IMAGE EVALUATION TEST TARGET (MT-3) V ^ /. // W.JH .^ m %° p &?/ (P- i< (/i fA 1.0 I.I 25 Ilia IIU IIM 140 ||M 2.0 III— U III 1.6 V] S^. f REPORT ON THE AFFAIRS OF TIIK fionsolikteb §ank of Janata, liV THE COMMITTEE, APPOTNTP^D BY THE SMAREIMI^I^RS, I On 23rd Jiiue, 1880. PRINTED BY JOHN LOVELL & SON, 1890. REPORT ov THE AFFAIES OF THE donsolitato land of faak BY THB COMMITTEE, APPOINTED BY THE SHAREHOLDERS, AT THB ADJOURNED ANNUAL GENEBAL MEETING, On 23rd June, 1880. I'l-t PRINTED BY JOHN LOVELL & SON. ■•' \ 1880. ... : I, TO THE SHAREHOLDERS OF THE CONSOLIDATED BANK OF CANADA. At the Adjourned Annual General Meeting of the Shareholders, held at the Banking House, on 23rd June, 1880, the following reso- lution was carried by a majority of 2,854 stock votes, viz. : Moved by J. W. Ritchie, Esq., Q.C., Seconded by Robert Cassels, Esq., and Resolved, " That all words in Mrs. HoUis' motion after That be struck out, and the following inserted : " Robert Cassels, A. B. Stewart, and William Allan be, and hereby are appointed a Committee with authority to institute in the name of the Bank an action against those of the Directors who were in office immediately before the last Annual Meeting, and resident in Montreal, for all dividends declared by which the paid-up capital of the Bank was impaired, and also for all losses sustained by the Bank in consequence of the mal-administration of its affairs by the said Directors, with power and instruction before bringing any suit to entertain and report to an adjourned meeting of Shareholders, to be held on the 1st September next at noon, any proposition from the said Directors for a settlement of the Bank's claim against such Directors for such dividends and damages, and with power to make such investigation into the affairs of the Bank as they see fit." The resolution does not name the date from which the investiga- tion was expected to commence, but the general feeling of the Meeting seemed to point to the period of amalgamation of the City Bank of Montreal and the Royal Canadian Bank of Toronto. Accordingly, your Committee commenced their labors of investigation from that Before entering on the details of the accounts, and working of the Bank, your Committee desire to bring under notice, ■iV^f I n THE ORGANIZATION OP THE BANK. This information is taken from the Minutes of the Bank, com- mencing with The City Bank, dated Montreal, Thursday, z-jth April, 1876. PRKSENT : Sir Francis Hincks, President. R. J. Reekie, Vice-President. John Grant. Robert Moat. W. W. Ogilvie. A. M. Delisle, And Cashier. Inter alia. — " The Cashier was also instructed to give notice that the transfer books would be closed on the lotii May (the date of amalgamation), that the books of the Consolidated Lank would be opened on the 1st June, and that the first General Meeting of the Shareholders of the Consolidated Bank of Canada, for the purpose of electing Directors and passing By-laws, will be held on Wednesday, the 7th June, at noon." (Signed,) F. Hincks, President. " J. W. Renny, Cashier. The Consolidated Bank of Canada, Montreal, iVednesday, loth May, 1876. " At a meeting of the Board of Provisional Directors (under the 7th Section of the Act 38 Vic, ch. 44) of the Consolidated Bank of Canada, held at their Banking House in the City of Montreal, the loth day of May, A.D, 1876, W. \V. Ogilvie, H. J. Tiffin, A. M. Delisle, John Rankin, present Sir Francis Hincks, Hon. a. Campbell, R. J. Reekie, John Grant, Robert Moat, It was moved by Mr. Grant, Seconded by Mr. Delisle, and Resolved, " That Sir Francis Hincks, K.C.M.G., and the Hon. Alexander Campbell, be Joint Presidents of the said Provisional Board, either of whom may act in the absence of the other : and that R. J. Reekie, Esq., be Provisional Vice-President of the said Provisional Board. •'Ordered — That Messrs. Renny (Cashier hitherto of the City Bank) and McCracken (Cashier hitherto of the Royal Canadian Bank) be appointed Provisional Joint General Managers of the said Consolidated Bank until the first Wednesday in June next, at the respective salaries hitherto enjoyed by them in their respective Banks." - .j ..;i^, ; :;,,i_' . . -. ■, •, - ;; ' '. ■--' -^H''- ',"• v''''-^''^ .■'*''' ''-.C;^!.' Frequent changes afterwards look place in the composition of the Board of Directors, by resignation and by new appointments. Those particulars are given in the extracts which we have made from the Minutes, and can be referred to by any of the Shareholders desirous of possessing exact information on the subject. We may state, however, that the following members of the late Board are those whom the Shareholders hold responsible for the losses made, dividends paid out of capital, and money improperly charged to Profit and Loss Account, viz. : — Sir Francis Hincks, Pres. R. J. Reekie, Vice-Pres. John Grant. W. W. Ogilvie. Hugh Mackay. John Rankin. We now proceed to review the Condition of the Bank, the Esti- mates of Profit and Loss, the Capital Account, the Opinion of the President and Directors as to the Value of the Assets of the Bank, their opinion of the Gemral Manager, their Professions of Care in the Management of the Bank, and their Zeal in its Service. l8M May, 1876. PRESENT : Sir F. Hincks, President. R. J. Reekie. Vice-President. John Grant. Robert Moat. W. W. Ogilvie. A. M. Delisle, H. J. Tiffin. The General Manager laid before the meeting the following statement of the business of the Bank for the past year : — loth May, 1876. Profit and Loss. Balance of Credit, Profit and Loss Account $2,480 93 Gross Profits for term ending 9th inst 629,435 33 Appropriated 631,91626 Expenses $159,208 27 Interest Paid ; $64,510 55 " Reserved 48,49331 Bad and doubtful debts written off Dividend City Bank, Dec, 1875 $59j632 52 Rnynl Can., Nov., 1875 •• 79>226 08 City Bank, May, 1876.... 59.652 40 Transferred to Rest Account , 113,003 86 85.542 96 198,511 00 60,000 00 616,266 09 T-rr nf Profit and Loss $15.65° ^7 6 Rest Account. City Bank, Montreal $130,000 00 Royal CannfUan 102,000 00 Balance at Credit of Profit and Loss Account , $232,000 00 15,650 17 $247,650 17 (Signed,) F. HiNCKS, President. Showing the Capital said to be intact of $3,477,224 00 And Rest Account of 247,650 17 Altogether $3,724,874 17 Sir I'"rancis Hincks, in replying to a vote to himself, the Directors, and em- ployees of the Bank, said : ^^ I would simply say that I cannot too strongly express my opinion as to the value of the sennces of the General Manager here,, Mr. A'enny, to ic'ho/n, as I look iifon it, the prosperity of the Bank is mainly due, his unremitting attention to the duties of his position is, I think, unsurpassed by any other officer of a similar institution in the Dominion. . . . I shall only say that we shall continue to discharge the duties which are assigned to us with as much zeal as is in our power." 26th October, 1876. The General Manager laid before the meeting the following estimate of Profits for the half year ending loth November, 1876. PRESENT : Sir Francis Hincks, President. R.J. Rkekie, Viee- President. John Grant. Robert Moat. W. W. OOILVIE. John Rankin. And the General Manager. Gross Profits for half year $290,337 75 Deduct — Expenses $87,540 78 " Reserved Interest 50.776 96 Losses during current half year 18,785 92 157,103 66 « Add — Balance of Profit and Loss Account . Deduct — Appropriations for previous years not sufficiently provided for I3?<234 09 15,650 17 148,884 26 24,507 90 $124,376 36 The Directors resolved to declare a dividend of three and a half ner rpnt fr.- ♦i,« „„....