FARROW'S BANK

Evening Post, Volume CII, Issue 34, 9 August 1921, Page 3

FARROW'S BANK

CROTCH'S EIVDENCE

INTERVIEW WITH MR. NORTON

(HMX ODS OWN COXRESPOHBSNT.)

LONDON, 21st June.

Further evidence in the trial of Farrow, Crotch, avid Hart, three of the principals associated with Farrow's Bank, 'was given by defendant Crotch. While in America last year, he said, he had an interview with Mr. Norton, the partner of Mr. Read, who agreed to subscribe for the 300,000 unissued shares in Farrow's Bank, and with "Transatlantic smartness " said., ',' I will buy the bank and find £2,000,000 on the nail as a deposit." When he returned he found the negotiations with Mr. Read had gone a long way, but eventually he lost his temper and said : " The proposition, as boiled, down, is to buy this bank with a packet of rotten oil shares." Eventually, against his better judgment, proceeded witness, lie was won over, and joined in the negotiations. When he suggested to Read that he should put half a million^ into the bank, Read said: "I. don't mind a million or more." Witness said: "You had better come to earth. I have heard enough of millions from, your partner." Read replied: " Yes, he was talking through the back of his collar when he offered you two millions straight away." -Later Read said he wanted the balance-sheet to look as good as possible, and added: " Gee, just you watch. m» farm those gins." (Laughter.) ,

"NEVER CONSCIOUSLY ROBBED."

' It was suggested, said Crotch, that he should receive. £20,000 as compensation for the loss of'office when Norton, Read, and Co. obtained control. Read told him he would be kept in a consultative position for work'in the city in connection with oil shares at a, salary of £3000. "I don't want to quibble," he replied to Bead, "but if you make it free of income tax I shall be a happy man." (Laughter.) "Fine," replied Read, "Churchill shall draft the scheme tomorrow." (Laughter.) Describing the scene when Mr. Churchill, the bank's solicitor, told him the books disclosed a serious state of affairs, he said he did not take it seriously at first.; Then Mr. Churchill said it would probably result in a stoppage and a criminal charge against the diroctorsi "I was thunderstruck," said the witness, "and I said with great solemnity,' 'What has been distorted here?' I swear before my Maker that I have .never consciously robbed a man of a shilling in my life, and I am prepared to'answer for that to Him now or hereafter.'' PROM/ HAND TO MOUTH. Crotch admitted that he was the chairman of the Dreadnought Cement Company, in which Farrow's Bank was financially interested. Writing on one occasion to another director in reference to the expenses of the Dreadnought Cement Company and the amount of money required, he said, "We must dodge the balance." He could not now tell what he meant by that expression. Sir Richard Muir: Does it not indicate a financial stress?— Witness: Not in this matter. Sir Richard suggested that the alternative to dodging was to pay up, and the witness said, >"At times we were living from hand ito mouth." He agreed that-he also wrote: "This indisposition to pay is chronic with us. We enter into commercial propositions and declare we are' going along on sound lines. We. make all plans, accordingly, bus when it comes to' paying that is a different tune altogether:' One has to come ito the board and beg for finance. Proper arrangements must be made so that we can maintain our position and pay our way as we go." In September, 1915, the witness wrote : "I wonder whether a good advertising campaign would help things along. This and next mojhth are good ' pulling months." He agreed that from that letter it would appear that there was a tightness of money.^ "Yes," said Sir Richard Muir, "and tightness of money in Farrow's Bank." INDICATIONS OF A BANKRUPT. Sir Richard Muir suggested that it was gambling to deal in Mexican rails. "That is a question, said witness, on which people better informed than either you or I might hesitate to express an opinion. It is unjust and unfair that you should :pin down one stock out of a large number and say ' that is gambling, when we had been recommended by a most, reputable firm of brokers to purchase those shares." Crotch mentioned one man with whoml he had had dealings,i and counsel inquired whether he was not' an undischarged "bankrupt.

Crotch: Ido not think so. He had a house in South Audley-street and another in Maidenhead. He lives in fine style.

Counsel: All the indications of an undischarged bankrupt. (Laughter.)

