The greatest bank robbery in The Maritimes’ history didn’t involve anything like masks, guns, and a getaway car. It happened in broad daylight over time, and though the man responsible left behind a note, his explanation raised more questions than it offered answers.
In 1881, PEI’s oldest and most respected bank, the Prince Edward Island Bank — known to all simply as “Old Bank” — lost roughly $1,000,000. In today’s money, that’s something mindblowing, like $32 million! It was, by any measure, much more than an ordinary bank robbery.
At the end of November of that year, the bank’s cashier, a 28-year-old named Joseph R. Brecken, went on a one-day work trip to the bank’s branch in Saint John. It was a city where he had once studied and, a newspaper noted, “was favourably known.”
He was due back in Charlottetown that Friday.
He did not return on Friday. Or Saturday.
On Sunday evening, Brecken’s wife reached out to other bankers in Saint John by telegraph to ask if they’d seen her husband.
Very early the next morning, on Monday, November 28th, 1881, someone arrived at the offices of the Saint John Daily Telegraph newspaper bearing some hot gossip. They said that The Old Bank’s branch in the city would not be opening today. A quick check on PEI revealed that the Old Bank’s main headquarters would also not be opening. No explanation was offered by the Islanders.
Reporters immediately knew this was serious stuff.
This was an era of unsecured deposits, when bank deposits were not backed by the government like they are today. A bank not opening back then meant a very real possibility that the money inside it was gone, and with it — business accounts, life savings, everything. It was all just gone. Such was the nature of banking back then.
Reporters dashed to the Old Bank’s Saint John branch to discover an angry mob had already gathered. Saint Johners were never shy about a riot at the best of times, and the mood that morning outside the bank was ugly.
Then something strange happened. Officials from the Bank of New Brunswick — a completely unrelated institution — climbed the steps to the Old Bank’s deserted office carrying piles of paperwork.
“The Bank of New Brunswick had received no official information,” they announced to the crowd, proceeding to start reeling off piles of detailed numbers about the inner-workings of the PEI bank, including specifics of the Old Bank’s private assets, liabilities, directors and shareholders.
Then, the New Brunswick bankers reassured the angry mob that the PEI bank’s shareholders and directors were legally personally liable for any losses.
The crowd calmed down (even though, the Telegraph observed, they were now considerably more confused than they had been before).
The bankers then announced a culprit: “J. R. Brecken, cashier of the Bank of Prince Edward Island, has absconded, leaving the Old Bank in confusion, and causing suspension of payments.”
The New Brunswick bankers didn’t have to be Sherlock Holmes to deduce what happened as soon as Brecken’s wife had told them he was missing. In 1881 alone, nearly a dozen North American banks collapsed after being robbed blind by their own employees, including one in Toronto and another in Boston. Back then (and probably still now if you think of it), banks were at far greater risk from their own employees robbing them than from the masked bandits you traditionally think of when you picture “bank robbers.”
The moment they heard that a banker was missing, they assumed he’d done something nefarious. That night had raced to make sure their own institution, the Bank of New Brunswick, was not in any way exposed if PEI’s Old Bank were to go under.
They had, the bankers told the crowd, done “an informal investigation of the affairs of the Old Bank last night. This led to the discovery that unauthorized advances to the extent of $300,000 had been made by the cashier. A large part of this sum cannot be recovered.”
The entire capital of the Old Bank was only $145,000. This meant that the bank itself was worth only half of what had been stolen.
Joseph Brecken’s motivation wasn’t money — he had plenty of that. His father, Ralph Brecken, was the richest man in PEI. His uncle Fred was a Member of Parliament.
An investigation in PEI revealed that Brecken had actually left a note before he’d departed. While his note seems to have been his attempt to explain itself, it really just begs more questions than it offers answers:
“I know what people will say about me. I deserve it all and plead guilty. Where customers got the thin of the wedge in, I had to go on advancing in order … to get the whole monies due the bank back without loss. This every person promised to do. I had to keep these facts from the directors or I would have been dismissed from the bank. I therefore commenced my downward course by telling lies and ended by making false accounts.”
What Brecken was trying to explain in his note was that he hadn’t exactly robbed the bank per se, but had catastrophically mismanaged the money, directly against orders from the bank’s directors.
In other words, customers kept asking for loans that the Old Bank’s directors rejected. Brecken approved the bad loans anyway. After they were unable to pay back the loans, he kept secretly approving more loans in the hopes that they’d eventually pay everything back.
“For example,” wrote Douglas O. Baldwin in Acadensis, “after the board of directors had refused a $1,000 loan to Shedd and Moore Lobster Shippers, Brecken granted them $42,000 the very next day. Although the directors had also ordered that John Hughes’ liability to the bank should not exceed £4,000, the cashier’s secret bill book for 1881 detailed ten entries over three months allocating more than £31,000 to Hughes.”
It was a strange sort of bank robbery; Joseph Brecken wasn’t stealing for himself, he was almost incomprehensibly bad at saying no — a pretty crippling problem for a bank’s loan officer! But it seems to be something more than mere incompetence, because the sheer scale of money he “loaned” was pretty obviously unlikely to be repaid.
The law took a dim view of such distinctions.
Joseph Brecken was a wanted man. Though early reporting claimed that Brecken was hiding out in Saint John, he’d actually already fled the country that very weekend, before the story broke.
A team of detectives from PEI went hunting for him. They very quickly caught a trace of him, tracking him down in New York City. They nearly caught him, too, but he slipped away.
The general public in PEI was largely unbothered by the internal affairs at their bank.
“The public mind is not much excited. General satisfaction is felt that the local banks are not affected,” reported the Ottawa Daily Citizen.
Depositors’ life savings were saved by the bank’s corporate structure and the responsibilities of shareholders, which, for modern readers, will be the most surprising part of this story.
The Old Bank was set up so that directors and shareholders were personally on the hook for any losses. Shareholders who had recently enjoyed a comfortable 8% dividend were now “subject to a call under their statute liability,” meaning not only did they profit during the bank’s good times, but, on the flip side, they were also they were personally liable for losses in bad times.
Just how much they were liable for is the most surprising part. Remember that Brecken had given away twice the bank’s value in bad loans? Well, the way the bank was structured, the shareholders might not only lose all their money in the company’s stock, but they were on the hook for three times the value of their shares!
(Imagine floating an idea like that for Wall Street today! The entire stock market would collapse at the mere mention of such an idea!)
The shareholders paid up, and soon the Old Bank resumed operations.
But, in the weeks and months after, it turned out that Brecken had been just as bad a bookkeeper as he had been a loan officer.
More and more unsecured debts kept appearing, and these were not small. Brecken had signed over one loan for $300,000 to a British shipping firm in which he’d asked for no collateral other than some ships under construction. Another unsecured loan was for $90,000.
The Old Bank’s investigation into its own books kept finding more and more unsecured loans, which, in the end, topped one million dollars.
This was well beyond the three times the value of the stock that the shareholders were on the hook for. The bank avoided a catastrophic collapse, but, in May of 1882, the Prince Edward Island Bank, the province’s oldest bank, went through an orderly, court-guided bankruptcy.
As for Joseph R. Brecken, one year later, New Glasgow’s Eastern Chronicle newspaper wrote that he “is said to be engaged in a Western city teaching a class of young men the science of banking.”
One hopes his students learned from his mistakes!