«.,» Koif vj>!ir and instmrtpd tho r- "i nxiinager to give the usual notice to the Shareholders. igM April, 1877. PRESENT : Sir F. Hincks, President. R. J. Reekie, Vice-President John Grant. W. W. Ogilvie. Hugh Mack ay. John Rankin. R. K. Stephens. H. McLennan. And the General Manager. The General Manager laid before the meeting the following estimate of Profits for the half year ending loth May : Balance at Credit of Profit and Loss Account at loth Nov., 1876. $94 43 Gross Profits for 6 months ending loth May, 1877 . $313,363 34 Interest accrued on Credit Valley Railway and Laid- law debts 28,392 99 Deduct — Interest accrued and paid in addition to amount reserved, loth Nov., 1876 . .. 34,967 28 Interest reserved 56,719 72 Expenses for 6 months 95.326 76 341,756 33 341,850 76 K << Net Profit Less — Bad and Doubtful Debts 40,95 1 78 '* Preliminary Expenses 10,12290 187,013 76 154.837 00 51,074 68 $103,762 32 The Directors resolved to declare a dividend of three per cent, for the current half year, and instructed the General Manager to give the usual notice to the Shareholders. (Signed,) F. Hincks, President. The Capital was then said to be intact of $3,465,910 00 And Rest of 245,723 33 Altogether $3.7".633 33 29M October, 1877. The General Manager laid before the meeting the following estimate of Profits for the half year ending loth November, 1877. ;. ,•,.'. Estimate of Profits. , ; ;•, ;, Gross Profits to loth November, 1877 $332,790 87 Deduct- Accrued Interest Paid $24,405 68 " Reserved Interest 68,43763 «' Expenses 89,89443 182,737 74 $150,053 13 8 Deduct — Losses for current 6 months $ 9,294 5 1 /4(/3.7^3 33 154,481 95 Deduct — Proportion of Old Losses not sufficiently provided for ($34,370 83), say two-thirds 22,913 89 $131,56806 The Directors resolved to declare a dividend of three and a half per cent. ($121,315 18) for the current half year, and instructed the General Manager to give the usual notice to the Shareholders. (Signed,) F. Hincks, President. At this time, when the Directors declared a dividend of three and a half per cent, for the current half year, payable on ist December, 1877, they had borrowed from other Banks, at from ii^i to 6 per cent, per annum, the large sum of $491,360. Besides which, the Bank held large amounts of very doubtful paper, and had heavy overdrawn accounts of doubtful character. 22nd April, 1878. PRESENT : Hugh Mackay. John Rankin. Sir F. Hincks, President. R.J. Reekie, Vice-President. John Grant. W. W. Ogilvie. And the General Manager. The General Manager laid before the meeting the following estimate of Profits for half year ending loth May next. Estimate of Profits. Balance at Credit of Profit and Loss Account at loth Nov., 1877.. $14,341 87 Gross Profits for 6 months ending loth May, 1878 327,666 95 $342,008 82 Deduct — Interest accrued and paid in addition to amount reserved loth Nov., 1877.. . $28,732 36 " Reserved Interest 66,805 34 •* Expenses of Management for 6 months. . . 83,830 35 Net Profit $162,640 77 Less 3 per cent, on $3,466,520 '03,995 60 58.645 17 Deduct Losses 53>242 64 Balance of Profit and Loss, say $5,402 53 179,368 05 $162,640 77 ■A 9 The Directors resolved to declare a dividend of three per cent. ($104,020 60) for the current half year, and instructed the General Manager to give the usual notice to the Shareholders. (Signed,) F. HiNCKS, President. At this time, wHt the Directors declared a dividend of three per cent, per annum for the current half-year, and before it was done — viz., on ist June, 1878 — they had borrowed from other Banks, at from 5 to 6 per cent, per annum, the large sum of $488,597, in addition to the sum previously reported of 8491,360 ; and on ist June, the day the dividend was payable, they borrowed the further sum of $100,000, at 6 and 5 per cent, per annum. 2otk May, 1878. PRESENT : Sir F. Hincks, President. R. J. Reekie, Vice-President. John Grant. W. W. Ogilvie. Hugh Mackay. John Rankin. And the General Manager. The General Manager submitted the following statement of Profit and Loss Account. The Consolidated Bank of Canada Profit and Loss Statement for THE YEAR ENDED lOTH MaY, 1878. Balance of ProHt and Loss Account, loth May, 1877 $13,723 33 Gross Profits for year ended loth May, 1878 665,976 55 Appropriated Interest Paid $"8,937 77 Reserved Interest 63,653 25 Expenses 174,120 01 $679,699 88 35fi>7" 03 Dividend, 1st December, 1877 121,315 18 '* payable 1st June, 1878 104,020 60 Bad Debts $ 107,325 94 Less transferred from Suspense Profit Account 19,466 66 87,859 28 ' 669,906 og iig9.793 79 Memorandum : Expenses for year ended loth May, 1877 $ 188,544 97 Expenses for year ended loth May, 1878 $174, 120 o I Less Expenses at St. Hyacinthe 2,360 48 171.759 53 Reduction , $16,782 44 (Signed,) F, Hincks, President. The Capital wras then said to be intact of $31467,352 67 And Rest of 241,793 79 Altogether $3,709,146 46 10 2ijth October, 1 878. PRESENT : Sir F. Hincks, Presuient, R. J. Reekie, Vice-President. John Grant. W. W. Ogilvie. Hugh Mackay. John Rankin. And the General Manager. The General Manager laid before the meeting the following estimate of Profits for the half year ending loth Novemljer next : Estimate. Gross Profits to loth November, 1878 $34i> 148 78 Deduct — Accrued Interest paid $ ' 7> 539 64 Reserved Interest 95, 246 19 ~ Expenses 86,85339 199,63922 Losses for current 6 months , 141,509 56 17,34892 Add 1 24, 1 60 64 Balance of Profit and Loss, loth May, 1878 9>793 79 133.954 43 Deduct — Proportion of old Losses, not sufficiently provided for, say one half ($45,465 31) 22,765 31 N $111,189 12 Balance of Profit and Loss $ 1 1 1, 189 12 Less dividend on $3,468, 285 at 3 per cent 104,048 55 $ 7,140 S7 The Directors resolved to declare a dividend of 3 per cent. ($ 104, 145 30) for the current half year, and instructed the General Manager to give the usual notice to the Shareholders. (Signed,) R. J. Reekie, Vice-President. At this time, and before the dividend was paid which the Directors declared at the Meeting of the Board on 24th October, 1878, they had borrowed from other banks at from 5 per cent, to 7 per cent, per annum the large sum of $905,772 within the six months, in addition to the two sums of $491,360 and $488,597 pre- viously reported, and the same day the dividend was due, viz. : 2nd December, 1878, they borrowed the further sum of $75,000 from the Stadacona Bank. In addition to which, the amount of doubtful paper under discount, and overdrawn accounts, continued to steadily increase. . - 11 2^h April, 1879. PRESENT : Sir F. Hincks, President. John Grant. W. W. Ogilvie. Hugh Mackay. John Rankin. And the General Manager, The Directors being unable to declare a dividend, the following Circular to the Shareholders was adopted unanimously (see Circular to the Shareholders, dated Montreal, 28'th April, 1879), in which Sir Francis Hincks, for the Directors, says : " I regret to inform you that, owing to the serious losses which this Bank in common with similar institutions has recently sustained, the Directors find them- selves unable to declare a dividend for the current 6 months ; and I am further directed to state that, after a careful examination and valuation of all the assets of the Bank, including the business premises and securities for past due debts, in which the shrinkage in value has been considerable, the Directors are of opinion that, in the interest of the Shareholders, and with a view of securing an early resumption of dividends, it will be expedient to reduce the capital stock of the Bank. " The Directors will thereby be enabled to set aside a fund sufficient, not only to meet all ascertained losses, and to provide for any that may occur in connec- tion with current loans, but also to create an adequate rest. (Signed,) F. Hincks, President. It will be specially noticed by