A ROMANCE OF CRIME.

New Zealand Mail, Issue 1509, 31 January 1901, Page 10

A ROMANCE OF CRIME.

THE: FRAUDULENT CAREER OF JABEZ SPENCER BALFOUR.

(By John G. Rowe)

11l the autumn of 1892 occurred the greatest financial crash of modern times. Millions or the public money were involved, and upwards of twenty thousand people were ruined—reduced from, if not affluence, at least fairly comfortable circumstances to utter and irretrievable beggary. The whole world stood aghast ait the immensity of the disaster. A ory of awful despair, of heart-rending anguish, went up from the heart of every man and woman in these islands. It was a unanimous burst of grief, the sob of a whole nation.

The London and General Bank, in connection with the Liberator Permanent Building Society, the Lands ‘Allotment Company, the House and Land Investment Tdust, and other companies, had failed, causing such national distress as —to use words lately become historical—to ‘‘stagger humanity.” The failure of the bank was attended by the failure of every one of the companies connected with it, companies that had been looked upon as most successful and increasing concerns, that up to the very hour of the crash were believed by the public to be in a flourishing condition and as safe as the Bank of England itself. The invested capital of the Liberator Building Society alone was reported to be seven millions. THE LIBERATOR BUILDING SOCIETY.

The total liability of all the-companies was something like £8,360,000, every penny of which had been obtained from the confiding public. The assets were supposed to be under three millions, leaving a loss of fully five and a half millions. There were 23,000 shareholders and 28,000 creditors. These to an -ndividual had lost their all, and thousands, as we have said, in that one hour of tne crash were reduced from comfort, not a few from luxv to absolute beG'mry. Widows and orphans in plenty were amongst the ruined. The blow for the most part fell ron the poorer and lower and middle-class, the thrifty and saving, of the working population, who, allured by thef bait of big dividends, Had sunk their hard-earn-ed savings in the companies’ funds. An appeal was made for the poorer sufferers, and a committee was appointed, with the result that, over £30,000 was collected in a few months, and great relief given. Close on £45,000 was received and distributed up to November, 1894. But meanwhile the rigorous inquiry into the dreadful business had brought to light a state of things "unique and wholb- unprecedented in the annals of crime, though everything did not come out at once. It was discoverfed that the entire management of the several companies was nothing more or less than a ~ ; ~antie combination or conspiracy to defraud.

THE PROSECUTION OF HOBBS, WRIGHT AND NEWMAN.

The result of the first revelations was the prosecution of threie men largely connected with the various companies. Their names were James W. Hobbs. Iloraoe Granville Wright and George Newman. All three! were sum>osed to be men of substance and position, and of unquestionable respectability. The sum total they were conjointly charged with obtaining by fraud and other criminal practices was little short of tdrs of a million of money. Thev were found guilty, and Hobbs and Wright were MKtenced to 12 years' penal servitude for forgery and to five years (concurrently) for fraud. Newman got five years for his share in the! fraud. But the master criminal, the ringleader ~»r excellence in the swindles, had meantime been to effect his escape. Immediately on the arrest of the three mem. Hobbs, Wright and Newman, Mr Jabez Spencer Balfour the highlv-esteeimed M.P. for Burnley, who had for years been the managing director, and for a lesser period the vice-ohairman of the Lands Allotment Company, the nucleus of all the Liberator societies, had secretly left the country and fled, whither it was for l«Mg unknown. Bub as more and more light was shed upon the mystery surrounding the crash, the “good Mr i>alfour.” as samel of his political friends styled him, to distinguish him from his namesake, the Rmhb Lon Arthur >t . Balfour, was discovered to be deeper in the mire than any of his co-directors, though nearly all, if not all, of them were more or less implicated in the frauds. The consequence was there was a r outcry in Parliament over his flight, and numerous defectives were phit upon his track. He was eventually traced the Argentine Republic, where he was living under the assumed name of Samuel ButlWr. He had been arrested near Buenos Ayres on a local charge connected with a brewery. The Argentine at the time had no extradition treaty with us, und: the question of the master roguefs extradition for long occupied the attention of thei two Governments. There were several difficulties in thei wa~ of asneedy settlement. The provincial authorities in Argentina decided they could not give up Balfour to the Federal Government until the actions brought against him at Salta Trad been tried. 'The ProcuratorFiscal of the provincial Government or Salta was entirely outside the control

