On September 5, 1876, Seattle pioneer Henry L. Yesler (1810?-1892) enters a not-guilty plea to a charge of illegal gambling. The charge arises out of his attempt to dispose of much of his property through a lottery authorized by the territorial legislative assembly the previous year, in a law that has since been ruled null and void. The lottery is never held and no prizes are awarded, although an unknown number of tickets have been sold. Yesler will later be convicted on the gambling charge by District Court Judge J. R. Lewis, but punished with only a relatively small fine and court costs. In subsequent decades, Yesler's actions with regard to the lottery will be characterized as fraud by several historians and journalists, but that allegation does not appear to be justified by facts or law.
Ups and Downs
Henry Leiter Yesler, originally from Maryland, paddled up Puget Sound by canoe in October 1852 to reach Elliott Bay, where the Denny Party had landed on Alki Point 11 months earlier. On the bay's eastern shore, land claims had been filed and rough cabins built by William Bell (1817-1887), Arthur (1822-1899) and David (1832-1903) Denny, Carson Boren (1824-1912), and David S. "Doc" Maynard (1808-1873). Yesler told them of his plans to build a steam-powered sawmill there, and Boren and Maynard agreed to give him from their claims the land necessary for his plans. In his own right, Yesler filed a 320-acre Donation Land claim for himself and his wife on what came to be called First Hill.
The mill, Seattle's first industry, opened in March 1853, and for the next several years Yesler employed at one time or another almost every male settler and a large number of Native Americans. This economic engine was critical to the early survival and growth of the city. His wife, Sarah (1822-1887), joined him in 1858, and together they began to develop some of the property that Yesler had acquired, much of it in what was becoming the city's financial and business center near the waterfront. But Yesler was not a good businessman, and by the end of the 1860s he was deeply in debt, mostly due to wanton borrowing and poor investments. As early as 1871 the country's leading credit agency had warned that Yesler was in a "hampered condition" and too indebted to be considered "safe" (Finger, 121). He offered to sell much of his waterfront holdings, including a recently built lumber mill, to two of his major creditors for the bargain price of $65,000, but was rebuffed.
Things just got worse from there. In 1873 the industrialized world was struck by a major economic depression, the effects of which would last several years. That same year, fellow pioneer Arthur Denny sued the Yeslers to foreclose on a mortgage. By 1875, near the end of the first of Yesler's two one-year terms as Seattle's mayor, his income from all sources was barely adequate to service the interest payments on his debts. The pioneer who had done so much for the city in its infancy was becoming increasingly desperate.
A Grand Idea
Although Yesler's financial affairs were complex, his essential problem was simple, in large part the result of unfortunate timing, poor choices, and bad luck. Henry and Sarah were property rich and cash poor at a time when the real-estate market was moribund. Much of their indebtedness was delinquent or coming due. They had to find a way to convert real estate into cash, and this necessity was the mother of the idea to stage a lottery that would have as its primary prizes much of their real-estate holdings.
It's not known if the lottery idea originated with Yesler, or if one of the couple's many friends in Seattle's business community, perhaps even a frustrated creditor, first suggested it. The latter seems most likely; Yesler was unsophisticated, even cavalier, about financial matters. Once established in Seattle, he had used his property holdings, most of which had cost him nothing, as collateral to borrow large sums to finance various business ventures, most of which failed and cost him much. He also loaned money without security, was lax collecting rents, and co-signed on the loans of others when prudence dictated otherwise.
Now the chickens had come home to roost, and however the idea arose, a lottery seemed like an elegant solution. It was straightforward, relatively inexpensive to stage, and would enable the Yeslers to convert real estate to cash at a time when the free market would not. But there was one major problem: Lotteries were explicitly banned under territorial law and had been since the first meeting of the territorial assembly in 1854. Also, a Seattle anti-gambling ordinance, while not specifically mentioning lotteries, was worded broadly enough to encompass them within its proscriptions.
Where There's a Will ...
Yesler, or someone on his behalf, glimpsed some daylight through the statutory prohibition. The territorial law criminalized only those lotteries "not authorized by law" ("An Act Relative to Crimes and Punishments ..."). Early in November 1875, with the legislative assembly in session, Yesler showed up in Olympia to ask lawmakers to authorize a lottery sponsored by him, in which he would put up much of his property as prizes. He sweetened the request with a pledge that 10 percent of the net proceeds would go to support the territorial university and other public schools. On November 6, William Pickering (1798-1873), a former governor of the territory and King County's delegate to the territorial Council (the equivalent of today's state Senate), introduced a bill that embodied Yesler's proposal.
