soldier with rifle american civil warTHE HORSEMAN
John J. Ryan©


THE HORSEMAN©


John J. "Bald Jack" Ryan

Original Text By Joe Ryan

 


Part Three

 February 1903, Mob in Front of Ryan's Office

Jack Indicted

After graduating from Vanderbilt, in  1893, Joseph W. "Holy Joe" Folk came to St. Louis from Nashville, TN, and opened a law office. His field of practice was corporate law and it became something of a success. In 1900, a street railway strike occurred which paralyzed retail business in the city. Cars were blown from their tracks with dynamite and scab employees hired by the traction companies were dragged from the car platforms and beaten almost to death. After several months of dithering, the traction companies accepted an arbitration arrangement in which a committee, chaired by Folk, would resolve the issues. This was done in June 1900 and resulted in the settlement of the strike and restoration of street care service to the citizens of St. Louis. The experience of finding himself in the public eye apparently induced Joe to run for the office of Circuit Attorney, and, with the help of the Democratic machine, he got himself elected in November of that year.

A year later, in January 1902, just as Snake Kinney was driving Jack out of St. Louis with lead, Holy Joe initiated a series a indictments against the boodlers which, by 1903, resulted in several convictions; but all of them—on one technicality or another—were eventually overturned on appeal. It seems from the record obvious that while Holy Joe may have been a decent corporate lawyer, he was a lousy trial lawyer.

Take, for example, Folk's most celebrated courtroom victory that turned to dust under the sharp scrutiny of the Missouri Supreme Court. In 1898, the St. Louis Social Register millionaires, who controlled the two street car companies operating at the time—the St. Louis Transit and the St. Louis Suburban—had offered to put up $75,000 for the use and benefit of the House of Delegates, if a certain ordinance, giving the companies favorable perks, passed the City Assembly. One Philip Stock, acting as agent for the millionaires, went to John Murrell, a member of the House of Delegates, and communicated their offer. Murrell accepted, and the two men went to the Lincoln Trust Co. and secured a lock box, into which was placed the seventy-five grand, with each man keeping possession of a key, both keys necessary to open the box. Once the ordinance became law, the money would be Murrell's to distribute to his pals. The ordinance did pass through the city assembly, but Judge O'Neill Ryan issued an injunction against its enforcement, on the ground of funny business (The Post-Dispatch had reported the lock box affair); and Folk convened a grand jury which indicted Murrell and several of his accomplices.

Holy Joe included in his indictments one Harry A. Faulkner. Faulkner was a member of the House of Delegates and also a member of a group of nineteen delegates who fashioned themselves the "Combine;" i.e., they acted consistently together as a block to vote on measures. Murrell was a member of this group. Folk had called Faulkner before the grand jury and, after his being sworn, Folk asked him if he knew anything of the seventy-five grand in the lock box in the Lincoln Trust Co. Faulkner responded that he knew nothing about it at all. Folk promptly got the grand jury to indict Faulkner for perjury, and, taking the case to trial, won the jury's verdict of conviction.

Problem was, Folk had no comprehension of the concept of proving the elements of the offense upon which he caused Faulkner to be tried. The evidence Folk did produce showed merely that the sinister "Combine" was nothing more than a group of like-minded politicians who generally voted the same way. Nothing was shown in the evidence to support the inference that the group was formed particularly to control the street railway legislation. No evidence was introduced to show that Faulkner had any dealings with John Murrell or any one connected to Murrell in his contacts with Stock. No one testified Faulkner had been present at any meeting in which the subject of the seventy-five grand in the lock box was discussed.

