IMAGE EVALUATION TEST TARGET (MT-3) ^ ^ :/- C/j % % \ 1.0 I.I 1.25 1^ 14^ IIM ill 2,5 ■16 2.0 IIIW U III 1.6 i Photographic Sciences Corpuration M ^ -40 s? r^ iV <^ 4:% 23 WEST MAIN STREET WEBSTER, N.Y. 14580 (716) 872-4503 «^ 1# 1^> o^ >^ rv^ %'' ..*. '"% v^ % ./ / A &?^ CIHM/ICMH Microfiche Series. CIHIVI/ICIVIH Collection de microfiches. Canadian Institute for Historical Microreproductions / Institut canadien de microreproductions historiques =^% vV ►> Technical and Bibliographic Notes/Note* tachniquas at bibliographiquas The Institute has attempted to obtain the best original copy available for filming. 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B. consider it a duty which they owe to I e Deposilors as well as to the Directors by whom they were nppointed, to j gire a hrief stalernent of the aftairs of the institution, prefaced with some ob- I eervations on its management before and subsequenl to the suspension I Shortly before the annual meeting in May, 1848, which had been post- poned for Borae months, owing to dolay on the part of I. j Actuary to furnish the nciessary statements, i: had come to the knowledge of several Direc- tors that that officer had, in various particulars, been guilty of neglect of duty. Measures were at once taken to guard against such derelictions in fu- ture and the completion of the annual statement was presped on. This having been at length obtained, the annual meeting took place in May, 1848, as above stated, and thereat it was deemed expedient to effect a change m the management by the appointment of the Hon. William Morris as President, and to adopt other means to secure a better supervision of the Actuary's conduct, and of the affairs of the Bank. Immediately afterwards it was ascertained that the Actuary had been using the funds of the Bank for his own purposes, and furcher investigations brought to'.light for the first time, that for months and even years he had practiced a system of deception on the Directors by furnishing falsifisd balance sheets, by misrepresentations as to loans and securities, and by the misappropriation of monies paid through Lis hands. Havmg secured from iiimand those who had participated in his defalcations as much property as couiJ be obtained, the Du rectors were under the painful necessity of disniissing one, who, up to a short period before, had possessed their confidence, and whose misconduct was, until then, wholly unknown to them. As stated, the new Board after their appointment took means to secure a better and more efficient management, and there is no reason to doubt but that the Actuary's defalcations, as well as other losses, would soon have been made up from the previous and subsequent profits, had not the run and con. sequent suspension taken place. Indeed, had the Bank been allowed to go on as usual until the securities held by it had attained their present value, it would have ultimately paid the Depositors in full. In investigating the causes of the Bank's failure it is necessary to keep in view, that for several years previous to tiie suspension, money was abundant, and all kinds of Bank Stcicks and other Securities were at a high premium. The calamitous year of 1847, however, began about that time to be seriously felt, especially in Montreal, where the heaviest losses had occurred, and the previous prosperity was succeeded by a period of unprecedent calamity and depression in all kinds of property. Now it was at this time of extraordinary pressure that a sudden "run" upon the Bank withdrew deposits to the extent of £52,605 : a slate of things which the Directors could not possibly have foreseen, and for which they were not provided. _ After an ineffectual attempt to meet the demands which were daily in. creasing in magnitude, in consequence of rumours of the Bank's insolvency, industriously circulated by certain debtors to it,|whom the Directors had been obliged to sue— the latter were reluctantly compelled to suspend operations and come to the conclusion of winding up the Bank, rather than exhaust the available assets to the injury of those Depositors who still retained confidence in the institution. After tiiis the Directors proceeded to realize in the manner which seemed most judicious the assets of the Bank, and no better proof of tbe pro- priety of the course pursued can be given than the simple fact, that they have been enabled to pay 183. in the pound, notwithstanding the un- precedent depression of all kinds of money securities and real estate in this city. Bank Stocks fell from 20 to 60 per cent