Chapter 3-3
Hacker Crackdown

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There are interesting parallels between the Service's
nineteenth-century entry into counterfeiting,
and America's twentieth-century entry into computer-crime.

In 1865, America's paper currency was a terrible muddle.
Security was drastically bad.  Currency was printed on the spot
by local banks in literally hundreds of different designs.
No one really knew what the heck a dollar bill was supposed to look like.
Bogus bills passed easily.  If some joker told you that a one-dollar bill
from the Railroad Bank of Lowell, Massachusetts had a woman leaning on
a shield, with a locomotive, a cornucopia, a compass, various agricultural
implements, a railroad bridge, and some factories, then you pretty much had
to take his word for it.  (And in fact he was telling the truth!)

SIXTEEN HUNDRED local American banks designed and printed their own
paper currency, and there were no general standards for security.
Like a badly guarded node in a computer network, badly designed bills
were easy to fake, and posed a security hazard for the entire monetary system.

No one knew the exact extent of the threat to the currency.
There were panicked estimates that as much as a third of
the entire national currency was faked.  Counterfeiters--
known as "boodlers" in the underground slang of the time--
were mostly technically skilled printers who had gone to the bad.
Many had once worked printing legitimate currency.
Boodlers operated in rings and gangs.  Technical experts
engraved the bogus plates--commonly in basements in New York City.
Smooth confidence men passed large wads of high-quality,
high-denomination fakes, including the really sophisticated stuff--
government bonds, stock certificates, and railway shares.
Cheaper, botched fakes were sold or sharewared to low-level
gangs of boodler wannabes.  (The really cheesy lowlife boodlers
merely upgraded real bills by altering face values,
changing ones to fives, tens to hundreds, and so on.)

The techniques of boodling were little-known and regarded
with a certain awe by the mid- nineteenth-century public.
The ability to manipulate the system for rip-off seemed
diabolically clever.  As the skill and daring of the
boodlers increased, the situation became intolerable.
The federal government stepped in, and began offering
its own federal currency, which was printed in fancy green ink,
but only on the back--the original "greenbacks."  And at first,
the improved security of the well-designed, well-printed
federal greenbacks seemed to solve the problem; but then
the counterfeiters caught on.  Within a few years things were
worse than ever:  a CENTRALIZED system where ALL security was bad!

The local police were helpless.  The Government tried offering
blood money to potential informants, but this met with little success.
Banks, plagued by boodling, gave up hope of police help and hired
private security men instead.  Merchants and bankers queued up
by the thousands to buy privately-printed manuals on currency security,
slim little books like Laban Heath's  INFALLIBLE GOVERNMENT
COUNTERFEIT DETECTOR.  The back of the book offered Laban Heath's
patent microscope for five bucks.

Then the Secret Service entered the picture.  The first agents
were a rough and ready crew.  Their chief was one William P. Wood,
a former guerilla in the Mexican War who'd won a reputation busting
contractor fraudsters for the War Department during the Civil War.
Wood, who was also Keeper of the Capital Prison, had a sideline
as a counterfeiting expert, bagging boodlers for the federal bounty money.

Wood was named Chief of the new Secret Service in July 1865.
There were only ten Secret Service agents in all:  Wood himself,
a handful who'd worked for him in the War Department, and a few
former private investigators--counterfeiting experts--whom Wood
had won over to public service.  (The Secret Service of 1865 was
much the size of the Chicago Computer Fraud Task Force or the
Arizona Racketeering Unit of 1990.)  These ten "Operatives"
had an additional twenty or so "Assistant Operatives" and "Informants."
Besides salary and per diem, each Secret Service employee received
a whopping twenty-five dollars for each boodler he captured.

Wood himself publicly estimated that at least HALF of America's currency
was counterfeit, a perhaps pardonable perception.  Within a year the
Secret Service had arrested over 200 counterfeiters.  They busted about
two hundred boodlers a year for four years straight.

Wood attributed his success to travelling fast and light, hitting the
bad-guys hard, and avoiding bureaucratic baggage.  "Because my raids
were made without military escort and I did not ask the assistance
of state officers, I surprised the professional counterfeiter."

Wood's social message to the once-impudent boodlers bore an eerie ring
of Sundevil:  "It was also my purpose to convince such characters that
it would no longer be healthy for them to ply their vocation without
being handled roughly, a fact they soon discovered."

William P. Wood, the Secret Service's guerilla pioneer,
did not end well.  He succumbed to the lure of aiming for
the really big score.  The notorious Brockway Gang of New York City,
headed by William E. Brockway, the "King of the Counterfeiters,"
had forged a number of government bonds.  They'd passed these
brilliant fakes on the prestigious Wall Street investment
firm of Jay Cooke and Company.  The Cooke firm were frantic
and offered a huge reward for the forgers' plates.

Laboring diligently, Wood confiscated the plates
(though not Mr. Brockway) and claimed the reward.
But the Cooke company treacherously reneged.
Wood got involved in a down-and-dirty lawsuit
with the Cooke capitalists.  Wood's boss,
Secretary of the Treasury McCulloch, felt that
Wood's demands for money and glory were unseemly,
and even when the reward money finally came through,
McCulloch refused to pay Wood anything.
Wood found himself mired in a seemingly endless
round of federal suits and Congressional lobbying.

Wood never got his money.  And he lost his job to boot.
He resigned in 1869.

Wood's agents suffered, too.  On May 12, 1869, the second Chief
of the Secret Service took over, and almost immediately fired
most of Wood's pioneer Secret Service agents:  Operatives,
Assistants and Informants alike.  The practice of receiving $25
per crook was abolished.  And the Secret Service began the long,
uncertain process of thorough professionalization.

Wood ended badly.  He must have felt stabbed in the back.
In fact his entire organization was mangled.

On the other hand, William P. Wood WAS the first head of the Secret Service.
William Wood was the pioneer.  People still honor his name.  Who remembers
the name of the SECOND head of the Secret Service?

As for William Brockway (also known as "Colonel Spencer"),
he was finally arrested by the Secret Service in 1880.
He did five years in prison, got out, and was still boodling
at the age of seventy-four.