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[410] of eighty men, was organized in Savannah, and reached Charleston December 23d. Capt. N. L. Coste, of the U. S. revenue service, in command of the cutter William Aiken, in Charleston harbor, turned her over to the State authorities, and enlisted, with his crew, in the service of South Carolina. This day, the Palmetto, or South Carolina, flag was formally raised over the Custom-House and the Post-Office at Charleston; and it was announced next morning that Gov. Pickens had been tendered the services of volunteers from Georgia and Alabama, as well as from all parts of South Carolina.

Mr. Jacob Thompson, Secretary of the Interior, having left his post to visit North Carolina in the character of a Secession Commissioner from Mississippi, a heavy defalcation was discovered1 in his Department. A South Carolina clerk named Godard Bailey, who was custodian of a large amount of State bonds belonging to the Indian Trust Fund, had abstracted therefrom bonds and coupons amounting in the aggregate to $870,000, and had disappeared. Mr. Thompson was notified by letter of the fraud, and, returning,2 called at once upon the President to announce it. An investigation was forthwith ordered; but neither the key of the safe nor the clerk who had charge of it could be found. Mr. Bailey was at length discovered, but could not or would not produce the key. The Department was then surrounded by a police force, which no clerk was allowed to pass, the safe broken open, and the extent of the robbery discovered. An examination of Mr. Bailey elicited the following facts:

The firm of Russell, Majors & Waddell held a very large contract for the transportation of army supplies from Leavenworth and other points on the Missouri river to the army stationed at Camp Floyd, in Utah; under which they were to receive from the Treasury about one million dollars per annum. The contractors being pressed for funds, Mr. Floyd had been induced to accept their drafts on his department, in anticipation of future service, to the amount of nearly or quite a million of dollars. These acceptances, being manifestly irregular, could with difficulty, and but to a moderate extent, be negotiated; so that the embarrassment of the contractors was thereby scarcely mitigated. Under these circumstances, it appears, Mr. Russell had been made acquainted with Mr. Bailey, and had, by some means, induced the latter to supply him with a large amount of bonds from the safe under his control, substituting therefor Mr. Floyd's acceptances aforesaid. The bonds he had hypothecated in Wall-street and raised money thereon. As our national sky darkened, the bonds depreciated, and the lenders called on Mr. Russell for additional security, which he furnished in the shape of more bonds, supplied by Bailey; who, finding himself inextricably involved, addressed, on the 18th, a letter to Secretary Thompson, disclosing the more material facts, and pleading that he had taken the bonds only to save the honor of Secretary Floyd, which, he was assured, had been compromised by his advances to Russell & Co. He did this on the faith of promises that all should be made right in due

1 December 24th.

2 December 25th.

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