The Hastings Standard Published Daily. MONDAY, JUNE 22, 1896. THE FAMOUS DRAFT.

Hastings Standard, Issue 48, 22 June 1896, Page 2

The Hastings Standard Published Daily.

MONDAY, JUNE 22, 1896. THE FAMOUS DRAFT.

For the cause that -lacks assistance. For the wrongs that need resistance, For the future in the distance. And the go*d that we can do.

The draft for £30,000 against oats purporting to be of that value given by the J. G. Ward Farmers' Association to the Colonial Bank has some features about it as a commercial transaction which deserve to be fully set forth. According to the evidence tendered by Mr Yigers, who was at that time the Inspector of the Colonial Bank, we learn that he was despatched by the General Manager to Invercargill to demand that the overdraft of the J. Or. Ward Association be reduced. This was at the end of -June, 1895, on the eve of the balancing cf the Ward Association accounts. Apparently, while Mr Yigers was on this expedition a cable from London is received by the Colonial Bank, which the General Manager misconstrues —the arrival of the message and the misreading occur at such an opportune time that it would seem almost to be a " fake." However, the draft, with warrants attached, was drawn and accepted by the Colonial Bank. The warrants were supposed to be bond receipts or warehouse receipts for oats. At the then value of oats there should

have been in bond or warehouse 120,000 to 150,000 sacks. The storage of such a lai'ge quantity of grain, and its shipment would be matters of considerable negotiation, and it seems that it would be almost impossible in a transaction of this kind to deceive a banker without the active connivance of the banker. The draft was, however, accepted by the Colonial Bank, and it was thus possible to manipulate the figures in the balance-sheet so as to make the Ward Association seem to owe its bankers less than it actually did owe. The draft was upon Messrs Connell and Co., London, but was held back pending the return to the colony of Mr "Ward, and until further advice as to the cable was received. Mr Ward returned to New Zealand in July, and, according to his statements in the House on Tuesday last, lie refused to let the draft go forward. Some time in September the Bank made the startling discovery that the oats which were supposed to be in some bond or warehouse did not exist. Now, it must be stated, and Mr Yigers emphasised the point in his evidence, that the draft did not mean advancing a fresh sum of money to the Association. Had it been a new advance, possibly more can; would have been taken to see that the security existed and was good. The duty that draft of £BO,OOO was intended to perform was manifestly to enable the Ward Association to " cook " its balancesheet-, and the peculiar features of the transaction suggest that it was intended to serve the purpose of the Colonial Bank also, and to enable that institution to present a balance-sheet which was evidently incorrect. The Colonial Bank must have known in August the reasons why the draft was not to be made effective by being sent to London for presentation, and although it is alleged that the nonexistence of the oats was known in September, there is strong presumptive evidence that this fact was known, and Mr Ward prevented the draft going forward. The Colonial Bank's balancesheet was made up as at 81st August, 1895, and to have known officially that the draft for ,£BO,OOO was not worth the paper it was written upon was not the desire of the bank officials. The worthlessness of the draft was known in September, and on the 2;"sth of that month the half-yearly meeting of the shareholders of the Colonial Bank was held, and the balance-sheet showing a profit of £19,989 2s lOd was presented to the meeting. This profit was arrived at by assuming that the'draft for £BO,OOO was good, so that instead of there being a profit there was an actual loss of £10,019 17s 2d; but the responsible officers of the bank, or such of them as knew of the bogus draft, failed to in any way convey the intelligence to the proprietors of the bank. They were silent for obvious reasons. They were actively engaged in negotiations for the sale of the institution to the Bank of New Zealand at the time, and to have admitted a deficit in the accounts would have in all probability jeopardised the sale. On the 18th October, the Bank agreement was finally signed and was next day presented to Parliament for approval; but in the meantime, the draft was written back to the debit of the Association, and the then ascertained loss of £55,150 was wiped off the Association by the Bank taking a promissory note from Mr Ward for that amount. Taken altogether, the transactions in connection with the famous oats draft are such as to make it impossible for any intelligent person to believe that they were in accordance with sound banking principles; and, in the interests of commercial morality, we think it the duty of the shareholders of the Colonial Bank to call upon Mr Mackenzie, the general manager, and the directors of the Bank to justify the same.