Folk's case for Faulkner's conviction was based solely on the fact that Faulkner was indeed a member of the Combine. Before the Missouri Supreme Court on appeal, Folk insisted that the inference was irresistible that the nineteen members of the Combine were to receive the $75,000, and as Faulkner was shown to be one of them he necessarily knew of the corrupt fund and its purpose, and therefore this evidence was sufficient corroboratory proof to overbalance the evidence Faulkner gave to the grand jury that he did not know of the bribery fund. In rejecting Folk's view of the probative value of his "proof," the Supreme Court wrote,

"This is a criminal prosecution for a felony. The law presumes the defendant innocent until his guilt is established beyond a reasonable doubt. We agree that his guilt may be established by circumstantial evidence, but these circumstances must be consistent with defendant's guilt and inconsistent with his innocence. Now, while this evidence tended to prove defendant was a member of a `combine' in the House of Delegates, or, in essence, an agreement of certain members to vote together, there is not a word anywhere in it that shows the conspiracy was for the corrupt purpose of accepting bribes to further legislation. While partisanship very often leads men into unreasonable support of measures, it is going entirely too far to say that because men go into caucuses and thereby bind themselves to abide their conclusions, they thereby commit themselves to every corrupt act which some member of that caucus may commit, and that they should be held to have a guilty knowledge of such corrupt act. So it is not therefore to be presumed that the combine was a combination for a corrupt purpose just because one of their number is shown to have accepted a bribe."

 

Getting reversed by the Missouri Supreme Court on similar grounds again and again, you might think that by the time he indicted Jack for "racing fraud," Holy Joe was awake to the reality that, to win his case in the trial court, he needed to prepare his case by searching out and gathering together substantial evidence legally sufficient to overcome the presumption of innocence a defendant, in Jack's shoes, is entitled to enjoy.

Though the St. Louis newspaper headlines blared "racing fraud" as Jack's offense, Holy Joe had to find a charge that was recognized as a crime by the statutes of Missouri. He must have spent some considerable time scratching his head and turning pages in the statute books back and forth, because just how to stick Ryan with "racing fraud" was definitely perplexing. Deciding on a shot gun approach, Folk secured an indictment from the grand jury which contained four counts, or theories:

1. Fraud

2. Conspiracy to commit fraud

3. Grand Larceny

4. Embezzlement by bailee

All of these counts, or theories, have one element in common that Folk had to prove beyond a reasonable doubt: felonious intent; i.e., at some point during the time Jack had possession of the subscribers' money he had to intentionally convert the money to his own use. In short, Folk had to prove beyond a reasonable doubt that, whether or not Jack had intended from the outset to trick the subscribers into thinking they could trust him to manage their money, by exercising his professional judgment in the matter of bookmaking, at some point during the progression of the gambling enterprise, he not only formed the intent to steal the subscribers' money but acted on that felonious intent.

Now, clearly Jack didn't grab the money out of the subscribers' hands and run—that would be an easy case of grand larceny, wouldn't it? Nor did Jack trick the subscribers into giving him their money, did he? In essence, they gave it to him on the explicit understanding that he would gamble with it and, as he did so, he would give a weekly dividend of five percent on the subscribers' investment as long as it might last (after all the subscribers had to understand the bookmaking business is risky); and, further, upon thirty days notice given by the subscriber, he would return the subscribers' principal; this last promise of Jack's contingent, of course, on whether his bookmaking business still had capital available to meet the subscribers' demand. On the surface of the situation, then, Jack and his subscribers were partners in a gambling business: the subscribers' providing capital upon the promise of receiving five percent weekly dividends and the hope that Jack would manage their capital investment successfully.

Probably because grand larceny at common law requires an actual trespass—Jack had to take the money out of the subscribers' hands unlawfully—Holy Joe went with the count of embezzlement by bailee when the trial date arrived in June 1903, his idea being that he could prove Jack had feloniously appropriated the subscribers' money to his own use after he lawfully gained possession of it. But, as with his several failures of the recent past, once again Folk failed to investigate and prepare his case against Jack competently.

Given the Missouri statutes in existence at the time Jack obtained the subscribers' money, and used it ostensibly in the normal course of his bookmaking business, for the mutual profit of all involved in the enterprise, Jack certainly was operating within the allowable limits of the law. The newspaper advertisements and the "literature" Jack mailed to potential investors constituted the writings that established the contractual relationship between him and the subscribers. Perhaps not today, but in 1903, this relationship was held in essence to be, a joint venture between Jack and the subscribers the purpose of which was to gamble on the outcome of horse races. Clearly, in this circumstance, the subscribers quite properly must be held to the knowledge a substantial risk existed, in the normal course of the business, that their capital might be lost. For this, the law recognized, Jack could not be held legally liable for damages, much less criminally responsible.

