Frauds upon banks and large financial institutions became prevalent about 1844. In that year the Bank of England suffered at the hands of one of its clerks named Burgess who robbed it of £8,000 in conjunction with an accomplice named Elder. Burgess fraudulently transferred consols in the above amount to another party. Elder impersonated the owner and attended at the bank to complete the transfer and sell the stock. Burgess, who was purposely on leave from the bank, effected the sale, which was paid for with a cheque for nearly the whole amount on Lubbock's Bank. Burgess and Elder proceeded in company to cash this, but as they wanted all gold, the cashier gave them eight Bank of England notes for £1,000 each, saying that they could get so much specie nowhere else. Thither Elder went alone, provided with a number of canvas bags and one large carpet bag. When the latter was filled with gold it was too heavy to lift and Elder had to be assisted by two bank porters, who carried it for him to a carriage waiting near the Mansion House. Elder was soon joined by Burgess and they drove together to Ben Caunt's, the pugilist's public house in St. Martin's Lane, where the cash was transferred from the carpet bag to a portmanteau. The same evening both started for Liverpool and, embarking on board the mail steamer Britannia, escaped to the United States.
Burgess' continued absence was soon noticed at the bank. Suspicions were aroused when it was found that he had been employed in selling stock for Mr. Oxenford, owner of the stolen consols, which developed as soon as that gentleman was referred to. Mr. Oxenford having denied that he had made any transfer of stock, the matter was at once put in the hands of the police. A smart detective, Forrester, after a little inquiry, established the fact that the man who had impersonated Mr. Oxenford was a horse-dealer named Joseph Elder, an intimate acquaintance of Burgess's. Forrester next traced the fugitives to Liverpool and thence to Halifax, whither he followed them, accompanied by a confidential clerk from the bank. At Halifax, Forrester learned that the men he wanted had gone on to Boston, thence to Buffalo and Canada, and back to Boston. He found them at length residing at the latter place, one as a landed proprietor, the other as a publican. Elder, the former, was soon apprehended at his house, but he evaded the law by hanging himself with his pocket-handkerchief. The inn belonging to Burgess was surrounded, but he escaped through a back door on to the river, and rowed off in a boat to a hiding place in the woods. Next day a person betrayed him for the reward and he was soon captured. The proceeds of the robbery were lodged in a Boston bank, but four hundred sovereigns were found on Elder, while two hundred more were found in Burgess's effects. Burgess was eventually brought back to England, tried at the Central Criminal Court and sentenced to transportation for life.
Within a month or two the bank of Messrs. Rogers and Co. in Clement's Lane was broken into. Robberies as daring in conception as they were boldly executed were common enough. One night a quantity of plate was stolen from Windsor Castle; another time Buckingham Palace was robbed. Of this class of burglaries was the ingenious yet peculiarly simple one effected at the house of Lord Fitzgerald, in Belgrave Square. The butler on the occasion of a death in the family, when the house was in some confusion, arranged with a burglar to come in, and with another carry off the plate-chest in broad daylight and as a matter of business. No one interfered or asked any questions. The thief walked into the house in Belgrave Square and openly carried off the plate-chest, deposited it in a light cart at the door and drove away. Howse, the butler, accused the other servants, but they retorted, declaring that he had been visited by the thief the day previous, whom he had shown over the plate closet. Howse and his accomplice were arrested; the former was found guilty and sentenced to fifteen years, but the latter was acquitted.
In 1850 occurred the first of a series of gigantic frauds, which, following each other at short intervals, had a strong family likeness in that all of them meant to make money easily, without capital and at railroad speed. Walter Watts was an inventor, a creator, who struck an entirely new and original line of crime. Employed as a clerk in the Globe Assurance office, he discovered and with unusual quickness of apprehension promptly turned to account an inexcusably lax system of management, which offered peculiar chances of profit to an ingenious and unscrupulous man. It was the custom in this office to make the banker's pass-book the basis of the entries in the company's ledgers. Thus, when a payment was made by the company, the amount disbursed was carried to account in the general books from its entry in the pass-book, and without reference to or comparison with the documents in which the payment was claimed. This pass-book, when not at the bank, was in the exclusive custody of Watts. The checks drawn by the directors also passed through his hands; to him, too, they came back to be verified and put by, after they had been cashed by the bank. In this way Watts had complete control over the whole of the monetary transactions of the company. He could do what he liked with the pass-book, and by its adoption, as described, as the basis of all entries, there was no independent check upon him if he chose to tamper with it. This he did to an enormous extent, continually altering, erasing, and adding figures to correspond with and cover the abstractions he made of various checks as they were drawn. It seems incredible that this pass-book, which when produced in court was a mass of blots and erasures, should not have created suspicion of foul play either at the bank or at the company's board. Implicit confidence appears to have been placed in Watts, who was the son of an old and trusted employee, and, moreover, a young man of plausible address.
