FARROW'S BANK

Evening Post, Volume CII, Issue 32, 6 August 1921, Page 16

FARROW'S BANK

READ ' CROSS-EXAMINED

FARROW GIVES EVIDENCE

FIRM DENIAL FOR'GUILT.

(nmh an «wn cauiirtmiNT.)

LONDON. 16th June. ' Throughout the past week the case against Thomas Farrow, W. W. Crotch, and F. D. T. Hart, the principals of the Farrow Bank, has been in continuous progress at the Old Bailey. Not a great deal of new evidence has been forthcoming, but some points in the crossexamination have thrown new light on the.case. • ' ' s . ' . In examining Mr. W^ A. Read, who negotiated for control of the bank, Mr. Curtis Bennett referred 'to witness's statement that Crotch had said that, if he had believed in a hereafter, he would have known what to do. "Do you know," he asked, "that Mr. Crotch has written a number of serious books, in which he deals with this question, and expresses belief in immortality 1 1 suggest that what Mr. Crotch may have said was: 'If I did not believe in the hereafter, I should know what to do'?"

Witness :■ "I ' thought he said, 'If 1 did believe.' I took it to moan that he did not want to do anything that would put him in the position of not knowing < where he was i going to. 1 regret very much that I should, have brought that up, but there was his discussion that indicated suicide."

'• Counsel remarked that witness's statement on the previous day had hurt Mr. Crotch very much. Witness, replying To, Mr. G. Eussell Vick, said that HaTt had never made any misrepresentations to him of any kind. : ;■■ In answer to Sir Richard Muri (for the Crown), witness said he had been concerned in finance for 1 twenty'years, and all the contracts he had made 1, had been fulfilled. The Caltex Oil Company had been extremely successful. Its profits for th« last seveii months were £25,000. ' THE SANCTIMONIOUS TONE. A number of depositors gave evidence. ■Mr. A'Court, who put in £50 the day before the bank failed, said he went to Farrow's Bank because of the glowing nature of the advertisements. Mr. Whiteley: "You have read Mr. Farrow's book, 'Shylock at the Bar'?" Witness: "Yes." ''. , Counsel: "And you know that Fairow was instrumental in getting a committee of the House of Commons set up'to investigate the matter?" —"Yes." "And that Mr. Farrow gave evidence for six days before the committee, as the result of which an Act was passed to prevent small- traders getting into the hands of the money-lenders?"— "Yes," Mr. Joshua McMillan, of New Maiden, another depositor, said he began to get a little suspicious towards the end, as the speeches were "rather treacley." "One of the.disgusting features of this case," witness added indignantly, "was the sanctimonious tone they adopted." Chief Inspector M'Lean> of the City Police, said that when arrested, Hart said: "It is all wrong; it is a colossal mistake." When Hart was searched a copy of the Falsification of Accounts Act was found on him. He said he had bought it that morning. . FARROW'S EVIDENCE. In giving evidence, Farrow said the bank had a good many difficulties to contend against from the start. The other great banks were extremely hostile, and they charged sixpence to a shilling on! oyery man who dared tender a cheque on Farrow's. They did the same with the Birkbeck, who decided not ito open branches, but Farrow's kept on, and repaid the? cheques to /their customers. Gradually they broke down this opposition. With regard to advertising in the religious press, the whole of that matter was left to the agent. Mr. Whiteley: What is your position in regard to people who have lost their money? Farrow: I can only express my extreme grief at the troubles which have so unfortunately arisen, and I can only say that until this case my honour has never been questioned., In spite of all that has happened, in spite of my sufferings,' I am glad to have this opportunity of ptempting to vindicate my, honour. ■ ' From beginning to end, what was your object in respect to this bank?—My sole concern was the interest of the shareholders and; the depositors. I have given my life to it. l Witness said his salary was increased by stages from £1000 to £2500 a year. Daring the war he suggested he should receive £1000 a year less, and received that amount. "I have ' lived^ for my bank and my home," he said. "I have never had a holiday for seventeen years. I refused to do anything butthe bank's work." - . , f FRIENDS AND BROTHERS. Dealing with the negotiation* with Mr. Read, Farrow »aid there vu no truth whatever in the suggestion that on 15th November he admitted to Bead he had been guilty of publishing fradulent bal-ance-sheets. Witness knew that Read's promised half-a-million would be taken into consideration in the June balancesheet, but ho did not know how Hart proposed to deal with it. He honestly believed Read would pay that amount^ and had faith in him until 29th November. When Read bought the bank he said he had attained the object of his life, adding that, as he had not served his country during the war, ■ he wanted to make up for it by serving the public. Mr. Whiteley: You and Read got on well together, I believe?— Witness: Yes, I admired his ability and energy. We were friends and brothers, and could have defied the banking world together. NO COMMERCIAL KNOWLEDGE. The Attorney-General (cross-examin-ing) asked Farrow if he held that he was/not to blame in the matter. Witness: "I am not guilty of the crimes' alleged against me. If 1 have done anything wrong it was without knowing it, and in the interests of shareholders." He did not blame his co-defendants, he went on. He had no commercial knowledge, and had no knowledge of accountancy or banking when he started the bank. Did you know that in every year after 1908 the amount of your expenses exceeded your income?— Yes. Ido not deny that knowledge." Counsel mentioned amounts which varied from £17,882, in 1914, to £132,350, in 1919. In the latter year the expenses were £209,562, while the earnings were only £77,212. Up to the end of 1919 the total amount of the writing-up of the investments of the bank was £1!572.291.

