New York, 18 Nov., 1874.

I hereby acknowledge the receipt of $465,000 of advances to the Cook County National Bank of Chicago for my account, same being made by Allen, Stephens & Co. in money, paper, and endorsements. I have arranged with them for additional advances. In consideration thereof I hereby grant and convey to Allen, Stephens & Co. by way of mortgage and as security for such advances, all my real estate of every kind and description, and wherever situated.

B. F. Allen.

This mortgage was not filed for record with the recorder of deeds of Polk county until the 19th of January, 1875. On the 30th of November, 1874, it had been placed in a sealed package and intrusted to Mr. Denman in the city of New York with sealed instructions and directions for him to proceed with the package to Chicago and there await further instructions. He was not even informed of the contents of the package and was instructed not to open it until he received advices from New York as to further proceedings.

When the people of Des Moines began to realize that B. F. Allen had really become a bankrupt they were ready to believe almost any theory that would exonerate him from the censure that he deserved in risking the money of his depositors in wild and foolish speculation. One theory promulgated and believed was that he had been deceived in the value of the assets of the Cook County Bank when he purchased the same. On the contrary the evidence taken in the suit to which I have alluded shows that he did not pay a dollar of his own money for the stock of the Cook County Bank. Several years before his failure and before his purchase of the Cook County Bank, or a controlling interest in it, he had been appointed by the United States Circuit Court of Des Moines receiver in a litigation that had been commenced against the Chicago, Rock Island & Pacific Railroad Company. As such receiver he had come into possession of about $800,000 of bonds issued by the Rock Island Company. These bonds he had hypothecated in New York City for money with which he carried on his speculations, and as the time approached for him to make settlement of his receivership he found it necessary to do something in order to save the sureties on his bond. He accordingly went to Chicago and in May, 1873, he purchased the controlling interest in the Cook County Bank, giving a draft for the larger part of it on Allen, Stephens & Co., and his note for the balance, all of which was ultimately paid out of the money of the depositors of the Cook County Bank. The funds that he came in control of by this means enabled him to settle his receivership. Mr. Allen, in his testimony in the case referred to gives the following account of his losses by speculation:

As a member of the firm of B. F. Murphy & Co., Chicago$200,000
H. M. Bush & Co., Grain Speculation75,000
Lewis & Stephens, speculators (grain)30,000
Swamp Land speculation18,000
San Pete Coal Co. of Utah18,000
Denver Coal Lands5,000
Kentucky Lands25,000
South Evanston property40,000
Building on So. Evanston property40,000
Sheffield near South Chicago32,000
Grand Pacific Hotel stock10,000
Prairie Avenue Residence31,000
Chicago Railway Construction Co.10,000
Canada Southern Railway Co.60,000
Toledo, Wabash & Western R.R. Co.35,000
Speculation Stock Exchange150,000