of the Federal Government, and that official insisted on proceeding with the local charge against Balfour notwithstanding the fact that the original complainant had abandoned the charge. There was a strongly-expressed opinion in Parliament on the Opposition side that the Government had not shown sufficient vigilance to secure Balfour’s arrest before he absconded, and the Under-Secre-tary for Foreign Affairs, Sir E. Grey, had repeatedly to explain that Her Majesty’s Government was sparing no expense or trouble to secure Balfour's extradition. “Ugly rumours” got afloat that some members of the House did not desire to see Jabez Balfour return, in other words that they too were “in the swim.” It was asserted that Jabez was being we.. supplied with money by persons interested in his keeping out of England.

THE EXTRADITION JAjuZZ BALFOUR. But at last, in. April, 1895, the Argentine authorities handed over Balfour to the English detectives, and he arrived in custody at Southampton on May 6th. He was immediately brought to London and charged with fraud at Bow' street. After the production of formal evidence he was remanded to Holloway Gaol. Several newspaper proprietors and editors now got into hot water for committing contempt of Court in commenting on the case. On October 25th Balfour’s trial, along with that of four of his co(directors of the Liberator and the other companies, was held in the wueen’s Belnch Division of the Royal Courts of Justice, before Mr Justice Bruce and a special jury. All the defendants had been allowed out on bail with the exception of Balfour. The Attorney-General, Sir R. Webster, Q.C., M.P., prosecuted on behalf of the Treasury, and Balfour was defended by Mr John O’Connor and Mr Swanston. The indictments were of considerable length, the nature i f the charges generally being fraud by making false entries and publishing false balancesheets in connection with the Liberator and the other companieis. Balfour was also charged with obtaining £20.000 by false pretences from the House and I.and Investment Trust in connection wiih certain property at Whitehall and. imtherir ore, with—while a director’ tE * Building Securities Company (Limitedj - converting to his own use £ISOO, with intent to defraud tlie shareholders.

BIG DIVIDENDS OF THE LANDS ALLOTMENT COMPANY.

It appeared the Lands Allotment Company had been incorporated in 1857. Balfour was managing director from .1872 to 1883, vice-chairman then to 1835, and afterwards director till the winding up of the company in 1892. George Edward Brock, one of the other defendants, rose from clerk to secretary, from s- x-e-

tary to director. The concern made no profits for the last twelve! years of its existence, but in order to draw subser-lo-tions from the public it was made to appear by falsifying the accounts and the description of “bogus” operations as successful commercial transactions that large profits were being yearly earned. Dividends and babuses were paid, and large sums divided amongst the directors and officials without any justification whatever. To put the matter in a nutshell, this company, as well as the others,, that grew mushroom-like upon it, practically did no business at all, but, with the most orazen audacity, paid the dividends and bonuses to the deluded shareholders as well as the princely salaries of the lirectors and promoters out of the sums raised from the (shareholders and depositors, who were ueoeived .up to the eyes by false! balance-sheets. If there had not been a regular inflow of fresh money, in the shape of subscriptions from the shareholders and depositors, the smash must have come years before. The Liberator Society was started by Balfour and his friends on the alleged huge profits accrkiing* from the Lands Allotment .Company. It purported to be a building society on a vast scale!, and to afford a most ample security to depositors. Balfour and his fellow-defendants, Brock and Theobald, were all directors of the new company. The offices of the Liberator Soeiefty and the Lands Allotment Company were in the same building at 20, Budge Row. Transactions in millions took place between these two concerns by the mere exchange of crossed cheques, without a penny piece of real money passing. Profits of thousands of pounds, supposed to have been earned sometimes by one society, sometimes by the other, were oordeu in connection with these “bogus transactions. Cheques were drawn between the companies and often handed hack again. The London and General Bank was established in 1882 in connection with the Liberator Society under Balfour’s influence. At the time when the Liberator Society had overdrawn its banking account, it was supposed to be dealing in thousands of pounds’ worth of property. This sham dealing appeared in the balance-sheets as real transactions, and people were thtujs induced to invest their monely in the fraudulent concerns. As the Attorney-General put it, in his opening of the case for the prosecution, “money poured in/tO' this vast sink, never to> come out again, and people lost theiir all and were ruined.” HOW THE ACCOUNT 1 BOOKS WERE FALSIFIED. George Newman, the man already convicted and' sentenced to five j eai s penal servitude for fraud, was the head

