Counterfeiting in the United States

All the rebel Mexican issues were quickly counterfeited, and much of this work was done in the United States.

American attitude to counterfeit currency

In the beginning it was believed that counterfeiters were breaking the federal law against “having in one’s possession with intent to circulate, false, forged or counterfeit money of a foreign country”. By March 1914 nine arrests had already been made on this charge in the district court in El Paso. Attorneys who had studied the law said that there was no question of the recognition of the belligerency of the Mexican rebel government involved in the complaints. The statute plainly read the passage of bogus money “of a foreign country,” and this applied like a blanket to all forms of currency. In addition to the federal charges there was a probability of arrest by state authorities on the charge of swindling in cases where the money had been passed by persons knowing that it was not genuine^{El Paso Herald, 27 March 1914}. Mexican officials pointed out that the Villa money had a certain monetary value even in the United States, as an exchange bank was doing business in El Paso^{El Paso Herald, 20 March 1914}.

However, within a fortnight it was assumed that the federal charges would be dropped, as the word ‘country’ had caused problems. The federal officials claimed that this meant money of any country, regardless of whether or not the United States had recognized that country and on this assumption had sworn out the warrants and made the arrests. It developed when the federal court opened that ‘country’ was meant in the sense of a nation, and as the United States had not recognized the belligerency of the revolution it could not be called a country under this law^{El Paso Herald, 8 April 1914}. On the understanding that the United States government had practically decided not to prosecute any counterfeiter, the Mexican authorities in Ciudad Juárez increased their activities against counterfeiting^{El Paso Herald, 9 April 1914}.

On 4 May 1914 Judge Dan Jackson instructed a grand jury to investigate the business of counterfeiting^{El Paso Herald, 4 May 1914}.

The rebel Constitutionalists called for recognition by the United States so that the United States and Mexican secret service could cooperate in stopping the manufacturing and passing of counterfeit money. A local paper reported that an enormous amount of counterfeit money had been printed and placed in circulation along the border, with the burden of losses falling on Americans who purchased the money, believing it to be genuine, and were then forced to lose all they had paid for it when the currency was confiscated by Mexican officials^{El Paso Herald, 4 August 1914}.

This question of counterfeiting was investigated several times by grand juries in El Paso and Fort Worth^{Fort Worth Star-Telegram, 30 September 1914}. As neither Carranza or Villa were recognized by the United States, lawyers argued that their clients were not committing the offence of counterfeiting the legal tender of a foreign country. It was then questioned whether the provisional government of Chihuahua, when not recognized by the United States government, would be regarded by the U. S. courts as a bona fide institution to such an extent that the issuing of false evidence of indebtedness against it would constitute forgery. The only charge that had been brought against those arrested was conspiracy to swindle.

Because of the problems caused by the flood of counterfeit money in September 1914 the Mayor of El Paso, C. E. Kelly, asked Governor O. B. Colquitt to pass a special law, making it a crime to pass counterfeit money of a foreign country in Texas, in the hope that a severe penalty could be used to break up the organized counterfeiting gangs^{Dallas Morning News, 8 September 1914: El Paso Herald, 12 September 1914}. The bill was introduced in the House by representatives Burges and Harris, from El Paso, and in the Senate by senators Hudspeth and McNealus, given a favourable committee report, passed on 15 September^{Dallas Morning News, 16 September 1914} and signed into law by the Governor on 17 September 1914^{Dallas Morning News, 18 September 1914}. However, an Attorney General’s ruling on the governor’s legal standing later put the law at jeopardy^{Dallas Morning News, 6 October 1914}.

On 22 September Mayor Kelly ordered police chief I. N. Davis to arrest all people attempting to pass counterfeit Mexican money^{El Paso Herald, 22 September 1914} but on 3 October he reported “We have arrived at no indictments, owing to the divergent legal opinions”^{El Paso Herald, 3 October 1914}.