the Shareholders, that no estimate of profit and loss was laid before the Board by the General Manager, as had invariably been the case on previous occasions, or if laid before the meeting, it was not incorporated in the minutes. Why this was omitted it is impossible for us to say, but the question may be asked, on what facts or statements did the Directors base their action in withhold- ing a dividend ? We fear the facts were only too well known to them ; as from this period, the descent towards ruin and bankruptcy was rapid. $th May, 1879. present : . ! R. J. Reekie, Vice-President. John Grant. John Rankin. Hugh Mackay. W. W, Ogilvie. And the General Manager. The Board authorized the presentation of a petition to the Legislature for leave- to apply, by private bill, for a reduction of the capital to 66 2-3 per cent., and they approved of the action of the President in proceeding to Ottawa to endeavor to get such bill passed. (Signed,) R. J. Reekie, Vice-President. l()th May, 1879. PRKSEVT • OiK r . Hincks, President. R. J. Reekie, Vice-President. John Grant. W. W. Ogilvie. Hugh Mackay. ' ■ " John Rankin. And the General Manager. , 12 The Annual Profit and Loss and General Statements were laid before the Meet- ing, and ordered to be printed and sent to the Shareholders. See Report of Annual General Meeting of 4th June, 1879. Showing the Capital to be $3)47i>936 70 Less at Debit of Profit and Loss 450,892 1 7 Leaving $3,021,044 17 2nd June, 1879. PRESENT : Sir F. Hincks, Presidmt. R. J. Reekie, Vke-Presuient, John Grant. W. W. Ogilvie. John Rankin. And the General Manager. The Directors after due consideration of the affairs of the Bank were of opinion that the maximum reduction of capital which it would be necessary to seek would *^ 33K percent., but as it was deemed advisable by the Select Committee to which the Bill was referred for consideration, in view of the continued depression of business, to recommend a reduction of 40 per cent, instead of 33>^, they did not deem it expedient to abandon the bill, and if it should receive, as they confidently anticipate that it will, the sanction of the Shareholders, the surplus will be as shown in the statement submitted herewith, $943,707 47. 15M July, 1879. The following Circular was approved by the Board : *' The Board of Directors of the Consolidated Bank feel it to be their duty to respond to the numerous appeals on behalf of the Shareholders to acquaint them at the earliest possible moment with the actual value of the assets of the Bank at the present time, without entering into minute details, which it must be obvious could not be published without detriment to the interests of the Shareholders. The result of a careful investigation has been to satisfy the Directors that, after making ample allowance for some heavy anticipated bad debts, the assets of the Bank are good value for an atnount ranging from $1,250,000 ^(^ $ 1 , 500,000, ^r from 60 to 75 per cent, of the present par value of the stock. The valuation has been made with an earnest desire not to place an exaggerated value on the assets, and a sufficient margin has been taken to cover possible unforeseen losses. The present estimate is concurred in by the Acting General Manager and by all the Directors. The large addition which has been made to the losses has been owing to what the Board are now convinced was a very erroneous estimate made at the close of the last year of the assets at the Head Office by the late General Manager. Without entering at present into details, the publication of which might be injurious to the interests ot the Shar«halHprs, the former Board of Directors main- tain that they will at a proper time be able to exonerate tneuisci-oo &on. any charge of mismanagemem. (Signed,) F. Hincks, President. . 13 iStk Jidy, 1879. PRESENT : Sir F. Hincks, President. John Grant. A. Robertson. A. Saunders. W. W. Or.iLViE. Having been requested to receive a deputation from some of the Montreal Shareholders to discuss the position of the Bank, a deputation, consisting of Messrs. J. H. Joseph, E. Bond and Rev. Mr. Green, was received and heard. A statement shewing the estimate of losses sustained by the Bank was submitted to them, which was as follows : Montreal, 18M July, 1879. The President and Directors of the Consolidated Bank, Montreal. Gentlemen, — I beg to state the result of investigation into the accounts of this Bank. The reduced Capital amounts to $2,080,000 Add balance of present Contingent Account 943,000 $3,023,000 From til is has to be deducted for bad and doubtful debts $ 1,420,000 B.ilance to Contingent Account 253,000 1,673,000 Leaving a surplus or Capital of 1,350,000 In addition to the Contingent Account of 253,000 It is proper that I should remark that the foregoing valuations are based on estimates of the assets of the Bank made by three parties acting independently, two of whom are the new Directors, Messrs, Robertson and Saunders, and in which I myself concur. The result being that the actual assets of the Bank are equal to nearly 65 per cent, on the reduced capital. Yours respectfully, (Signed,) Arch. Campbell, Acting General Manager. (Signed,) Approved, F. Hincks, President. 1st August, 1879. present : Sir F. Hincks. John Grant. R. J. Reekie. The Acting General Manager reported to the Board that, after consulting with the President and such of the Directors as he was able to see yesterday, he had decided to abandon the attempt to continue cash payments of the liabilities of the Bank. The various statements made by the Directors from time to time of the value of the assets, and which we have carefully given to show the downward progress, have been found entirely incorrect and illusory, notwithstanding the declaration on 2nd u June, 1879, made after " ducconsidemlmt ; " the statement of 15th July, 1879, " the result of a careful investigation," and the letter of iWi July, 1879, stating that " the foregoing valuations are based on estimates of the assets of the Bank made by three parties acting independently y The last, and probably the only, reliable estimate yet obtained is that furnished by the Acting General Manager, under date of 28th May, 1880, showing the Liabilities to be $474 i;8l qi ■^^sets 1,063,578 52 Leaving a probable surplus of $588,996 61 Taking the Capital and Reserve with which the Bank commenced business on loth May, 1876 $3,724,874 17 And deducting the above probable surplus of 588,096 61 The total loss in less than four years is $3,13'; 877 56 This enormous loss has arisen from bad debts made at the Branches and the Head Office, and may be classified as follows : I At St. Catharines .... 105,400 " Wingham 1,416 " Berlin 178 '• New Market 12,347 " Norwich 804 " Woodstock 200 " Toronto 5^1,373 At Belleville $52,946 " Chatham 32,496 " Clinton 233 ■"Gait 1,525 " Hamilton 124,858 " New Hamburg... 1,366 *' St. Hyacinthe .... 600 *' Seaforth 115,431 « Sherbrooke..,. .. 