So, then, the challenge this legal situation presented Holy Joe Folk with, was to prove that Jack did not lose the subscribers' money—eight hundred thousand dollars in less than ten weeks—in the ordinary course of the bookmaking business of the J.J. Ryan Co. Ryan must have stolen it! But how?

Note: Jack's advertisements do not make the statement that the weekly dividends will not be paid out of capital received by subscribers, though it is obvious that, in fact, as the operation unfolded, they were—since there seems no evidence exists that jack's bookmaking operations made a net profit. But, and this is Folk's problem, this fact, standing alone, did not make Jack guilty of a crime recognized under Missouri law.

 

Today, in Los Angeles County, as in any major metropolitan area in the nation, the District Attorney's Office employs hundreds of lawyers who are responsible for the prosecution of major felony cases, some of which require thousands of hours of time, to investigate and to prepare for jury trial. Holy Joe Folk, in 1903, had two assistants. He had possession of the books and records of the J.J. Ryan Co.—the betting sheets, payout slips, checks, tab man's ledger, etc—and he had access to the Racing Form News which reported summaries of the daily races, including those held at Ryan's track at Newport. These records showed on their face that Ryan lost 80% of the subscribers' paid-in $1 million of capital, primarily by side bets that went awry. While this fact is suspicious—as Faulkner's membership in the Combine was suspicious—proof of it could not lead legally to the irresistible conclusion that Ryan must be pulling a fast one, that the books and records are a bald-faced lie, a mask or cloak that Ryan's felonious intent to steal is hiding behind.

If Folk had sat down at his desk, with Ryan's documents spread before him, and concentrated—he had to have seen, if he was thinking at all, that Ryan's trick was right in front of him. He needed to impeach the record as it stood, show it was a false picture designed to hide what actually had happened.

To convict Ryan of a crime Folk had to prove Ryan's books, showing the bookmaking business had lost the subscribers' $800,000 of capital, were phony; that the bets recorded in the books were phony; that, in fact, the bets were "lost" to straw men standing in for Ryan, himself. (Most likely—you guessed it—George F. Considine.)

To prove this would be very hard work. Folk had to go to Covington, Kentucky, and investigate Ryan's operation of the Newport track and the Tuxedo Pool Room. The first issue to investigate is where did Ryan's odds come from? Ordinarily, odds on horse races are set at the opening of the day by the bookmakers who have positions in the track's betting ring, and they change as the public comes into the course grounds and bettors lay their money down in the betting ring. It is the masses attending the races at the track that drive the odds up or down on this horse or that. These fluctuating odds are transmitted by telegraph wire to Ryan's pool room (and to pool rooms everywhere) and there, posted on the board, they fluctuate further as bets are laid down by bettors in attendance at the Newport track, as well as bets coming in by wire from other bookies in other locations (New York, Chicago, New Orleans). Had Folk the resources to investigate this issue, he would have soon understood that there were no public crowds attending the races at Ryan's track—for the simple reason it was cold outside in February and there were no practical means for the public to get there, because there was no bridge to carry the Covington street cars across the Licking River. Which means, of course, that there were no bettors in the betting ring to explain the odds Ryan's pool room advertised. Ryan clearly had manufactured the odds, the illusion there was public betting going on.

