On April 24, 1906, the Comptroller's office was startled by the receipt of a telegram from Milwaukee, Wis., stating that Frank G. Bigelow, the president of the First National Bank of Milwaukee, was a defaulter to the extent of one million four hundred and fifty thousand dollars, an amount in excess of the combined capital, surplus and profits of the bank.
Bigelow had been president of the American Bankers' Association, was widely known among the bankers of the country, and had been prominent and active in every movement affecting banking and financial interests.
When the shortage was discovered, a meeting of the board of directors of the bank was called, at which Mr. Bigelow was present. When confronted with the accusation against him he calmly informed the directors that he had a painful confession to make to them and admitted that he had misappropriated the funds of the association. An examination of the books of the bank, he stated, would show that he owed the institution nearly a million and a half dollars. The money, he said, had been lost in speculation in wheat and stocks, that none of it could be recovered, and all that he could offer the bank in return for the loss was personal securities of the value of about three hundred thousand dollars.
At first some of the directors of the bank were disposed to make good the loss and conceal the defalcation from the public, through fear of the effect of the disclosures upon the bank, but after deliberation they finally concluded, for the protection of the depositors, to make up the shortage and report the defalcation to the Federal authorities. A resolution was therefore adopted by the board removing Bigelow from the presidency of the bank, and a warrant was sworn out for his arrest.
There was nothing novel in Bigelow's method of concealment of his large shortage. He manipulated the accounts with correspondent banks and with approved reserve agents. The collection accounts and balances with reserve agents were made to appear several hundred thousand dollars larger than they were. The defalcation was discovered not by the bank examiner, nor by any officer or director of the bank, but by an employee, whose suspicions were aroused by some questionable entries in the books, and he communicated his suspicions to one of the directors. An investigation was immediately instituted, which led to a discovery of the shortage and the confession of Bigelow.
When the amount of the defalcation was ascertained, the directors heroically came to the relief of the bank and the protection of its depositors by immediately signing an agreement pledging themselves to advance and pay to the bank the sums set opposite their names, as it might be needed for the payment of depositors. The respective sums subscribed by each director varied in amount from ten thousand to six hundred thousand dollars, and aggregated one million six hundred and thirty-five thousand.
Before the news of the defalcation was made public, the directors secured from Chicago one million dollars, thus fortifying the bank against a run and saving the institution from suspension. A run, however, was started as soon as the shortage became known, not only on this bank but upon other banks in Milwaukee, and in about two hours' time nearly a million dollars was withdrawn from the First National. At the same time, while there was a long line of depositors at the paying teller's window withdrawing their money, many friends of the institution manifested their confidence in its officers and the solvency of the bank by making deposits at the receiving teller's window.
Bigelow at one time was rated a millionaire. He was prominent in business and social affairs in Milwaukee, and was a member of several clubs and civic organizations. He freely admitted his defalcation when confronted, offered no apology for his wrongdoings, and was sentenced to and served a term in the penitentiary.