FARROW'S BANK.

Press, Volume LVII, Issue 17124, 20 April 1921, Page 11

FARROW'S BANK.

CASE AGAINST DIRECTORS.

* (from ont OW* CO»nKSPOSDtST.) • ■; LONDON*, March 3. ■ -Mr William A. Read, the voung .Tic* blander negotiated for a coninterest in Farrow's Bank for JJTTum of £-500,000, on'l who wrf* in.tromcntal in revealing the true statu Vthe bank's affair*, appeared as a - itness before the Guildhall for the :'f time this WO* in tho case against S&EW. f* H«t- H.W " i n the southern oilfields of Mexico .ten be received word by special ines!,necr that his persona} evidence was SffirtH* the .Court. Ho imruedi; IfSv cut bis trip short and engaged a trial transport' to Tampico, n«:jrly •' «0Q miles.from the Panuco oiihekis, Xro bo then was. . Of ms motor inirrncv in Mexico Mr Bead says: ' It ias absolutely the road 1 have ever been on. Tho Indian driver, like ii ],i 3 tribe, was simply out to mak* the car do all it could; -ho drove over , that wreck of a road liko a maniac. J warned him—without tho slightest effect—and then lie hit the jungle by the 6 ido of the track. A front wheel was i ta^e n off as dean as a whistle, t ortuuatclv wo obtained another car i'roin mining- camp near hy, and I reaches Tanipico in time for a tram to New York* which enabled mo to catch the Adriatic." , , • ' Farrow, -who was formerly chairman I and managing director ot the hank, has rtmftinod in custody since December 21sfj and lR> has greatly benefited in health. Tho otfher two a.cused were, able to sureties, and il.ey aro at ibtfty. Tho 'case is being heard before a Coort of Summary Jurisdiction at tho . Gtuldhall, before Alderman Sir Charles "Wakefield, and considerable interest was ghotin in tho resumed sitting this week, owing to Mr Read's appearance. Jilt answer to questions put by Sir JX. Mttir (for the l)irector of Public Prosecutions), Mr Rend told at great length the story of his itcao' iutiona with tile • directors of farrows Dank. His lirra (Messrs Norton, Head end Co., of New York and London, he said, dosircd to obtain a sußstantial interest in an English.banking concern, and in making enquiries ho came across the published particulars of "Farrow's Bank. He first met Farrow at Cheapside oil May 7th, told Ihirii who lie was, and indicated that ho might want to take a iinancial interest in the bank. He gavo Mr Fairoiv particulars of himself and his associates, and Mr Farrow gave him a booklet and a copy ol the 1919 balance-sheet. Mr Farrow told him Farrow's was one of tho finest of the smaller banking institutions in the United Kingdom. There wub a general conversation, and Mr Crotch, was Mentioned, Farrow saying he was tt man of groat ability. He said the nUQQ. of Thomas Farrow was well . kiwrrti and particularly well regarded, aid ho coulcf raise any additional capi> y he needed on his name alone. ■, Read and Mr Crotch lunched together at the Carlton, and tho latter ma&tioned possible depredations. He j posted that witness should provido i jiievfo fund, ultimately agreed at . £§oo,ooo. A portion of £200,000 was wbo paid to a retiring directors' fund. ' law was ultimately reduced to £IOO,- | OOP, and £400,000 was to go to tho ) |«ftry:e fund. At that meeting it was ■flirted that the auditors of the bank • T«iy, straight, and insisted on ttriting' down the assets each year, and ifliit thqro were assets which were not 'sjHhnt—in fact, "hidden reserves.""jt/ltimately Mr Head was elected man- ' Ogitig director, and hp proceeded to Idok into the affairs of the bank. In . tho balance-sheet of IC2O witness's firm w/18 debited with £500,000, and witiiew expressed his surprise at this havihg been done before any contract waß in existence,, or Air Norton becoming a party to any agreement. Farrow's reply to Ahiswaa that-he was unaware of |ny sueH entry, of of Mr." Hart having, treated this sum a!s fin "anticipated : reserve. ; Crotch was present at this - discussion. Ho agreed that Farrow's Bank had no right to dear with this £600,000 without the approval of witness or of Mr Norton, and expressed a , d6ubt*as to the accuracy of his (Mr Head's) information. He 'then told Farrow that ho «should continue the examination of: the books, and that after what had occurred he would be extremely.surprised if he did not. find ajgenerally unsatisfactory condition of 'affairs; ' 1 ' . On December Bth Mr Read's repreoptative, Mr Biohe, presented » relation the assets of the Bank, andui . TNfcort was forthcoming on certain prAforties' at Birmifffeham and Croydon. -1 mmesß communicated to Farrow and * <CH)tch that the value of these proper- * tigf wad practically negligible, They that his.... estimate must bo , wrong. "Wjth regard to"" tho Dread- ' , aqught Coflftptlny, witness was told it • one "of the Bank's finest assets, and ' it would be in a position to pay 'all - the dividends on the .Bank's cjtfital twice over. As a matter of fact, he'found that it was an unfinished pttjlt. j,; "JChe Game is up." ,». did you say to 7>otch, asked Siri'R> Muir?—l told him I was now of definite information Tjitn regard to the condition of the . And that ( I had -arrived at the i -coiiclusion that it was insolvent. "Did you say anything about the bal—Yes, I told Crotch thait : - tK«f balance-sheets published were wete absolutely misleading Wto the condition of the Bank, ana tntt they were getting money by false \ pretences. vftVfhat did Crotch say to that ?—What - - said was, "The game is us." (EfiMghtor.) Ho liad been "sitting on . tp thinc for years, he said, hoping hope, "and,ho went on, ■' y° vl turned up tre thought our Jfebles were ended, instead of which . tMk. have only Begun." Crotch then \ . had feared that this condition "Wit ultimately come about, but that all it had its compensations, as now have a period o|.'time in wr^e a sones of hooks. T Mr Crotch I appreciated llis sense J nour difficult conditions. '•£ '•6 kj to , further questions, Mr V before his resignation he ' uA 0n ono occasion spoken to FarVJ?? ® nc i Crotch about the bank!s affairs, and Farrow then Well, Mr lload, you (ire not , to leave us?" 1 said, "I must * SPP m y investigation before I deX'am going to do." He 'tvA "^°i n J5 to leaVe usl It, is «. yov energy and your business ability weiflesue much more than money."..! MSfPertd, by saying that- possibly a -Wentifnl supply of both would be needk* (Laughter.) This was before I «wovered the balance-sheet was frnudstour position afterwards was that jw had discovered that they hud been false balance-sheets for years? »■ either Crotch or Farrow say aWra SJB. J'OU might do—as to giving ilil °? \° P°hce. for instance P hoth eaid they knew what my « n * on ld bo, nntl that thoy were . B°tting tub ja there because s '»SJSsl ou , j n - th«> satfie boat with md if I got' myself out I could B et them out. (Laughter.) 1 r ! 3si- Te Crotch spoke fii - st, and that-S'fflgWr-agreed with him. ■ of witness was d with on the secopd day/ ''■mSl point of view of one not porconcerned in the case, the hu*jg« .element was naturally more in- • tJina the details of the negoHBjUpns. In fact, it was sotfietimcb <2®Cult to understand what advantage ~ would gain .from the questioiiV ' n 6 f{Js l M^c^'v e counsel. Sohw W'Mr Bead's answei-s gave rise to apIjauEej and Sir Charles Wakefield iu-

