The effect of this fraud, when the depositors found that no help was coming, was most disastrous; some of those who had lost considerable sums of money took to hard drinking, declaring that they would spend their own money themselves: the feeling found expression in such phrases as,“We will spend our money rather than a George Haworth shall have it.”If the moral influence associated with such habits as those of economy and forethought were not annihilated, they seemed to be, and the lessons as well as the savings of years lay buried in this bad man's grave. The Rochdale bank was never re-opened; the bank at Heywood, a small town about four miles distant, was entirely closed by the shock which followed after Haworth's decease; and in many towns in the North of England, but especially in Lancashire and Yorkshire, the case exerted an evil influence for many years on the spread of provident habits, and is still bitterly remembered.
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Among the details of several cases of fraud in Savings Banks that were presented to the Committee of 1848, we find some particulars of the defalcations at Reading and Brighton, which we mention together, inasmuch as the same actuary related them in brief, and in fact was connected with both investigations to which they led.[125]In 1842 a fraud was discovered in the Reading bank through one of the clerks therenoticing that a depositor's book did not agree with the ledger account. The books of all the depositors were called in, and great numbers were found not to correspond. Ultimately the frauds were found to have extended over several years, and to amount in all to 3,000l.They were easily traced to the secretary of the bank, who was also the accountant. It seems he took sums of money from depositors, entered them in their books, but not in the ledger of the office; and hoped by constant attention to the work to be present whenever any of the books that had been tampered with were brought to the office. So culpable in this case did the trustees feel themselves to be, that the secretary was allowed to refund the money he had taken, so long as his private funds lasted, and was then quietly dismissed. Being before the year 1844, the trustees were liable to the whole extent of the defalcation, and proceeded to pay off all depositors by means of a subscription amongst themselves, one of them giving 1,000l.Mr. Hatton, then a clerk in the Reading bank, was employed to investigate the fraud and bring matters to a settlement; and this he did so ably, that he was appointed actuary.
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In seven years from this time, Mr. Hatton was engaged upon an equally unfortunate business in connexion with the Savings Bank at Brighton. A deficiency was found out in this bank in 1849, to the extent of nearly 4,000l., and was proved to have arisen from falsifications in the accounts of Mr. Buckoll, who for many years had been actuary of the bank. The first suspicion of anything being wrong was felt by one of the managers, who, somewhat shrewder than the rest, went carefully through the balance-sheet of the year 1848, under the impression that the amount of profits oughtto have been larger. He was unable to do more, however, than confide his suspicions to the actuary of the Reading bank, and to request his opinion. After Mr. Hatton had examined into the amount of business done, and compared the business with the capital and the various items presented to him, he expressed his opinion that the profits on the year should have been at least 100l.more than they appeared to be. Strengthened in his opinion by this advice from an experienced actuary, the manager in question, at the annual meeting held immediately afterwards, got up and said that he did not feel satisfied with the balance-sheet, and moved that the meeting should adjourn for a short time for some investigation to be made. A close examination of the accounts was so little to Mr. Buckoll's mind that he“decamped,”leaving a letter for the managers, in which he stated how unworthy he had been of the position he had filled, having committed frauds on the funds of the bank to a considerable extent. A warrant was immediately issued for his apprehension, with a view to criminal proceedings, but he got clear away; and up to within a few years ago had never been heard of. Mr. Hatton, who succeeded eventually to the situation which Buckoll filled, was called in to pursue the investigation into the case, and it is from his evidence before the Committee, already so often alluded to, that we are enabled to extract some account of the way in which the frauds were accomplished. The actuary, it seems, made false entries in depositors' books, false entries in the ledgers, and forged the initials of managers, who were required to certify to each entry in the latter. If he wished to draw 100l.from the funds of the bank, his plan was to get hold of a pass-book,—a new one, if he could not find an old one readily,—forgeentries in that book as well as corresponding entries in the ledger; this book he would present to the managers in attendance, who readily paid the amount. In some cases the money was left with Buckoll to pay over to thequasidepositor, as was then too much the custom all over the country. Afraid, however, to do too much of this sort of work himself, he arranged in several cases to have the money paid on what is known as a power of attorney, or an order for payment to a second party. Thus he went among his friends, and represented that some poor person or other had applied to him to withdraw a sum of money standing to his credit; but as he could not act as his agent in the matter, and the party could not himself attend at the bank, would Mr. So-and-so oblige him by simply going and receiving the money? These persons, who in all cases were proved to have been innocent agents in the transaction, relied on the character of Buckoll, who of course was highly respected in the town, and would then hand the money over to him according to agreement. Another mode by which, towards the end of his course as actuary, he contrived to appropriate to his own use several large sums of money, was by taking deposits out of course (as in the case of the Dublin actuary, even in the street), and never in any way accounting for them to the bank. What the trustees were doing during all the years these frauds lasted, how the accounts were made to square, and where the system of check was, does not appear. Mr. Hatton, in justice to the trustees, said they“were as efficient as trustees and managers are found to be;”but this kind of evidence is simply a reflection on the general body of such officers, and scarcely any exculpation of the individuals in question. The system of check was clearly inefficient.
It is pleasing to add, that in this case the depositorssuffered nothing from the frauds. The bank had money in the“separate surplus fund”to the extent of 3,000l., and this, with 600l.which an unfortunate Guarantee Company had to pay for the defaulting actuary, paid nearly all claims.