By 17 February 1915 there had been a number of arrests in Texas of people floating large amounts of counterfeit paper money, purporting to be the currency of the Constitutionalist Government of Mexico, which, as the genuine currency had a certain value on the border, would cause injury to the Americans who bought it. Again, the Department of Justice was unable to decide whether such counterfeit notes constituted a violation of Section 156 of the Federal Penal Code of 1910, or that the Constitutionalist Government was “any foreign government” within the meaning of that same section, and wrote to the State Department for advice. The State Department replied that neither the Department nor any officials of the United States had recognized the Constitutionalist administration as a “foreign government”^{SD papers, 812.5158/20 letter Charles Warner, Assistant Attorney-General, 17 February 1915; letter Robert Lansing, Counselor for State Department, 25 February 1915}.

On 31 March Villa decreed the death penalty for counterfeiting. Villa said, “I am sorry to say I have been forced to take this step, because it has been impossible to cause punishment of the culprits in the United States, notwithstanding the truthful evidence that we have presented against the defendants in many cases and because the conscious sellers are not prosecuted in any way, and the consequence has been to increase the issue of bogus money.”^{Washington Post, 2 April 1915}. On 7 April 1915 Enrique C. Llorente left the following memorandum with Bryan, the Secretary of State.
“The Provisional Government of Mexico is much concerned relative to the circulation of quantities of counterfeit Mexican currency, introduced from the United States. The making or passing, or possession, of counterfeit notes, with criminal intent, has, therefore, been made a military offense by the authorities, and is punishable by death, since this drastic measure seems to be the only means of preventing the practice, of late so prevalent.
Representatives of the Provisional Government, in the United States, have frequently invited the attention of the authorities both Federal and State, to the fact that counterfeit Mexican currency was being manufactured in this jurisdiction, and on numerous occasions parties were pointed out with packages of the false notes in their possession. The Federal authorities assert that the laws by which they are guided, are insufficient to embrace this class of counterfeiting, since the notes do not purport to have been issued under the authority of a government recognized by the United States. The State officials, on their part, seem indifferent to the matter, notwithstanding the guilty parties might, in many instances, be prosecuted for uttering forged instruments. Despite the fact that Texas recently adopted certain amendments to its criminal code, specially designed to prevent the counterfeiting of Mexican currency, issued since the commencement of the revolution, the authorities of that State have failed in securing adequate results, and hardly a day passes what quantities of the spurious notes are detected in the possession of persons engaged in its exchange for legitimate money. This condition of affairs has compelled the Provisional Government to provide the unusual measure above referred to, as punishment for the introduction of counterfeit currency into Mexican territory.
In the case of Cox, an American citizen, it is reported that the accused was recently apprehended in Monterrey with 109,560 pesos in his possession, having arrived there from Tampico, through which port, it is believed, the bills were introduced. Cox, when tried, will be afforded every opportunity to present his defense, and the Department of State can rest assured that he will receive every consideration compatible with the demands of justice.
Meanwhile, the Provisional Government would much appreciate it, were the Department of State to employ its good offices with the several border states, to the end that more active steps be taken for the prevention of the counterfeiting of Mexican currency, and in forbidding, by lawful means, the use of their territory as bases from which persons engaged in traffic in that currency may freely continue their nefarious work, so injurious to the people of Mexico, and to the good relations between them and the people of the United States, along the border.”
The Secretary of State replied that on April 6, the matter was called to the attention of the Attorney-General, with the request that, if it was practicable under the law to take action to prevent the manufacture and sale in the United States of counterfeit Mexican money, he issue instructions to the appropriate officers and agents of his Department^{SD papers, 812.5157/75}.

On 9 April the Department of Justice noted that it assumed that the State Department’s statement held true in relation to the Villa alleged de facto government. If so, the making in the United States of so-called money counterfeiting money issued by General Villa also did not constitute a violation of Sections 156 to 161 of the Federal Penal Code of 1910, or of any other criminal statute of the United States. So there was no legal action that it could take to prevent the manufacture and sale in the United States of the alleged counterfeit Mexican money. On 16 April the State Department informed Llorente and George C. Carothers of this opinion^{SD papers, 812.5157/76, letter Assistant Attorney General to Department of State, 9 April 1915; letter Robert Lansing to Enrique L, Lorente, 16 April 1915; letter Robert Lansing to George C. Carothers, 16 April 1915}.

