Broker, Trader, Lawyer, Spy - Eamon Javers [17]
But the agency didn’t work for the taxpayers. Pinkerton was an intelligence agency that worked for corporate clients and wealthy individuals. It went after criminals who were causing the most damage to the biggest companies of the day: railroads, mining concerns, telegraph services. Pinkerton wasn’t as concerned about crimes against people as he was concerned about crimes against property. The company’s logo, a human eye above the slogan “We Never Sleep” inspired the term “private eye,” still used today.
PINKERTON SOON LANDED the biggest names in business as his clients. He went to work for the American Express Company, which was beginning to transport packages containing all sorts of valuables on specially designed fast railcars. He worked for the Pennsylvania Railroad, just one of several rail clients whose nationwide scope helped push the Pinkerton name across the continent. And he worked for Western Union, which was establishing a cross-continental communications network of telegraph stations.
For the express companies, the Pinkertons tracked down stolen packages and the crooks who swiped them. For the railroads, they hunted stickup artists on the western frontier. And for the telegraph companies, they busted white-collar criminals who sent bogus information over the wires to Wall Street as part of an elaborate insider trading scheme.
In 1871, the U.S. Department of Justice outsourced much of its investigative work for the year to the Pinkertons on a $50,000 contract. The firm grew so large and successful that its mission, tactics, and organization ultimately became the inspiration for the U.S. Secret Service and the FBI itself.
For their time, the Pinkerton detectives aggressively deployed new technology and centralized information-collection techniques. Photography had been invented as recently as 1840, and Pinkerton grasped how the technology could be used in fighting crime. He invented the mug shot, and his agents were clever in getting pictures of crooks across the country. Once, they got a notorious criminal so drunk at a saloon that a bartender on the Pinkerton payroll took his picture as he slumped against the bar and grinned sloppily for the camera. That picture was soon circulated across the country and used to identify the man.
The Pinkertons understood the edge that the telegraph gave them in sending coded information across state lines. But it also gave corporate crooks new avenues for thievery.* One case set a new standard for technological innovation—and financial corruption. In 1864, a stockbroker in California was arrested for conspiring to tap telegraph lines to intercept news before it hit the markets in order to arbitrage the insider information. The Sacramento Daily Union of Friday morning, August 12, 1864, detailed the scheme under the headline: “Tapping the Wires for Stock Operations.” A well-known stockbroker, D. C. Williams, checked into a hotel in the small gold rush town of Placerville, California, early that summer. The State Telegraph Company had offices in the same hotel, and Williams, an expert in telegraph technology, intercepted the messages simply by hearing the clattering of the telegraph machine and mentally deciphering the long-dash and short-dash code. That gave him advance notice of the goings-on in the region. He used the information to develop invaluable insights into upcoming corporate events that would set off gyrations in the stock market. This was enough to let him make plenty of money through insider trading on the tidbits of information that came his way. But Williams had an even more elaborate plan in mind: to bribe the telegraph agent in exchange for help intercepting information on the outcome of a crucial mining lawsuit in the Nevada Territory.
Williams planned to take over the telegraph controls when the news came through. He’d know the result of the case—and which company’s stock price would soon surge—and he’d be able to keep the news from being passed on to San Francisco long enough to buy and sell the appropriate shares