Watts led two lives. In the West End he was a man of fashion, with a town house, a house at Brighton, and a cellar full of good wine at both. He rode a priceless hack in Rotten Row, or drove down to Richmond in a mail phaeton and pair. He played high, and spent his nights at the club, or in joyous and dissolute company. When other pleasures palled he took a theatre, and posed as a munificent patron of the dramatic art. Under his auspices several "stars" appeared on the boards of the Marylebone theatre, and later he became manager of the newly rebuilt Olympic at Wych Street. No one cared to inquire too closely into the sources of his wealth. Some said he was a fortunate speculator in stocks, others that he had had extraordinary luck as a gold-digger. Had his West End and little-informed associates followed him into the city, whither he was taken every morning in a smart brougham, they would have seen him alight from it in Cornhill, and walk forward on foot to enter as a humble and unpretending employee the doors of the Globe Assurance office. His situation, exactly described, was that of check clerk in the cashier's department, and his salary was £200 a year. Nevertheless, in this position, through the culpable carelessness which left him unfettered, he managed between 1844 and 1850 to embezzle and apply to his own purposes some £71,000. The detection of these frauds came while he was still prominently before the world as the lessee of the Olympic. Rumours were abroad that serious defalcations had been discovered in one of the insurance offices, but it was long before the public realised that the fraudulent clerk and the great theatrical manager were one and the same person. Watts' crime was discovered by the secretary of the Globe company, who came suddenly upon the extensive falsification of the pass-book. An inquiry was at once set on foot, and the frauds were traced to Watts. The latter, when first taxed with his offence, protested his innocence boldly, and positively denied all knowledge of the affair; and he had so cleverly destroyed all traces that it was not easy to bring home the charge. But it was proved that Watts had appropriated one check for £1,400, which he had paid to his own bankers, and on this he was committed to Newgate for trial. There were two counts in the indictment: one for stealing a check for £1,400, the second for stealing a bit of paper valued at one penny. The jury found him guilty of the latter only, with a point of law reserved. This was fully argued before three judges, who decided that the act of stealing the bit of paper involved a much more serious offence, and told him they should punish him for what he had really done, and not for the slight offence as it appeared on the record. The sentence of the court, one of ten years' transportation, struck the prisoner with dismay. He had been led to suppose that twelve months' imprisonment was the utmost the law could inflict, and he broke down utterly under the unexpected blow. That same evening he committed suicide in Newgate.
The details of the suicide were given at the inquest. Watts had been in ill-health from the time of his first arrest. In Giltspur Street Compter, where he was first lodged, he showed symptoms of delirium tremens, and admitted that he had been addicted to the excessive use of stimulants. His health improved, but was still indifferent when he was brought up for sentence from the Newgate infirmary. He returned from court in a state of gloomy dejection, and in the middle of the night one of the fellow-prisoners who slept in the same ward noticed that he was not in his bed. This man got up to look for him, and found him hanging from the bars of a neighbouring room. He had made use of a piece of rope cut out from the sacking of his bedstead, and had tied his feet together with a silk pocket-handkerchief. The prison officers were called, but Watts was quite cold and stiff when he was cut down.
In 1853 a second case of gigantic fraud alarmed and scandalised the financial world. It outshone even the defalcations of Watts. Nothing to equal the excitement caused by the forgeries of Robert Ferdinand Pries had ever been known in the city of London. He was a corn merchant who operated largely in grain. So enormous were his transactions, that they often affected the markets, and caused great fluctuations in prices. These had been attributed to political action; some thought that the large purchases in foreign grains, effected at losing prices, were intended by the protectionists to depress the wheat market, and secure the support of the farmers at the forthcoming election; others, that Napoleon III, but recently proclaimed Emperor of the French, wished to gain the popularity necessary to secure the support of the people. Few realised that these mysterious operations were the "convulsive attempt" of a ruined and dishonest speculator to sustain his credit. Pries, although enjoying a high reputation in the city, had long been in a bad way. His extensive business had been carried on by fraud. His method was to obtain advances twice over on the same bills of lading or corn warrants. The duplicates were forged. In this way he obtained vast sums from several firms, and one to which he was indebted upwards of £50,000 subsequently stopped payment. Pries at length was discovered through a dishonoured check for £3,000, paid over as an instalment of £18,000 owing for an advance on warrants. Inquiries were instituted when the check was protested, which led to the discovery of the forgeries. Pries was lodged in Newgate, tried at the Old Bailey, and transported for life.
