ALLEGED BANKING SCANDAL.

Otago Witness, Issue 3489, 25 January 1921, Page 24

ALLEGED BANKING SCANDAL.

OFFICIALS BEFORE THE COURT. LONDON, January 19. Astounding disclosures were made at the Guildhall Police Court during the prosecution of Farrow’s Bank officials. Sir R. D. Muir, in his opening statement, said that in May, 1920, the Nev York firm of (Messrs Norton, Read, and Co., with a London house, agreed to acquire a controlling interest in the bank by providing £500,000, whereof £400,000 would be placed to the reserve account, and £IOO,OOO would be used for compensation to Farrow and the other directors, who would retire. Mr Read, the London partner of Messrs Norton and Read, was dissatisfied with the examination of the books, some of which were withheld, and called in chartered accountants in November, who eventually informed him that the bank was hopelessly insolvent, whereupon the agreement was cancelled. Counsel suggested that Farrow’s and Crotch’s idea was that when the crash came Mr Read-, being enmeshed in this fraudulent business, would shoulder the financial burden to save the honour and credit of his firm, and to prevent exposure. Crotch, who was the leading spirit in the concern, apparently owed the bank between £IOO.OOO and £200,000, of which £45,000 was still in the name of a certain lady. Counsel said that, with the exception of the first portion of 1908, the bank had clone nothing but make losses, ranging from £II,OOO in 1909 to £203,000 in 1920, aggregating £1,107,000, quite apart from tlie loss by depreciation of securities, which must be considerable. During all this time the bank was paying interest to depositors. The shareholders must have been paid out of capital, and tli a losses concealed by the fictitious values of the book assets. One asset, which appeared as £780,000, due from a cement company, was wholly fictitious. The reserve fund was also wholly fictitious. A clipboard broken open in Hart’s room revealed papers showing how the fraudulent balance sheets had been prepared for each year. A document was prepared showing the true position of affairs, from which Hart (the auditor of the bank) “cooked” a balance sheet.

Thomas Farrow, chairman and managing director of Farrow’s Bank. Ltd., was born in 1862. lie went from Calton, Norwich, in 1884 to continue his legal career in London. Shortly afterwards lie became honorary secretary to the Agricultural Banks Association. In connection with this office, lie investigated the evils of usury, publishing the results of some five years’ work in several volumes. The revelations disclosed created great public interest, and the Government appointed a Select Committee of the House of Commons to inquire into the whole subject. He opened the inquiry by giving evidence which occupied six days. The result of (he inquiry was the passing of an Act known as the Moneylenders Act. His publications included “The Moneylender Unmasked,” “In the ’ Toneylender’s Clutches.” “Shylock at the Bar.” “Land Banks for England.” “Banks and People.” and “How to Win the War—-Financial Solution.” William Walter Crotch was joint founder, with Thomas Farrow, of Farrow’s Bank. Although lie started life as a journalist, ho abandoned it for banking ns a profession. He is president of the Dickens’s Fellowship, and has written a number of books and brochures, including “Cottage Homes of England,” “The Social

Reformer,” “The Soul of Dickens,” and “The Pageant of Dickens.”