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From 1851 to 1861 there were numerous instances of frauds in Savings Banks, all which cases will he found included in a list at the end of this chapter, though not described at any length. It is the less necessary to do so, as nearly all of them are fully described in reports made by Mr. W. H. Grey, a professional actuary, who had long been experienced in Savings Bank matters, and who had been sent down by the National Debt Commissioners to investigate such cases as they arose. It would appear from his reports that most of them were imitations on a small scale of the gigantic frauds already described in detail. The common feature of almost every case was extreme laxity of book-keeping;[126]nothing like a proper audit; and signatures given by responsible persons without even a cursory examination. Thus in the Isle of Wight Savings Bank at Newport, Mr. Grey's testimony is, that he found that“fictitious documents, purporting to be signed by depositors, giving notice of their intention to withdraw a part or the whole of their deposits, have been produced by the secretary, on the faith of which cheques have been signed by the attending manager without seeing the pass-book, and without ascertaining whether such sums were really standing in the ledger or not. These cheques have been entrusted tothe secretary for delivery to the depositors at any time they might call for them, instead of insisting on personal attendance during bank hours.”The actuary of the Rugby bank committed his frauds in the same way. Again:“In some cases, fictitious accounts had been raised in the ledgers, and closed again immediately fraudulent repayments had been made; and in other cases in which the amounts had been previously withdrawn, the dates of the real withdrawals had been altered into those of the fraudulent ones.”No comparison, it seems, was ever instituted between the cash-book and the ledger, and the system pursued had practically left the whole control of the receipt and payment of about 30,000l.a-year to one individual. The secretary, indeed, William Wheeler Yelf,“was generally much respected in the island,”was distributor of stamps, did a large business on week days, and was employed as a Wesleyan preacher on Sundays; but we have seen how much all this, and more, avails where the man is thrown amongst overwhelming temptations and has no principles to guide him. We have already spoken of many of the results of the Rochdale fraud; the case of the Isle of Wight bank shows that that fraud affected other banks. It was suggested after the failure of the Rochdale bank that the trustees of every other institution should at once set about a rigid comparison of the depositors' books with the books of their respective banks. The Newport trustees at once acted upon the suggestion of the National Debt Commissioners. They established the practice of having the balance-book containing a list of the balances due to depositors always on the table when the bank was open, and of comparing this with the depositors' books brought to the bank. Had not Yelf been a clever swindler, or had the trustees carried the plan to a fairconclusion, he would now have been found out. Mr. Grey thus explains the new deception adopted to conceal the deficiency:“At the annual examination both ledger and balance-book were duly placed in the hands of the managers; but when they had satisfied themselves that all the balances had been correctly transferred, they shrank from the laborious task of adding together two or three thousand accounts, trusting to the secretary's addition.”This labour was just what Yelf wanted.“In point of fact,”continues Mr. Grey,“the addition of each page was correct, but the total of each page was brought into a summary page at the end; and in doing so, 1,000l.was dropped in one place, 1,000l.in another, in the capital column, and 20l.here and 30l.there in the interest column, with some odd money to make up the required deficiency.”Well might the Government actuary add,“From these practices it will be perceived how imperfect a system has been pursued, and how little it was calculated to prevent or discover fraud!”
We come now to a comparatively recent date, and to two frauds in Savings Banks which must be fresh in the memory of every reader. We refer, of course, to the aggravated case at Bilston, and the late case at Canterbury. A witness before the Committee of 1858 expressed his opinion that from that time henceforth the country had done with extensive fraudulent proceedings in any large Savings Bank. It unhappily comes, however, within the province of history to chronicle one such case occurring so late as 1862, and another the facts of which transpired even after the passing of the Consolidation Act of 1863.
The Bilston Savings Bank was established in 1838. Nothing unusual marks its early history, except the fact that the manwho ultimately managed all its affairs and so largely embezzled its funds was prominently active in its establishment, and was one of the original trustees. To show the estimation in which the Rev. Horatio S. Fletcher was held by his fellow townsmen in 1838, we need only state that in that year, being before simply perpetual curate of the parish, he was presented by them with the incumbency of St. Leonard's, Bilston, worth 700l.a year. That he should take a large share of honorary employment after this was only what might have been expected. Whether expected or not, he did undertake many offices. In 1839, Mr. Fletcher, in addition to being a trustee, was made secretary to the Bilston bank. In 1849, he also became treasurer. Not content with this monopoly of offices, he soon afterwards took upon himself—for there is no record of his having been appointed to the office—the work of actuary. The whole of these offices, and the entire system of check which they are properly supposed to give to each other, Mr. Fletcher held till 1861. And why not? The man was universally known for his charity and benevolence: as the principal clergyman of the place, did he not teach mercy and charity; and, as a magistrate, did he not uphold the majesty and dignity of the law? Since the way in which trust is reposed in individuals can never be fully explained nor made the subject of rigid rule, who could better be relied on than the Rev. H. S. Fletcher, Incumbent of the parish, and Justice of the Peace? Nothing can be more easy than to saynow, that it was consummate folly to allow one man to hold the important offices he did; but who would think of saying so muchthen? Suffice it to say, that this man, like so many more of whom we have had to speak, contrived to ingratiate himself into the good will of all around him, and had thatpeculiar kind of cleverness which succeeds in getting his application and zeal laid to the credit of his disinterestedness and charitable disposition. Since the subsequent facts make it impossible to put a kinder construction upon them, all the rest follows in this case simply as a matter of course.