33,445 $1,044,618 The losses at Montreal were so numerous that we shall classify them in different sums, only giving the names of a few of the more remarkable accounts, which are now historically known in connection with this unfortunate Bank. In sums of and under $1,000 $14,453 " " over $1,000 and under $2,000 ",647 " 3,000 26,355 " 4.000 18,658 S.oop 31.234 " 6,000 15,884 " 7.000 6,673 " 9,000 8,500 " 11,000 58,946 2,000 3,000 4,000 5.000 6,000 8,000 9,000 Ascher 6^ Co $501,850 Beattie H. cSr" Co 94,849 Cowpar, George 20, 1 14 Gushing 6- Co.,C. Gushing, L. Gushing &» Son 65,080 $192,350 15 Davidson Bros, df Co $64,221 S. Davis &^ Co., in liq 23,000 Fish, Shepherd (Sr' Co 120.355 B . F'urniss dr" Co 146, 242 R. )'orsyth 38,000 W.Head 48,518 M. Kortosk dr- Co 82,885 , Mulhol land dr^ Baker 146,876 T. F. O'Brien 141,840 W.H. Riley 65,000 William Rhind 15,000 Shultze, Reinhardt dr» Co 26,283 $1,600,113 Sundries, y'lz. : Interest suspense account '9)467 Bank Premises 25 ,000 Loss on Mechanics and forged notes 2,253 R. C. Bank, Old P.D.B 16,086 H. dr»B. Mortgage 17,000 Harvey Hill Property 59-742 Loss on Corn, Cowpar 52,000 191.548 Loss on Syndicates 65,091 Expenses, Interest, dr'c, say 42,157 2,091,259 Totalloss $3,135,877 We have thus given at great length, but not, we think, without advantage to the clear understanding of the affairs of the Bank, full statements of the opinions of the Directors as to the value of the as- sets, estimates of profit and loss, and management of the business, from the time of the amalgamation of the City and Royal Canadian Banks on loth May, 1876, together with statement of losses. We shall now proceed to show the manner in which the business was conduct- ed, and the means at the command of the Directors for ascertaining and becoming thoroughly acquainted with the true and real condition of the Bank. We have their own statements, through their mouth-piece, Sir . Francis Hincks, in which they have informed the Shareholders that they were systematically deceived by Mr. Renny, the late General Manager of the Bank. Thus on 7M July, 1879, in a minute of the Board, Sir Francis Hincks says : " But without going into details, " I simply wish to place on record that to Mr. Renny's systematic " concealment from the President and Directors of his operations is to 16 ** be attributed those losses which he admits in his letter to be " inevitable." And again, in a n-inute of i6//; SepU'.mber, 1879, he says : "■ The " liability ledgers which were from Ume to time examined by the '' Board, and from which the scatcmentb of liabilities were made, " were so kept as to render it impossible for the iJoard to form any " idea as to the aggregate liability of the customers." We can only state, that we have carefully examined the Liability Ledgers, and have found that they were correctly kept, exhibiting the various accounts in a perfectly businesslike manner, giving details of bills discounted from day to day, and showing the balance under discount of each account. We have found no ledger for liabilities of sterling bills of exchange purchased, but the amount running, which was not large at any time, could easily have been seen by referring to the " Bills of Exchange Purchased Register." The same may be said of overdrawn accounts, the deposit ledgers clearly show the balance of each account from day to-day, and the Directors had only to refer to the ledger keeper, or to the book itself, to discover the exact state of each customer's balance. Having thus made a general statement on these points, based on an examination of the books of the Bank, we shall now give in detail a full and clear account of the manner in which the Discount of Bills was carried on, and the knowledge which the Directors could not fail to possess of the liability of each person doing business with the Bank. The details of the discount operations of the Bank would be very tedious. We therefore do not publish the lists, by which the know- ledge of the Directors of every bill discounted is unquestionably established. Those lists are, however, at the service of the Share- holders, and can be examined at leisure. On each Board day, and the Directors almost invariably met twice a week, a minute was passed confirming the minutes of the previous day, and approving of all bills discounted since the previous Board day; the amount being stated at every meeting, as will be seen from the list which we have taken from the minutes, said minutes being signed by the President. In addition to this, a book was laid before the Board, containing a list of persons to whom discounts had been granted, with the 17 le amount so discounted, and this book was also signed by the President; and, in his own handwriting, lie entered the names of the other Directors present after his own signature. We have carefully compared these lists with the minutes, and have found them ];erfcctly correct and to correspond exactly in all cases, except in a few instances which we have noticed, explaining the cause of the slight mistakes. These trifling differences are, however, of no consequence what- ever, and are mentioned merely that nothing should be passed over or be taken for granted. These lists fill eight long pages, we therefore give the following summary of them : At 4 meetings, the Minute Book was omitted to be signed. " 299 do do do signed by Sir F. Hincks, Pt. " 27 do do do R. J. Reekie, V. Pt. " 2 do do do do John Grant. "18 do do do do John Rankin, Pt. 350 meetings altogether. At which bills were passed amounting to nearly twenty millions of dollars (^$20, 000, 000). Such facts prove that the President and the Directors undoubtedly had the means of knowing, from week to week, and month to month, that large amounts of discounts were granted to many of the weak customers of the Bank. But, if further proof be desired, we can point to the following state- ment compiled from the " Bills Presented for Discount Book " (which, as already stated, was regularly laid before the Board) to show the names and amounts granted to a few firms and persons whose names are unfortunately too well known from their connection with the Bank, and the heavy losses sustained by the Shareholders in con- sequence thereof. In giving these names and amounts of discounts we do not wish to reflect in any way whatever on the parties receiving the accommoda- tion, but it is for the Shareholders to consider whether or not the President and Directors were justified in granting such enormous discounts. It must be remembered, too, that these discounts were in addition to heavy overdrawn amounts, to which we shall presently allude and discuss. 18 Discounts to t/ie /onowini^ Customers from ^oth May, 1876. to t^ist December. 1879. exclusive 0/ Overdrawn Accounts and Sterling Bills of lixchange purchased. Ascht'r6-Co $1,172,000 H. Ik-attie 6- Co 1,177,000 Cuslimg iSr" Co., C. Ciishint, ""'' L. Cushing iSr' Son 605,000 Davidson Uios, dr* Co 287,000 S. iJavis (Sr- Co. in liq ' ' a^o'ooo B. I' urniss ^^^ Co. 160,000 Fish. Sheplierd dr- (.lo 781,000 W. Head 748,000 M. Kortosk 6- Co 844,000 Mulholland vS^" 15aker g(j 1,000 T. F. U'Hrien ;' 72,000 W.H.Riley 294,000 $7.33 '»ooo The loss to tlie Bank, resulting from these twelve accounts, has been one million five hundred thousand seven hundred and sixteen dollars ($1,500,716). \Vhile on the subject of losses we may refer to the following minute of the Board, by which, or through previous entanglements, the Bank lost a very large sum of money. 