FARROW’S BANK CRASH

Dominion, Volume 14, Issue 101, 22 January 1921, Page 7

FARROW’S BANK CRASH

ASTOUNDING DISCLOSURES AT POLICE COURT ALLEGED FRAUDULENT BALANCE-SHEETS ■r T»l**r»Dh-Fr»«« IsKtoiatlon-Oopyrirb' London, January 19. There were astounding disclosures at the Police Court prosecution of the officials of Farrow’s Bank at the Guildhall. Sir Richard Muir, K.C., in his opening statement, said that in May, 1920, the New York firm, Norton, Read, and Company, with a London house, agreed to acquire a controlling interest in the bank by providing .£500,000, of which £400,000 was to be placed to the reserve account, "and .£lOO,OOO was for the compensation of Thomas ■ Farrow and other directors who would retire. Mr. Read, the London partner of the Norton, Read Company, was dissatisfied with his examination of the books, some of which were withheld, and called in chartered accountants in November. They eventually informed him that the bank was hopelessly insolvent, whereupon the agreement was cancelled. Counsel suggested that the idea of Farrow and Crotch was that when the crash came, Read, being enmeshed in this fraudulent business, would shoulder the financial burden to save his honour and credit, and prevent exposure. Crotch, who was the-leading spirit of the concern, apparently owed the bank between .£lOO.OOO and .£200,000, of which <£35,000 stood in the name of a certain lady. Counsel said that with the exception of the first portion of 1908 the bank had done nothing but make losses, ranging from £ll,OOO in 1909 to .£203,000 in 1920, and aggregating d 11,107,000, quite apart from the loss by the depreciation of securities, which must be considerable. All this time the bank was paying interest to depositors and shareholders. This must have been paid out of capital, and the losses concealed by fictitious values of book assets. One asset which appeared, £780,000 due from a cement company, was wholly fictitious. The reserve fund was also wholly fictitious. A cupboard broken open in Hart’s room revealed papers showing how tho fraudulent bal-ance-sheets were prepared for each year. A document was prepared showing the true position of affairs, and thus Hart “cooked” tho balance-sheet.—Aus.-N.Z. Cable Assn.