HEADQUARTERS, Key West, October 17, 1861.

Brigadier General L. THOMAS,
Adjutant-General, U. S. Army, Washington City, D. C.

GENERAL: On yesterday I had the honor to report in an indorsement upon a communication from the U. S. district attorney here that the steamer Keystone Stae had got under weigh, not permitting me to write in extenso. I now inclose a copy of the letter* from the American counsul at Havana which I showed to Captain Scott, U. S. Navy, immediately after its receipt at about sundown. The Keystone State sailed and captured the Salvor at about 11 p. m. the same night (13th). The Salvor was brought in at sunrise the next morning. I boarded her and found the evidences so strong against her and against all on board that I sent the officer of the day to arrest Mr. McKay, the owner, also two persons named ball and Doctor Barrett. These men are now confined in the fort.

The U. S. court here then asserted jurisdiction over this case which has been resisted by the naval commander, who refused to obey the arrest served on him and sailed away after two hours' notice to me of his intent, requesting at the same time that the three prisoners should be sent on board. I was not prepared to lend myself to such hasty action in the presence of a regularly organized U. S. court and declined doing so. It is very probable others on this Key and elsewhere are implicated in this treasonable attempt to aid the rebels.

This morning I arrested and have confined Mr. Charles Tifft, in charge of a large mercantile firm here. I have sufficient evidence to know that he has furnished McKay with means very recently on a late visit to the Havana. The unexpected sailing of the Keystone State to avoid the U. S. civil authorities carries off evidence which might trace out others and enables them to screen themselves from immediate suspicion. These prisoners will be sent to New York the first opportunity which presents, which may be when the steamer McClellan returns from Fort Pickens. I will now give a succinct history of the Salvor.

This propeller was built for a wrecker on the Upper Lahased for McKay for the same purpose on the Florida Reefs. No business of that kind McKay employed her to carry cattle from Pease Creek to Havana and for the troops here and at Tortugas. The blockade stopped that and learning that Hartstene, late commander, U. S. Navy, was negotiating for her, I seized her on her next arrival here. The steamer was then employed by the quartermaster's department and made one trip to Pickens and to Tortugas. Running constantly in salt water her boilers burned out and I had a survey made on her by the assistant quartermaster and Assistant Engineer Grier, U. S. steamer Crusader, who reported her unsafe and unfit to go to sea. She was then anchored under charge inside the harbor. About the last of August having occasion to procure horses from the Havana the acting assistant quartermaster informed me that Captain McKay thought his steamer would be able to go and return with them. The quartermaster returned in about a week and reported that the steamer had broken down and could not be repaired for some time. Since then she has remained in the Havana. The horses, however, were purchased and arrived here in a schooner about a week since. The money was advanced by Mr. Tifft throught Mr. McKay. The

quarter-

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* Omitted.

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