The St. Stephen Lottery Swindle

Articles in San Francisco Examiner and Boston Journal circa 1880

“Swindlers” “Rascals” “Frauds” “Scoundrels” “Humbugs” “Artful Dodgers” and even more derogatory terms were used to describe Canadians by many irate editors of U.S. newspapers in the late 1800s. The editors weren’t referring to Canadians in general but rather to residents of New Brunswick and more specifically to those who lived in St. Stephen New Brunswick. How is it that St. Stephen found itself in the angry sights of American newspaper editors? A 1883 article in Western Rural newspaper of Chicago Illinois explains it best:

At St Stephens Canada is a den operated under the name of the Royal New Brunswick Lottery and it is now said to be getting in its work in Oregon. It is manipulated under the names of two firms: Simpson Co and Goldsmith Co. Among the officers are Hugh McKay, commissionare; F.S. Nesbitt inspector and G.W. Foster supervisor. All lotteries are frauds but this one is ranker than usual. It is a game of get all they can and keep all they get. They have never paid a prize or allowed one to be drawn that amounted to anything. People who are right there upon the ground write that the majority of the people of St Stephens are highly incensed at having the notorious swindle in their midst but that there are some who favor it because it brings American money into the town. McKay, the commissionare, was once referred to on the circulars of the concern as the “Chief of Police”.  He was once a peddler of sewing machines, became a bankrupt and was appointed Town Marshal of St Stephens with the princely salary of fifty dollars a year. That is how he became “Chief of Police” He is now a rich man thanks to the gullibility of a public that has patronized this swindling lottery. It is a disgrace to the Canadian authorities to let this thing go on but they have permitted it for years. Nothing can be done on this side the line but to let the fraud severely alone and we warn our readers to do so.

In the late 1870’s St. Stephen became the headquarters of the notorious “Royal Gift Soiree” fraud, sometimes called the “Royal New Brunswick Lottery”. An image of the King and Queen graced some of the lottery tickets. How this came to be is a complicated story but in the short version the U.S. Postal Service is the culprit. In the 1870’s crooked lotteries preyed on the poor and uneducated, especially west of the Mississippi. Many lost their homes and farms after being enticed by colorful and convincing mailings delivered by the U.S. Postal Service to buy lottery tickets which were, it was claimed, almost certain to make them rich. Testimonials of formerly desperate homesteaders now living a life of luxury in San Francisco were a strong incentive to send the family savings by return mail. Many did although no one personally knew a winner which was not surprising because no drawings were ever held. The promoters simply kept the money.

The federal government was finally forced to act and did so very efficiently by making it a federal offense to send lottery materials by the U.S. Mail which effectively shut down the crooked lotteries. The story would have ended there and the reputation of our friends across the border would have been saved but for a postal treaty between the United States in Canada which required all mail passing between countries to be delivered without any restrictions. The lottery swindlers had only to find a convenient location in Canada from which to run their operation and none was more convenient that St. Stephen. It bordered a small but vibrant U.S. city, was on the main telegraph line from Canada and Europe to the east coast of the United States and was connected with most of the population of the United States and the mail and rail routes west.

Queen Hotel Water Street  original Headquarters of the lottery

By the late 1870’s the lottery crooks had enlisted local St. Stephen help and operations were again in full swing with headquarters in the Queen Hotel, St Stephen. Hugh McKay of St. Stephen was the local front man for the operation. McKay was a good choice, a local businessman, assessor, Mason and for a short time Chief of Police. He seemed a pillar of the community. The U.S. press thought otherwise.

