A History of Banks for Savings in Great Britain and Ireland

by William Lewins

The Bilston Savings Bank was established in 1838. Nothing unusual marks its early history, except the fact that the man who ultimately managed all its affairs and so largely embezzled its funds was prominently active in its establishment, and was one of the original trustees. To show the estimation in which the Rev. Horatio S. Fletcher was held by his fellow townsmen in 1838, we need only state that in that year, being before simply perpetual curate of the parish, he was presented by them with the incumbency of St. Leonard's, Bilston, worth 700l. a year. That he should take a large share of honorary employment after this was only what might have been expected. Whether expected or not, he did undertake many offices. In 1839, Mr. Fletcher, in addition to being a trustee, was made secretary to the Bilston bank. In 1849, he also became treasurer. Not content with this monopoly of offices, he soon afterwards took upon himself—for there is no record of his having been appointed to the office—the work of actuary. The whole of these offices, and the entire system of check which they are properly supposed to give to each other, Mr. Fletcher held till 1861. And why not? The man was universally known for his charity and benevolence: as the principal clergyman of the place, did he not teach mercy and charity; and, as a magistrate, did he not uphold the majesty and dignity of the law? Since the way in which trust is reposed in individuals can never be fully explained nor made the subject of rigid rule, who could better be relied on than the Rev. H. S. Fletcher, Incumbent of the parish, and Justice of the Peace? Nothing can be more easy than to say now, that it was consummate folly to allow one man to hold the important offices he did; but who would think of saying so much then? Suffice it to say, that this man, like so many more of whom we have had to speak, contrived to ingratiate himself into the good will of all around him, and had that peculiar kind of cleverness which succeeds in getting his application and zeal laid to the credit of his disinterestedness and charitable disposition. Since the subsequent facts make it impossible to put a kinder construction upon them, all the rest follows in this case simply as a matter of course.

On the 3d of January, 1862, the announcement was made in the Times newspaper that the Bilston bank had come to a sad end, and that defalcations to the amount of 8,840l. had been found out in the accounts of the treasurer of that bank. How these frauds, which extended over several years, were accomplished, and how they were found out, remains to be seen. We will reverse this order, and speak of the exposure first. In the spring of 1861, Mr. Tidd Pratt, the energetic Registrar of Friendly Societies—whose name indeed seems almost synonymous with such subjects—visited Bilston, and delivered a lecture on “Benefit Societies.” In the course of that lecture Mr. Pratt alluded to the cognate topic of Savings Banks, and spoke of the necessity for regular accounts and regular returns in connexion with them. He then took the opportunity to refer to the “very irregular manner” in which the accounts of the bank in their own town were kept. Now, it must not be supposed that Mr. Fletcher had forgotten his returns; he was far too careful for that; he knew the penalties attaching to such neglect. It seems that both weekly and annual returns, although they were habitually and carefully “cooked,” were regularly forwarded to the National Debt Office. The “Returns” to which Mr. Pratt appears to have pointed, were those called for annually by the House of Commons, with the object of improving the law of Savings Banks; and these returns, from 1855 to 1861 the factotum of the Bilston bank had constantly neglected to send. Mr. Pratt, in continuation of his statement afterwards, confessed he knew nothing of the circumstances of the bank, further “than that his suspicions were always aroused in cases where he found any accounts were not properly rendered.” There can be no doubt about it, that this reference roused the “reverend defaulter” to a sense of his danger; for it subsequently transpired that not a penny was abstracted unlawfully from the bank after the week of Mr. Pratt's visit and lecture. Furthermore, not only was the culprit aroused, but the trustees were awakened to some sense of their responsibility, and very soon afterwards there was a movement amongst them for a change in the management and an overhauling of the books of the bank. In a very few weeks after Mr. Pratt's visit a new set of managers and trustees were proposed, and Mr. Fletcher was deputed to see them, and endeavour to get them to act. In July the appointments were legally made, including that of Mr. Hawkesford to the post of actuary. Then quickly followed the disclosure which indeed, sooner or later, was now inevitable. The new actuary got the books from the parsonage—the bank being held in the school-room of the church—and was not long in finding out some of the discrepancies with which they abounded. On first discovering the frauds the actuary spoke to the treasurer, who promised to confer with him about them; on finding out the magnitude of the defalcations, he again mentioned the matter, choosing an extraordinary time, not however without its significance—of a Sunday after the usual service. The clerical delinquent acknowledged his guilt, and said, “He was very sorry, but never intended to defraud the depositors of a shilling.” It will be seen, however, that the fraudulent transactions were of such a nature as not to admit of any extenuation, and to render condonation of any sort impossible. The feeling produced by the disclosure was painful in the extreme, and the country spoke out with vigour on this extraordinary and merciless breach of trust. The local magnates, indeed, and the body of trustees who had allowed these frauds to run on, spoke with bated breath of the “deficiencies” of the Bilston treasurer; the Times, on the other hand, spoke far more in accord the with the general feeling of the country, when it characterised “this man Fletcher” as “the meanest, the most cowardly, and the most cruel of swindlers.”[127] Under his manipulations, the Bilston bank was a Savings Bank in nothing but the name; there were trustees, but they were tools; rules, properly certified, but never obeyed; accounts made out and “cooked,” but never checked or audited. The trustees did just what they were bid, and the real operator at the bank did just what he chose. This clergyman and magistrate was a swindler, his books a heap of lies, his balance-sheets pure fiction.