In reply on 14 June James E. Ferguson, the Governor of Texas, wrote that the state had a statute bearing upon the circulation of counterfeit Mexican currency, but it was not properly drawn to meet the situation, as it subsequently developed. However, he was giving the matter attention^{SD papers, 812.5157/85}.

On 17 July Elisio Arrendondo^{writing care of Messrs. Douglas, Ruffin and Obear, Southern Building, Washington, D. C.} wrote to the State Department that several persons with counterfeit Mexican paper money in their possession had been arrested at San Antonio, Texas. The State Department copied the letter to Ferguson, Governor of Texas^{SD papers, 812.5157/94}and on 3 August W. C. Linden, the District Attorney in San Antonio reported to the Governor that more than two years ago parties both in San Antonio and El Paso engaged in the printing of counterfeit Villa and Carranza money. However, an examination of the statute revealed the fact that it was not a violation of the law of Texas to counterfeit the circulating medium of a foreign country or de facto government. Linden called the attention of the local Federal officers to the conditions existing here, and learned that their law did not reach it.
“Subsequently, at the called session of 1914, the Legislature of Texas enacted a law which was designed to cover this defect, and which provided that the counterfeiting or forging of the money or circulating medium passing as money of any foreign government, de facto government, office – or the having in possession of such money for the purpose of circulation, or the means of producing same, constituted a felony. The nature of the statute, however, is more of a forgery statute than a counterfeiting statute.
“After it became law, several parties were arrested upon a charge of violation of the statute, and a charge of conspiracy growing out of the statute itself, and a large amount of the money was seized together with the plates and press used in its creation, which are now held in custody by the sheriff of this county, to be used as evidence upon the trial of these cases. I think three parties are under indictment upon this charge. The cases have not been tried, and parties are all out on bond a little above the bond for felonies of like grade.
“I am a little bit doubtful as to my ability to convict them because it becomes necessary to allege that the money which they were making was money of a de facto officer or government, to wit: the Villa de facto government, and Villa as a de facto officer of the Republic of Mexico. My doubt is based upon the fact that under that allegation it becomes necessary to prove that Villa’s government is a de facto government of the Republic of Mexico and that he is a de facto officer. This will be extremely difficult (first) because the United States government, not having recognized either faction in Mexico, even as a belligerent, the courts cannot take judicial cognizance of the existence of that government as a de facto government, - and, second, because in the absence of judicial knowledge upon the subject it would be necessary to establish the proof thru some officer or purported officer of the Villa faction in Mexico, and when the proof is offered it would be a mere declaration upon the part of a witness, and would only be the basis for a contention upon my part that that established the existence of the Villa regime as a de facto government, which, of course, would be met with the contention that the proof merely established that Villa is the head of a revolution and that there is no de facto government existing in Mexico by reason of the fact that neither party has been recognized by this government either as a de facto government of the Republic of Mexico or as a belligerent entitled to recognition.
“I believe, however, that these arrests and seizures, coupled with the pendency of these indictments, has effectually stopped the wholesale traffic in and manufacture of this money which had existed prior to that time. I am sure that there has been no trouble of this character of recent origin in San Antonio, as the matter has been very closely watched and guarded both by the sheriff’s department and by the city officials^{SD papers, 812.5157/97}”.

Similarly in California, U. S. Webb, the San Francisco Attorney General, reported to the Governor, Hiram W. Johnson, that “Investigation has disclosed the fact that a large quantity of such alleged paper money has been printed in this City; that prior to the printing of the same, the parties printing such alleged money investigated the condition of the Federal statute covering such act by consulting the United States District Attorney upon the same, and were advised that the printing of such alleged money was not an offense against the Federal statute, inasmuch as there was no recognized form of government in Mexico, and that the Federal statute covered only the counterfeiting of the money of a foreign government recognized by the United States.
“So far as the statutes of this State are concerned, the printing of such alleged money cannot constitute an offense, and is an act on a parity with the printing of the promissory notes of any individual.
So far as we have been unable to ascertain, none of the alleged printed money has been sold or circulated in this State as actual, valuable currency.
“I beg, therefore, to advise you that, as far as our State statures are concerned, it is not within our power to take proceedings against the persons concerned in the affair^{SD papers, 812.5157/97 letter 29 July 1915}.”