. The State did sue the sureties of Treasurer Bates’ bond he gave in 1855 and won a judgement.[40] Most of the men who pledged assets for the bond were either broke or had nothing of value. However, one man was forced to sell his property, Samuel Norris. The Norris Ranch was sold to Lloyd Tevis and the proceeds went to the State.

Before the scandal with Edwin Rowe broke, Dr. Bates married Miss Tilden in a fashionable wedding in San Francisco in early December 1856.[41] After all of the trials, Dr. Bates and his wife made their home in San Francisco. His wife would die three years later and Dr. Bates would succumb to tuberculosis on November 18^th, 1862 at the age of 38.[42]

With the death of Dr. Bates and Edwin Rowe no longer compelled to testify, little information has surfaced on what happened to all the money. Neither Bates nor Rowe appeared to have spent any large sums of money that would indicated a secret stash of gold from California’s treasury. Additional Assembly investigations concluded that a bulk of the money went into other businesses that failed. The largest benefactor of the swindle seems to be the Palmer, Cook & Company. They never had to fully honor their bond to California for the first lost interest payment. This suggests that Bates and Rowe themselves, may have been manipulated by some of the largest speculative banking companies operating in California at the time.