On the3dof January, 1862, the announcement was made in theTimesnewspaper that the Bilston bank had come to a sad end, and that defalcations to the amount of 8,840l.had been found out in the accounts of the treasurer of that bank. How these frauds, which extended over several years, were accomplished, and how they were found out, remains to be seen. We will reverse this order, and speak of the exposure first. In the spring of 1861, Mr. Tidd Pratt, the energetic Registrar of Friendly Societies—whose name indeed seems almost synonymous with such subjects—visited Bilston, and delivered a lecture on“Benefit Societies.”In the course of that lecture Mr. Pratt alluded to the cognate topic of Savings Banks, and spoke of the necessity for regular accounts and regular returns in connexion with them. He then took the opportunity to refer to the“very irregular manner”in which the accounts of the bank in their own town were kept. Now, it must not be supposed that Mr. Fletcher had forgotten his returns; he was far too careful for that; he knew the penalties attaching to such neglect. It seems that both weekly and annual returns, although they were habitually and carefully“cooked,”were regularly forwarded to the National Debt Office. The“Returns”to which Mr. Pratt appears to have pointed, were those called for annually by the House of Commons, with the object of improving the law of Savings Banks; and these returns, from 1855 to 1861 the factotum of the Bilston bank had constantly neglected to send. Mr. Pratt, in continuation of his statement afterwards, confessed heknew nothing of the circumstances of the bank, further“than that his suspicions were always aroused in cases where he found any accounts were not properly rendered.”There can be no doubt about it, that this reference roused the“reverend defaulter”to a sense of his danger; for it subsequently transpired that not a penny was abstracted unlawfully from the bank after the week of Mr. Pratt's visit and lecture. Furthermore, not only was the culprit aroused, but the trustees were awakened to some sense of their responsibility, and very soon afterwards there was a movement amongst them for a change in the management and an overhauling of the books of the bank. In a very few weeks after Mr. Pratt's visit a new set of managers and trustees were proposed, and Mr. Fletcher was deputed to see them, and endeavour to get them to act. In July the appointments were legally made, including that of Mr. Hawkesford to the post of actuary. Then quickly followed the disclosure which indeed, sooner or later, was now inevitable. The new actuary got the books from the parsonage—the bank being held in the school-room of the church—and was not long in finding out some of the discrepancies with which they abounded. On first discovering the frauds the actuary spoke to the treasurer, who promised to confer with him about them; on finding out the magnitude of the defalcations, he again mentioned the matter, choosing an extraordinary time, not however without its significance—of a Sunday after the usual service. The clerical delinquent acknowledged his guilt, and said,“He was very sorry, but never intended to defraud the depositors of a shilling.”It will be seen, however, that the fraudulent transactions were of such a nature as not to admit of any extenuation, and to render condonation of any sort impossible. The feeling produced by the disclosure was painful in the extreme, and thecountry spoke out with vigour on this extraordinary and merciless breach of trust. The local magnates, indeed, and the body of trustees who had allowed these frauds to run on, spoke with bated breath of the“deficiencies”of the Bilston treasurer; theTimes, on the other hand, spoke far more in accord the with the general feeling of the country, when it characterised“this man Fletcher”as“the meanest, the most cowardly, and the most cruel of swindlers.”[127]Under his manipulations, the Bilston bank was a Savings Bank in nothing but the name; there were trustees, but they were tools; rules, properly certified, but never obeyed; accounts made out and“cooked,”but never checked or audited. The trustees did just what they were bid, and the real operator at the bank did just what he chose. This clergyman and magistrate was a swindler, his books a heap of lies, his balance-sheets pure fiction.
Mr. Pratt was sent for to examine into the state of the bank immediately after its condition became known, and it is to the account which he himself subsequently gave to the depositors that we are indebted for most of the particulars which elucidate Mr. Fletcher's mode of operation, when in the thick of his guilt. Mr. Pratt stated, that from 1848 to January, 1861, there did not appear to have been any meeting either of the trustees or managers, for the purpose, according to the rules, of auditing or settling the weekly accounts. The Rev. R. J. Heafield, a trustee and manager of the bank, confessed at the trial of Mr. Fletcher, at the Staffordshire Lent Assizes, 1862, his own culpable negligence in the following words:—“The weekly returns signed by me were prepared by Mr. Fletcher.When I signed them, I never in any way compared them with the books.They were presented to me eitherby Mr. or Mrs. Fletcher,and I took no measures to verify their accuracy.”[128]What might not a designing man do with such a tool as this? Having subdued his trustees in this way, the rest was, as we shall see, quite easy. The books at the bank were, it is only fair to say, kept quite correctly; so were the depositors' books. According to the evidence of Mr. Pratt:“In the day-book everything was entered with scrupulous correctness; and 1200 depositors out of 1400 had brought in their books, and he did not believe an error had been discovered.”Mr. Fletcher chose a somewhat simpler course of action, which we will describe. His duty as actuary of the bank required that he should furnish weekly returns of the transactions to the National Debt Commissioners: the correctness of these returns were to be checked by the treasurer, which office he of course filledhimself. All that was necessary to the perpetration of fraud was that this actuary-treasurer should be on easy terms with his conscience, and this unfortunately was the sad state of the case. Deceive the Commissioners by falsified returns, and any amount of money, under the peculiar arrangements of this bank, might be pocketed without fear. In order to help himself to a full solution of the case, Mr. Pratt brought these returns down from London, and compared them with the bank accounts, with the following result:[129]—“The whole of the Returns he held in his hand were signed by Mr. Fletcher, as actuary and manager. In the statement dated January 1, 1859, the amount received was returned at 234l.On looking at the books for that day, he found it should have been 334l., therefore 100l.had been abstracted on that day [cries of 'Shame,' and sensation].On the 8th of January, he found the payments were set down at 174l., whereas they had only been 74l., thus showing that the treasurer had put another 100l.in his pocket that week. In the return dated January 29, the receipts were set down at 183l., and the payments at 148l., whereas the former ought to have been 283l., and the latter 48l., thus taking to himself 200l.[renewed sensation].”So on through almost all the weekly accounts of three or four years. There seems to have been no other fraudulent transactions than those of this simple but abominable kind; the whole defalcation had taken place in this way, and it was made manifest that no one but the treasurer had participated in it. It is fortunate for the depositors that the frauds were found out when they were; but for the negligence in sending the required returns ordered by the House they might have been continued for an indefinite period. As it was, the assets of the bank realized in the first instance ten shillings in the pound; towards the close of 1862, another dividend of half-a-crown in the pound was paid, and since that time a third small amount has accrued to the depositors, who are never likely to be completely reimbursed of their loss. In 1862, Mr. Fletcher was tried before Baron Channell, and found guilty of“appropriating money with intent to defraud.”His counsel, however, having made an able defence, characterised by the judge as being as subtle as it was ingenious, the point as to whether the prisoner was a“trustee”at the time of appropriating the money—this being one of the facts upon which the indictment was based—was reserved, and he was released on heavy bail. Into the further history of this man, the sequestration of his living by the Bishop of Lichfield for the behoof of the depositors, the repeated failures of justice in his case, his eventual imprisonment for two years, it is not befitting thatwe should enter, these being items of almost current police intelligence.