Racing Form News, December 2, 1902

Map of Covington, 1903: The Latonia Track ended its season Dec. 2, 1902

Newport Race Course Grounds and Bldgs, 1903

Latonia Race Course Ground and Bldgs, 1903

Latonia Grandstands, 1903

Crowds in Attendance at Latonia, 1903

The next issue for Folk to investigate was whether the races run at Ryan's track (before empty grandstands) were objectively competitive, or were the outcomes preordained. The owners of strings brought their horses to the track ostensibly to win purses, the purses then paid for the maintenance of the horses which included feed, training, and grooming; leaving the owner with the hope something was left over as profit. The jockeys came to the track for the same reason, to get a share of the purses won by the horses they rode. If pressed by aggressive investigating lawyers, would these people admit the horse races were fixed, that Ryan dictated which horse would win, place, or show? Or was Ryan's trickery more covert than that? Did he manipulate the condition of the track, the condition of the horse, bribe the jockeys in their rides? All of this, of course, to create the paper record that shows the subscribers' capital was lost on Ryan's wrong choices on races.

Finally, Folk had to interrogate, under oath, the persons whose names appeared in Ryan's books as the winners of the bets that constituted the lion's share of the book's losses; especially the winners of the side-bets that naturally would have been the prime source of Ryan's books showing large capital losses. Most of all, Holy Joe needed to get himself to New York and sit down with George F. Considine and grill him regarding his involvement in taking money out of Ryan's book.

In the event, of course, Folk didn't have the time, money, or the inclination to prepare his case against Jack properly. Instead, he merely relied upon the facile argument that, in the nature of the situation the irresistible conclusion must necessarily follow that somehow Jack must have stolen the money. Trial Judge O'Neill Ryan did not agree. He instructed the jury to bring in their verdict for Ryan.

Judge Ryan's Instruction to the Jury

The Jury Verdict in Ryan's 1903 Trial

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Of course, though he escaped Judge Ryan's court clean, the law still had hold of Jack in several ways and he made haste to slip loose from its lingering grip quickly. The first thing he and his lawyers did when they left the Judge Ryan's courtroom, was to cross 12th Street and go into the Federal Courthouse and up the stairs to U.S. District Court Judge Adams' bankruptcy court.

During the criminal trial in Judge Ryan's court, some of Jack's erstwhile investors had filed a petition before Judge Adams which sought an order initiating an involuntary bankruptcy proceeding. Ryan being the clever guy he was, protested the petition publicly, claiming he was going to make the investors whole by reorganizing the business and continuing. To bolster the credibility of this, he formed a West Virginia corporation called the Western Racing and Breeding Association and he claimed it now held majority stock control of the Queen City Jockey Club which in turn controlled a majority interest in the ownership of the Newport race track. And he made a show of offering his old subscribers, stock in the new operation at a value to match the value of their lost capital.

 (Though Ryan's advertisements represented that the Elkton stock farm was an asset of the bookmaking business, Ryan had it sold through a sheriff's sale to a straw man, in August 1903. Then, in March 1904 the straw man sold the farm to Ryan's sister-in-law, Mary Maloney.)

Baltimore Sun, August 28, 1903

Baltimore Sun, March 4, 1904

Cincinnati Enquirer, February 18, 1903

At the same time, Ryan's lawyers—experienced criminal lawyer Charles T. Noland and property specialist Thomas E. Rowe—were arguing in Judge Adams' court that the petitioners had no standing to seek a share of the old business's assets for two reasons: First, as investors, they had to take a back seat to any creditors of the company; and, second, Missouri law expressly prohibited a person who loaned money to another for use in a gambling business from suing to recover it.

Distracted by more pressing matters, Judge Adams ordered the matter determined by the Bankruptcy Referee, who bought into Ryan's arguments.

St. Louis Post-Dispatch

But, once the referee's recommendation hit Judge Adams' bench, he brusquely waved the arguments aside with the statement that, as far as he was concerned, Ryan had secured the capital of the petitioners by making the false representation that the five percent dividend was being paid out of profit when, in fact, it was being paid out of the capital received from new depositors. Of course, the whole point was that, under Missouri law, which U.S. District Judge Adams could care less about, this particular truth was not recognized as a crime. Thus, the good judge, acting in the context of equity as opposed to law, deemed Ryan to be a trustee of the capital so received from his "partners," and, to the extent it had not been lost in the prosecution of the enterprise,  ordered Ryan to give it back.

