I don't know either. I do know the guy has probably had the bill since at least the sixties and possibly earlier. In the 80's when I lived in Mississippi, $500 bills were still in circulation. The lady we dealt with at the bank offered to hold one for us. I never took her up on the offer.
I think at one time the larger bills did circulate. With the rise of money laundrying and the drug problem, the fed has taken everything but $100s out of public circulation.
The large-denomination bills - $500, $1000, $5000, $10000 - were issued to the public until 1969, although printing stopped during the Second World War and they've been phasing out of circulation ever since. The $5000 bill and lower are in fact still legal tender, and must be accepted accordingly. The $10000 bill is no longer legal tender, but can be exchanged (for Bennies!) at a bank once authenticated. It was only the $100,000 bill that was strictly for transfers between Federal Reserve banks. Come up with one of those, and you'll be calling Leavenworth home. =)
I think you meant to say "With all those people with the nerve to think they are free enough to carry large sums of money around without the government knowing about it..."