2%th March, 1878. I'RESEN r : Sir Francis Hincks, President. R. J. Rkekie, Vice-JFresident. John Grant. W. W. Ogilvie. Hi)Gir Mackay. John Rankin. And the Generai, Manacer. " Whereas Robert James Reekie has. at the request of the Bank, and upon its promise of indemnity, become one of the Syndicate mentioned in the projectors of the Credit Valley Railway Company, and as such has become Lable for j^20,ooo stg., which liability he has incurred as aforesaid for the purpose of enhancing the value of the Bonds of the said Company held by the IJank : It is hereby resolved that the Bank will hold harmless and keep indemnified the said R. J. Reekie from all loss or damage which may be sustained by him in consequence of his having become one of the said Syndicate, and of his having assumed the liability aforesaid, and the President and General Manager are hereby authorized and required to execute under seal of the Bank, and deliver to Mr. Reekie; any writing which may be required to carry this resolution into effect as between him and the Bank. ' ' (Signed,) Y. Hincks, President." The amount of loss written off, and included in the amount of bad debts at Toronto, In re " Credit Valley Railway Co.," was $106,451 83, in addition to which there is a further sum of $i7;48o 47 in name of George Laidlaw, who we understood was, and is, the President of the Company, We find that in list of overdrawn accounts at 28th May, 1880, " The Credit Valley Railway Syndicate If) 1-ed ae of as 47 he account" stands at $63,592 02. It surely becomes tlie duty of the Liquid. itors of the Bank to look int(j matters of this kind, and endeavor to recover a portion, .it all events, of such vast losses, either from the Railway Company, or from its President on private account ; and we cannot avoid remarking, that we consider it extremely doubtful whether or not the Directors were authorized to name one of their number as a member of such a Syndicate. It seems to us beyond their power, and that in doing so they have incurred a personal liability for all losses which have been sustained in conseciuence of their illegal act. We must again refer to Sir Francis Hincks' famous minute of the 7th July, 1H79, in which he expresses astonishment at the " overdrawn accounts!' We fiuote his own words : " I found to my ama/.eniL'nt tli.it the overdiawn accounts in Montreal ••amounted to no less than $615,702 44, and I required a statement of these " accounts, which when obtained made it clear to my mind that there h.ad been " systematic concealment of most important transactions from the I3oard of " Directors." We can only ask the Shareholders to contrast this opinion of Sir Francis Hincks with the reality, as proved by the books. We carefully examined the Deposit Ledgers., as we have already stated, and found that they have been kept with perfect exactness, every overdraft being entered, and the b. vs regularly posted and written up daily. They were open to the Directors at all times, as they have been to us, and would at any moment, on examination., have shown the exact condition of the customers' accounts. In proof of this, we made a tabular statement, which we think imnecessary to publish, but which can be seen by any of the Share- holders, of eleven of the most celebrated overdrawn accounts of the Bank taken as to date almost at random, that is, we fixed on dates running through the years 1876, 1877, 1878 and 1879 for the first account examined, and then took down the balances of all the other ten accounts on the same days throughout that period, thus prevent- ing the possibility of any inflated statement. These accotmts were Ascher & Co., H. Beattie & Co., George Cowper, Davidson Bros. & Co., S. Davis & Co. in liq., B. Furniss & Co., Fish, Shepherd & Co., R. Forsyth, W. Head, T. F. O'Brien, W H. Riley. And the average amount overdrawn was during 1876 $iSo>o59 1877 238,766 i«78 $522,585 1879 493>042 In addition to these accounts, which are sufficient, however, for our purpose, there were many others overdrawn for considerable 20 sums, which, if given, would have added considerably to the balance. From this statement of OVKRDRAWN ACCOUNTS it will be- perceived that the system of heavy overdrafts was the normal condition of the IJank, and should have created no '■^amazement'' in the mind of Sir Francis Hincks, as it must have been in operation previous to amalgamation, and doubtless must have been known to himself and the Directors when arranging the terms of union between the City Bank of Montreal and Royal Canadian Bank of Toronto. Besides which the Directors had weekly or monthly returns from the Ikanches before them, with a printed form for " Deposit Accounts Oi'cniiinun,'' giving date, name, amount, and a column for •' remarks," with this heading, (" State what Security held''). They must therefore have been aware that if such overdrafts were common at the Branches, they must also have existed at the Head ( )ftice in Montreal, where the business was as heavy, probably, as that of all the Branches together. ]k' this as at may, there is evidence sufficient that during 1876, 1877, 1878 and 1879 very large advances were made and permitted on over- drawn accounts, and that no concealment was even attempted, but the books at Montreal.and returns from the Branches, were open at all times to the examination and inspection of the President and the Directors. We may now refer to the "■ systematic " BORROWING FROM OTHER BANKS. We noticed that very large balances were left with the Bank on de. posit, in current accounts, at interest of from 5 to 6 per cent, per annum, averaging several hundred thousand dollars. Even this vicious practice of giving very high rates for deposits may be overlooked, but there can be no excuse for the course adopted by the Directors, of borrowing at ruinous rates from the other Banks, and placing the amounts so bor- rowed among the ordinary deposits of the Bank, thus grossly deceiving the Shareiiolders and the public as to the real condition of the Bank, Another exceedingly objectionable practice was purchasing sterling bills from other Banks, and re-selling the amounts in the Montreal market at a loss, clearly proving that the Consolidated Bank was in difficulty early in 1877, and that the Directors were not justified in de- claring and paying a dividend of 31^ percent, on ist December, 1877. The following statement, giving particulars of Money Borrowed from other Banks, and entered as deposits, will no doubt occasion considerable surprise, when the amount is known to have exceeded four millions of dollars during the space of about two years. 21 Date. .877. May 13 June 8 " 8 Ag. 14 " 99 Spt. as Oct. 30 N'v. 29 .878. I Jan. a a" ■• Ap. 13 " »7 " >5 " 30 May 39 June I " I " M " 34 Ag. 13 " 14 " 34 Spt. 33 " 34 " 34 Oct. 9 " 9 " 19 " 24 " 34 Name of llnnk lending. 53 Hank of Montreal 54 t.':ui;iitlaM l);inl( of (.'omm., £io,oooM^. Ilfoiiuht at I) ^k and xoM at 9 9-i6ctx . . . fi,vCan;»lian IjU^ of Coinin. . j 7,5 ^^ „g HoukIu at o'ii and sold at i)}i p. c 7' 73 80 Canadian ftank of Comm., /|io,ooo »tg. Hon>{l>t at H y-i6 C'anailian Hank of Comm., XiiO|Ooo «tg. Hou^lit at X% and sold at 8 7-32 Canadian Hank of Coinni., /lo.ooostg. IHoiiMit at ^^^, sold at 8 1-4 89 Hank of Montreal 93 R. et J. Moat (1 ft 14 15 Dec. a (( 3 i( 3 (( 18 (1 19 3^ €4 1879 30 |an. 10 f < II r* II t( 32 it 38 tt V Feb. 18 *< 31 (( (( 25 38 ft 28 1 t 28 (t 28 May 4< I I l< 20 105 107 •37 ^Mi 141 144 150 1 5'^ >53 16,, 184 .85 1 89 '..ilO 213 213 334 225 232 234 235 348 250 262 263 264 270 371 273 274 381 383 383 Do Do to order Quebec Hank . . . The Stadacona Hank Do do Canadian l!k of Comm., ^in.ooo stg.. . Hank of Hritish North America I'he Stadacona Hank R. el J. Moat, to order Ouebec Bank.. "Do Hank of H. N. America, ^37,600 stg, 9 1-8 p. c City of I'oronto Honds deposit a.s Canadian Hank Comm., j((|io,ooo stg. . . Do jjio.ooo stK. . . HouKht at op. c., sold at 8% Hank of H.N. Amer'ca Canadian Hank of Comm., /Iio,ooo stg. Hank of H. N. America K. CI J. Moat Do to order of Quebec Bank. Do Do Do Canadian Do to order East. Town. Bk. Bk. of Comm. } , t X 10,000 stg. HouRht at 8)^ p. c. , sold at 8^ to 8;^ . . Canadian Hank of Commerce Hank of Montreal, ;{|2o,ooo stg k. it J. Moat The Stadacona Bank Do Do Rank of B. N. America ;{^37,6oo stg. 9 1-8 p. c R. Ct J. Moat to order Quebec Bank. . Do Bank of B. N. America Do Hank of Montreal . R. a J. Moat.... Do 5P. c. ■■ ■• 6 p. c. 3 months' notice 5 p. c. 10 days' notice c. 30 days' notice c. and k4 commission 3 months CI 15 days' notice. c. 30 days' notice at call sHp. 9H P- 5 PC. 5J4 p. 6 p. c. 5 p. c. 286 Bk. of Men., ;^25,ooo stg., 10 p. c.dt^ 28S 293 295 296 299 Do Do Do Do Do Do 300; R. 61 J. Moat to order East. Township. 