25 November 2014

The first whistleblowers

In today's age of whistleblowers, it's worth noting that the practice is hundreds of years old. One of the first, although not commonly recognized as such, was at the center of one of the most important Supreme Court cases in our nation's history.

In 1816, the Congress of the United States passed a law which provided for the incorporation of the Second Bank of the United States. The Bank first went into full operation in Philadelphia, Pennsylvania. In 1817, the Bank opened a branch in Baltimore, Maryland. Soon thereafter, the General Assembly of Maryland passed an act designed to impose a tax on all banks in the State of Maryland that hadn't been chartered by the legislature (the Baltimore Branch of the Second Bank of the United States was the only such bank).

James W. McCulloh (right; misspelled McCulloch in the eventual Supreme Court case; and not to be confused with James H. McCulloch, who was the customs collector in Baltimore at the same time), cashier of the Baltimore Branch of the Second Bank of the United States, refused to pay the tax. The State of Maryland argued that because the Constitution did not specifically state that the federal government was authorized to charter a bank, the Bank of the United States was unconstitutional. The courts in Maryland agreed; but in a landmark decision, the Supreme Court reversed. Chief Justice John Marshall famously expounded upon the scope of Congressional powers under Article I of the Constitution, and in particular, the Necessary and Proper Clause.

Most of that history is well known. What is less known is how the case came to the courts in the first place. The Maryland law passed to tax the Bank included the following provision:
And be it enacted that the President, cashier, each of the directors and officers of every institution established or to be established as aforesaid, offending against the provisions aforesaid shall forfeit a sum of $500 for each and every offence, and every person having any agency in circulating any note aforesaid, not stamped as aforesaid directed, shall forfeit a sum not exceeding $100, every penalty aforesaid to be recovered by indictment or action of debt in the county court of the county where the offence shall be committed, one-half to the informer and the other half to the use of the State...
John James was the informer who filed the lawsuit against McCulloh for failure to pay the tax, knowing that he would recover half of the prescribed penalties (today, this sort of whistleblower claim is sometimes called a qui tam action). But because McCulloh ultimately prevailed, John James was never able to recover from his whistleblower claim. Maybe that's one reason why very little is known about James. A contemporary directory of Baltimore lists a tin manufacturer named John James. Beyond that, there isn't much to go on.
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