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TRIAL OF THE WEST OF ENGLAND…

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TRIAL OF THE WEST OF ENGLAND BANK DIRECTORS. At the Central Criminal Court, London, on Tuesday (before Lord Chief Justice Cockburn and a common jury), the trial of the late West of England and South Wales District Bank directors was commenced. The names of the impeached directors are as follows Mr. Jerom Murch (chairman), Mr. George Hare Leonard, Mr. Joseph Coates, Mr. Alexander Allen, the Rev. Hereford. Brooke George, and Mr. Clement Lucas (directors), and Mr. John Pomeroy Gilbert, the manager. The indictment contained over 50 counts bat the main charge against the defendants was that, in their position as officials of the bank, they jointly conspired to issue fictitious balance sheets, in order to deceive the public as to to the real condition of the bank; and that they paid large dividends out of the supposed profits of the bank's operations, whereas it was at that time in a hopelessly insolvent state. The counsel for the prosecutinn, which was insti. tuted by the Treasury, were Sir John Holker, Q.C., Sir Hardinge Stanley Giffard, Q-C., Mr. A. Collins, Q.C., Mr. A. L. Smith, and Mr. M'Kellar. For the defendants—Mr. Day, Q.C., appeared on behalf of Mr. March Sir Henry James, Q.C., and Mr. E. Clarke, Q.C., for Mr Leonard; Mr. Herschell, Q.C., M.P., and Mr. Mortimer, for Mr. Alexander Allen and the Rev. Mr. George for Mr. Gilbert, Mr. Charles and Mr. J. F. Norris; for Mr. Coates and Mr. Lucas, Mr. Littler, Q-C., and Mr Petheram, Q.C. The defendants, who surrendered to their bail at ten o'clock, and pleaded not guilty, were accommodated with seats in the spacious dock of what is known as the "old court." Sir Johg Holker rose soon after ten o'clock to open the case for the prosecution, and began by speaking of the early history of the bank, and then proceeded to deal with the connection of Messrs. Booker and Company and Messrs. Booker and Company (Limited) with the bank. He read copious extracts from the evidence given before the magistrates during the pre- liminary examination at Bristol, the object being to show that the bank directors invariably treated the connection of Booker and Company with the bank as of value, yet, in reality, the bank's prosperity de- pended very much on the well-being of Messrs. T. W. Booker and Co., or, as the firm was afterwards styled, Messrs. Booker and Co., Limited. Voluminous cor- respondence between Mr. Gilbertson and the firm of Booker and Co., and Mr. Murch, the chairman of the bank, was read. The learned counsel put it to the jury that the position of the bank depended on the prosperity of Booker and Co. that there was no pros- pect of the prosperity of the latter, and that therefore they had no right to treat the shares of Booker and Co. as part of their available assets. Letters that passed between Messrs. Gilberson and Murch in 1875 were read in support of this suggestion, and a com- munication from the pen of Mr. Jeffreys, the manag. ing director of Messrs. Booker and Co. (Limited), whose qualification was paid by the bank, stating that until trade improved generally they could not hope until trade improved generally they could not hope for a better state of things. In December, 1875, Booker and Co. and Booker and Co., Limited, owed to the bank £ 556,365. This was treated as a good asset, and in that year, although there wa3 no charge on that head, the bank declared a dividend of 8 per cent., with a bonus of 2, practically a bonus of 10 per cent. Reference was then made to the fact that Booker and Co. ultimately became Booker and Co. (Limited), whereby the charges on the works, collieries, and lands of Messrs. Booker were extinguished and got rid of, and the bank had a limited liability com- pany to look to. In 1876, Booker aud Co. (Limited) owed the bank £ 524,000 odd, and in the next balance sheet that sum was included in the item ".Other secu rities, bills, &o., £ 4,226,859 15s. 9d." The learned counsel then proceeded to dilate on the subject of in- surances on Mr. Booker's life, and remarking on the fact that he (Mr. Booker), a man 45 or 46 years of age, was insured for £90,000, he asked how the direc- tors could place that item in the balance sheet at £ 100,000 ? The real value ef the policies was only about il2,000, and if the directors had stated the truth, he was obliged to say the truth only, the latter sum would have been put down. The Lord Chief Justice But £1(\0,000 was their value. Sir J. Holker No, my lord, £90,000 with bonuses. The Lord Chief Justice They