In October, 1879, the United States Attorney preferred charges to the Department of Justice at Washington against the Comptroller of the Currency, John Jay Knox, alleging that although the bank had been in the hands of a receiver for eighteen months, neither the Comptroller nor the receiver had aided in or encouraged the prosecution of the officers in any way, except to furnish him, upon application, such records and information as he called for.
He charged that neither the receiver nor the Comptroller had denied the guilt of the defendants, and that the Comptroller in his testimony before the grand jury pronounced certain entries in the bank's books upon which indictments were based, to be materially false entries, and that certain reports of condition that were sworn to by the cashier were false reports. In explanation of why he had not reported such violations of law to the United States Attorney, he quoted the Comptroller as stating that the usage of his office was when officers or directors were charged with criminal violations of law to endeavor in the first place to collect what could be collected from them, and having done that to inform the Solicitor of the Treasury or the Attorney General of the facts in connection with any criminal violations of law by such officers for such action as they, or either of them, should determine.
The District Attorney contended that such a policy on the part of the Comptroller was not consistent with his plain duty as a public officer. He assumes, he said, the right to retain control of the question of prosecution until he has exhausted the pecuniary resources of the offenders and then to simply report the facts to the Department of Justice for its action. He stated further that the Comptroller of the Currency is charged with the execution of all laws and regulations relating to national banks. These laws, he said, define and denote what are criminal violations of law, and that it is the Comptroller's duty under his oath of office not only to report all such violations of law to the Department of Justice as soon as they come to his knowledge, but to voluntarily give the moral and substantial aid of his bureau to the prosecution of the offenders. He contended that the Comptroller has no right to withhold the facts until the statute of limitations intervened to prevent prosecution, nor for a single day for the purpose of realizing on pecuniary demands for the benefit of creditors of the bank. He held that it was of far greater importance that offenders against the law should meet with almost certain punishment that attends prompt and vigorous prosecution of crime than that the creditors of the bank should receive an increased percentage of dividends.
He charged that no report was made, or even contemplated, to either the Solicitor of the Treasury or the Attorney General, and that by reason of such neglect the statute of limitations had barred prosecution of some of the most flagrant violations of law in this case, some of which, he said, were known to the Comptroller's office for months before the bank was closed. He declared that through the grossest frauds and criminal mismanagement the bank had been insolvent for years, and that the cashier, although under indictment, had been employed and retained by the receiver, with the knowledge of the Comptroller, as the principal assistant to the former, at a salary of three thousand dollars a year, in charge of the very books which contained the evidence against him and his indicted associates.
He also complained that in the compromise of the claim of the National Bank of Commerce, the receiver had surrendered notes which were material to a successful prosecution of the indicted officers, and that the legal adviser of the receiver was the leading attorney for the defendants in the criminal cases, and charged the Comptroller with apparently being in league with the offenders arrayed against the Government in its efforts to bring them to justice.
The United States Attorney concluded his charges against the Comptroller with the statement that if he could not give his official support to the prosecution of the cases against the bank officers, the Department of Justice should know the reason why, and he desired that his communication to the Attorney General be regarded as a formal complaint against the Comptroller and receiver, and that it be submitted to the Secretary of the Treas-ury, with such comments as the Attorney General might deem proper.
The charges of the United States Attorney were referred to the Secretary of the Treasury, Hon. John Sherman, who in turn referred them to Comptroller Knox, with a request for a report thereon.