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FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-63UO
July 10, 1929.
SUBJECT: Misuse of Salvaged Postage Stamps.
Dear Sir:
There is enclosed herewith copy of a selfexplanatory letter addressed to the Governor of the
Board by the Postmaster General, with regard to the
practice of certain of the Federal reserve banks of
salvaging cancelled postage stamps and disposing of
them to collectors and others.
The Board is inclined to agree with-the
Postmaster General that in view of the small ambunts
received from the sale of the used stamps, which
would hardly apt)ear to justify the expenditure in
collecting them, and in view of the extensive misuse
of such stamps, it would be well for the Federal reserve banks to have the salvaging and sale of cancelled stamps discontinued.
An expression from you regarding the matter
would be appreciated.
By order of the Federal Reserve Board.
Very truly yours,
E. It. McClelland,
Assistant Secretary.
Enclosure.
TO GOVERNORS OF ALL F. R. BAHS
X-6340a
COPY
OFFICE OF THE POSTMASTER GENERAL
Washington, D. C.
July 8, 1929.
Hon, Boy A, Young,
Governor, Federal Reserve Board,
Washington, D. C.
My dear Mr. Young:
i
This department had been making extensive inquiries into the illegal traffic in postagd stamps with particular reference to the removal of precancdled. stamps ffcom wrappers and the reEiale of them to
stamp "brokers and otherfe. Thes6 inquiries indicate that the Department is losing an enormous amount annually in postal revenue! through
the reuse and resale of precanceled postage stamps.
In.this connection it has "been ascertained that for a number of
years, Federal Reserve Banks have been salvaging and selling used postage stamps to stamp collectors and others, on the representations that
they were to be used for philatelic purposes. The revenues derived from
such sales are credited to the proceeds of the hanks. It was found, however, that large quantities of such stamps had been washed, or otherwise
treated and sold to various persons and firms for postage purposes.
The records show that Federal Reserve Banks at the following places
have been disposing of canceled stamps as indicated!
Location of Bank
Boston, Mass.
New York, N. Y.
Philadelphia, Pa.
Atlanta, Ga.
Detroit, Mich.
Kansas City, Mo.
Dallas, Tex.
Saint Louis, Mo.
Purchaser
pub Stamp Company, Boston, Mass.
{Elmer Smith, Brooklyn, N. Y.
William H. Green, Camden, N.
Various dealers, Including an
itinerant stamp collector be*lieved to have been Wm. B. Hale.
Elmer Smith, Brooklyn, N. Y.
Elmer Smith, Brooklyn, N. Y.
Elmer Smith, Brooklyn, N. Y.
A. 0. Roessler, East Orange, N. J.
B. R. Yates, Joliet, 111.
E. A. Mosely, Saint Louis, Mo.
X-63%0a
2
Location of Bank
Chicago, 111,
Cleveland, Ohio.
Cincinnati, Ohio
Purchaser
L« V. Phillips, Chicago, 111.
L. J. Flerlage, Cincinnati, Ohio.
1, J. Flerlage, Cincinnati, Ohio.
One of the most flagrant cases of the use of these stamps which
has come to light is that of William H. Ore en, who was arrested at
Camden, IT. J., on June 7, 1929. He had been buying from the Federal
Reserve Bank at Philadelphia, Pa., all of their canceled stamps, paying the bank $10.00 per month for the same. He soaked the stamps off
the tags and papers to which they were affixed, and sold them to various persons. Green, together with eight others were indicted at Charleston, S. C. on May 28, 1929, for washing used postage stamps with intent
to reuse them for postage purposes, and conspiracy to commit such offenses. Among the others was William B. Hale, who was arrested in 1926
for similar offenses and sentenced to prison for one year and one day.
Hale was again sentenced on June 6, 1929, to serve twenty months to the
penitentiary. The cases against the others are pending. Hale received
directly or indirectly, the canceled stamps obtained by stamp collectors
from the Federal Reserve Banks at Philadelphia, Pa., Boston, Mass., New
York, jr. Y., Detroit, Mich., Kansas City, Mo., and Dallas, Tex.; he is
believed to be the person who obtained many of the canceled stamps from
the Federal Reserve Bank at Atlanta, 6a.
In February of this year it came to the attention of inspectors
that postage stamps of high denominations on registered shipments of
the Federal Reserve Bank at Cleveland, Ohio, were being lightly canceled and covered with transparent paper so that they could be recovered and returnd to the Assistant Cashier of the bank, who, it was
stated is an ardent philatelist. Obviously this practice afforded opportunity for the reuse oftij|estamps, and the temptation to do so would
be increased by the fact thai the stamps were of high denominations. Instructions were issued for t$ie postal employees at" the Contract Station
located in the Federal Reserve Bank at Cleveland to take such action as
may be necessary to protect the revenues on mailings emanating from the
bank. The matter was recently takentipby inspectors with the Chairman
of the Board of Directors of the Federal Reserve Bank at Cleveland, who
is also a member of the national organization. He indicated that an independent investigation would be made and the results communicated to
the inspectors; but so far the Department has not been advised of the
results.
The subject was also taken up with the Cashier of the Federal Reserve Bank at Atlanta, Qa., and another officer of that Institution,
and they have premised to furnish the inspectors with available information as to the names of stamp collectors with whom they have had dealings.
X-63UOa
3
In Aoril of this ye^p a report was received, from an inspector covering the disposition of used precanceled stomas "by the Federal Reserve
Bank at Saint Louis, Mo. The Controller of the bank stated, hovevor,
that the small amount derived from the sale of the used stamps barely
paid, for the labor used in recovering them, and on April 3, 1929. he
informed the inspector that instructions had been issued "?ith a view
to cooperating with the inspector and to prevent the improver use of
such stamps.
From the foregoing it will be observed that the stamps used by 'Federal Reserve Banks, because of their high denominations, are of particular interest to persons who may use them for improper purposes. The
small amounts received from the sale of the used stamos would not appear to justify the expenditure for the labor in collecting them, and
in view of the extensive misuse of them in the past, it will be greatly
appreciated if you will bring the matter to the attention of all Federal
Reserve Banks and branches thereof, with a view to having 6he sale of
salvaged used stamps discontinued and the stamps destroyed.
I shall be pleased to be advised of the action taken.
Very truly yours,
(Signed)
192975-0
Walter F. Brown
@FedFRASER