What happened next is a bit mysterious and evokes a quote attributed with near-equal frequency to German statesman Otto von Bismarck (1815-1898) and American humorist Mark Twain (1835-1910): "Laws are like sausages, it is better not to see them being made" ("On Making Law ..."). Through machinations that remain obscure, Pickering's bill containing a provision for the support of public schools was assigned for further study to the Council's Committee on Roads and Highways. When it emerged, schools were out and a wagon road was in.
The revised version was titled "An Act to Aid in the Construction of a Wagon Road Across the Cascade Mountains." It mandated that 10 percent of the net proceeds of any lottery conducted pursuant its terms be allocated for that purpose. The Council passed the amended version and sent it to the House, where minor additional changes were made. The bill was returned to the Council on November 12, 1875, the last day of the session, where it was quickly approved. Later that day Governor Elisha P. Ferry (1825-1895) signed it into law. Two days earlier both houses of the legislative assembly had petitioned the U.S. Congress to allocate $50,000 "for the construction of said wagon road" ("Memorial"). Clearly, lawmakers had a wagon road connecting King and Yakima counties on their minds, and it was considered a more pressing need than improvements to public education. Public opinion, as reflected in the newspapers of the day, was split on the issue, and on the desirability of permitting a lottery for any purpose whatsoever.
Yesler's Grand Lottery
The new law didn't mention Yesler by name, nor did the word "lottery" appear anywhere in its 16 sections. Rather, it stated, at the outset:
"Be it enacted ... That any person residing in this territory, who is desirous of aiding in the construction of a wagon road across the Cascade Mountains, shall have the right to dispose of any property, real and personal, situate in this territory, by lot or distribution, under such restrictions and conditions as are provided in this act'' ("An Act to Aid ...")
There followed detailed requirements, including that a license be acquired from the board of county commissioners where the "disposition" was to take place, the posting of a bond, and the transfer of subject properties to a trustee pending distribution.
Yesler wasted little time. In mid-December he had lottery tickets printed by Clarence B. Bagley (1843-1932), a friend and ally who happened to be the territorial government's official printer. Before the year was out, Yesler filed an inventory with the King County auditor, posted a $30,000 bond (with mostly borrowed funds), and was issued a lottery license by the King County Board of Commissioners. He had started advertising in various newspapers in the territory even before receiving the license, and would continue to do so in the months leading up to the drawing, scheduled for July 4, 1876, the nation's centennial.
Yesler announced that there would be a total of 5,575 prizes. Among the assets initially offered was $300,000 (his estimate) worth of Seattle real estate, with the grand prize being "The Seattle Saw Mill and Mill property, owned by H. L. Yesler" ("Grand Lottery"). Later advertisements added to the pot 4,500 cash awards, 61 pieces of farmland, and 1,011 lots in various parts of Seattle, many from the Yeslers' original claim, but 470 of which were bought from others specifically for the lottery, paid for in part with the proceeds from the sale of lottery tickets.
Sixty thousand tickets at $5 each, or 11 for $50, were to be offered. The July 4 drawing was to be made by blindfolded children reaching into two "glass wheels" ("A Grand Distribution!"), one containing slips with ticket numbers and the other containing slips with the description of one of the 5,575 prizes. The two slips would then be paired, and the winner recorded. One of the smaller mysteries of Yesler's plan was the unmentioned mathematical fact that, allowing just 30 seconds for each drawing, it would take those blindfolded children nearly 48 hours to complete their task.
Things Fall Apart
Yesler soon faced myriad problems. Simply selling 60,000 tickets seemed unlikely in a county with a population of only about 3,500, situated in a corner of a sprawling territory having barely 50,000 widely scattered men, women, and children (not counting Native Americans), almost no decent roads, and no easy means of communication.
Aggravating the situation was the springing up of competing lotteries in King County. One of the first, sponsored by Benjamin Conkelman, was called the Gold Coin Lottery and offered $20,000 in cash prizes. The drawing was on April 3, 1876, and on April 8 the anti-lottery Washington Standard gleefully reported: "The Gold Coin Swindle has got through with its drawing. Its managers sold only half the tickets, and the prizes were reduced accordingly ... Vanity Fair is still in full blast. An attempt was made to close it, but the managers entrenched themselves behind the bulwarks of the law ..." ("The Gold Coin Lottery").