We can only spare a few words to tell how similar results followed in this as in previous frauds. Men declared they would put it out of the power of mortal man to deceive them in this way again. In many cases a degree of recklessness was induced in those who had been cruelly wronged, which could only have been considered excusable if they had lost their all. It is not at all unnatural, that, from what cannot but be considered a defective education, men should so act, and be so ill prepared and disinclined to look evil consequences fairly in the face: still such facts only prove the truth of what we have before urged, that the extent of money loss, through such dishonest transactions as Savings Bank frauds, is but a trifling part of the aggregate misfortune they entail upon the country. Other depositors, it is but fair to say, acted far more wisely. Induced by the counsel and persuasion of those whom they could trust in a time of need, many depositors in other banks withdrew their money, and placed it where alone they could get that security which they so much needed, and several of the Bilston depositors did the same with the sums they obtained. It was represented to them truly, that not only would Government suffer by a run upon the old banks, but, what was of far more importance, they would themselves suffer, and their second period of suffering be worse than their first. Nothing can be so palpably true as that money, completely withdrawn at such times, is oftener wasted than kept, and frugal habits rewarded after this fashion far oftener discontinued than resumed.
And here, it seems to us,—and we mention it, though we are somewhat anticipating the subject—the country is greatly advantaged in having the new system of Savings Banks topoint to. What was much wanted in previous cases was some safe place, where timid depositors might resort with their savings, and defrauded depositors go with what they had saved from the wreck.[130]In the Bilston case this privilege was largely used. The Post Office Banks broke many a fall, and they set many on their feet again who otherwise would have been hopelessly overcome by the shock. Two years before it would have been sheer mockery to have told depositors, under such circumstances as those to which we are alluding, not to make a run upon Savings Banks; they had no alternative till, in 1861, that alternative was provided. It would seem, from a memorandum before us, that the authorities of the Postal Banks, without in any way seeking to prejudice the interests of the old banks, did all that was fairly possible towards reducing the disasters which have invariably and inevitably followed previous cases of Savings Bank failures. They instructed their agents, in all cases where, owing to the depredations at Bilston, Savings Bank depositors applied for advice about withdrawing their money, to recommend continued confidence in these institutions; if, however, such depositors were bent upon withdrawing their money, then to advise that it should not be asked for in cash, but by means of a transfer certificate, which would make them depositors under the Crown. The strict fairness of these instructions may be judged by the closing injunction:“Although you may fairly inform those depositors who are alarmed at this failure, that the depositors in Post Office Savings Banks have absolute and direct Government security for their money, youmust on no account do or say anything to weaken their trust in the old Savings Banks.”
The last case[131]in the catalogue of this peculiar description of crimes is that which occurred at Canterbury during the year 1865. This case is indeed so recent that any lengthy description of it would scarcely be tolerated. We may well spare ourselves the trouble, for the Canterbury fraud was little else than a repetition, on a smaller scale, of the one perpetrated at Rochdale, to which we have given so much space. Nor is it a little singular that the actuary in the Rochdale case was in many respects the prototype of the Canterbury actuary: in the estimation in which both were held in their respective spheres, in their character and occupation, there are several points of close resemblance between them. In the Canterbury case we have the old story of misplaced confidence, want of check, and a constant embezzlement of considerable sums of money extending over a long series of years. The actuary and secretary of the Canterbury bank, Mr. Samuel Greaves, was for many years almost the sole responsible official; of course“he bore the highest possible character for probity and honesty”: nor will it surprise any of our readers to be told that it came afterwards to be said of this man,“from his many professions he was thought incapable of such conduct as that which was proved against him.”The Canterbury bank was established in 1816. Greaves's connexion with the institution dates from 1830, when he was appointed actuary at a salary of 40l.per annum. The salary, however, wasincreased from year to year, up to the time of the exposure, when it stood at the respectable figure of 200l.Originally a“hoyman,”the actuary of course, and necessarily, engaged in other pursuits than those connected with the bank; and this circumstance, in the same way that it occurred in almost every other fraud of the kind, led to the malappropriation of the money of the bank. It was another case of partial service and partial pay, and an almost unlimited command of money, when among many other business engagements it was always possible that money might be urgently needed. Like Haworth of Rochdale, Mr. Greaves undertook several agencies, among them those for the sale of coal and porter. In 1840, it seemed, from the statements of his counsel, he began to lose money in his business, and was then, to put it in the mild form chosen at his trial,“induced to abstract some of the funds of the bank to meet his pressing difficulties.”Once on the downward road, he never turned back; it was impossible to manage it. It was the old story, told with plainness by his own advocate. He took the money, with the full intention of repaying it on an early date; difficulties gathered fast around him, and still the man went on, foolishly trusting to some turn of fortune's wheel to replace him in his old position. He tried speculation, but he lost still more irretrievably; his lucky day never arrived: and at length the weight of anxiety under which the man must have laboured for twenty-five years brought him down, and with the lack of his usual vigilance came detection and exposure.