301 Bank of Montreal 302! Do 313 314 319 Do Do Do Rate of interest and how payable. 5 p. c. on 30 days' notice. . 454 p. e. 3 months' notice'. loSK I- 16 p. c. i^A p. c. 3 monthx' notice. . :»Kp. c. 4 " " •• OSS 1-4 p. c. 4H P' c. 3 months' notice, . 4K P- c. 3 months' notice. loss 1-32. 4^ P' c. 3 months' notice, loss 1-4 p. c. 6 p. c. at call 6p. c. " " 6 p. c. 6 months . . . .< security for this loan. 9 3-8 and 54 P- c. commission. . . . 5 p. c. 3 months loss 1-8 p. c. 3 p. c. 3 months, 15 ,000 50,000 50,000 183,360 48,597 48,444 100,000 43,597 50,000 35,000 35,000 25,000 25,0<» 50,000 24,083 34.083 48,466 96,138 25,000 25,000 25,000 25,000 182,360 25,000 5,000 200,000 200,000 98,287 10,000 15,00 ) I23.I38 50,000 200,000 25,000 50,000 50,000 125,000 50,000 100,000 25,000 100,000 470,000 78,080 4. '42. 595 22 We presume that the deposits in favor of Messrs. R. & J. Moat, amounting to $505,000, were loans procured by that firm from Banks, as several of the receipts in their favor have been endorsed over to the Quebec and Eastern Townships Banks, and no doubt a commis- sion, to which they were of course entitled, was paid by the Consoli- dated Bank to that firm, which would add greatly to the percentage at which the money was borrowed. The last sum borrowed $78,080.17, we were informed was for the " Workman Syndicate." We shall have something to say regarding this loan, when we come to dissect that Syndicate account, and others of a similar character. Before entering upon an explanation of the » " SYNDICATE ACCOUNTS," We may give copies of letters referring thereto, and statements ta' jn from the Stock Ledger, of the shares held and transferred by several of the parties interested in those accounts. Those so-called Syndicate Accounts are very intricate, and it required no little time and a great amount of labor to unravel them. We feel satisfied that it would be impossible for the Shareholders to understand the accounts unless they have every item placed before them. We shall therefore ,50 most minutely into this matter, and give exact copies of the various entries from the books of the Bank. The irequent transfers from the " Deposit Ledger " to the " General Ledger," from '' Reekie Trustee " to " R. J. Reekie," " Rankin in Trust" to "Reekie," "Workman "to "Reekie in Trust," and " Rankin in Trust," " Grant " to " Reekie in Trust," " Reekie Special " and " Rankin Special," " Syndicate Workman, &c." to " Syndicate Joseph, Workman, etal.," are so confusing and perplexing, that, as we have said, these accounts were extremely difficult to understand ; and must therefore be given in detail, after which we shall endeavor to place before the Shareholders a clear and succinct account of this very painful affair, and our opinion of the position in which the various parties interested are placed regarding transactions which appear to be of an extremely doubtful character. Messrs. R. dr»J. Moat, City. LETTERS. Montreal, 21st November, 1878. ^^ Dear Sirs, — We hereby request you to purchase for us Consolidated Bank stock to the amount set opposite to our names respectively, and to borrow the money 23 \\ requisite to pay for such stock on the best terms you can obtain ; such terms and other conditions to be arranged by you on our behalf, we becoming responsible for such loan, and for our proportion of any less amount of stock than the aggre- gate hereby subscribed for. And we further agree to keep up a margin of ten per cent, upon the purchases made, and to sanction any sale made by you in your dis- cretion. Very truly yours, (Signed,) R. JAS. REEKIE, JOHN RANKIN, JOHN GRANT. Montreal, 24/^ January, 1879. Messrs. R. &=]. Moat, City. Dear Sirs, — We hereby request you to purchase for us Consolidated Bank stock to the amount set opposite our names respectively, and to borrow the money requisite to pay for such stock on the best terms you can obtain ; such terms and other conditions to be arranged by you on our behalf, we becoming responsible for such loan, and for our proportion of any less amount of stock than the aggre- gate hereby subscribed for. And we further agree to k ^p up a margin of ten per cent, upon the purchases made, and to sanction any sale Made by you in your dis- cretion. Very truly yours, (Signed,) R. J. Reekie Three hundred . 300 shares. John Rankin Three hundred 300 shares. H. dr" A. Saunders Three hundred 300 shares. Samuel H. Moss Two hundred 200 shares. Thomas Workman One hundred 100 shares. J. H. Joseph Three hundred 300 shares. Jas. O'Brien Two hundred 200 shares. F. Macculloch One hundred and fifty 150 shares Montreal, dth March, 1879. Messrs. R. •St'J. Moat, City. Dear Sirs, — We hereby request you to purchase for us Consolidated Bank stock to the amount set opposite our names respectively, and to borrow the money requisite to pay for such stock on the best terms you can obtain ; such terms and other conditions to be arranged by you on our behalf, we becoming responsible for such loan, and for our proportion of any less amount of stock than the aggre- gate hereby subscribed for. And we further agree to keep up a margin of ten per cent, upon the purchases made, and to sanction any sale made by you in your dis- cretion. Very truly yours, Two hundred shares (Signed,) JOHN RANKIN. Two hundred shares R. JAS. REEKIE. Two hundred shares A. SAUNDERS. The following memorandum in pencil is written below : „ ' • Will you (Directors) sign the above, and shall call for it this afternoon. 24 Extracts frotn • < Stock Ledger " Hugh Mackay held 9th May, 1876, 300 shares. Bought 1 8th January, 1877, 200 30th " «' 120 28th February, " 28 1st March. " 2 l( Sold 2nd February, " " 2ist " " '• 29th January, 1878, 100 " nth February, " 100 SO 350 650 shares. to Jno. Rankin, in Trust, to Thos. McDougall. 600 shares. Leaving in his name jq shares. John Grant held 9th May, 1876, 50 shares. Bought 9th « 1879, 80 " " 31st July, " 20 « Sold 31st " " " 3rd Dec, " 20 130 150 shares. to R.J. Reekie, in Trust. to A. Campbell, Acting Genera] Manager. 150 Account closed. R. J. Reekie held 7th November, 1878, 380 shares ' Bought Sthjune, 1880, 201 " " 7th " " 330 " 911 shares, which he still holds. R. J. Reekie, in Trust, Montreal. 1878— 20th December, No. 2294.-held 601 shares from R. &- J. Moat 1880— 31st May, transferred 50 shares to John Rankin. 50J " to A. Campbell, Acting Gen. Manager, in Trust. 7''^ June, " 50 w to R.J. Reekie. 601 Thus closing the account. John Rankin held 5th November, 1878, 150 shares. ' Bought in May, 1879,363 " "July, " 70 " " " August, " 508 " "September, " 582 <* " October, •' 705 " " 31st May, 1880, so " ,Q^„ ,„. „ ^ , 2,428 shares. •' ' i»79— I »th September, transferred 50 shares to James Croil. i88n ^7th October, " 396 '• to James Rankin. 1880- sthjune, « 181 " to R. J. Reekie. T . . , . 627 shares. Leavmg m his name 1,801 shares. JOHN Rankin, in 7>-«.A held nth July, 1879, 300 shares, transferred by Thomas Workman, still held by him in trust. ^ 25 Prust. 1. Vust. cting ager. R. J. Reekie, in Trust, No. 3, held nth July, 1879, 300 shares, transferred by Thomas Workman. ^879— 31st July, transferred 20 shares to Sir 1'". Hincks. 1880— 7th June, " 280 " to R. J. Reekie. 300 shares. Thus closing the account. R. ]. Reekie, in Trust, No. 2, held 3rd May, 1879, 140 shares, transferred by G. W. Simpson. 1880— 31st May, transferred 140 shares to A. Campbell, Acting General Manager, in Trust. Thomas Workman held 30th January, 1879, 211 shares. Bought February, " 789 " 1,000 shares. 