In the beginning this wasn't the Stockmen's Bank of Martinsdale, but the State Bank of Martinsdale. The State Bank of Martindale was incorporated September 30, 1909, with $20,000 in capital and deposits totaling $200,000. Opened in a small wood frame building, in 1919 construction of a new $15,000 brick bank building was begun.
The majority of its clients were local ranchers grazing mostly sheep in the surrounding countryside, which, for the bank, would not be a good thing. Drought hit Montana in 1917 and lasted for several years, forcing many farmers off their land. Eventually, the banks which held the mortgages on these farms would fail, as well. In fact, over half of Montana's banks would disappear as a result of the protracted drought, this one included. The bank closed its doors on Saturday, February 3, 1923 and was taken over by the Montana Superintendent of Banks the following Monday.
Though area ranchers were still doing relatively well, the bank failed nonetheless and it transpired that the cause may have been a combination of the economic climate, reckless lending practices, lax bookkeeping standards and a trio of brothers, one of which controlled the bank, who may or may not have embezzled bank funds. In any event, the bank's failure put a substantial damper on Martinsdale, a situation which the local ranchers found untenable. They took the situation into their own hands and, on July 8, 1923 incorporated and August 28 officially chartered the Stockmen's Bank of Martinsdale, with a capital of $20,000, in the selfsame building.
From that time, all the way through the "Dirty Thirties" and almost into the '50s, things went relatively smoothly. Then suddenly and without warning, on May 5, 1949 the
Big Timber Pioneer, and others, alerted readers to the merger of Stockmen's Bank of Martinsdale with the Continental National Bank of Harlowton due to a shortage at the former of between $80,000 and $208,000.
It turned out that cashier Olaf Haugan had concocted a scheme years earlier, in 1936 actually, wherein a woman named Annie Berg would cash cheques on an empty account, the money being charged to other accounts. The ploy was finally discovered when a depositor realized his account held substantially fewer funds than it should have. The bank was closed and its affairs immediately taken over by the Continental National Bank of Harlowton. Ultimately, it was discovered that $205,000 had been embezzled by the pair.
Many news articles on this story were published in Montana newspapers, beginning in May of 1949, when the news of "irregularities" at the bank first surfaced. The article quoted below pretty much wraps up the case, with the death of cashier Haugan having come a few months before and the death of Mrs. Berg occurring not much later.
Annie Berg Withdraws
Plea of Innocent
September 21, 1950
Helena—Annie L. Berg withdrew her plea of innocent to a charge of conspiring to misuse $143,912 In funds of the Stockmen’s Bank at Martinsdale and decided not to contest the government case against her.
As a result, Federal Judge W. D. Murray of Butte postponed sentencing the short, graying little woman on the first of eight counts in a federal grand jury indictment against her.
Murray stayed imposition of sentence on the charge of “conspiracy to misapply bank funds and make false entries” until October 1, 1951. But he sentenced her to 18 months on each of the other counts, the terms to run concurrently. He then suspended all of the concurrent sentences and placed her on probation for three years. Her bond was set at $3,000.
Murray indicated that sentencing on the first count was due to Mrs. Berg’s physical condition.
The indictment charges Mrs. Berg “conspired with Olaf Haugan, cashier of the Stockmen’s bank of Martinsdale, to embezzle and misapply moneys and funds of a bank insured by the Federal Deposit Insurance corporation by an officer of the bank and make and cause to be made false entries in the books, reports and statements of the bank with intent to defraud the bank and Federal Deposit Insurance corporation.”
Haugan died early last year after the shortage was discovered. The government claims the two conspired to misapply funds for 13 years, between 1936 and 1949. It alleged Mrs. Berg wrote checks which her account could not cover—but that Haugan cashed the checks, charging sums to other accounts.
After bank examiners uncovered the alleged manipulations the Martinsdale bank was taken over by the Continental National bank of Harlowton. State Bank Examiner W. A. Brown said the total shortage in bank funds was $205,000—one fourth of its total assets.
From the Big Timber Pioneer