below their former rates ; the loss upon this species of security alone, which has been considered the lifiHt. beinirnearlv £7000. eoual to 15A per cent upon the amount invest- ed; so that had" all the assets of the Bank been of this description, the loss would have been much greattSr. Real estate, in many cases, fell to less than half its former vaiue, and, (in other cases was altogether unsaleable, whilst nanv.also. of the personal suretkjs to the Bank became insolven t. T he sue. iesBiul windihg up of the InstTH^SKni, tlie TrusteeSjhowever, attribufl^n a great stem of transfer of mortgages to the deposit- with advantage, and the consent of parties, t the rate of 90 per cent,— 10 per cent being ■ " ienc In com faithfully, tousdutie of the del jnar uesBiui winding up ( measure, to the adoption of a ors, wherever it could be dun| These transfers were all made> To John Dear! general n ing's Bar examinee assets at Mr. Free of the mi Thatt sitors on on amoui generally this way is every | appears t mortgage dends wc covering lue of re fairly asa tors have perhaps < unfavora trary, wt by the co pension, most dis believe si done, ha Wear gages foi party hoi and gem Wefu cient, as had not for clain amount Weal not have treal an( vious to had to b From had to and the crifico, t highly f of the a deposiio With winding pitancy '"ggW "-*'"- ■".- — w.«^ ^., |"»J *w-. .'■ V"^' |»vr»...... ..^^w.*.--- ^ ---- — -- precedent depression of all kinds of money securities and real estate in this | yious to th k at mnl ' which they owe to were nppointod, to . aced with some ob- 1 he suspension. I lich had been post- Actuary to furnish e of several Direc- juilty of neglect of :h derelictions in fu- Fed on. This having in May, 1848, as feet a change in the (Morris as President, n of the Actuary's luary had been using vestigations brought 3 he had practiced a id balance sheets, by misappropriation of n and those who had I be obtained, the Di. one, who, up to a i whose misconduct jk means to secure reason to doubt but ould soon have been lot the run and con. : been allowed to go eir present value, it lecessary to keep in loney was abundant, it a high premium, time to be seriously ,d occurred, and the cedent calamity and ime of extraordinary leposits to the extent Id not possibly have hich were daily in. ) Bank's insolvency, le Directors had been ) suspend operations her than exhaust the 1 retained confidence anner which seemed sr proof of the pro- imple fact, that they ithstanding the un- id real estate in this leir former rates ; the been considered the the amount invest- } description, the iuss ny cases, fell to less her unsaleable, whilst insolvent. The sue. ir, attributl^ a great tgagcs to the deposit- le consent of parties, t,— 10 per cent being ■ " ienc In conclusion, the Trustees would only add that they have diligently and faithfully, to the beet of tlieir abilities, discharged their onerous and gratui- tons duties in the midst of much obloquy, with as much regard to the mteresti of the depositors as if the case had been their own. John Reupath, ) James Ferrjer, > Tr «•<««». John Torranob. i Montreal, 30lh June, 1851. To John Redpath, Esquire, ) President, Sec. S Dear Sib,— Having been requested by yoo to give our opinion upon the general management of the Directors of the Montreal Provident and Sav- ing's Bank, since the time of its suspension, we beg to state, that we have examined the several statements submitted to us, exhibiting the liabilities and assets at the time of the suspension, and at several periods subsequent y. Mr. Freeland.late actuary, has also given explanations on the leading points of the matter, and on review of the whole we are of opinion, That the course adoptpd by the Directors of liquidating claims of Depo- sitors on the Institutioi. -y V'ansfer of mortgages at the rate of 90 per cent, on amount of claims, has. beyond doubt, resulted favorably to the depositors generally. Those depositors who did not take mortgages for their claims in this way have received in cash 16s in the pound on their claims, and there is every probability of their receiving 2u more, or in all 90 per cent. It thus appears they have sustained no loss when compared with those who took mortgages, except the loss cf interest since the suspension until the divi- dends were paid. Against this hea of interest, the delay and risk in re- covering the mortgages have to be placed, and from the depreciation in va. lue of i-eal estate in Montreal, and the state of business generally, it may be fairly assumed that a great