Crotch: I appreciate your witticism, Sir Richard. Referring to a witness's description of his attitude when tho result of the examination of the books of the bank was disclosed, Crotch gaid he objected to the suggestion of suicide. It was absolutely opposed to his religious and moral convictions. He also objected to the suggestion that he had "wilted." He agreed that he doubted Mi. Read in the early part, of the negotiations, but that his doubts were removed when that gentleman offered him £20,000 as compensation. Sir Richard Muir: And when he added an offer of £3000 a year, free of income tax, they vanished altogether. (Laughter,) , THE " OLD GANG." Replying to his Lordship, witness said he ha-d never been a director of a corn pany before his association with Farrow's. Nobody had ever told him that it was irregular and wrong for a direc tor to have dealings with a company with which he was officially connected. It never occurred to him that there was anything wrong in it. While on his return from America last year he sent a wireless to Farrow to be read at the meeting of shareholders. The wireless stated, "As result long series ,of consultations convinced new plan enormous benefit augmented resources raising to Imperial international importance." (Laughter.) He alco admitted writing a letter in which he referred to " the lengths the old gang would go to beat and cheat me."' The "old gang" was known ?t tho bank as the Triumvirate, and he hnri nl?o written that they "did not stop at forgery." \ NORTON-READ HALF MILLION. The .accountant, F. D. T. Hart, stated that on 11th June, 1920, he wrote to the secretary of Farrow's, saying that having regard to the very unsatisfactory condition of affairs at the close of the previous year, when the bank published accounts hefoie the auditors' requirements were fulfilled, steps should be taken to ensure that no accounts 1 were published until hi^ firm had seen and signed the certificate. > Counsel: What was the unsatisfactory condition of affairs in 1919? Witness: Certain share certificates were not produced to me. He informed the secrej tary that if such publication was repeated in spite of his letter he would report the matter to the shareholders. In 1920 he refused to sign the balancesheet until he received a telegram confirming tho value of the Laminated Coal

Company from a member of Parliament. That year that investment was written down £10,500. The balance-sheet of 1920 included £500,000 which it was anticipated would be received from Norton, Read, and Co.

| Mr. Russel Vick (for. Hart): Why did you take the £500,000 into the balancesheet?—l took it in on the strength of a letter, followed by the signed agreement, and also because I saw the securities which had been lodged. Witness wont on^to say tliat before taking the £500,000 into the balance-sheet as an asset he discussed the matter with his | father. The latter advised him that it could be treated in- the way that it was actually dealt with. He denied refusing access to. the books to a representative of Nortoii, Read, and Co. When he was arrested, said the witness, there was found in his pocket a copy of the Falsification of Accounts Act. His explanation was that it', was mentioned to him 'that the opinion of Sir John Simon had been taken, and he said there had been' fraud. He could not understand that, and he turned up his reference books to see what was meant by a fraudulent bal-ance-sheet, and he the* saw a reference to the Falsification, of Accounts Act. "I happened," he'said, "to buy a copy of the Act. on the very morning that the bank failed." .

Counsel : Have you ever, from begin-' aiing to end, intended to defraud anybody by tho publication of. the balancesheets of the bank?— Witness : "Never." Since that case had been before the Courts lie had heard a great deal which was quite new to him. : The Judge said that one of the bank's ■balance-sheets showed a reserve fund of £138,000. A reserve fund should be for the purpose of meeting contingencies .which might arise, whereas the £135,000 represented bad debts which had already arisen. , " PROFIT REQUIRED." Cross-examined by Sir B. Muir, Hart agreed that when preparing the balancesheet for. 1920 ho x found that nearly £500,000 was required. Did you find tliat you wanted half a million to put your balance-sheet into the position you desired?— Something Jike that.' . The Judge : Having found out approximately that the bank was being conducted at a loss year by year so far as the working was concerned, you never brought that fact to the minds of the directors ?—fitness • I did not recognise that it was working at a loss. Why vnofc. The figures show it as clearly as it can ba shown. In each particular yeai there was a .loss, apart from taking anything from reserves?— The year would not be' complete until all the profits were brought in. Hp might have gone to. Farrow each 1 year and let him see a pencilled statement of the- year's workings. Counsel asked for whose information the' words were written in a pencilled statement "approximate estimate of profit required," and Jie replied : "For my own information to ses what they had . to find." Who had to find?— The directors. Bid you tell them the amount they had to find?—l may have, or see what they had first. What was it done for unless it, was for the purpose of telling the directors what they had got to find ? —For my own information I had to know what thay had to find. Did you tell them what they had to find ?—Yes,. in some of the years. How did they find it?— Generally from some investments which had not gone through the books. Something to write up ?—Not necessarily. What else war, it?—lt might be some bonus shares. -; i Sir Richard Muir read extracts from the minute book, which authorised the taking of £110,000 and "£160;000 from the securities reserve fund at the end of the year. Counsel also pointed out that the'amount increased yearly. Replying to the Judge, witness said that in 1920 the bank's interest in the Colliery Investment Trust was appreciated to the extent of £125,000. That appreciation took place as shares had been received, and a letter was received from a firm of stockbrokers offering, for a fee, to try and get, a quotation for the shares on the London Stock Exchange. The stockbrokers also oxpressed the opinion that the Shares shoi'ld fetch par.

[On the 21st June, Farrow, Crotch, and Hart were found guilty. . Farrow and Crotch were each sentenced to four years' imprisonment, and Hart to one year.] ; ■ : . . '