This detection was effected by a Mr. Abrams, the clerk of the bank, and it is from his evidence at the trial of his superior officer that we learn the actuary's mode of operation. All the cases of fraud, it seems, were identical in character,and were effected by means of claims for withdrawals only. Every deposit reaching the bank was properly received and properly accounted for. Like Haworth at Rochdale, the Canterbury actuary carefully noted those who were generally putting money into the bank, and seldom taking any out. In the case of many of these depositors he had provided himself with forged pass-books, with the deposit column always correct, but the withdrawal side manipulated according as he himself wanted money. Suppose any of the depositors came to the bank, to deposit or withdraw a sum of money; they presented themselves to the actuary, who entered in their proper bock the proper sum, but immediately substituted a forged pass-book for the purposes of the bank. The ledger clerk received a book from the actuary to copy into the ledger, and in this way the books of the bank came to tally with the forged depositors' books. All that was necessary to carry on the frauds was that the actuary should keep a strict eye on the real pass-books of the depositors, for the discrepancies would be patent, as it eventually transpired, the moment the true books were seen. Sometimes the money was obtained with less trouble. Greaves would occasionally give himself notice that a depositor wished to withdraw a certain sum of money (and this occurred several times in connexion with a person who had deposited considerably, but never withdrawn any sum), and represented that the money was entrusted to him“to keep.”After thequasinotice had been acted upon, he would draw a cheque for the money, and the amount would be entered in a false pass-book and copied into the ledger; the luckless depositor, with her book safely by her, being in entire ignorance of the whole transaction. The utter absence of any control on the part of the managers and trustees, as exemplified in such a mode of procedure, especiallyconsidering that it came after the case of Bilston, the agitation of the last few years, and the passing of the Act of 1863, reflected the greatest discredit upon the honorary officials of the bank, though their conduct subsequently went far to atone for their past neglect.
The case is described as having excited the most painful interest in the city of Canterbury. The actuary, an old man of seventy, was tried at the city quarter sessions in October, 1865; the trustees of the bank prosecuting him on the charge of felony. The transactions were again described, but only in brief, inasmuch as the prisoner pleaded guilty. A strong memorial was presented, signed by many clergymen and tradesmen, which, instead of asking for a mitigation of sentence solely on account of his age and infirmity, put forward the following extraordinary motive for interference:“The memorialists wish so far to relieve his character from any undue opprobrium that may attach to it, by declaring that the various business transactions they individually have had with him, have always been conducted in an honourable and satisfactory manner.”At any rate, this questionable memorial may at least serve to show the estimation in which he was held by his fellow-townsmen. The prisoner was sentenced to six years' penal servitude,—six years for each of the two indictments; but, on account of his age, the years to run concurrently together.
The entire deficiency, when at length the whole of the accounts of the bank were made up, was found to be 9,300l.Happily the depositors, whom, so far as he knew, the actuary was mercilessly robbing, were ultimately secured against loss. The surplus fund of the bank, amounting to 3,500l., was applied to meet the case; the actuary gave up property to the value of 1,700l.; a gentleman who was his surety for400l.was called upon to pay that sum, and the remainder, about 3,000l., was subscribed by the trustees and their friends. The bank was of course stopped on the defalcations coming to light, the books were called in, and the trustees sought the advice of the Government officials, as to transferring the business to the Post Office. The stipulation in this case was, we believe, that the trustees should make good the deficiency, and that then the business of the bank, which was a large one, the deposits amounting to 150,000l., should be handed over to the new establishment. Every effort was made by the Post Office, in the way we have shown in the Bilston case, to stem the tide of improvidence which generally sets in at such a time, and in this case with great success.
The frauds above described have, of course, formed the principal cases,—cases which from their flagrancy and extent have either been made the subject of parliamentary investigation, or have so occupied the attention of the press as to have become grave subjects of public discussion. Besides those leading cases, there have been, as we have before hinted, a certain number that have been concealed from the public from motives which, though they may have been open to question, we cannot characterise as wholly bad or unwise. From two Returns issued at different times on motions made in the House of Commons, we are enabled to compile a complete list of those frauds that have been officially reported to the National Debt Office. The first Return embraces the period between 1844 and 1852, and the second, 1852 to 1857. The numerous frauds of which we have already spoken, or to which we have referred, occurring before 1844, and the important ones perpetrated since 1857, are not included in the following list. The gross amount of loss would have been considerably swelled had a perfect list been possible.As it is, the following table gives the name of the Bank, the amount of the Fraud, and the amount of the Loss to depositors, so far as it can be correctly ascertained:—
The frauds at Hertford, Brighton, Reading, Cuffe Street, Bilston, and Canterbury, where the amounts of the defalcations are known, are left out of consideration. Thus the total amount of the frauds enumerated in the Returns, extending over thirteen years, was 179,280l.; or if we include the Cuffe Street bank fraud, to make up for those Irish banks which sent no returns, and errors of computation, and spread the total over all the thirteen years, the average amount of defalcation was at the rate of 17,600l.a year; or, taking the banks mentioned in the Returns, upwards of 7,900l.for each involved. Doing the same with the total loss to depositors, or 117,732l., we find the average loss for each bank to be nearly 5,000l.
The reader who may have followed us through this chapter, and remembers the classes to which the cheated depositors generally belonged,[132]will have some idea how much pain and suffering the amount of money so treacherously wrested out of their hands really represents.“But the evil,”Mr. Gladstone well said several years ago when speaking on this very point,“that is done, is, unfortunately, not to be measured by the actual amount of money loss; there is an amount of evil such as figures can convey no idea of; and it is impossible that the public confidence in these institutions can be that which it ought to be, while these losses are liable to occur at all.”This was a deficiency which Mr. Gladstone set himself to remedy immediately afterwards, and, though unable to do so at the time through the opposition of Savings Bank managers, it was not long before another system wasprovided which struck for ever at the root of this grievance; and for all practical purposes, and so far as it was now possible, repaired the injury which the industrious classes had suffered through the action of defective legislation, and the moral obliquity of those who had been trusted with their earnings.[133]After entering still more fully in the next chapter into the defects of the Savings Bank institution, considered purelyas a system, and the attempts made from time to time to remedy its deficiencies, it will be time to describe how the above beneficial result was brought about.
