The Vagabond – Mayor’s horse sense saved city a bundle

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By Danny Crownover

One of the most sensational happenings in the history of Gadsden’s financial operations was the narrow escape of Mayor Charles P. Smith from losing the proceeds of a $150,000 bond issue voted to extend sanitary sewers into the residence sections.

As the story goes, Mayor Smith came home with $15,000 in cash and $135,000 in unsold bonds, the city losing nothing more than expense of negotiating the sale. In a signed card, Smith explained that a big bond buying firm out of Cincinnati had bought the bonds by offering the best price and that they had been put in escrow in a Cincinnati bank.

Before making the sale, however, Smith made inquiries and had been assured by local and outside banks that the firm was reliable. He also found that the bank had just bought $200,000 bonds issued by Birmingham.

Smith went to Cincinnati to complete the sale and get the cash, having been summoned by telegraph by the bond firm’s head. Upon his arrival, he was handed $15,000 in cash, having and released that amount of bonds.

The buyer insisted that the whole issue be turned over to him and the city draw on him for the cash as it was needed. The mayor refused to do anything of the kind, declaring that he would not release a single bond without its cash equivalent. The buyer promised the remainder of the money in a few hours but suddenly disappeared with the proceeds of many bogus transactions and forged bonds.

The absconder was reported to be on his way to Honduras, and federal and state officers were requested to pick him up. His defalcation was a great surprise to the financial world, for his firm was regarded as one of the strongest of its kind in the nation. It eventually was discovered that the buyer had duplicated genuine bonds from the plates and forged the necessary signatures.

Two prominent brokers in Cincinnati strained their resources to make up for the steal and to save the firm. Smith saved Gadsden from losing $135,000, with such a loss most likely delaying sewer construction for years.

As it was, Mayor Smith soon called for bids for constructing the system and began negotiating for the sale of the remaining bonds. That was back in 1909 when Gadsden could ill afford any loss such as that. Smith was warmly congratulated for his caution and his native business sense, but he admitted that he did not want to go through another experience of the kind.

Contact The Vagabond at dkcrown@bellsouth.net.

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