A COLOSSAL FRAUD

Evening Post, Volume CXXVIII, Issue 64, 13 September 1939, Page 18

A COLOSSAL FRAUD

THE WATERLOW CASE

BANK OF PORTUGAL'S CLAIM

HISTORY OF AFFAIR

The greatest monetary swindle of modern times is that by which a gang of forgers and sharpers succeeded in circulating 209,718 spurious bank-notes in Portugal, says a writer in the Melbourne "Age." Each of these notes, which purported to be issued by the Banco de Portugal, was of the face value of 500 escudos. At the exchange rate of 96 escudos to the pound sterling, the spurious notes in circulation had ■ a face value equivalent to £1,092,281. It was impossible to distinguish the spurious notes from genuine ones, for the conspirators had , managed by J trickery to get the English firm which had printed the genuine notes for the Banco de Portugal to print notes for, them on the same plates, and.on paper which was exactly similar. This colossal fraud was ventilated in English Courts in 1930, when the Banco de Portugal sued Waterlow and Sons, Ltd., printers of the notes, for the recovery of the sum of £1,100,281. The bank subsequently reduced its claim to £610,392, as a result of the realisation of the assets, of the conspirators when arrested in Portugal, where they had started a bank, mainly for -the purpose or putting their spurious notes in circulation. SOLE RIGHT OF ISSUE. The Banco de Portugal has the exclusive right, conferred on it by the Portuguese Government, of issuing bank-notes for circulation in Portugal, the Azores, and Madeira. The Banco National Ultramarino has the exclusive right to issue bank-notes in the Portuguese colonies. In 1922 the Banco de: Portugal. entered into a contract with Waterlow and Sons to print 600.000 notes each of 500 escudos. These notes were known as Vasco da Gama notes, because they had a portrait of that famous navigator and explorer in the left-hand corner. The dies and , plates prepared by Waterlow _and Sons for printing the notes remained in their possession for subsequent use, should the bank want more notes of the same kind. . On December 4, 1924, a Dutchman named K. Marang van Ysselveere called at the London headquarters of Waterlow and Sons, and interviewed Sir William Waterlow, who was then the chairman of the company. Mr. Marang, as he was called, was about thirty-five"years of age. He was of prepossessing apeparance; he naa charming manners, and he was very well dressed. He made a very favourable impression on Sir William Waterlow who neglected to make adequate inquiries into his credentials and into the truth of the story he told. He said that he represented a Dutch group of financiers who were arranging to give financial assistance to the Portuguese Colony of Angola, West Africa. FOKGED DOCUMENTS. He produced two forged documents. One of them which purported to be made between the Governor of Angola and Mr. Alves Reis, acting oa behalf of the Dutch syndicate, authorised tne syndicate to print banknotes to the face value of 100,000,0000 escudos. The other contract purported to between tLe Bancd d 6 Portugal and We Governor of Angola, and by 'it the bank authorised the Governor to have the U°WatSlow and Sons communicated with their agent in .Lisbon in regard to the matter, and instructed him to g^t the Banco de Portugal to give their- authority to print the notes for the.Dutch syndicate which" Marang represented. The agent replied that he was. unable to obtain such authority as the Banco de Portugal had not the right to print notes for circulation in the colonies. He suggested that Water r low and Sons should be extremely cautious in their dealings; with the Dutch syndicate. But this warning was disregarded when Marang again presented himself in London, and told Sir William Waterlow that it was necessary to preserve the utmost secrecy in regard to their business together, as .only; a few of the directors of the Banco de Portugal had been made acquainted with the position in Angola.