number of the mortgages taken by the deposi- tors have not realized the amount. There are instances of great loss and perhaps of not recovering at all. The general result therefore has not been unfavorable to those daoositors who did not take mortgages. On the con- trary, we have no doubt that their interests were most materially benefitted by the course adopted. To have foreclosed all the mortgages held at the sus- pension, and brought the property to sale, under execution, would have been most disastrous to the interests of the depositors generally, and we do not believe such a large dividend could possibly have been paid as has been already done, had the property and securities been pressed to sale. We are also of opinion that the resolution of the Directors to give mort- gages for depositor's claims, at 90 per cent, was sufficiently public. Ariy party holding such claims could have ascertained it on enquiry at the Bank, and generally the fact was well known. We further believe that the deduction of 10 per cent first mi\de was suffi- cient, as is evidenced by the result so fur as ascertained, though v^e think, that had not the Directors taken the course they did, that of giving mortgages for claims, the 10 per cent would have been considerably short of the amount required. ,,«,.... j u We also think, that all circumstances considered, the 2d dividend could not have been paid sooner with propriety. The loans from Bank of Mon. treal and Bank of British North America, to meet pressing demands, pre- vious to the suspension, and thereafter to pay the dividend of 20 per cent, had to be refunded before a second dividend could be paid. From an examination of the realization of the assets, and reference being had to the depressed state of all stocks and securities in 1848 and ia4a, and ine great aimcuity oi ruaiizing iist;i" a^ "...r 7" "-ri.- " crifice, we are of opinion that the, course adopted by the Directors was highly favorable to the interests of the depositors, and that any forced sale of the assets, would have defeated t^e object in view, that oi paying the depositors, as ifSRriy^s itrar With respect to the question, whether duo diligence has been used in winding up the afTairs of the institiltioM, wc are of opinion that any preci- pitancy in realizinff, must have resulted in (rruat loss to the depositors. That rea l estate in this | yiou s to the suspensio n, and therea/ter to pay the d ividend of 20 per cent. precedent deprcseion or all kinds of money sccuritiefi and rrni estate in this city. Bank Stocks fell from 20 to 60 per cent bolow their f-rmer rates ; tlio loss upon this species of security alone, which has been considered the tiest, being nearly XTOOOj equal to 15^ per cent upon the amount invest- ed; BO that had all the assets of the Bank been of this description, the loss would have been much greater. Real estate, in many cases, foil to lesn than half its former value, and,iinothercaBes was altogether unsaleable, whilst HHiaf^v.a lan. of iho personal safeties to the Bark became insolvent^ The euc. cessiul winding up of the Ins^nHl&n, tljeTruBtee8,howcver, attribufll^ a great measure, to ihe adoption of a ^stcm of transfer of mortgages to the deposit- ors, wherever it could be don|^ with advantage, and the consent of parties. These iransi'ers were all made at the rate of 90 per cent,— 10 per cent being reserved as the estimated amoginl required to meet the ultimate deficie/icy. On the propriety of this ooursQ, which has been impugned, and the general management of the Bank since its suspension, the Trustees would call at. tention to the copy of a letter from three of the Cashiers of Banks in this city, with a note from Hugh Allan, Esq., President of the Board of Trade, which will be found below. At the time of the suspension upwards of £100,000 was due to the Bank by mortgage on real estate, in addition to £88,000 in Stocks, and had the Directors proceeded in the ordinary cuurse to collect the monies secured on real estate, so much property would have been brought into the market, as greatly to depreciate its value, and result in a ruinous loss to the Depositors; and to any one who knows the delays incident to the collection of debts in Lower Canada, it will be apparent that the course followed by the Trustees, was the most judicious that could be adopted. In order to meet the money borrowed during the •' run," and the first divi- dend of 4s. in the £ to the Depositors, the suip of £64,000 had to be pro- Tided, and to obtain this, nearly all available securities had to be pledged