GREAT BANK FRAUD.

Auckland Star, Volume LXIV, Issue 114, 17 May 1933, Page 20

GREAT BANK FRAUD.

"PORTUGUESE NOTE CASE." ECONOMIC COMPLEXITY. One of the greatest frauds ever perpetrated, together with the extraordinary economic puzzle it created, was discussed by Mr. W. H. Cocker in a presidential address to the Auckland branch of the Economic Society of Australia and New Zealand. The fraud, said Mr. Cocker, was known as "The Portuguese Bank Note Case." In 1925 a set of conspirators had induced Waterlow and Sons, well known London printers, to print over £3,000,000 worth of notes of the Bank of Portugal, and succeeded in passing £1,100,000 worth of them into circulation in that country. When the fraud was exposed the whole financial structure of Portugal threatened to collapse. The position had been saved only by the prompt action of the bank in redeeming all the false notes. Criminal and civil litigation, extending over seven years, had followed the fraud. The conspirators were-sent, to gaol for long terms, and the Bank of Portugal proceeded against Waterlow and Sons in the High Court to recover £000,000. which was the face value of the £1,100,000 worth of ' false _ notes redeemed, less tho value of certain property recovered from the conepirators. The defendant company submitted that the bank's loss was not the face value of the notes, since it had merely redeemed them with new notes of its own, which were not convertible into gold, and that the only loss was the cost of printing the new notes, namely, £9000. On that account £10,000 was paid into Court by the defendant company. | 'v

Tho High Court found in favour of tho bank for the full amount, claimed. The Court of Appeal reduced the amount to £300,000. When Waterlow and Sons took the case to the House of Lords, the High Court's original judgment was upheld by a majority decision. While tho judges had obviously not gone deeply into the economic aspects of the matter there were a number of reasons, said Mr. Cocker, why courts of law had found it difficult to apply economic principles or to do strict economic justice. Whatever the bank's loss might have been, the conspirators had obtained £1,100,000 of value in return for the spurious notes, and there must have been an equivalent loss somewhere. Doubtless the bank had shared in that loss.- Owing to the lack of certain data it was impossible to sa* ! just how tho burden of loss had been distributed. Mr. Cocker said that his own very tentative view was that in order as far a« possible to satisfy economic justice, Waterlow and Sons should have been required to pay £000,000 to the Portuguese Government, as representing the whole population for tho general purposes of tho State, the bank to have the right to represent its loss to the Government. If tho paper currency of the country wero ever made redeemable in gold the bank should be entitled to claim from the Government the face value of the false notes it had redeemed. However, the English Courts would obviously have been debarred on that occasion from giving judgment in any such form.