of a firm known as “George' Newman and Co., land surveyors,” and this firm was constantly making big contracts, from which the alleged profits of the Lands Allotment Company were largely derived. Newman played the part of “pro-fit-maker” for the company. At the end of every financial year, when, as a matter of fact, there was a considerable loss, Newman would make a paper contract, utterly worthless, but which was described in the balance-sheet as a successful transaction, and large dividends and bonuses would be paid. In this wav. over three-quarters of a million of money was obtained from te duped public. Hobbs, another of the three convicts, was also a “profit-maker” when. necessary. He traded as “J. W. Hobbs and C 0.",” but was originally a builder in a very small way at Croydon. He was intimately connected with Jabez Balfour. Among' other companies floated by Balfour and his fellow-conspirators and swindlers were the* Real Estates and the Building Securities. Tne former only had a subscribed capital or £j.<B! It was started in 1888, and cued with the other companies in 1892, having in thattime incurred a liability of £300,000. Some of the companies could not show an asset in the worl- at the time of the crash, and yet were represented to be in a flourishing condition, and were paying 5 per cent, dividend and 3 per cent, bonus.

MR BALFOUR’S SYSTEM OF BANKING.

The London and General Bank carried on a so-called banking business in connection with these fraudulent companies, and its controllers were again Balfour and Co. Otherwise, of course, the bogus transactions would have been discovered, as also the fact that the dividends were paid year by year out of the money coming from the public. In 1872 the capital of the Lands Allotment Company was £15,000, in £ISOO shares of £lO each. In 1875 the capital was said to be £50,000 ; in 1876 it was increased by £IO,OOO, and so it went- on increasing till it was reported to be half-a-milh

of money, when powers were taken to raise another half-a-million. A quarter of a million was actually raised in 1888. Fictitious sales and bo"us financial undertakings were entered into, and fictitious values wdre set upon property to show valuable assets. The book value of the property grew in six years from £75,000 to £442,000, without any independent valuation. Balfour and his fel-low-conspirators were meanwhile drawing large sums of money from the companies for their own use.

HIS SYSTEM OF BOOKKEEPING. The books of the different companies were altered to make mem square with the entries of the bogus transactions. In 1886, it was decided to raise more money still by debentures.. To make a good_show on the balance-sheet The figures given by the valuer of the property were suppressed and greatly increased. One estate at Romford, valued at £360,000, stood in the books at £462,000. The honest valuer’s services ware dispensed with, and Newman was made valuer. The value of the Meersbrook property at Sheffield was also greatly exaggerated'. So the fraud went on year after year without discovery, Newman and Hobbs playing their parts of profitmakers excellently well, and Balfour superintending the entire working of the scheme. The crash came at last when there was no more public money to be raised.

On November 20th, the jury found Jabez Balfour, George Brock and Moreill Theobald guilty, but the extraordinary case against the first-mentioned did not close until he had been tried an convicted a second timd for the larceny, in conjunction with the convict Wright, of a secret profit of which was fraudulently added to the purchase money paid by the House and Land Investment Trust (Limited). Balfour was sentenced to fourteen years’ penal servitude, Brock to nine months’ imprisonment, and Theobald to fcnu,r months, each with hard labour. In passing judgment on Balfour, his Lordship made use of these words : “No prison walls and no prison doors can shut out from your ears the wails of thei widows and orphans reduced to penury.” At the time of his leader in crime’s conviction, Hobbs was at Portland and workiilli in the carpenter’s shop there.