Steuben Republican Angola Indiana: March 5, 1879

Brown, Pattee, Ludlam and McKay are a right quartet of choice rascals who have managed to swindle the public for years. These scamps vibrate between Wyoming territory, Calais, Maine and St. Stephen NB. Hugh McKay and Company profess to run a quote “Royal Gift Soiree” at St. Stephen NB. Brown is or was at Calais Maine but has recently been arrested at Cheyenne for swindling. The Seminole Mining Company is run by this crew and when Brown was arrested, Ludlam and Pattee would have been taken also but they were in New Brunswick attending, no doubt, their lottery swindle. It is useless to go into particulars as to these swindlers. The “Soiree” being in Canada, cannot be stopped by United States authorities, neither can victims catch the scoundrels did they desire to. The scheme is a notorious fraud and all cash received is clear gain.  McKay and Company offer 22 chances for $10 and would gladly give 42 at the same price as they are never paid any prizes, they have nothing to do but to skin the poor fools who sent in cash for tickets. We repeat the Seminole and Soiree are all run by Pattee, Brown Ludlam, McKay and their crew and are base frauds and swindles. Pattee will be wise to keep on Canadian soil and Brown no doubt will get clear and be ready for more swindles in due time. All mining companies advertised by circular may be set down as frauds, and all lotteries are the same.

The reference to mining companies needs some explanation. In addition to lottery scams there were many gold and silver mining scams being operated at the same time and often by the same people. Some Calais and St. Stephen people, especially bankers and lumber barons, were involved in these and sometimes became victims themselves.

 Newspapers in the United States and even the U.S. government soon began demanding action against the St. Stephen operation, but none was forthcoming. In 1883 Paul Lange, United States Consul to Canada, published an article condemning what was then being called the “Royal New Brunswick Lottery.”

You will oblige a great many of our fellow citizens by warning them against the “Royal New Brunswick Lottery”, a swindle institution managed in St. Stephen New Brunswick under the fictitious name of Jay Goldsmith and Company. The United States postal authorities forbade the transmission of lottery matter through the mails, and the Dominion of Canada offered a safe base of operations, as according to the provisions of the existing international postal treaty between the United States and Canada mailed matter from either country, postage prepaid, has to be forwarded to its destination in the other period. The mails in the United States are flooded with special circulars, offering remarkable inducements in the way of prizes to purchasers of tickets. These circulars were at first signed F.W. Andrews and Company, later Hugh McKay and Company, and WD Simpson and Company and it was announced that the drawings would take place regularly every 30 days. It is stated for a fact that no money was ever paid to any purchaser of a ticket, and many drafts have been sent to the banks of Saint Stephen for collection by purchasers of tickets for prizes drawn but they were not honored when presented to the managers of the lottery by the bank officials.

This concern is receiving every day by American Express numerous packages containing smaller and larger sums of money from the United States, and it is deplorable that so many of our fellow citizens should be duped by these swindlers, especially when the victims are found among the poorer classes. In most cases, ignorant farmers, mechanics and poor laborers invest their hard earnings in these lottery schemes. I have received and answered numerous letters from all over the United States concerning this swindle, but the only effectual way will be left for the American press to expose and break up this robber’s cave.

Respectfully Yours

Paul Lange United States Consul

Some articles published during the early 1880’s while scathing in their condemnation of New Brunswick and Canadian authorities defended the average citizen of St Stephen. The San Francisco Chronicle after condemning the lottery and failure to act by the authorities was less harsh with the ordinary citizens.

 San Francisco Chronicle 7 January 1884  

The better class of the people of New Brunswick and the press unite in denouncing the concerns as swindles, but the provincial government apparently winks at the matter and pockets the revenue derived from their operation.

It is also true that the St. John papers were strongly opposed to allowing the lottery to continue but the charge that the province benefited from the fraud was accurate. The revenue to the Canadian Postal Service was said to be $30000 a year and the St. Stephen postmaster was the highest paid in the country. Some local businesses also found the lottery profitable.