to the Banks which made the necessary advances. In consequence of the large privileged amount thus requiring to be met, and the difficulty experienced in realizing the assets, it will be easily seen that a considerable time neces- sarily elapsed before a second dividend could be paid. It was, therefore, not until November, 1850, that by the sale of £23,800 Road Bonds to the Government, at a comparatively small discount, the Trustees were able to clear off all advances and declare a second dividend. This amounted to 7s per £, and was followed in April last by a third of Ss, which, with the present one of 2s, makes, including the first dividend, a total of IBs per £, on the amounts due at the Bank's suspension. Appended is a statement shewing in figures, the afFaiis of the Bank. It will be seen that the assets on hand are estimated to realize £13,393 18s lOd of this amount, £8,500 can be shortly realized, and as experience shows that the Depositors do nut all como forward at once, to claim their dividends, the Trustees have not hesitated to declare the dividend, believing that the other assets can he realized as the payments are needed. Before concluding, the Trustees feel called upon to notice the course adopt, ed by some of the depositors in this city, no doubt influenced by certain parties whom they (the Trustees) had to sue as debtors to the Bank. But in doing so, they do not desire to impute other motives to those per- sons than their actions warjant. That course has been to throw discredit on the Bank, impugn the good faith of the Trustees' statements, impede the collection of debts, and induce deposito's to sacrifice their claims. The case of the depositors who wers thus led astray, is, doubtless, a hard one ; but, with the exception of a few who may have been compelled by necessity, and for whom none can feel more deeply than the Trustees, they would not thus have suffered had they not chosen to believe the mijrepresentations of irre- sponsible persons rather than the statements of the Trustees, which have been verified to the Ltter, and who had no object whatever to serve, except the right discharge of a duty which they had undertaken for the public good. The Trustees would only further add in connection with these proceedings, that they cordially acquiesced in the appointment of a Commission of enqui- ry appointed by Governnient as prayed for by the parties above referred to, believing that it only required an impartial investigation into tiia management of the Bank to set their conduct righl before the Depositors and the public. On the appointment of the Commi88ioners,every Book and paper was placed at their disposal, and every facili'y afforded them ; and it was hoped that they would have proceeded with dignified impartiality to the investiga. tion of the truth. On the contrary, however, they bad scarcely commenced when the chairman distinctly stated that the object of himself and the Com- missioners was to make the directors personally liable, and the Trustees are prepared to prove that all the subsequent proceedings of the Commissioners had in view the same object, namely to inculpate them and their predecessors, and to promote the end and objects of their accusers. In fact, the Commissioners have allowed themselves to become prosecutors instead of, as the nature of their appointment required, in partial investi- gators. The Trustees make these statements to guard the minds of Depositors against the conclusions and opinions expressed in the Report of the Com- missioners now ordered by the Legislature to be printed, and which .nay be in circulation before the opportunity which the Trustees have sought from the Legislature, of proving its contents to be most onesided and un. fair, can be afforded them. vious to th had to be i From ar had to th( and the gn crifice, we highly favc of the asse deposiion, With rei winding u{ pitancy in the result I to be attrib such care impossible tors are mi On revit adopted bji and w^ do other meat \ From ai me, and fr as Actuary concur in ' Trustees e in the win Montret Abstract Pr The Liabi amounts Of which transfen per cen^ say Amount d Upon this declared which al Outstandit viz. : — 1 2 3 Add resets Amount n To meet t ceived Bonds, ! From whi( course Estimaied tors 90 N.B.— 1 iq VPt in 11 estimated piiaiiuy III reaiiziiif^, iiiubi. nave icnuiivu m ^i>.