would have realised that sum if be had died. Sir J. Holker Yes. If he had died next day they would have been worth £ 90,000, plus something. Continuing his remarks the learned counsel summed up with the argument that if the defendants had, knowing these facts, put forth the balance-aheets which had been published, they were guilty, and in supporting his case he spoke of the transactions with the Plymouth and Abernant Company, E. J. Wait and Co., Cardiff, and others. In concluding a speech which lasted five hours, he asked the jury not to be deterred frpm their duty by the position of the de- fendants, who, owing to their intelligence ought to be more careful not to be suspected of deceiving the public. The trial will be resumed at the Guildhall at 10.30 this (Wednesday) morning. On Wednesday morning, Mr. Day, Q.C., having handed in the late Bank's deed of settlement, Mr. E. G. Clarke, public accountant, Bristol, and one of the official liquidators of the late West of England and South Wales District Bank, was the first witness called. He said the bank closed its doors in the usual way on Saturnay, the 7th of December, 1878, and did not open again. On Monday, the 9th December, a petition to wind up the Bank was presented, and about the 11th or 12th Mr Turquand and himself were appointed provisional liquidators, taking possession of the books of the concern. Subsequently Mr. Turquand and himself were made official liquida- tors, and on the 20th of the month witness and his co- liquidator presented arftfficial statement to the share- holders. Mr. Murch, one of the defendants, was present, and so were some of the others, but he was not sure about all. In answer to the learned consel, Mr. Clarke then proceeded to detail the liabilities of the bank. He stated that on current accounts the liabilities were £1,474,345 Os 9d, and on deposit receipts £ 1,692,319 lis 9d. The statement of liabilities was then put in, and witness went on to give evidence concerning certain assets to th& bank. He said that the doubtful and bad debts were set down at jE810,804, but the liquida- tors thought they might be worth £249,898. and, roughly speaking, [that had proved a correct estimate. The item of bad and doubtful debts" was entered in'- the books of the bank as debts simply, Then in the books of the bank, under the head investments," there appeared the sum of £776,929 4s 10d, and this the liquidators allowed £159,645 7s 8d but witness could not say whether that was a correct estimate, for the chief items in the amount were not yet realised -they. were the amounts owed by Booker and Co., Limited, and the Abernant and Plymouth Iron and Coal Company Limited. The Lord Chief Justice: Up to the present time is it your impression that your estimate is a proper sum? Witness I should not like to commit myself, but I do not think it will exceed that. In reply to Mr. Collins, witness further stated that wtn tr.fi! pf nfHITt? +"■ "l"Ht liabilities other than on capital amount. Referring to the abstract balance sheet for September 30, 1876, witness said among the assets there were the follow- ing Messrs. T. W. Booker and Co. (Limited), investment account, jB199,242 debenture account, £120,500 fully paid-up shares, £104,000; and life policies account, £IOO,OOO-total, about £ 523,700. On the 31st of December, 1877, the accounts were the same. As regarded the Aberdare and Plymouth Com- pany, in 1876, the debenture account stood at £152,733 6s 8d, and other accounts JE7,909 17s Id total, £160,64338 9d. In 1877 the debentuae account stood at £ 153,330; the mortgage account at £ 2,340 38 7d; and the consolidation account at £ 3,331 3s Id; total, £ 159,001 6a 8d. Questions respecting Messrs. T. W. Booker and Company's policies account were then asked, in answer to which witness, referring to page 1,305 of the bank ledger, said that on the 22nd January, 1876, to this account was transferred, as the value of the policies on the life of Mr. T. W. Booker for £90,000, with bonuses, the Bum of £ 100,000. The actual amount of the policies with bonuses was £96,983 7s 8d but the liquidators, taking the policies at their surrender value, valued them at £ 13,000. The premiums were nearly all pay- able by the bank. The whole of the Booker assets were valued by the liquidators at jE122,000, including dE12,000, the value of the policies. As to the Aber. dare and Plymouth Company's debentures, from surrounding circumstances the liquidators did not take them as worth anything. They thought that if the debentures were worth a certain sum there was a oontingent liability which might bring them down