Another set of frauds, which resembled those of Pries in principle, although not in practice, was soon afterwards discovered. These were the forgeries of Joseph Windle Cole. This clever but unscrupulous trader proposed to gain the capital he needed for business purposes by raising money on dock warrants for imported goods which had no real existence. When such goods arrived they were frequently left at a wharf, paying rent until it suited the importer to remove them. The dock warrant was issued by the wharfinger as certificate that he held the goods. The warrant thus represented money, and was often used as such, being endorsed and passed from hand to hand as other negotiable bills. Cole's plan was to have a wharf of his own, nominally occupied by a creature trading as Maltby & Co. Goods would be landed at this wharf; Maltby & Co. would issue warrants on them deliverable to the importer, and the goods were then passed to be stored in neighbouring warehouses. The owners of the latter would then issue a second set of warrants on these goods, in total ignorance of the fact that they were already pledged. Cole quickly raised money on both sets of warrants. He carried on this game for some time with great success, and so developed his business that in one year his transactions amounted to a couple of millions of pounds. He had several narrow escapes. Once a warrant-holder sent down a clerk to view certain goods, and the clerk found that these goods had already a "stop" upon them, that is, they were pledged. Cole escaped by throwing the blame on a careless partner, and at once removed the "stop." Again, some of the duplicate and fictitious warrants were held by a firm which suspended payment, and there was no knowing into whose hands they might fall. Cole found out where they were, and redeemed them at a heavy outlay, thus establishing business relations with the firm that held them, much to the firm's subsequent anger and regret. Last of all, the well-known bankers, Overend & Gurney, whose own affairs created much excitement some years later, wishing to verify the value of warrants they held, and sending to Maltby & Co.'s wharf, found out half the truth. These bankers, wishing for more specific information, asked Davidson & Gordon, a firm with which Cole was closely allied, whether the warrants meant goods or nothing. They could not deny that the latter was the truth, and were forthwith stigmatised by Overend & Gurney's representative as rogues. But Overend & Gurney took no steps to make the swindle public, and therefore, according to people of principle, became a party to the fraud.
The course of the swindlers was by no means smooth, but it was not till 1854 that suspicion arose that anything was wrong. A firm which held a lot of warrants suddenly demanded the delivery of the goods they covered. The goods having no existence, Cole of course could not deliver them. About this time Davidson & Gordon, the firm above-mentioned, who had out fraudulent warrants of their own to the extent of £150,000, suspended payment and absconded. This affected Cole's credit, and ugly reports were in circulation charging him with the issue of simulated warrants. These, indeed, were out to the value of £367,800. Cole's difficulties increased more and more; warrant-holders came down upon him demanding to realise their goods. Cole now suspended payment. Maltby, who had bolted, was pursued and arrested, to end his life miserably by committing suicide in a Newgate cell. Cole too was apprehended, and in due course tried at the Central Criminal Court. He was found guilty, and sentenced to the seemingly inadequate punishment of four years' transportation. Davidson and Gordon were also sentenced to imprisonment.
A more distressing case stands next on the criminal records—the failure and subsequent sentence of the bankers Messrs. Strahan, Paul & Bates, for the fraudulent disposal of securities lodged in their hands. This firm was one of the oldest banking establishments in the kingdom, and dated back to the Commonwealth, when, under the title of Snow & Walton, it carried on business as pawnbrokers. The Strahan of the firm which came to grief was a Snow who changed his name for a fortune of £200,000; he was a man esteemed and respected in society and the world of finance, incapable, it was thought, of a dishonest deed. Sir John Dean Paul had inherited a baronetcy from his father, together with an honoured name; he was himself a prominent member of the Low Church, of austere piety, active in all good works. Mr. Bates had been confidential managing clerk, and was taken into the firm not alone as a reward for long and faithful service, but that he might strengthen it by his long experience and known business capacity. The bank enjoyed an excellent reputation, it had a good connection, and was supposed to be perfectly sound. Moreover, the partners were sober, steady men, who paid unremitting attention to business. Yet, even as early as the death of the first Sir John Paul, the bank was insolvent, and instead of starting on a fresh life with a new name, it should then and there have closed its doors. In December, 1851, the balance sheet showed a deficiency of upwards of £70,000. The bank had been conducted on false principles; it had assumed enormous responsibilities—on one side by the ownership of the Mostyn collieries, a valueless property, and on the other by backing up an impecunious and rotten firm of contractors with vast liabilities and pledged to impossible works abroad. The engagements of the bank on these two heads, amounting to nearly half a million of money, produced immediate embarrassment and financial distress.