1879 — 10 July, transferred 50 shares to Henry Archbald. " II " '« 300 " " R. J. Reekie, in Trust. " " " 300 " " Jno. Rankin, in Trust. " " " 100 " " Saml. E. Moss. *' " " 200 " " James O'Brien. 950 shares. Leaving in his name 50 " G. W. Simpson held nth March, 1879, 140 shares. 1879 — y^ May, transferred 140 shares to R, J. Reekie. Thus closing the account. 3t. SYNDICATE ACCOUNTS. No.i—Sir F. Hincks, R, J. Reekie, et al. Deposit Ledger Folio 533. A to L,from 1st October, 1878. T)r. Cr. Balance. 1878. Dec. 10 $5,00000 Z?;-. $ 5,000 00 " " 19 6,00000 «' 11,00000 " " 19 30,00000 " 41,00000 1879. Jan. 29 49004 " 40,50996 " 29 19.38050 « 59,89046 " "31 28950 " 60,17996 " 31 10,04875 «< 70,22871 , " " 3 1 Transferred to debit of Joseph Syndicate 29,718 25 " 40,510 46 1879. February 3 50 « 40,50996 " April 22/23. In Journal, page 534, and debited to Hincks ;-. $29,718 75 1879. February 5 6,33150 " 36,05025 " 6 1,281 25 «« 37,331 50 " , " 8 3J79 50 " 40,511 00 " " 8 3,768 75 " 44,279 75 " " 17 1,19400 " 45.473 75 , *' " 18 2,47500 " 47,94875 . , Mv « 21 18,66925 " 66,61800 *' " 24 11,03200 " 77,65000 " March i 4,280 75 " 81,930 75 •• '♦ 4 5,31925 ' " 87,25000 ■-■'**- " 5 1,62350 « 88,87350 " " 8 1,93725 " 90,81075 *• '« 15. 18900 '• 90,99975 " •' 15 189 00 ♦« 90,81075 " " 21 18900 " 90,99975 ** April 22, by balance trans- ferred to General Ledger, fi 'io 638 90,999 75 $91.^88 75 $91.188 75 I si 27 . ' JVo. 6—SvsD\CATE(J\ro.2j. In terms of letter in the hands of the General Manager. General Ledger, page 638 (from 1st July, 1878, on folio i). 1879, April 22. To Balance transferred from Deposit Ledger (folio 67 1), see particulars Account Current Book, pages 259, 260, and 261. Workman . . 1000 shares Joseph. .,. . 400 " Saunders... 415 '« Dr. Cr. Balance. ^^""^^ 35 •' $90,999 75 Dr. $90,999 75 1850 ^°^* 61 2,537 00 <« 93,536 75 1879. April 25— 10 47750 " 93,05925 " May 2—109 4,98675 " 2-35 1,57500 " 2—12 54575 "100,16675 2—80 3.54000 " 103,70675 •' " 6-63 2,78775 " 6— 3 13275 " 106,62725 " 10 Interest 54241 "107,16966 10 — 10 430 00 ^°— 250 »' 107,60216 " 20 Interest 6 p. c... 14959 « 107,75175 " " 20 Transferred by Journal entry to General Ledger, folio 636 to Debit of Syndicate Joseph, Workman, etal.. No. i. 91,691 75 " 16,060 00 1879. August 27. Transferred to Reekie Syndicate, by Journal entry to folio 637— see below. . . 16,060 00 $108,229 25 $108,229 25 No. 7— Syndicate (No. \). General Ledger, page 636 (from i July, 1878;. Dr. Cr, Balance. 1879. May 20. To Journal entry, transfer from Syndicate Work- man, Joseph, Saunders, etc $91,691 75 iJr. $91,691 75 1879. May 21. By Joseph.. ..300 . $14,86893 " « 21. By Macculloch.150 7,43446" 69,38836 " July 17. By Workman.. 100 4,997 04 " 64,391 32 ♦' " 21. By Saunders ..300 14,99114" 49,40018 V • " August 27. By Reekie Syn- . ■ " dicate 49,40018 " - ' v- V,, ,- $91,691 75 $91,691 75 28 N^o. 8— Syndicate, Reekie et al. General Ledger, page 637 (from i July\ 1878J. In terms of letter in hands of the General Manager. Dr. Cr, Balance. 1879. April 22/23 To Balance transferred from Deposit Ledger, • see particulars Account Current Book, page 257. 601 shares in the name of R. J, Reekie $40,509 96 Dr. $40,509 96 1879. May 10. To Interest 7 p. c. 990 89 " 41,500 85 " " 14. — 140. Journal 604. 10,375 00 " 51,875 85 " July 23. By Rankin 19,276 74 " 32,599 il . " " 26. By Reekie 19,28825 " 13,31086 '* August 27. To transferred from Syndicate Joseph, Work- man ct al 49j400 18 1879. August 27. To transferred from Syndicate No* 2, Joseph, Saunders, Moss, (Sr'c 16,06000 " 78,771 04 1879. August 27. By O'Brien 9,994 10 " " 27. By Rankin.... 'SjO'S 59 " " 27. By Reekie I4,97l 68 " " 27. By Moss 9.978 14 " 28,313 53 " Nov. 20. By Ogilvie I>747 74 " 27,065 79 " " 20. 363 shares interest to 9 July, 1879 256 64 1879. Nov. 20. 1,400 shares, in- terest to 9 July, 1879 570 30 1879. Nov. 20. 601 shares, in- terest to 9 July, 1879 477 SS 1879. Nov. 20. 140 shares, interest to 9 July, 1879 Ill 44 " 28,48172 1880. April 13.W. oiTJ.B. Renny 10,444 60 " " 13. John Grant 7,66460 * " " 13. John Grant 1,747 74 " " 13. Hugh Mackay... i>747 74 " 6,877 04 " May 10. Written off. 6,877 04 $118,751 96 $118,751 96 For the sake of reference, we have numbered these " Syndicate Accounts " from i to 8. It will be observed that $29,718.25 is credited in No. i, " Hincks, &c.," and debited to No. 5, " Joseph Syndicate." That $40,509.96 is credited No. i, " Hincks, &c.," and debited io No. 8, " Syndicate Reekie." That $10,375 is credited No. 4, " G.W. Simpson," and debited to No. 8, "Syndicate Reekie et al." That $90,999.75 is credited to No. 5, " Joseph Syndicate," and debited to No. 6, Syn- 29 dicate No- 2, "Joseph, &c." That $91,691.75 is credited No. 6, Syndicate iVb. 2, " Joseph, Saunders, &c.," and debited io No. t , '• Syndicate Joseph, Workman et al.'' That $49,400.18 is credited No. 7, " Syndicate Joseph, Workman el al.,'' and debited No. 8, " Syn- dicate Reekie et al." What is the meaning, it may be asked, of all these entries ? Only one answer can be given — to bamboozle. All these Syndicate accounts are taken from the books of the Bank, and in the same form in which they appear in the books of the Bank. They were all., without an exception., carried on with the money of the Bank, and at a loss to the Shareholders, which these accounts do not fully show, but which it will be our duty to explain and expose. The following entries of these losses are found in the books of the Bank charged to Loss as Bad Debts, &c. LIST OF SUMS MISAPPROPRIATED. In General Ledger, ioXxo 637 : 1880. April 13th, J. B. Renny $ 10,444 60 " " " John Grant 7,66460 " " " John Grant Ij747 74 •' " " Hugh Mackay 1.747 74 " May loth, written off 6,877 04 $28,481 72 . In Deposit Ledger, folio 337, M to Z, from ist December, 1877 : R.J. Reekie, Special No. 2. 1880. May loth, written off $6,165 ^9 John Rankin, Special. 1880. May loth, written off 6,57624 12,741 53 By Journal entry, page 411, to Bad and Doubtful Debts : 1880. May loth, John Rankin 6,000 " " " R.J.Reekie 6,000 12,000 By Journal entry, page 769, in General Ledger to suspense account : 1879. December 3rd, Grant 2,000 ' »• " " " 6,000 8,000 John Grant, special account in " Deposit ledger " : 1880. January 9th 3,86854 Total loss to the Shareholders $65,091 79 30 Your Committee would direct the special attention of the Share- holders to the dates of which the closing entries of these Syndicate accounts were made, and by whom the entries were authorized. It will be observed that in No. 5, " Joseph Syndicate/' the balance of $90,999,75 is transferred to JVo. 6, " Syndicate No. 2, Joseph, Saunders, Moss, also John Moat," and that that account No. 6 goes on increasing until the total sum advanced by the Bank amounts to $107,751.75, when $91,691.75 of that sum is transferred io No. "], '• Syndicate Joseph, Workman, et nl " and $16,060 is also transferred to No. 8, " Syndicate Reekie d al.,'' while only $42,291,57 appears to have been paid in cash by Messrs. Joseph, Macculloch. Workman and Saunders, and afterwards credited in No. 8. $21,719,98 paid by Messrs. O'Brien, Moss and Ogilvie, together $64,011 55, leaving a further sum of $49,400.18 carried to debit oi No. 8, " Syndicate Reekie et air It appears only fair therefore that the balance of $43,740.20 should be made good by members of Syndicates Nos. 5, 6 and 7 on page 29. The question of liability between themselves is a different matter, with which we have nothing to do, but to the Consolidated Bank, by whom the money was advanced, they are in our opinion justly bound in terms of their letter to R. & J. Moat, in which they dis- tinctly say : " And to borrow the money requisite to pay for such stock on '' the best terms, and other conditions to be