[114]“In the case of a fraudulent actuary, especially if the bank is carried on at the man's own house, there is no limit to the fraud which he may commit.”—Evidence of Mr. Tidd Pratt before the Committee of 1848.
[115]That Lynch, was no ordinary man there is abundant evidence. The following address to the inhabitants of Tralee—which from anybody else would be considered well meant and well expressed advice, simply completes the burlesque in his case:—
1.“Money, as the means of procuring the necessaries and comforts of life, is a blessing; and to be careful of it is a duty incumbent on all.”
2.“To lay by in the time of youth, and whilst we enjoy good health, a portion of the fruits of industry in store for future wants, is a mark of wisdom; and considering that all are liable to infirmities, a provision to alleviate them is of the greatest importance.”
3.“Some men by hard labour, and others by superior skill, earn high wages; yet for want of proper management they have nothing to reserve. Many might be disposed to save a part of their earnings if they knew how to set about it,or where to place it with safety; whilst others who have occasionally practiced saving, have lost what they had laid up,by trusting it in unsafe hands.”
4.“The promoters of this institution are aware that several of their neighbours, from various causes, are unable to procure many of the comforts, if not the necessaries of life; they are, nevertheless, fully persuaded that many others who have the advantage of constant employment, and are favoured with the enjoyment of health and strength, might, by practising laudable economy, reserve a portion of their earnings to meet the demands which a future pressure of bad times, sickness, old age, or an increase of family, may bring upon them, and thereby avoid the calamities under which so many of them suffer.”
5.“It is a great mistake to suppose that small sums are not worth saving. By the habit of saving in little matters, riches are acquired; farthings saved would soon accumulate to shillings, and those to pounds,”&c.&c.&c.
[116]A Mr. Fitzgerald was the manager who generally attended and did the current work of his office. His statement after the frauds had come to light was, that he made the best inspection he could of the ledgers of the bank. When asked why he never compared the ledgers with the daily cash books, he confessed he never thought of it,“there was the omission,”“that was where the link of investigation broke,”“that was the omission which concealed the fraud so long,”and other similarly shiftless remarks.
[117]Report of the Select Committee of 1848.
[118]Ibid.(Qu. 674).
[119]Mr. Pratt's idea was to make the trustees liable in a great measure for the deficiency, as guilty of wilful neglect or default. The advice given as to Lynch's property was of very questionable propriety, and very questionable, as it afterwards appeared, in law. The money, however, was lost to the depositors completely, and went to Lynch's relations.
[120]As usual, many persons had been allowed to deposit illegal sums on which they had no claim. One man was shown to have taken out 420l. from the Provincial Bank of Ireland, and to deposit it all in the Killarney bank in one day.
[121]Vide Select Committee on Savings Banks, 1858. Evidence of Mr. Jameson, actuary of the Perth Bank. (Qu. 2,906.)
[122]An estimable sect of Christians, they are not better known for the zeal with which they contrive to amass and keep in their immediate circle vast stores of wealth, than for the uprightness and conscientiousness they generally display in the conduct of their business. The transactions of Haworth, and another of their black sheep who about the same time committed, or attempted to commit murder, whilst assuming their character, is described to us as having spread consternation and dismay through their ranks. The way in which the Society of Friends has, as a body, taken up the management of Savings Banks is most commendable.
[123]A great part of our information relative to the Rochdale bank fraud is gathered from the evidence of Mr. Edward Taylor, a worthy and intelligent tradesman of Rochdale, who was examined before the Committee of 1858 in reference to the transactions in question; and no one is better able to speak of them.
[124]So prevalent was this impression, that for several weeks 17s.6d.in the pound was freely offered for Savings Bank books in Rochdale.
[125]Evidence of Mr. Hatton, actuary of the Brighton Savings Bank.
[126]It almost passes the bounds of credibility, and yet it cannot be denied, that in two separate banks, where the accounts were thus overhauled, items of money to a large amount were repeatedly found entered in the books with nothing but a pencil!
[127]Times, January 17, 1862.
[128]Midland Counties Express, March 16, 1862.
[129]Report of the depositors' meeting,Birmingham Daily Post, January 16, 1862.
[130]Or, as it was far better illustrated at the time,“It is not enough to bring a man who has been tossed about in an unseaworthy bark within sight ofterra firma. We must heave him a rope, or, if possible, run out a plank between the quay and his crazy ship's side, on which he may safely walk across.”
[131]No attempt is here made to catalogue and describe frauds not occurring in Savings Banks proper: a chapter itself might be written on banks for the people established and carried on under a system of complete deception and villany. Nor have we entered into the case of frauds in Penny Banks, such as the unfortunate case at Birmingham.
[132]Of the Rochdale depositors, for example, 1,245 were women, 722 unmarried factory operatives, 292 married, and 231 young girls; there were besides, 953 miners, 539 labourers, and 191 members of sick clubs.
[133]Since the above pages were in type, a deficiency has been made public in the accounts of the Worcester Savings Bank, the cashier, Benjamin B. Wilkins, having committed frauds to the extent of between 4,000l.and 5,000l.On the frauds coming to light last August the cashier decamped, and, as it now appears, found his way to America. The trustees, having heard of him through some channel, put the matter into the hands of the police, who have succeeded in apprehending him, and bringing him back to this country, and he will shortly be brought to justice.
ON THE DEFICIENCIES OF THE EXISTING SYSTEM, AND THEESTABLISHMENT OF SUPPLEMENTARY SAVINGS BANKS.
“Were greater facilities provided for saving, and greater encouragement given by the intelligent classes to the formation of provident habits, we believe the habit of economy would spring up in many quarters where at present it is altogether unknown. The working man, though he may not like to be patronised, likes to be helped; and those who help to provide him with convenient places in which to deposit his spare earnings, will not fail to be regarded by him as among his best friends.”—Mr. S. Smiles.