altogether to nil- The Lord Chief Jaatiee What was this contingent liability ? Witness There was a claim made with reference to this particular asset which, if it is successful, and it is Mow being proceeded with, woald sweep off any value placed on these debentures. As a matter of fact, no- Sing has been received from these Aberdare and Ply- ,th Company's debentures. ,tinuing his examination in chief, Mr. Clarke gave '">rmation respecting some of the minor debts bank. One of these debtors was Mr. E. "rass and Spanish ore merchant, of "wed the bank £34,590, and. at "edoess was between £40,000 "lar than jthe former. The aces and interest. The liquidators had realised £ 1,146 by the sale of some ore warrants, which formed part of Mr. Wait's securities '■ and whatever securities they now held consisted of share? in ship3 and steamers. They had agreed to give these up on payment of £ 7,000 in instalments. give these up on payment of X7,000 in instalments. Messrs. Miller and Co., Bridgend, were other debtors. In 1S76 they owed £ 9,519, and in 1877 £ 15,680. But In 1876 they owed £9,519, and in 1877 £ 15,680. But at the latter date two sums of £3,000 and £4,000 were written off, which reduced the debt to between £ 8,000 or £ 9,000. The Crumlin Viaduct Works, Limited, owed the bank £15,490, and about the same amount at the time the bank stopped. The company stopped payment at the end of 1877, but liquidation proceed. irgs did not take place until January, 1878. The liquidators of the bank had realised JE500 on account of the company's debt, and they would get £1,000 or £ 2.000 more. Witness further said that in the general ledger of the bank at Bristol in 1876 the item of out- standing ad vices was set down at £18,00@. By this term "outstanding advices," witness understood that money had been paid into the credit of various per- sons, either by themselves or others, and not drawn out or dea!t with. Of the sum of j618,000, j615,000 was carried to the bad debt fund. There were two accounts, the bad debts and the bad debt fund the latter turned out to have been exclusively in con. nection with Bookers' affairs. It was a provision for any loss which might come upon the bank through Messrs. Booker and Co. To some extent it was a pru- dent provision against a possible loss. The witness concluded his examination in chief by giving the amount of Messrs. Bookers' indebtedness to the bank at the end of the following years :-1870, X465,451 1871, £ 458,829 1872 (the first year in which any mention occurs about the limited company) £459,208 1873, £510,657; 1874, X548,271 1875, 556,365 1876, £524,409; 1877, £535,464; and in 1878, £ 535,746. Cross-examined by Mr. Day, Q.C. (on behalf of Mr. Murch), witness said he had gone carefully through the Share register of the bank; and it was a fact that on the day of the stoppage the defendant held 400 shares. Mr. Murch became a director in 1855 or 1856; in the latter year he held 80 shares, and in- creased them, from year to year, until in 1878 he held 400. On two occasions he transferred shares to mem. bers of his family for a nominal consideration, but be bought shares, restoring his holding to the extent of 400. For some he paid high prices. In addition to the 400 shares held by Mr. Murch, the relations of the defendant held from 250 to 300 shares among them, and had paid the calls on them. The witness further said that Mr. Pritchard (Fussell and Pritchard), Mr. Christopher Thomas, and Mr. Gardner, all of whom had been connected with the bank, were gentlemen of the highest standing, and excellent business qualities. Messrs. Thomas and Gardner joined the bank in No. vember, 1878. An interval of half-an-hour for luncheon here took place. When the Court re-assembled at 2.15, Mr. Clarke's cross-examination by Mr. Day was re- sumed, when the witness said the works of Messrs. Booker and Co. had been carried on within his know. ledge with the greatest success. A good deal of the money advanced by the bank was to adapt the works for modern requirements, and the new blast furnaces were built with the bank's money. The tin-plate trade was bad in 1876, and during the two following years things-got worse and worse. At the beginning of the current year, the works, which are being carried on by the liquidators, were doing "first-rate," but there had been a falling-off since. The books of the bank had been very carefully ex. amined by a professional accountant-Mr. Smart. The amount held by the bank on deposit notell and current accounts was such that it would amount to £ 4^000,000 of money at any moment—the turn over would be more like hundreds