GIGANTIC PARIS FRAUD.

New Zealand Herald, Volume LXVII, Issue 20722, 15 November 1930, Page 2 (Supplement)

GIGANTIC PARIS FRAUD.

CLERK EMBEZZLES £130,000. / UNDETECTED FOR 16 YEARS. CONFESSION OF GUILT. / NOTAIRES' ABSURD CUSTOMS. Sixteen million francs—about £130,000 — Bounds a lot of money in France, and even in England it makes a desirable sum. It seems incredible that such a sum should have disappeared from the funds entrusted to a. Paris notaire, without the notaire himself having the smallest suspicion that it was missing. Vet that is what happened in a notaire's otlice in Paris recently, and the default only became known he cause the confidential clerk, who had been accumulating tlio embezzlements for as many years as he had taken millions oi francs, himself announced his guilt.

Of all the figures in French social life the notaire is tho most traditional representative of respectability, reliability, and nil the bourgeois virtues, says the Paris correspondent of the Observer, London. >1 is office is older and more permanent than any political constitution, and his powers are more extended and more durable than any political Act. Parliament may in theory be able to do anything, but even in theory is not entitled to alter an " acte notaire," an agreement made !' par devant " a notaire. Function o* the Notaire. The notaire used to be appointed directly b>/ the King, and he is now appointed directly by the President of tho Republic, ft here if, ,1 strictly limited number of him, and the Chainbre des Notaries, the professional association which represents him, has successfully rosisted any demands that it shall be increased. He is .the most solid thing in France, for he represents the security, the transfer, and the confidence of property —and in France everyone has a little property of some sort. The ancient professional tradition and habits of the conduct of a notaire's business, which are not only maintained by individual notaries, but are to a great extent imposed by the Chambre des Not aires itself, are to a large extent responsible for frauds such as that which has just come to light; for they make any efficient accountancy and control impossible.

The refusal of the notaires to admit any increase in their number is also largely blame, for although those who hold the monopoly are exceedingly prosperous, they have no time to go into the detail of transactions for which they nominally

have to account. Although notaires only deal with the management of property and its transfer by sale of by inheritance, and have none of the other functions of an English solicitor, enoyuous sums of money pass through their hands; and they can make large profits out of this money even if they never go beyond what professional custom allows them to do. Weakness ol the System. In any transaction before a notairo there is always a long interval between the date when a purchaser pays the money into tho " etude " and tho date when the " etude "—which is the name for a rotaire's ofiice —pays it out to the seller. The notairo retains the interest during that time; When there is a question of ■winding up an estate, the interval is very much longer, and although the notaire is naturally not allowed to take the income from the property in the meanwhile, there are mariv profits which he can and does make while the money is under what is called " sequestre." It was these " sequestres " which en-

»bled the confidential clerk not only to tnke the money out of the till without t his employer ever knowing that anything was wrong, but also to make up the deficit with new sums coming irjto the " etude " until it became so large that he saw he could do so no longer. For the /remarkable thing about this fraud was that everything which the clerk did was regular. He forged no signature —for the notaire had given him a power of attorney. What he did was to sell shares which the notaire held in trust, and imagined to be still in the bank where he had placed them. Good Accountancy Unpopular. That this fraud continued for 16 years without being discovered was made possible by/the absurd system of accountancy which/still obtains in notaires' offices and the entire absence of efficient verification or control. There is a nominal control, carried out once a year, by two other notaires, who take their turn to undertake this honorary job on behalf of the Chambre cies Notaires, but who riot only have no training as accountants, but naturally hesitate to ask awkward questions of a colleague.

As for the system on which (he accounts lire k(/pt, its antiquity may be understood when it is said, first, that all payments

lire stipulated in notaires' agreements as having to be made in cash and even in coin—" pieces sonnatites et trebuchantes " jire words which have hardly yet* disappeared hum notarial phraseology—and, second, that no notaire is allowed, by rules of his profession, to have a banking account, although, of course, they all do so. Recently, a more than usually modernminded notaire engaged as Ins cashierclerk a young man who had passed through is special training in an accountant's office --the thing is rare in France, and the chartered accountant is unknown. This <lerk instituted a system of books which •enabled the notaire to ascertain his position at any moment. The visiting commission. from the Chambre des Notaires orderea the system to be abandoned, arid reprimanded the notaire for having adopted it. Chambre to the Rescue. The ,16 million francs, although thev have been lost, will not lOine out of the pockets of. the uotaire's clients. The amount has been made good to them, partly by the notaire sacrificing Ins own fortune o! four millions, hut principally by the Chambre des Notaires providing the remaining 12. This is always done. I lie ( hambre ch s Notaires never allows the client to suffer, or the high—and in nearly every case justly high—reputation of notaires in general for integrity to be diminished. All sorts of suggestions are now being made for reform, and for the creation of some official system for the verification of notaires' accounts. It is thought, however, that the notaires will be strong enough to resist any outside intcrfeien with their affairs, and they will have public opinion with them, and for this reason. The only official inspectors of accounts would.have to belong to the Ministry of Finance; and if once anybody from the Ministry of Finance put his nose info a notairtf's office he might find out a lot of things about the private property of the clients, which might result in the fax collector asking inconvenient questions and making exorbitant domands.