The Daily Dispatch: December 27, 1860., [Electronic resource]

The Washington defalcation, &c.

‘ A day or two since, Goddard Bailey, the law clerk of the Interior Department--a native of South Carolina, appointed to office from Alabama, a young married man of about thirty years of age, admitted to be a person of remarkably flue abilities and attainments — placed in the hands of a friend a letter to be handed to Secretary Thompson. This was during the latter's recent absence. His manner was such as that the frind pressed him with inquiries concerning its contents, and, learning them, hastened to deliver it to Mr. T. on the instant of his return to this city on Saturday evening last. It proved to be a voluntary confession from Bailey that at the instance of another he had abstracted (and loaned to that person) from the iron safe under his charge, a large amount--$830,000--of the State bonds held by Mr. T. as Secretary of the Interor in trust for sundry Indian tribes — the proceeds of their bonds sold by the Government, and so invested and held for their benefit in pursuance of treaty stipulation.

’ It seems that the Secretary had endeavored to induce the regular treasurer of his department, Mr. Peter Lammond, to become their custodian, but not being obliged so to do by law or regulation, he declined the responsibility of their charge. The Secretary then entrusted them to the keeping of Bailey, the department's law clerk, who was under bonds of ten thousand dollars for the faithful performance of other trusts — not that one. The receipt of this letter by the Secretary of course created great commotion in the department, and he, with Bailey and other clerks, were there engaged in the consequent investigation all Saturday night last until 3 A. M., with hacks, police officers, &c., plying over the city. According to Bailey's confession, he loaned the bonds to the party who had induced him to commit this abstraction, but was not to receive a single dollar of the proceeds of the speculation. He had cut off and preserved in the safe the coupons for the next six months interest, so that no part of that could be lost to the Government or Indians.

One theory of the abstraction is, that Bailey and his confederate desired to make a large sum by speculation in the stolen bonds (the first of which were taken as early as five months ago,) by selling them at the comparatively high prices at which they sold some time since, and buying them back and replacing them in the safe when the sectional troubles they knew were about to arise should depress their prices, as at present; and that his confederate having failed to return any of them so far, B. became alarmed and made his voluntary confession to the Secretary.

Bailey is said to allege that he loaned Russell the bonds under his persuasions and those of a Washington banker, not for the purpose of speculation in stocks, but that by selling them he might meet sundry accepted drafts of his firm on the War Department, payable out of any moneys due them or to become due to them from the Government, to meet which the Department bad then no money at command. Of course he alleges that he anticipated that when the Department might be in funds, the stocks would have been re-purchased and handed back to him. Russell gave him an amount of such accepted drafts equal to the amount of stocks B. illegally loaned to him, which said so accepted drafts he placed in the sale as security for the eventual return of the State bonds.

It is further said that Russell obtained from the Bank of the Republic, in New York, on the State bonds — that bank now having them in its possession — the money with which to take up the accepted drafts on the War Department. It is doubted whether the accepted drafts which Bailey held as security are really any security whatever. But that fact will be settled very shortly, we apprehend, on further investigation.

All yesterday the Secretary continued his investigation into the affair, and is said to have so far found all the statements of Bailey's letter of confession correct to the letter. He obeyed the Secretary's summons, and aided him on Saturday night and again yesterday afternoon in his labors of search.

This morning a warrant for his arrest and commitment was made out by Capt, Goddard; Chief of Police, and it was determined to place him in jail without an examination at this time, unless that was demanded by his counsel, Mr. Carlisle.

As soon as Mr. Thompson received the letter and ascertained the probable whereabouts (in New York) of Bailey's alleged confederate — Wm. H. Russell, of the firm of Russell. Major & Co., the great overland pony express and army-transportation contractors — he telegraphed to Marshal Rynders to effect his arrest; but up to the hour at which we go to press we have not been able to learn that he is in custody. He is believed to have reached Washington this morning per rail, getting into the cars at Philadelphia, and leaving them only after they had backed out of the Washington depot, to return in on another track; eluding the officers on the watch for him, by jumping off thus on the outskirts of the city. Russell is said not to be the only person implicated besides Bailey. A Washington banker, and others, whose names we have not been able to learn, are rumored at the Department to be well nigh as deeply involved in the trans action, as aiders, abettors, advisers, &c., and as sharers in the contemplated profits of it.

Bailey had three millions of dollars in such bonds in his custody, and might as easily have taken the whole. Our impression is that the particular bonds can be identified. If so, while parties who may have innocently purchased portions of them may lose their money so invested, the Government may not ultimately be a loser.

Bailey was appointed to office on perhaps the strongest testimonials as to his alleged high character that were ever offered in behalf of any other applicant for a Government clerkship, though since his appointment he has been known to the men about town as a fast liver and a regular frequenter of the faro banks.

This morning Bailey went over to the jail in company with his counsel, Mr. Carlisle, and gave himself up, and was fully committed by a magistrate.

Later.--As we go to press we learn that Capt. Goddard, Chief of Police, has just received a dispatch from officers Allen and Busher, of this city, dispatched by the department to New York to arrest Russell, announcing that they arrested him this forenoon.

A telegraphic dispatch to the N. Y. Herald announces the discovery of another great fraud:

‘ It has been discovered within a few days that two million of dollars are missing from the United States Treasury that is not accounted for on the books. The clerks have been busy ever since the discovery searching the books to ascertain whether an actual robbery has been committed to the above named amount or not. The matter is not yet known to the public, but the officers of the Government are in the secret, and very much exercised, fearing the report may prove true right upon the excitement consequent upon the robbery in the Interior Department.

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