Alas, it was only too true. The liabilities were nearly one and one-half millions. Of course, there were large assets, mostly merchandise, but everything was gone, and my wife threw in "Redstone," which had cost me forty thousand dollars, with the rest.
As soon as I recovered myself, I had a meeting with my creditors, all of whom were most kindly disposed, and my statement was accepted without any examination of the books of the firm. Outside of our regular bankers we had heavy loans in which there were large equities. Arrangements were made and these loans taken up at once.
Our position had been so prominent and our holdings were so large, the news of the failure caused a heavy decline, which carried the price down to almost the lowest figure in the history of the trade; but not one ton of our stock was thrown on the market and we ourselves liquidated the business over a period of several months.
Our former clerk, the broker, George Norman, also failed, claiming our failure as the cause.
In our operations it was often necessary to cover our identity by using a broker's name, an established custom in many lines of business. We had favored George largely and our business had been very profitable to him. We did not know at the time, but learned a little later, that prices on the contracts made through him were on our books in excess of the prices he had paid the seller, whereas they should have agreed. This really made him a principal instead of a broker. Actually he had bought of sellers for his own account at one price and sold to us at a higher price, he making the difference in addition to his commissions. His representations to us were always that the price we were paying him was the lowest the seller would accept.
Norman also had been operating on his own account, and by failing escaped his losses. The general opinion of the trade was that he really made money by his failure.
On our books at the time of the failure were a number of discretionary accounts. All of these clients were our friends, and most of them had been with us for many years and had received their investments back in profits over and over again. In order to do justice to all we had to syndicate these accounts. The combined capital was large and the operations had always been very profitable.
These clients had come to us without our solicitation and it was distinctly understood from the start that their investment was at their own risk. All this money was now lost. We had no legal liability, but we did feel, as they were friends, that there was a moral responsibility and we told them one and all we would accept it.
We did something else for them; a few knew it at the time and showed their appreciation. Some of them will not know it until they read it here.
Every one of those clients could have been held as an undisclosed partner, for a very large part of our losses were made in the December operations for the syndicate. Morally, they were not responsible, for they never intended assuming any such liability, nor would we have allowed them to; but legally, technically, they were liable, and we saved them, keeping the burden where it had fallen, on our own shoulders. We had one discretionary account that was not in the syndicate. It was the account of Albert Caine. This was operated under our guarantee against loss, we taking half the profits as compensation for the guarantee. Although this account stood in Albert's name, it was his wife's money and her investment. It had been running for a long time and profits had been paid her to the extent of about forty-seven hundred dollars.