>ii. ■ ronl estate in this • former rateg; tlio en eonaidered the le amount invest- Bscription, the loss cases, fell to lesn r unsaleable, whilst solvent. The sue. ittribuMlfm a great iges to the deposit- lonsent of parties. -10 per cent being timate deficiency. (I, and the general ees would call at. of Banks in this iC Board of Trade, 8 due to the Bank cks, and had the monies secured on [to the market, as 1 to the Depositors; ection of debts in id by the Trustees, "and the first divi- }00 had to be pro- lad to be pledged consequence of the Bculty experienced lerable time neces- I sale of jC23,800 mall discount, the I second dividend, t by a third of 5s, at dividend, a total n. of the Bank. It £13,393 18s lOd of experience shows im their dividends, believing that the se tlie course adopt, uenced by certain lo the Bank. But ves to those per- to throw discredit 3ments, impede the claims. The case , a hard one ; but, 1 by necessity, and ey would not thus isentations of irre- 3, which have been a serve, except the he public good, these proceedings, nmission of enqui- above referred to, Lo tli3 management ors and the public. )aper was placed at 3.S hoped that they to the investiga. arcely commenced iself and the Com- id the Trustees are he Commiasioners them and their of their accusers. 3Come prosecutors inparlial investi- iinds of Depositors eport of the Gom- d, and which .nay usiees have sought onu. sided and un. vious to the auspension, and thereafter to pay tlif; dividend of 20 per cent, had to be refunded betoro a second dividend could be pud. From an examination of the realization of the assets, and reference being had to the depressed state of all stocks and securities in 1848 and 1849, and the great difficulty of realizing them at any rate short of absolute sa- crifice, we are of opinion that the, course adopted by the Directors was highly favorable lo the interests of the depositors, and that any forced sale of the assets, would have defeated the objpcl in view, that of paying the (lepOBliora, «a ifSfiTly\i» posvibte; xhiMVM^uiuuiu of cmnr-claims. With respect to the qacstion, whjpther due diligence has been used in winding up the affairs of the institiftion, wo are of opinion that any preci* pitancy i realizing, must have resulted in groat loss to the depositors. That the rtsuli has been so favorable, we aro in justice bound to fllata, is mainly to be attributed to your pergonal exertions and unwearied attention. Withou'. such care end attention on the pDrt'of yourself end Mr. Freelanu, it was impossible the assets could have been so «vf>|| realized. For this the deposi. tors are much indebted to you. On review of the whole, wc are of opinion that the mode of settlement adopted by the Directors has been for the best interests o^ the depositors, and w^ doubt if the same favorable result could have been attained by any other means. We are, Dear Sir, Ycur most obedient servants, (Signed) A. Simpson, Cashier, Bank of Montreal. F. Macdlloch. J. Ross. From an examination of the various papers and documents submitted to me, and from the testimony I have received from the gentleman employed as Actuary after the Huspension of the Provident and Saving's Bank, I fully concur in the opinions expressed in the above document, and think the Trustees entitled to great credit for their assiduity and attention to its afitairs in the winding up. Huqh Allan. Montreal, Aug. 2, 1851. Abstract Statement op the Liabilities and Assets of the Montreal Provident and Savings' Bank, on the SIst July, 1851. The Liabilities to Depositors at Suspension amounted, per printed statement, to £158,719 19 4 Of which there has been paid in cash and transfers of mortgages to the extent of 90 per cent., including reserve of 10 ^er cent., Bay 99,309 18 4 Amount due remaining Depositors, say 59,410 I Upon this balance three Dividends have been declared, equal to IGs per £, the amount of which already paid is £41,224 11 U Outstanding, and now in course of payment, viz. :—l8t Dividend, £323 7 8 2d •• 2467 4 1 3d " 3175 7 3 Petty Balances... 132 5 ,.«_. 6098 4 Add reserve of 10 per cent., say 6201 1 6 53,523 17 6 Amount required to pay 2s per £ additional. . 5886 3 7 Assets. To meet this Dividend the amount to be re. ceived from Bank Stocks, Corporation Bonds, Loans, &c.. is estimated at .£13,393 18 10 From which deduct Dividends declared and in course of payment as above i». 6098 4 ^ 7295 14 10 Estimated surplus after paying all the Deposi- tors 90 per cent, or IBs per £ £1309 11 3 N.B. It is to be observed, that as'ff considerable portion of these Assets Ig vpf in liiiaation. and no allowance has been made for future expenses, this estimated surplus may be greatly reductd. EE. Montreal, 31st July, 1851. JAMES COURT, Actuary.