Note: Unlike Ryan, Arnold voluntarily sought protection in Judge Adams' court, making an effort in the process to walk out with some of the money that was left. In the course of Arnold's proceedings, a creditor, a printing company Arnold owed money to, opposed the investors' petition to recover, on a pro rata basis, their investment from the assets. In rejecting the creditor's argument that the investors, having invested in a gambling business, had no standing, Judge Adams wrote, "[Arnold's] circulars were distributed all over the country and assured the public that the bankrupts were no get-rich-quick outfit that paid dividends out of receipts. It is undoubtedly true that the bankrupts secured money from their so-called depositors by false representations of material fact. Thus, they can be treated as a trustee of property they fraudulently received and can be compelled to give it back, despite the unlawful nature of the venture." (E.J. Arnold & Co. 133 F. 789 (1904) But, though such a "false representation" might support a civil suit for restitution by the investors against Arnold or Ryan, to support a conviction of either for a crime there must be a showing of felonious intent.

 

Hearing Judge Adams rule he was a trustee of the capital still remaining, like Shylock before the court of Venice, Ryan wrings his hands and exclaims "Mighty Judge—a Daniel come to judgment"—and runs forward with his books to show that, indeed, there remains available to the investors, in the company's bank accounts, $192,000 in cash; and his lawyers move the court to immediately order a settlement conference to convene—the purpose of which is to divvy up this sum on a pro rata basis to the 11,000 subscribers who, by this time, had signed their names on the dotted line of Ryan's subscription form. Judge Adams agrees to this and within a month, he has signed the order of pro rata distribution, and case closed. Any claim the investors had against Ryan for civil liability now has been released as a consequence of their taking a pro rata share of the $192,000; i.e., three cents on the dollar.

Note: Nowhere in all this newspaper print is there any reference made to the issue of what exactly happened to the missing eight hundred grand of capital the 11,000subscribers in the J.J. Ryan Co. invested.

 

About to let out now the deep breath he's been holding since the grand jury's indictment, Jack feels another hand fall on his shoulder: this time it's U.S. Post Office Department Detective Fulton with a federal warrant for his arrest on mail fraud charges.

In the Federal Eighth Circuit, in which Missouri is included, the law was clear, in 1903, that, if you are shown to have devised a scheme to defraud, such as obtaining money of unwary persons, ostensibly for you to use in speculation at your discretion; and you convert it to your own use and finally represent to the sucker that it has been lost in some untoward turn of events; and you effected the scheme by opening correspondence with the unwary persons through the United States Post Office, you are likely to be found guilty of violating certain criminal statutes of the United States. In the classic case, for example, you might send a letter through the Post Office to a sucker claiming to be a stock broker, inducing the sucker by representations in your letter, to entrust her money to you for use in stock market speculations, promising the return of large profits. Then you report falsely to the sucker that the investment you made for her has been disastrous and all her money has been lost, when, in fact, you have it in your pocket. It was this alleged scenario that the postal authorities suspected Jack had engaged in. Jack, of course, recognized that, unlike Holy Joe, the Feds had the financial resources, the patience, and the muscle to dig out of the woodwork every witness and every document connected with Jack's operation of the Tuxedo Pool Room and the Newport race course.

So, no sooner does he sit down at a conference table surrounded by sour-looking federal officers than he asks for immunity from Federal prosecution, explaining that he has evidence that horrible corruption infects the Postal Department's attorney general's office; bribe-taking is rampant there he says; and to prove it he offers up on a silver plate one lawyer Johns, the friend of Second Attorney General Miller, who accompanied him to Washington the previous November when he presented his case to Tyner's stand-in, Chistiancy.

Cincinnati Enquirer, Spring 1903

Apparently embarrassed that the press is now laughing at them for giving Ryan the "no fraud" letter, the postal authorities grant Ryan immunity from federal prosecution in exchange for his cooperation in nailing Johns and Miller on bribery charges. Agreeing to appear as a witness when the trial commences in Cincinnati, Ryan lets out the breath and walks.

Jack Walks, July 1903

End of Part III

Part One
Part Two