In Placerville, Calif., a stockbroker named D. C. Williams took advantage of the latest high-tech telecommunications gear in an insider trading scam. The year was 1864. Mr. Williams, claiming to be in the stagecoach business, rented a room at a hotel called the Sportsman’s Hall, where the State Telegraph Company had offices. Sitting in his room, within earshot of the receiving equipment, Mr. Williams simply decoded the messages about business deals as they clattered in. When he tried to bribe the telegraph agent for exclusive access to news on an important mining lawsuit, the agent turned him in, and Mr. Williams was arrested.
Or take the case of John Broady, an audacious wiretapper who in the mid-1950s set up an eavesdropping nest at an apartment in Midtown Manhattan. Working with a source inside the phone company, he set up equipment capable of tapping and simultaneously recording 10 phone lines in the area. Among Mr. Broady’s clients was the drug company Pfizer, which hired him to tap the phones of its own employees and those of a competitor, Squibb.
Mr. Broady was ultimately undone by an anonymous tipster, most likely someone inside his organization. Bizarrely, at his trial he claimed there was a nefarious Chinese angle to his scam — he said he’d used the equipment to spy on a rogue Chinese Air Force general who’d stolen millions from his government. Mr. Broady said that someone who wanted to stop the investigation had killed one of his own agents in Mexico. “I didn’t want them to knock me off, like they did my man,” he said, breaking down in tears. “I have a wife and kids.” The jury thought it was an act, and Mr. Broady received a two- to four-year prison sentence.The Sacramento Daily Union for 13 August 1864 reported that
The San Francisco Bulletin has the following in connection with the operations of D. C. Williams, mentioned in the Union yesterday :
Williams has been twice ia the employ of the State Telegraph Company, and was always suspected of bad faith, to say the least. He was in the employ of the Alta Telegraph Company during the early days of Washoe, and it is said that at that time be was in the habit of regularly taking copies of the dispatches from the office to a room near by, where they were made known to outside parties who were dabbling in stocks. This practice he is said to have carried on dally for a series of weeks, until the Alta line consolidated with that of the State Telegraph Company, when he obtained employment with the latter. It is a notorious fact that one of the operators in Washoe, at about the same time became a large owner of "feet" through stock operations which his knowledge of telegraph secrets enabled him to carry on. The criminal action of Williams, while exposed by the Alta line, was not suspected when the State Telegraph Company took him into their employ; but they soon began to "smell a rat," and although they could not prove that he divulged any of the business of the office, still they considered the evidence sufficient to discharge him. They became hard up for operators soon after and again engaged him, upon his promise to act in good faith, but they soon discovered thai he was again in stock speculations, and informed him that he must either drop stocks or leave the office. Williams chose the latter alternative, and turned stock broker. He went into the First Board, and soon became a leading spirit. From his utter recklessness and want of judgment, many were surprised that he existed as long as he did; but fortune seemed to favor him — surely it was not judgment — he was at one time supposed to be worth $80,000. His luck, however, deserted him, and be failed. His friends set him up again, upon his promise to do a safe, legitimate business; but the spirit of gambling had got possession of him and he was continually buying and selling 'short', until in a few months be was again bankrupt. Again and again did his friends assist him in this manner, but to no purpose; and at last, to retrieve his fortunes, he went to Washoe, and, from his course since he left here seems to be ready for any undertaking, however dishonorable, which promises to pay.
Upon the first injunction decision in the Savage and North Potosi case, it will be remembered that he was at Washoe, and informed his friends here of the decision, and then demanded of the Telegraph Company to send a long dispatch that would have occupied their lines for several hours, giving his friends of course time to operate. The company refused to accede to Williams' modest request, and he sued them for $80,000 or thereabouts as damages! He has probably been telegraphing and corresponding with a number of firms here, with the understanding that he is to share in the profits of all speculations wherein he gives the evidence to warrant "pitching in". Pease & Grimm say that they know nothing of Williams' operations save what they have heard from others. The above letter they have never received. They say that they have always looked upon him as utterly unreliable, and have paid no attention to his dispatches or letters. Some time since Williams telegraphed to that firm to "sell short …" but they did not heed his advice at all. Had they done so they would have made a handsome thing.
They afterwards received a letter from Williams, stating that he had sneaked into the office …. and that the stock must go down, but from a knowledge of his character they paid no heed to his advice. They say the only speculation ever existing between themselves and Williams was on Lady Bryan stock, and that was months ago. Williams sent to the firm to get bail for him, which they refused to do.
His conviction is expected under a law which makes it a misdemeanor, punishable by imprisonment, to divulge or make use of any information which may be acquired from the telegraph office in a contraband manner, whether the party so offending is an employe of the company or not. The telegraph managers in this city say that had Williams succeeded in bribing the boy at Sportsman's Hall, and thus acquired the privilege of working the line in his stead, still the operators who received the messages at San Francisco could have detected the deception by the peculiar "click", which can be be easily recognized by the ear of a skillful operator at a distance of hundreds of miles as a man's handwriting can be by ocular inspection. A first-class operator can tell the "click" or writing of every operator on a long route, and recognize who it is that sends him messages.