of millions -and it would be legitimate banking to make short loans, and grant over-drafts to responsible customers. Sir H. James In some localities there are no bills to be discounted, and you must get such securities as you can. The Lord Chief Justice Is that so; is it good banking ? Not that we are trying that question. Witness T should sa\ that if the bank could not use the money in discounting, they would grant short loans the customers would say they were entitled to have accommodation. Sir H. James Can you tell me whether there was a possibility of using £4,000,000 in mere discounting. Witness I cannot answer that. Tn further reply to Sir Henry James, Mr Clarke said he did not suppose bankers lent money for long investment, but it might be that a loan once made would have to stand over for years. The Booker loan was a very old affair it certainly dated as far back as 1857. He did not know that the account was first of all transferred from a bank, the business of which was taken over by the late West of Enland Bank. Prices in the tin plate and iron trade were double at one I time to what they were at another; and the value of works like those of Messrs Booker and Co. (Limited) necessarily depended very much on the time at which the valuation was made. In 1877, 1878, and 1879 the depression in the coal and tin-plate trades, certainly the latter, was worse than had ever been known in Glamorganshire. Booker's works could produce 1,500 boxes of tin-plates per week, and rolled sheets of a very well known quality to the extent of about 150 tons per week-. Prices had varied very greatly between the years 1373 and 1879, he dared say as much as from £ 18 to £ 9 5s. He had heard of sheet iron being sold under certkin circumstances during the late depression at X8 10s. The prices were far below those of 1873 and the two following years. The works were still in operation, after being closed for about a year. The profits could not be less than J6500 or JE600 per week, ex interest on capital. Sir H. James, reading from his instructions, here said that in 1873 the works made a net profit of £ 32,000. The witness was cross-examined on behalf of the other defendants, but nothing of importance was elicited. At five o'clock the court rose. The trial was resumed on Thursday morning. The first witness called was Mr. John Dester, who, in reply to Mr. A. L. Smith, said he joined the New- port branch of the bank in 1840, and was afterwards appointed manager at the Swansea branch. In 1864 he was appointed sub-manager at the head office at Bristol. Prior to 1864, Mr. J. P. Gilbert had been sub-manager at Bristol, and in that year Mr. Gilbert was appointed general manager over the whole bank- system. From 186A to October 1875, witness was sub-manager of the whole system, and manager of the Bristol branch. During that time he attended the Board meetings and took rough notes. The advances to Booker and Co. amounted in 1859 to £97,000, and in 1860 to £ 147,000. He remembered the minute of October 4tb, 1861, when the Board passed a resolution expressing regret that Booker and Co., had not only not deposited stocks, but required a further advance, and asserting that no further advances would be made. Mr. Gilbert wonld be present at the meeting. On the 9th September, 1864, the Board resolved to reduce the allowances to Mr. Booker from £1,500 to £1.000 and to Mr. Ashley Thompson from £1,000 to X700 after the 31st of October. In the same year the Board agreed to d"l|"w' Moaaya Ttr.r.l-cy onrl fn thft silim nf -P. 10 000 Mr. A. L. Smith then read several of the minutes of the meetings in 1865, at which the Board resolved to communicate with Messrs. Booker and Co., urging them to meet the demands of the bank, and stating that the bank would be prepared to close the works unless the requirements of the Bank were attended to. Messrs. Murch, Coates, and Leonard attended all those meetings. Witness Mr Jeffreys after this submitted a report of the working of Booker and Company for the quarter, and stated that he believed a company could be formed with a capital of £ 500,000, that the debt of the firm was about £450,000, which would be reduced by se. curities by JE50,000, making a total of £400,000; then there were the policies for £90,000, and the bonuses set aside, £ 10,000, making d6100,000, reducing the debt to £300,000, to be provided for out of the fran- chise money, which was, in fact, to be paid off with the means obtained by the intervention of a limited company. Mr. A. L. Smith read the correspondence in which Mr. Nash tendered his resignation as director on ¡ account