The mention of "Vanity Fair" referred to a rather notorious Seattle bar owned by one Val Wildman, who advertised it as "the 5-cent saloon" ("Vanity Fair"). Wildman organized the Centennial Lottery, with 50-cent tickets, drawings every day, and a promise that "particulars as to scheme will be fully explained at their place of business" ("The Centennial Lottery!"). Whether they were fully explained is unknown, but the Wildman plan had a whiff of opportunism about it and a connection to his unsavory watering hole. In the end the Centennial Lottery was no more successful than Conkelman's, but this did not dissuade Wildman from procuring a second lottery license the following August.
Many people who believed all gambling was immoral had grudgingly accepted what they thought would be a single lottery intended to benefit a single old pioneer, Henry Yesler. With the likes of Conkelman and Wildman jumping in, the opposition hardened. The few newspapers of the day with relatively wide circulation were divided on the issue. The Puget Sound Dispatch, edited by future Seattle mayor Beriah Brown (1815-1900), had reluctantly supported a lottery for Yesler, but after the Gold Coin debacle printed an editorial repentance that summed up the feelings of many:
"[I]n an unguarded moment, surrounded by a popular sentiment that it seemed folly to resist, urged by considerations of personal friendship towards parties interested ... we yielded our public assent to a measure which our conscience condemned ... Under the act intended for the disposal of Mr. Yesler's property in a manner that would revert to a worthy and desirable object, the County Commissioners have licensed other lotteries which are mere gambling schemes" ("Public Demoralization").
Even after the unsavory Wildman and Conkelman affairs, Yesler had no choice but to persevere. He tried desperately to drum up business for his lottery, running large ads in newspapers around the territory, printing and distributing circulars, and encouraging "agents" to whom he would sell discounted tickets to "get up clubs at once and remit" ("A Grand Distribution!"). Despite all, he simply could not sell enough tickets. In mid-June 1876, two weeks before the scheduled drawing, Yesler had to announce that it would be delayed until January 1877. At about the same time, he wrote to Clarence Bagley in despair, advising him that "the sale of tickets is very dull. I am at a loss to know how I am to get out of this trouble" (Finger, 125). Ironically, the statute that had allowed him to get into "this trouble" would also provide a way out. Not a perfect way, by any means, but a liberation all the same.
A Messy End
After the failure of Conkelman's and Wildman's lotteries, upstanding citizens opposed to gambling formed an unnatural alliance with gambling-house proprietors who didn't like the competition. Acting in concert, they pushed authorities to bring criminal complaints against several lottery operators, including Yesler, alleging violations of the territorial statute that explicitly banned lotteries "not authorized by law" ("Of Offenses Against ..."). The complication, of course, was that Yesler and the others were conducting lotteries that had been authorized by law. For availing themselves of the benefit of one statute, they found themselves charged with violating another.
A grand jury was summoned in Seattle, and on August 22, 1876, District Judge J. R. Lewis gave the jurors their charge, in which he explained the law they must apply to the facts of the cases to determine if any criminal charges should be laid. He noted that although it was not his place to judge the wisdom of legislative acts, it was his job to judge their validity. There were limits on what kinds of laws a territorial assembly could enact, he explained, and the law Yesler and the others had relied upon had exceeded those limits. It was therefore null and void, and the grand jurors could not accept it as a defense to the gambling charges.
Judge Lewis's reasoning was logically unassailable: Although the first section of the lottery law purported to grant the rights it provided to "any person in this Territory" ("An Act to Aid ...," Sec. 1), the very last section of the statute limited its operation to "the counties of King and Yakima" ("An Act to Aid ...," Sec. 16). The powers of territorial governments were defined and proscribed by federal law, and since 1842 Congress had mandated that "The legislative assemblies of the Territories shall not grant private charters or especial privileges ..." ("The Territories"). By limiting the operation of the lottery law to King and Yakima counties, the territorial assembly conferred an "especial privilege" not equally available to other counties. For that reason alone, the lottery law was stillborn, void ab initio, and of no force and effect. One can question the fairness of prosecuting people under one law for acts taken in reliance on the terms of another, but Judge Lewis's ruling was clearly correct.
Lottery operators, including Conkelman, Wildman, and Yesler, were charged by the grand jury. Yesler pleaded not guilty on September 5, 1876, and when convicted some days later he received the most lenient treatment, let off with a $25 fine and court costs. Wildman refused to pay a $150 fine levied against him and spent weeks in jail as a result. Conkelman's punishment is not readily ascertained.