For instance, Boston Advertiser January 3, 1883, in a long expose of the swindle noted the involvement of local businesses including the St. Croix Courier:

Calling to their aid Archimedean lever, the operation secured a valuable adjunct and accessory in the St. Croix Courier, a weekly published at St. Stephen, whose editor, Mr. Main, not only printed the tickets, circulars, and other job work of the concern, but also published in his paper fulsome puffs and eulogies of the gift and showy advertisements announcing coming drawings. He also issued, as alleged, sundry special editions of his avowed paper for distribution in the United States, and a number of bogus called the St. Stephen Journal, St. Stephen News, St. Croix Courier-Monthly, which were made up with some news, miscellany and general advertising, but were chiefly devoted to the interests of the lottery. To do the man justice, he showed much cleverness and skill in so arranging these publications as to make them present the appearance of bona fide newspapers, the lottery matter being adroitly worked in as an incidental feature.

Finally, the pressure on the authorities became too great especially after the promoters made the fatal error of targeting people in Maine and New Brunswick.

Lewiston Sun Journal April 9, 1884:

So long as the great swindle New Brunswick Lottery of St Stephen found its victims on the other side of the line the people of that town and vicinity had not a word to say in denunciation of it but in a negative way afforded it protection and discouraged attempts to put it down. Now that their own have been gored they denounce the lottery as heartily as anybody and at a public meeting over which the mayor presided have passed resolutions appealing to the government of Canada to suppress the concern. It seems that several weeks ago the company sent out thousands of circulars announcing a drawing to be held at once with one grand prize of $50000 and others in proportion to the whole number of prizes aggregating nearly a half a million dollars. A number of persons in St Stephen and Calais purchased a large number of half and whole tickets although several of the numbers included in the lot were advertised as drawing prizes, repeated requests have failed to bring any response from the company. It Is probable that the company has overreached to an extent that will lead to its extinction, but it is no credit to the St Stephen people- that they waited till the eleventh hour before making an effort in this direction.

 Perhaps enlisting locals among the scam’s victims was a suggestion of one N.S Read of Princeton. No fraud in this part of the world in the 1880’s would have been complete without the participation of Read who had recently perpetrated the legendary Lakenwild property scam in Princeton and was likely hiding in St Stephen from purchasers of these lots. Many had recently discovered their lots were either underwater or had also been sold to several others. When he joined the St. Stephen lottery scam is unknown but Read would certainly have been a valuable addition to any criminal enterprise.

Nathan Read, notorious swindler was only person arrested in the lottery scam

Hugh McKay and M Horan local St Stephen men make bail for the notorious Read

Calais December 16- On Wednesday last Nate S. Read, the head and front of the St. Stephen swindle, was arrested at St. Stephen, on a local magistrate’s warrant, for illegal use of the mails. He waived examination and was placed under $2000 bonds for his appearance for trial today. Hugh McKay, one of Read’s partners, and M. Horan, a merchant, becoming sureties in $500 each, and Read himself being accepted for $1000. The arrest was kept very quiet, and the impression given that the charge was smuggling. It had the effect of thoroughly frightening all concerned in the lottery, and the building was hurriedly closed, and all hands came on this side of the river. The magistrate’s office was thronged this afternoon, but Mr. Read failed to appear. It is generally thought that the Dominion government have at last taken hold of the swindle in earnest, and that Read’s arrest we’ll close the affair for all time. It is supposed that all connected with the scheme are now on Read’s farm, a few miles above Princeton.

There were never any legal proceedings as Read wisely did not return for his trial. He went to ground in Princeton briefly but soon left the area entirely. He died in 1898 in Philadelphia. He must have retained some emotional connection to this area as his handwritten will leaves “The large crayon portrait of myself at Lakenwild to my niece Natalie Battie.”  

Hugh McKay’s home in St Stephen

It is interesting that the only person charged in this long-running scam was Nathan Read, an American and late comer to the group of conspirators who initiated and ran the operation. Hugh McKay and M. Horan, a local merchant, went his bail which was forfeited when he failed to appear for trial and McKay at least was acknowledge to be one of Read’s partners. He was involved in operation from the beginning and a major player in the swindle but never charged. In fact, it seems few in town shunned him for his participation in the lottery. He lived in one of nicer homes in St. Stephen and in 1890 was elected mayor. 

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