timatcd that, he would -have to c ' ear tlie Court if it continued. Mr Russell Vick, appearing for Mr Farrow, asked Mr Head if he did mosu of the- talking in his preliminary conversations with 3lr Farrow: —''It__is obvious that you do not know '-**" Farrow," said witness, "or you would not raako that statement. My suggestion 13 that he took up most of tho time, though lie possibly said least.'

A Picturesque Phrase. It was untrue, said Mr Bead, that he- told Farrow he wanted to secure the whole or part control, even if he had to wait ten years. • "I am not in the habit of waiting ten years for anything," added the witness. It was not true that he told Mr Farrow that tho money behind him was inexhaustible, or that Mr Fnrrow replied thpt i: was a comprehensive word. Ho did not sav that, if necessary, he could get £u0.000 : 000. Counsel: Did yon say you knew tho Americans very 'well, and could turn them upside down and s-hako the money out of their pockets?— Any roan who knew the Americans Yerj wel\ would know that be could not do that. (Laughter). Counsel: Thnt w<* « rather picturesque jjhiaso for Mr Farrow to have invented? I admit it is a'picturesque ■phrase, but I did not say Mr Farrow invented it. Mr»Vick read Mr Read's 'lef.nite offer to take over .the hank—assets and liabilities —"as they ttand." "As it stands," said ?Jf Vick, might mean ono of two ' things^—as things really wero or as they appeared to be. Mr Read said when he wrote his offer, which was later embodied in an agreement, he believed tho bank to be perfectly solvent. He never took over what was not there. Ho wanted to go in and investigate. -His letter was not a- trick to get in and investigate what he had already agreed to buy. Mr Vick: I put it to you it was a trick? ' • . • • . Mr Rend: My answer is it was not.

Affectionate Letters. Before witness became managing director certain enquiries as to tho foreign exchange department were made. "Witness had no experience of foreign exchange, and did not tell Mr Farrow ho could make £200,000 a year out of the department. When ho (Mr Head) wont into tho bank he did suggest to Mr Farrow that he Bhoilld take a rest; he did not \lo all ho could to keep Mr Farrow out of the way. "You could not keep Mr Farrow out of the way," said witness. .."Witness might have suggested that as a lack of war service ho should be glad to help the British public financially by building up this bank, doing constructive work. You were writing affectionate letters to Mr Farrow ?—I liked him. You suggested that your second name was Frankness ?—I think it is. (Laughter.) . . And you were conducting a secret investigation?t-It was not secret; Mr Farrow knew of it. Later, Mr Head was cross-examined by Mr Meyers, counsel for Crotch, who asked: How many businesses have yon tried to finance since you have been in London?—-Nono. How many have you tried to pur-chase?—-None. Moat of his time had been taken up with matters connected with the Old Colony Corporation and Farrow's Bank. Ho had to find a site for Corporation premises. They had temporary quarters at % his" Ho boupht Morley's Hotel, and sold it again—at a profit} which went to the Old Colony organisation. Norton, Read's share was about 20 per cent. He had also been looking after the interests of tho Caltex Company. He had been looking for a place to establish an oil refinery hero. He had nothing to do with selling the shares; that was done by the brokers. Thero waß a scone when Mr Meyers was cross-examining Mr Read with reference to tho suggestion that he had stated at one time that owing to the failure of Farrow's Bank Norton, Read, and Co. were financially embarrassed. Mr Read, speaking warmly, denied that there was any foundation for such a suggestion, and said he liad become aware of counsel's intentions to "attack him in that manner.—You can attack.me as much as you like," said Mr Read with evident feeling, "but don't try to defame me." (Applause in Court,) , , Later Sir Richard Mmr said that if counsel, had nothing more ,substantial in support of his suggestion than he had hitherto shown, tho suggestion was disgraceful. '' . ' » Tho hearing was adjourned for a w>ek. •