Fraud or Not?
A number of subsequent accounts (including an essay previously posted on this website) have alleged that Henry Yesler's lottery was a clear case of fraud, but in strictly legal terms this is simply not correct. To prove fraud, whether civil or criminal, requires evidence of a number of elements, including proof that a defendant made a false statement of fact with knowledge that it was false. There is simply no evidence that Yesler did this, either when setting up the lottery or during its promotion. He may have somewhat overstated the value of his real estate, but that would fall more into the category of opinion or permissible puffery, and had nothing to do with the failure of the overall scheme. He complied with the technical requirements of the lottery statute. There is no evidence that he knew that his lottery would ultimately be ruled illegal and canceled, nor did the poor ticket sales that delayed the scheduled drawing indicate anything more than perhaps an initial excess of exuberant optimism. In short, Yesler may have been culpable in some way on some theory of law, but fraud is not the one.
Then there is the question of what happened to the money that was collected through the sale of tickets. Records are sparse, and there is not even a rough accounting of just how much Yesler collected in ticket sales. One history, written more than 40 years later, states, without documentation, that "some $30,000 said to have been collected from the sale of tickets was not accounted for ..." (Hunt and Kaylor, 205), but the truth is that no one has the foggiest idea. It is at least possible that this was the $30,000 that Yesler posted as a bond, but it is unknown if that was returned after the lottery's cancelation to those who had staked him the money. The same source refers to a letter found in Clarence Bagley's papers in which Yesler writes to tell his friend that he will pay the $700 owed for the printing of the tickets "as soon as he can raise the amount" (Hunt and Kaylor, 205). This is hardly the act of one rolling in ill-gotten dough, and it seems most likely that Yesler enjoyed no windfall, if he even profited at all.
If there was any money left and Yesler did keep some of it, individual purchasers probably could have sued for refunds, and this may have happened. (Between 1861 and 1887, Yesler was involved in more than 200 lawsuits in King County alone, in most of which he was the defendant.) But it appears that there was little or no money remaining by the time the lottery was ruled illegal. Some of the proceeds went to make partial payment on the 470 lots that were included as lottery prizes. Yesler's advertising bills alone would have been substantial -- his display ads in several territorial newspapers were the largest seen up to that time, and they ran for months. (The stoutly anti-lottery Washington Standard kept publishing the ads long after the law was nullified, without charge and apparently for the sole purpose of rubbing Yesler's nose in it.)
In 1877 the territorial assembly, which bore primary responsibility for the ill-considered and fatally flawed lottery bill, passed "An Act to Provide for the Recovery of Certain Money Raised to Aid in the Construction of a Wagon Road Across the Cascade Mountains." It directed the King County auditor to demand that any and all lottery money raised be paid into the public treasury. No hard evidence has come to light that there was any such money, and this author is aware of no record of any such payment in any amount ever being made by anyone.
Firm conclusions are rendered impossible by a near total lack of contemporaneous documentation, but it seems that about the worst thing that Yesler could be accused of was persuading the legislative assembly to give him a possible way out of his financial dilemma. Invoking public schools as additional beneficiaries of the scheme was more ploy than a reflection of any deep concern for public education, a conclusion supported by his failure to object when the territorial assembly thought a wagon road more deserving. But after that initial step, matters quickly spiraled out of Yesler's control. Viewed most benignly, he can even be considered a victim, and it is a fact that he remained a respected and widely loved public figure in Seattle even after the lottery experiment's ugly end. Yesler was elected mayor again in 1885, and later survived, unscathed, grumblings from the pulpit and society folk when, in 1890, three years after Sarah's death, he married Minnie Gagle, a second cousin nearly 60 years his junior. In the preceding decade his financial luck had finally turned, and Yesler had become one of the city's wealthiest citizens when his real-estate holdings soared in value.
The judgment rendered by most of his contemporaries on Yesler's role in the lottery mess seemed to be that he was an old man who had given Seattle and its people much, and if he had profited at all from the lottery, it was but a little, and should not be begrudged. Most if not all ticket purchasers just absorbed the small loss they incurred. Yesler apparently worked out matters with those from whom he had partially purchased lots to include as prizes. The $30,000 bond may well have been returned to those who had loaned him the money to post it.
Clarence Bagley, in his History of Seattle, perhaps best summed up the aftermath of the debacle: "The affair was soon forgotten and if there were any dark spots in the history they were covered up and allowed to hide themselves from sight" (Bagley, 219).