These losses only foot up $779,000, whereas in truth and in fact the depositor's accounts in his private bank in Des Moines alone amounted to $800,000 at the time of his failure, and his indebtedness to the Charter Oak Life Insurance Company for money procured by Blennerhassett from that institution amounted to over one-half million dollars, and a draft of the Iowa State National Bank $100,000 not credited to that bank until after the failure. In May 1874, one Warren Hussey, of Utah, visited Blennerhassett & Stephens in New York City and induced them to procure a pretended loan of $400,000 from the Charter Oak Life Insurance Company, then represented by its vice-president, a man by the name of White. The money was advanced as a pretended loan to one Matthew Gisborn without any security whatever save the personal security of Gisborn & Hussey, with a private understanding that Mr. White and Messrs. Blennerhassett & Stephens should have the benefit of anticipated dividends on the stock of the mine, a large share of which was in the hands of Warren Hussey for his commission as procurer; in other words, it was a speculation on the part of Allen, Stephens & Co. and White, the vice-president of the Charter Oak Life Insurance Company, being one of the causes of the failure thereafter of the Charter Oak Life Insurance Company, as the stock proved to be entirely worthless and the security of Gisborn & Hussey was of no value whatever. On April 22, 1875, B. F. Allen was adjudged a bankrupt on the petition of his creditors filed on the 23rd of February, 1875, and Hoyt Sherman, of Des Moines, was appointed assignee in bankruptcy. Mr. Jeff S. Polk and Mr. Bisbee, an attorney of Chicago, were employed by the assignee in bankruptcy to defeat the suit for the foreclosure of the mortgage. The main ground of defense to this mortgage was that at the time of its execution there was an agreement between Allen and Stephens & Blennerhassett that it should be withheld from record, and that between the time of its execution and the time that it was recorded Stephens & Blennerhassett represented that Allen was solvent and possessed of large properties in real estate, and they caused him to be rated by the commercial bureaus of the country as worth one million dollars, and at the same time knew that he was in fact insolvent, and this defense was held to be abundantly proved by the testimony taken in the case, and the supreme court of the United States decided that as against the creditors and the assignee in bankruptcy the mortgage was absolutely void. After the original petition was filed for the foreclosure of the mortgage I filed a supplemental bill making the Charter Oak Life Insurance Company the plaintiff and Hoyt Sherman, the assignee in bankruptcy, the respondent. After several months had elapsed from the time the suit was begun I concluded to make a personal visit to Blennerhassett & Stephens, of New York City, and try to understand the real situation and facts in the case. I spent some two weeks interviewing the two men who constituted the firm, but for some reason not known to me I never could obtain from them any very accurate account or reliable statement of the facts necessary to be understood to make the proper presentation of the case. Mr. Blennerhassett especially appeared to be a very peculiar man and his desire for concealment amounted to a controlling passion. The books of the firm of Allen, Stephens & Co. had locks upon their lids and Blennerhassett carried the key. No attempt was made to inform me of the detail of the transaction between them and the Cook County Bank, and I never became fully advised as to these matters except as they were developed by the testimony afterwards taken. The evidence showed that the correspondence between the house in New York and Mr. Allen was carried on by means of a cipher or fictitious word. Allen was represented as "head," Blennerhassett as "arm," and Stephens as "leg" of some imaginary person. The transmission of the mortgage itself to Chicago in a sealed package with sealed instructions, and the manner in which the business was transacted were well calculated to excite suspicion, or in other words give the impression that there was something that it was necessary to conceal. That Allen was insolvent and had been for several years prior to his actual failure the testimony left no doubt, and the manner in which he conducted his business in connection with the house in New York was overwhelming proof that the parties knew that he could not promptly meet his pecuniary obligations. The real interested party in the transaction was the Charter Oak Life Insurance Company. Mr. White, the vice-president, proved to be under the influence of Blennerhassett and obtained the money of the company in matters of loan and discount to an extent that was wholly unjustifiable.

My visit to New York, however, was a very profitable one to myself. The Charter Oak Life Insurance Company and several of the banks to whom Allen's mortgages and bills receivable had been negotiated from time to time, including $100,000 of bonds of the Des Moines Gas Company, placed in my hands their collections, and I think that the securities that I brought home with me amounted to one half million dollars, and in the suit and foreclosure of these collaterals the firm of Nourse & Kauffman made very handsome profits. The litigation lasted a number of years and a final result was not obtained until the decision of the supreme court of the United States at the April term, 1882. The opinion is reported in United States Supreme Court Reports, Volume 105, page 100. After this decision was made we filed a claim of the Charter Oak Life Insurance Company against the bankrupt estate as a general creditor. In the meantime the Charter Oak Life Insurance Company itself had gone into bankruptcy. We had some doubt as to whether our claim would be allowed as we had insisted on a preference that the court had decided was fraudulent. Mr. J. S. Polk and Mr. Bisbee, of Chicago, finally bought the claim of the Charter Oak Life Insurance Company against the bankrupt estate, and had no difficulty in having it allowed by Mr. Sherman, the assignee. These men also bought large and valuable portions of the real estate from Mr. Sherman, the assignee, and received a conveyance accordingly. The estate paid to the general creditors only, as we were advised, about fifteen cents on the dollar. Another interesting feature of the transaction was that Mr. Allen claimed the benefit of the homestead law of Iowa and claimed the fine residence on Terrace Hill with forty acres of land as exempt from his debts. The homestead law of Iowa, however, only exempted a homestead in favor of a resident of the state. Mr. Allen had been for a number of years a resident of Chicago, had purchased a home there, and had paid out $31,000 on the purchase. We also proved that he had voted as a citizen of Chicago, I think at the city, county, and state elections, and that he had offered the property on Terrace Hill for sale and had caused a number of articles to be published in the city papers claiming the property to be worth $100,000. A compromise, however, was made by the assignee in bankruptcy by which Mr. Allen was allowed the buildings and a limited amount of ground, and Mr. F. M. Hubbell purchased the same for $40,000. This $40,000 did him no good, for within a year or two he lost it in another grain speculation on the board of trade in Chicago. In the meantime his wife, who was a daughter of Captain F. R. West, had become insane and imagined that her husband's creditors were pursuing her because of their losses, and she died within a few months after losing her reason. Mr. Allen a few years afterwards removed to California, where he still lives at the time of the present writing, holding some employment from the United States government in connection with the business of preserving the timber on the public lands in that state.

Charles Clinton Nourse
From Photograph by I. W. Kramer, Des Moines