The Attorney-General: Did you think tliat process of writing-up was any, cure for these losses?— Witness: I imagined that the auditor knew what he was about when he upheld them. You trusted the auditor?— l did. Was is solely because you trusted the auditor that you permitted that state of affairs to go on and grow worse? —No. We did our best to remedy it by endeavouring to realise those securities and turn them into cash. .'■■■■.

WRITING-UP

'. "Are you aware?" Sir Gordon Hewart asked, "that by the end of the financial year 1919 the aggregate of the annual

trading losses was £918,741?" ■ Farrow: I heard that for the first time in these proceedings. ' ; I gather that until then you had never taken the trouble to add up the total ?— I' had no idea of the accumulation of these so-called losses. I never regarded them as losses. I regarded the valuations as giving us the necessary profits. ' You did not regard tham as assets?— 'Yes, I did. V When did you get i;i that frame of mind to regard annual losses as assets? —I never regarded them as losses. There might have been losses in regard to cx 7 penditure and earnings, but ours were more than met by the profits arising from the valuations.

That is what we call " writing-up," is it not? —"I have never seen anything ■wrong in it," persisted Farrow. He would not agree that the annual losses did not matter to him. They mattered ■ very much, he said, and .his efforts were directed towards realising the profits on the property. You mean, in plain English, you always wrote up the required amount? — It was the auditor's business to deal with the valuations. \ Farrow would not admit that, without Read's half-million in the balance-sheet, or an amount from share transactions in a previous year, the bank would'have collapsed. If Read had not come in'," 1 he said, they would have gone on. They had received other offers, and\9electedi Read's in preference to the others. They had plenty of money. "INNER RESERVE." When Farrow went on to speak of an "inner reserve," the Attorney-General remarked : "When you have trading losses, you write up the assets, and if there is any further difficulty, you talk about an innei reserve. Is there anything left in the formulae?" Farrow : "Before you write up the assets, you have trading losses. But first you must z aye the assets valued, and be convinced the value is there. From ths profile, of these assets an. inner reserve can properly be formed."

Does it occur to you that the great objection to that system is 'that whilst the losses are real, the writings up are not real?—l'don't admit that. If the value of these assets was gone into thoroughly, I am certain it could bo proved that th* valuations in the bal-ance-sheet, wevc fair.

"I ■am "pot a court of morals," eaid Farrow a littk latei. "I know many things are done by banks at the end of the financial year.",' V Mr. Justice Greer;' "Do you mean to deceive 'the people, who read the bal-ance-sheet?" Farrow : "I think there is much in the balance-sheet which is not informative, and which, if you-like to take a severe view! is calculated to mislead the public, I have two balancesheets her© of other banks, which puzzle and mislead me, but there is no intention of dishonesty about them or about ours." SATISFIED WITH THE VALUATIONS.

George Hart, of Brighton, formerly a chartered, accountant of Gray's Inn, and the father of the, defendant Halt, said he acted a.* auditor and accountant of Farrow's Bank from 1908. to 1917. He received £1200 the last year, and. had to .maintain a .staff of six, including his son. „ i

Mr. Whiteley : "It is suggested that your son was, from 19\?S to 1917, responsible for the figures in th 6 balancesheets. Is that true?"- Witness: "I am solely responsible." He added that he was satisfied then and now as to the correctness of the valuations. He did not discuss figures very' much with Mr. Farrow. None of the directors gave him any instructions as to the value to be added to any particular property. He iisfrd his own judgment. He had no doubt that when his son became auditor .in 1917 h e followed witness's methods, which he understood.

[It has been reported by cable that Farrow and Crotch .were each sentenced to four'years' .imprisonment, and Hart ito on© year.]