of the unsatisfactory state of Booker's debt. Examination continued In July, 1872, steps were taken for the formation of the company. He believed the bank was to take 14,500 shares. Booker's debt at the time was £ 440,000. The number of shares left for the public to subscribe was 6,400. If the com- pany had been launched independently, and the public had paid for the debentures and shares, they would have subscribed £ 550,000. If that money had been obtained, £425,000 would have gone straight into the coffers of the bank, in discharge of Booker's debt, and the difference between the £425,000 and the £ 550,000 would have been the working capital to carry on the. business. The money for the shares taken by the bank did not really leave the bank, but Booker's account was credited with the amount. The bank had a right of X145,000 in cash, but they did not get it. He believed that shares were taken by the public to the extent oi £ 40,000. In July, 1872, a document was presented by Mr. March to the Board, showing the statement of accounts of Booker and Company, and how the bank expected to be paid. The debt was £ 439,216, and it was estimated to receive on purchase debentures JE150,000, fully paid up shares. £ 130,000, and cash £145,000, making £425,000 then their stock valued outside the freehold property XAOOO, making j6487,000, and the assurances were pat down at £ 100,000, which made a total of assets of £ 587,000. Besides the debt to the bank it was estimated that there were other items to be paid, viz., £116,000 for preference claims, £18,000 on behalf of Mrs. Booker, and other sums, making the total liability £ 606,716— so that there was a deficiency of £ 19,716. In October, 1873, the bank were anxious to dispose of their £130,000 of shares in the limited company but, as a fact, none of them were sold until they guaranteed a dividend of 71 per cent. for five years. On the 16th of April, 1875, Mr. Murch reported an interview he had had with Mr. Gilbertson, one of the directors of Booker and Co., Limited, and it was resolved to forego the interest on £43,000, the balance of the pur. chase money, and also, in consideration of the payment of the balance (the money to be raised by a call not exceeding X2 per share), the bank were to grant a loan of from X10,000 to £12,000 to Booker and Co., on terms to be arranged. A fall which took place in the bad debt fund, from £79,500 to £4,500, was due to I the fact that a portion of that sum had been applied to the reduction of Booker and Co. 's liability to the bank. Witness then described the preparation of the balance sheets and reports for the general meetings. Cross-examined by Mr Day, Q.C., for Mr Jerom Murch In the ledger appeared as credit to Booker and Co. the debentures and fully paid-up shares, and the policies and bonuses—the latter for £ 100,000. The Lord Chief Justice But they would not be of that value until the death of Mr Booker. How came that amount to be entered there ? Witness It was in consequence of the suggestion of Mr Pritchard, and it would be entered by the account ants. By Mr Day: He did not believe the item of £ 100,000 was ever called to the attention of the directors until the 22nd of January, 1876, except in the minute of June, 1872. As a matter of form, the balance-sheet book was presented to the directors at every weekly meeting. In reply to an observation from His Lordship, Mr Day submitted that the fact of this item appearing in the books as of the value of £ 100,000 was an over sight on the part of the officials, that it was a mistake in the books, and that it did not originate with the directors. In fact, it originated in a mistake by Mr Pritchard, and was entered in the books by Mr Dester. Witness, resuming, said he told Mr Thomas and Mr Gardner that the policies were worth from £12,000 to £ 15,000. It was in October, 1878, that he found the policies were not then worth the £ 100,000- He had always looked upon that account as a kind of suspense account. The effects of the failure of the Glasgow Bank were severely felt in the West of England, and the depression in the coal and iron trades in the months of November and December, 1878, was exceedingly great. He expected that the bank would be able to get over their difficulties, and if the trade in South Wales had revived about twelve months earlier, he believed that the West of England Bank would now have been in a flourishing condi- tion. The re-examination of this witness by Sir John Holker was postponed. The Court adjourned at five o'clock until 10.30 this morning.

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