Inthe fourth chapter we endeavoured to trace the progress of Savings Banks up to the year 1841, or after they had had a legalized existence of twenty-five years. We there tried to show that, for some years prior to that period, a manifest improvement had set in, and was rapidly proceeding, in all that related to the social condition of those classes for whose benefit such institutions as Savings Banks are mainly intended; and we think we succeeded in proving that the progress of these banks was commensurate with the gradual national advancement. Except in the years marked by financial or political embarrassment, the number of Savings Banks increased in a fair and regular proportion each year; and not only so, but the first table we gave(page 91)showed conclusively that the amounts deposited increased in the different years in the same proportion. We would now takeup the statistics where we left them, and present the reader with a continuation of the same, in a slightly different form.
TABLE 4.[134]
Showing the amount of Deposits and Withdrawals, and the Capital, of Savings Banks, at the end of each year from 1841 to 1861 inclusive.
From the above table, many important facts may be gathered. Speaking of the yearly proceeds, in 1847,1848, 1849, and 1850, the withdrawals of money exceeded the deposits by amounts respectively of 2,411,067l., 2,790,366l., 325,877l., and 396,638l.This extraordinary state of things is partly accounted for by the panic which set in about this time among Savings Bank depositors, owing to the discovery of numerous frauds, and, as a matter of course, the knowledge of the divided and defective responsibility under which the system was worked; but more especially was it owing to the commercial crisis of 1847-8. In the three following years, 1851-2-3, the crisis quite over, and a general examination of Savings Bank accounts tending to reassure the public mind, the deposits again gained their natural ascendency, when, in 1854-5-6-7, the excess paid was at least equal to the excess received in the three previous years. There can be little doubt but that this result again was owing in some measure to the Crimean war, and the scarcity of money during the period, but principally to the agitation which generally prevailed among depositors at the constant failures in the Legislature when attempts were made to place Savings Banks on a proper footing; these failures leading to repeated petitions for a Select Committee to go over the whole subject. In 1858 there was a slight improvement; in 1859 a considerable increase in the deposits, clearly the result of the investigations of the Select Committee of the previous year, which Committee, though it had done little towards a final settlement, had certainly dispelled a cloud of misapprehensions that had gathered round the concerns of Savings Banks. That improvement continued, though in a less degree, in 1860; when the Returns for 1861 show another large decrease of deposits and an increase of withdrawals, which we would not be wrong were we toattribute to the frequent discussions in Parliament, and in the country, relative to a new system of Government Banks.
Having to some extent accounted for the variations observable in the above table, let us proceed to compare the progress made during the period of twenty years now under consideration with that shown during the previous quarter of a century and described in a previous chapter. Between the years 1825 and 1835 the increase in the aggregate amount of deposits in the Savings Banks of the United Kingdom was at the rate of exactly fifty per cent. Between the years 1835 and 1845, the returns show an increase in deposits in this decennial period of ninety-eight per cent. Comparing the returns for 1845 and 1855, the progress made, if indeed progress is the right word to use here, was at the rate ofonly five per cent.
Were we to take the first five years of this last decennial period, we should find that there had absolutely been adecreasein the business of Savings Banks to the extent oftwelve per cent., but this unsatisfactory result admits, as we have just shown, of partial explanation. To continue our survey, however, up to the latest period,viz.including the Returns for 1864, we find that the deposits for 1854 amounted to 7,400,141l., and the deposits for 1864 to 8,174,679l., showing an increase during ten of the most prosperous years this country has known since the establishment of Savings Banks at the rate of only about eight per cent.
It is almost unnecessary to say that as regards all the material elements of prosperity the progress of the country between 1841 and 1861 was most marked. Taking England and Wales only, we find the amount deposited in Savings Banks in 1841 was 4,440,379l.; in 1861, the amount deposited was 7,188,034l.Now the population of England and Waleswas in 1841 15,929,000; in 1861 it was 20,119,496. The declared value of our exports was in 1841, 51,545,116l.; in 1861 it had increased to the enormous sum of 125,102,814l., and last year (1865) it stood at over 165 millions sterling. What the increase in the amount paid aswageswas likely to be, we leave our readers to estimate from these sums. In nothing is the national prosperity more manifest than in the relative number of paupers in receipt of relief. Though the population increased during the twenty-two years in question several millions, the total number receiving in and out-door relief, was, in 1849 (this being the first year the return was made) 934,419; in 1861, the number was 890,423, or an actual decrease of forty-four thousand persons. Such statistics as the above might be multiplied indefinitely, especially those relating to the wonderful progress of the Money Order Office at the Post-Office, but it may suffice just to make a reference to the increase of wages during the period.[135]Mr. David Chadwick, an eminent authority in Lancashire, states that between 1840 and 1860 the wages of the operatives employed in the different departments of the cotton trade had increased from 12 to 28 per cent.; in the silk trade the increase had been 10 per cent. In the building trade the increase throughout the country had averaged from 10 to 30 per cent.; in the iron trade from 8 to 20 per cent. It would scarcely, therefore, be too much to say that within the period,and up to1861, while the price of most kinds of food had decreased,the wage for almost every description of labour had increased in at least an equal proportion.
In view of such facts, and before we attempt to describe the different plans which were produced in order to make these useful institutions once more progressive ones, let us try to ascertain why more of the money thus gained did not reach the Savings Bank. A careful examination of the Returns of Savings Banks will show beyond the possibility of doubt that the first and greatest check received by these institutions was when it became apparent that they did not possess within themselves that absolute security which they were thought almost universally to offer. We could not well exaggerate the result; this is the fountain from which all the ills have proceeded. The evil did not confine itself to the banks where the depredations had been carried on; it was not confined to the banks already established; but it extended to quarters where before there had been a manifest disposition to increase the facilities and to meet the wants of an advancing population, and this feeling was destroyed. The first effect of the frauds was, of course, to stop the deposit of money; in a smaller degree and among less educated people they even tended, as we have seen, to destroy the habit of laying by any money at all; but among all they produced a decided conviction that the financial arrangements of the system, especially with reference to the anomalous connexion between Savings Banks and the Government, were unsound.