arrranged by you on our *' behalf; tve beco?fung responsible for such loan." In the statement of money borrowed from the Banks, it will be seen that the last amount, $78,080.17, was from the Bank of Mont- real, at 7 percent, per annum, for, it is said, the use of the Workman Syndicate, against which account, however, only 6 per cent, per annum appears to have been charged. Whatever doubt there may be regarding the liability on Syndicate account, there can be no question whatever as to the liability, jointly and severally, of each of the late Directors of the Bank for the large sum of $65,091.79 which they have mis-appropriated It will be observed that though the names of three of the Directors, Messrs. Hincks, Ogilvie and Mackay, do not appear in the letters, they are mentioned in the accounts, and may therefore be supposed to have been aware of the transactions. The 40th clause of the Banking Act reads : ' The Bank shall not, either directly or indirectly, lend money or *' make advances upon the security, mortgage, or hypothecation of \ 31 " any lands or tenements, or of any ships or other vessels, nor upon " the security or pledge of any share or shares of the capital stock of the " Bank'' Here we have a distinct statement showing the illegality of the trafficking in stock of the Bank by the Directors. It was ultra vires to do so for the Bank, they have therefore made themselves personally responsible for all loss of principal and interest incurred by this contravention of the law. We have a still more powerful argument to use, in the recent judgment delivered by Judge Johnson in the Bank of Montreal case against the Directors of the City Passenger Railway Co., wherein the learned Judge implied, that though the advances had been made by the Manager of tlie Bank without the knowledge or consent of the Directors, that nevertheless, as it was contrary to law, they, the Direc- tors, were liable to the Shareholders for the loss sustained. We can also refer to a judgment of Mr. Justice Hawkins, delivered in England not long ago. in the case of Rosenberg for slander. He thus forJbly states the c^^e o{ knowing], which is almost identical with the position occupied by a Bank President and Directors : " The printers," he said, "' were much to blame. They were •' both men of respectability, and the hi,i:h commercial esteem in " which their house was held had made Rosenberg's libels all the "more mischievous, and aggravated the crime. He did not believe " they knew the nature of what they printed, but this they ought to " have knotvn, and for this they were legally responsible.'' A parallel can be drawn between this case and that of Sir Francis Hincks and the Directors, they ought to have known, and must therefore be held legally responsible. Without knowledge., the law will hold them liable ; how much stronger then the case, when they not only knew, but actually partici- pated in the illegal operations. Another serious charge against the President and Directors is the payment of dividends out of capital. On 29 October, 1877, they declared a dividend of 3 1-2 per cent., $121,315.18, payable on ist December, 1877. The estimate of net profits laid before the Board howed $13 1,568 But as only 2-3ds of proportion of old losses (viz., $34,370) was written off, leaving a still further sum to be provided for, this should be deducted, viz i^>457 Reducing the net profits to $120,111 32 or $1,204, under the mark. But there was a nominal surplus fund of $232,000 also in hand. We think it will not be difficult to prove, that at this time the Directors were aware that a very large sum of doubtful paper was held by the Bank, the loss on which would far exceed tiie amount of dividend declared, together with the apparent surplus fund, amount- ing together to $353,315. The same argument would hold good regarding the dividends declared 22nd April, 1878, of 3 percent., $104,020, and 24lh October, 1878, of 3 percent., $104,145. If the Shareholders succeed in proving the Directors liable for the dividend of ist Deceml)er, 1877, those of ist June, 1878, and 2nd December, 1878, would be proved, as a matter of course. On the last occasion, however, 24th October, 1878, the statement of profit and loss was worse than that submitted on the two previous occasions : Balance of net profits was shown to be only $111,189 ^^ From which should have been deducted 22,765 31 As only one-half of old losses ($45,465) were deducted, leaving only $88,423 81 Of net profits, while the dividend amounted to 104,048 55 Or, under the mark. . .. $15,624 74 Of course the same nominal surplus fund of $232,000 00 still remained at the credit of that accoui ' The amount at this time, ist December, 1878, of doubtful paper on hand and enormous overdrawn accounts must have been over- whelming, in addition to which the Bank was at same time heavily indebted to other Banks for loans to enable the Directors to keep the doors of the Bank open. We considered it right that the Directors should have timely notice of our proceedings, and that they should not be taken by surprise. We accordingly, about a fortnight after we had commenced our exam- ination of the books of the Bank, and after we had discovered sufficient proof of the dangerous position in which they stood, addressed to each of them the following letter, viz., to Sir Francis Hincks, Messrs. John Rankin, R. J. Reekie, W. W. Ogilvie, Hugh Mackay and John Grant; to which, however, no reply has been received : 33 MoNTREAI,, -jth July, 1880. Sir, — We beg to enclose herewith copy of a reso'ution passed at the adjourned Annual Meeting of the Shareholders of the ConsoliJatcd Bank of Canada, held on 23rd ult,, and l)eg respectfully to c'irect your attention to the same. We are, sir, Vour obedient servants, (Sit,nied,) ROBERT CASSELS. A. B. STEWART. WILLIAM ALLAN. We may here recapitulate the chief amounts for which we consi- der the late Directors are legally responsible : Dividend paid 1st December, 1877 $121,315 18 " " ist June, 1878 104,020 60 " " 2nd December, 1878 104,145 30 Misappropriation of funds in stock specu- lations 65,091 79 $394,572 87 In addition to these amounts we consider that the lute Directors are liable to the Bank for a very lar^e amount for losses caused by their gross mismanagement of the affairs of the Bank. It is not of course possible for us to state the sum which such liability may amount to, but our investigations furnish abundant proof of the validity of such a claim. We may add that we have been informed by some of the officers of the Bank, that no inspection of the affairs of the Bank at Montreal, since the amalgamation of the two Banks in May, 1876, ever took place. We have thus performed our task, a very laborious one, and have placed before you in plain language a truthful statement of the affairs of the Consolidated Bank of Lani.da, fromioth May, 1876, up to the present time ; and we have endeavored to do so in a business-like manner, without prejudice, free from all feeling or the least taint of malice. It is a painful record of neglect, incapacity and reckless daring by which upwards of Three Millions of Dollars have been lost to the unfortunate Shareholders, many of them widows and orphans. . « V / 14 Their wrongs should stimulate the Shareholders to adopt such measures as will enable the Li(iuidators of the Bank to recover a por- tion at least of the money so recklessly squandered and illegally used, as will to some extent modify the sufferings and Losses those unfortu- nate persons will otherwise have to endure. All most respectfully submitted. ROBER'l" CASSELS. A. B. STEWART. WILLIAM ALLAN. MoNTRKAL, i6th August, 1880. •iFfr ;'2.i'^-i \' M