CHANNEL OF COMMUNICATION. He declared that it was essential that every communication between Waterlow and Sons and the Banco de Portugal should pass through his hands, so that it might be safely delivered m the right quarter. And with one exceptSf every letter which Waterlow and Sons sent to the Banco de Portugal at Lisbon, was entrusted to^Marang The exception was a letter which, if it had been received by the bank, would Save, led to inquiries, . which _would have exposed the conspiracy. But the bank officials said that neither this letter nor any other dealing with the negotiations between Marang and Waterlow and Sons was received It is assumed that Marang or his fellowconspirators found means to intercept the one letter to the bank which was not entrusted to Marang., Waterlow and Sons received a forged reply to rt, and as a result they proceeded to carry out the order given by Marang to print the notes. A total of 200,00Q notes of 500 escudos were delivered to Marang in February and March, 1925. He placed another order for 380,000 notes of the same denomination, and these were delivered to him between August and November of that year. It was mentioned in court,that Marang had not paid the bill for'-printing the second supply of'notes, or that for the suitcases in which they were packed for removal. His unpaid indebtedness to Waterlow and Sons was £486. SAME NUMBERS USED. The fact that spurious notes were in circulation in Portugal was discovered by the Banco de Portugal early in December, 1925, but as these notes were exactly like genuine notes, having been printed from the same plates and on paper of the;same quality, it was impossible for experts to tell the difference between them. Marang's ingratiating manner and his plausibility had exercised so much fascination on Waterlow and Sons that he had been able to induce them to number the notes with the same consecutive numbers as genuine notes they had printed for .the Banco de Portugal. It was not''until' 3 the bank discovered two notes with the same mimber, that it was realised one must be spurious. Instead of making public the fact that spurious notes were in circulation which could not be distinguished from genuine notes, the bank decided to call! in all 500 escudos notes bearing the portrait of Vasco da Gama. When all the notes came in it was found thatj 209,718 spurious notes had been in cir- f culation. Alves Reis and another of the conspirators were arrested in Lisbon, and were sentenced to 25 years' transportation. Marang was tried' at The Hague and put up the defence that he had been merely an innocent! agent of the conspirators. This plea was accepted, but on some technicality

he was convicted, and sentenced to eight months' imprisonment. The prosecution appealed against this light sentence, and it was increased to two years. "That, however, was a matter of no moment to Mr. Marang, because he was not in Holland at the time, and he has not been there since," said Mr. Bevan, K.C., in outlining the case for the Banco de Portugal, when its claim against Waterlow and Sons came before Mr. Justice" Wright in the King's Bench division of the High Court of Jusjice, in London, in November, 1930. YEARS OF PREPARATION. It took several years to prepare the case before it could 'be ■ brought into Court. Nearly all the documents, including bundles of correspondence and various Portuguese statutory decrees, had to be translated. All of the witnesses for the bank were Portuguese, whose evidence with one or two exceptions, had to be interpreted. Most of these witnesses were two months in London in connection with the case. Some of them held high official positions in Portugal, and were accompanied by their personal staffs. In all 9801 questions were asked and over 600,000 words spoken. A shorthand note of each day's proceedings was taken, and printed transcriptions were supplied to the Court on the following day.

Mr. Justice Wright gave judgment for the Banco de Portugal and fixed ihe damages at £531,351. He expressly stated that no reflection was cast on the integrity of Sir William W .terlow or his firm. The case was "one of those "■ unfortunate circumstances which overtake the most eminent, distinguished, and high-class firms." When the case came before the Court of Appeal, Lord Justice Scrutton took the view that the Banco de Portugal had not been defrauded by the circulation of the spurious notes. He held that the damage suffered by the bank was limited to the cost of printing genuine notes to replace those called in. This amounted to about £9000. "PURE GAIN TO THE BANK." Lord Justice Greer and Lord Justice Slesser thought that the bank's damage should be reduced to a round sum of, £300,000 on the ground that the bank could have refused to exchange good notes for bad ones after the discovery of the. fraud. This sum of £300,000 represented the majority decision of the Court of Appeal, but the case was taken to the House of Lords: Three of the five Law Lords who heard the case held that the bank had estab- ! lished its claim to the full sum of £610,392 6riginally demanded, and the other two agreed with Lord Justice Scrutton that the 6nly. damage suffered by the bank was the cost of printing notes to replace those called! j in.

Sir Cecil H. Kisch, in his survey of the case in 'a book entitled "The Portuguese Bank Note Case," expresses the opinion that the sums recovered fron* Waterlow and Sons and from the liquidation of the assets of the bank founded by the conspirators, "appear for the most part in the light of pure gain to the Banco de Portugal or partly to the bank and partly to the State." The loss was ultimately borne by the community in the form of raised prices (caused by inflation of the currency) so that although the total recoveries were equivalent to the injuries received, th,eir distribution had no "particular correspondence with the incidence of the pecuniary losses." ' .