We have several times referred to the state of the law as to the exact nature of this connexion, but it is necessary to return to it again as entering very largely into the consideration of the slow progress of Savings Banks. There can be no question that the great bulk of the British people,and not simply the lower and middle classes, imagined—up at least to the time of the great frauds of 1845-48—that Government was fully responsible for all the money placed in Savings Banks. In 1851 we find Mr. Bright saying in Parliament:“Nine out of every ten depositors believed that they had the security of Government for whatever money they invested, and that in placing that money in the local Savings Bank they were securing it better than if they lodged it in the hands of the wealthiest private banks in the country.”[136]Mr. Hume said the same on several occasions. Mr. H. A. Herbert, an Irish member, whose name deserves to be associated very intimately with legislative attempts to put Savings Banks on a proper footing, testified over and over again to this impression being the prevailing and universal belief. General Thompson told the House in 1848 that he“was struck with profound astonishment to learn that Savings Banks were not what in common parlance was called 'as good as the bank.'”He had advised servants on numerous occasions to put their money into such banks in the belief that they had complete Government security for their money. Such expressions of opinion from men who, though they had never penetrated into the mysteries of official life, could scarcely be thought ignorant in financial questions of this kind, show how wide-spread must have been the misapprehension, and are of themselves almost a sufficient justification of the ignorance of the bulk of the poorer classes.
Nor were there wanting excellent and numerous authorities who must have contributed to this improper impression.Mr. Scratchley, in hisPractical Treatise on Savings Banks, pp. 72-4, has taken great pains[137]to string together a formidable list of those whom he finds inculcating the same view as that already expressed by prominent members of Parliament during debate. Suffice it to say, that when such books as McCulloch'sCommercial Dictionary, Porter'sProgress of the Nation,The Quarterly Review,Chambers's Information for the People,Chambers's Magazine,The Penny Magazine, and the Irish school books, laid it down that depositors had perfect security from Government for the money paid into Savings Banks, those of the class which relies to such a great extent on the intelligence of those above them may well be excused for falling into error, and may well be pitied when called upon to bear loss. Government took up the subject of Savings Banks at an early stage in their history, with the object of“protecting”them,[138]and to that end they made it an imperative duty on the part of the trustees of these banks to deposit their money with the State; unfortunately, however, no steps were taken to enforce this provision. Here lay the fatal mistake, and the source of all the trouble.“The whole success of Savings Banks,”says Mr. McCulloch in hisStatistics of the British Empire,“depends upon the security the depositors have for their money. No one was accustomed to speak of Savings Banks without commenting on the increase in the stability of the country by giving the poorer classes a direct interest in the preservation of public credit; but it requires no great amount of penetration to see that so much entirely depends upon the fact that faith is kept with such depositors.”To all intents and purposes proper faith wasnotkept by the banks, and a proper knowledge of the real amount of risk the poor were running was wrongly withheld from them: hence the undoing of a great part of the good work accomplished in the first quarter of the present century by the establishment of Savings Banks.“What was the use,”indignantly asked a member of the House of Commons of the Government in 1851,“of preaching to the poor the duty of being honest, industrious, and self-dependent, if the fruits of their hard earnings were thus to be swept away?”
Ten years afterwards a more powerful voice than Mr. Herbert's asked the same question, and appealed to the country for a reply.“If ever,”said theTimesnewspaper, speaking of Savings Bank money in a leading article, 17th January, 1862,“there was a sacred fund, this is one; if ever there was a class and a fund which deserved the protection of wise laws and stringent responsibilities, surely this is the class and this the fund.”Says an objector:“Irregularities will creep into the management of the best of funds, and frauds are as old as the world.”Says theTimes:“How can people treat such cases as a matter of course! How can we look on while the poor commit their all to such institutions as these! It is useless to tell us that nine out of ten, or ninety-nine out of a hundred of these Savings Banks, are conducted with scrupulouscare and constant supervision.”Referring, then, to the recent case at Bilston, it continued,“How can the depositors of a few hoarded shillings know where the Fletchers hold sway, and where the managers do their duty? The only sound advice to give the working classes under such circumstances is, to have nothing to do with institutionswhere such things can occur.”The argument was irrefutable; nor was the advice given hastily. The Postal Banks had then been introduced to the country, and the article thus winds up:“This advice would have been difficult to give some years ago; it is not so now. The Post Office Savings Banks offer an escape from danger, and at the same time remove the necessity of taxing the time and attention of philanthropic men in offices where negligence may occasion such wide-spread ruin. We confess that, in the face of such occurrences as those of Bilston, we hope the day will speedily arrive when these 531 fallible Savings Banks will all cease to exist.”[139]
We have said that the frauds in some of the Savings Banks led not only to their stoppage, but to the closing of others in the neighbourhood. Nothing can be clearer on this point than a reference to Ireland. In 1846, there were 74 Savings Banks in Ireland; in 1851, no fewer than 21 of them had ceased to exist. In 1846 there were eight in county Down; in 1851 only two remained. In county Kerry there were almost an equal number; in 1851 not one remained. Doubtless other causes besides the breaking of faith with the people led to this, partly and indirectly,—such, for example, as the failure of crops,—though still there was the fact, significant enough, that in the districts least visited by famine, and where the people were most industrious and frugal, there had been the greatest diminution of these banks. Bearing in mind such facts, and also that it can be proved that the frauds to which Savings Banks have been so liable have led directly or indirectly to the breaking up of no less than fifty of these institutions in the United Kingdom, let us proceed to some inquiries as to how far the banks, uncertain and insecure as they were in 1861, met the requirements of the country in other respects.