Mr. Pratt was sent for to examine into the state of the bank immediately after its condition became known, and it is to the account which he himself subsequently gave to the depositors that we are indebted for most of the particulars which elucidate Mr. Fletcher's mode of operation, when in the thick of his guilt. Mr. Pratt stated, that from 1848 to January, 1861, there did not appear to have been any meeting either of the trustees or managers, for the purpose, according to the rules, of auditing or settling the weekly accounts. The Rev. R. J. Heafield, a trustee and manager of the bank, confessed at the trial of Mr. Fletcher, at the Staffordshire Lent Assizes, 1862, his own culpable negligence in the following words:—“The weekly returns signed by me were prepared by Mr. Fletcher. When I signed them, I never in any way compared them with the books. They were presented to me either by Mr. or Mrs. Fletcher, and I took no measures to verify their accuracy.”[128] What might not a designing man do with such a tool as this? Having subdued his trustees in this way, the rest was, as we shall see, quite easy. The books at the bank were, it is only fair to say, kept quite correctly; so were the depositors' books. According to the evidence of Mr. Pratt: “In the day-book everything was entered with scrupulous correctness; and 1200 depositors out of 1400 had brought in their books, and he did not believe an error had been discovered.” Mr. Fletcher chose a somewhat simpler course of action, which we will describe. His duty as actuary of the bank required that he should furnish weekly returns of the transactions to the National Debt Commissioners: the correctness of these returns were to be checked by the treasurer, which office he of course filled himself. All that was necessary to the perpetration of fraud was that this actuary-treasurer should be on easy terms with his conscience, and this unfortunately was the sad state of the case. Deceive the Commissioners by falsified returns, and any amount of money, under the peculiar arrangements of this bank, might be pocketed without fear. In order to help himself to a full solution of the case, Mr. Pratt brought these returns down from London, and compared them with the bank accounts, with the following result:[129]—“The whole of the Returns he held in his hand were signed by Mr. Fletcher, as actuary and manager. In the statement dated January 1, 1859, the amount received was returned at 234l. On looking at the books for that day, he found it should have been 334l., therefore 100l. had been abstracted on that day [cries of 'Shame,' and sensation]. On the 8th of January, he found the payments were set down at 174l., whereas they had only been 74l., thus showing that the treasurer had put another 100l. in his pocket that week. In the return dated January 29, the receipts were set down at 183l., and the payments at 148l., whereas the former ought to have been 283l., and the latter 48l., thus taking to himself 200l. [renewed sensation].” So on through almost all the weekly accounts of three or four years. There seems to have been no other fraudulent transactions than those of this simple but abominable kind; the whole defalcation had taken place in this way, and it was made manifest that no one but the treasurer had participated in it. It is fortunate for the depositors that the frauds were found out when they were; but for the negligence in sending the required returns ordered by the House they might have been continued for an indefinite period. As it was, the assets of the bank realized in the first instance ten shillings in the pound; towards the close of 1862, another dividend of half-a-crown in the pound was paid, and since that time a third small amount has accrued to the depositors, who are never likely to be completely reimbursed of their loss. In 1862, Mr. Fletcher was tried before Baron Channell, and found guilty of “appropriating money with intent to defraud.” His counsel, however, having made an able defence, characterised by the judge as being as subtle as it was ingenious, the point as to whether the prisoner was a “trustee” at the time of appropriating the money—this being one of the facts upon which the indictment was based—was reserved, and he was released on heavy bail. Into the further history of this man, the sequestration of his living by the Bishop of Lichfield for the behoof of the depositors, the repeated failures of justice in his case, his eventual imprisonment for two years, it is not befitting that we should enter, these being items of almost current police intelligence.

We can only spare a few words to tell how similar results followed in this as in previous frauds. Men declared they would put it out of the power of mortal man to deceive them in this way again. In many cases a degree of recklessness was induced in those who had been cruelly wronged, which could only have been considered excusable if they had lost their all. It is not at all unnatural, that, from what cannot but be considered a defective education, men should so act, and be so ill prepared and disinclined to look evil consequences fairly in the face: still such facts only prove the truth of what we have before urged, that the extent of money loss, through such dishonest transactions as Savings Bank frauds, is but a trifling part of the aggregate misfortune they entail upon the country. Other depositors, it is but fair to say, acted far more wisely. Induced by the counsel and persuasion of those whom they could trust in a time of need, many depositors in other banks withdrew their money, and placed it where alone they could get that security which they so much needed, and several of the Bilston depositors did the same with the sums they obtained. It was represented to them truly, that not only would Government suffer by a run upon the old banks, but, what was of far more importance, they would themselves suffer, and their second period of suffering be worse than their first. Nothing can be so palpably true as that money, completely withdrawn at such times, is oftener wasted than kept, and frugal habits rewarded after this fashion far oftener discontinued than resumed.

And here, it seems to us,—and we mention it, though we are somewhat anticipating the subject—the country is greatly advantaged in having the new system of Savings Banks to point to. What was much wanted in previous cases was some safe place, where timid depositors might resort with their savings, and defrauded depositors go with what they had saved from the wreck.[130] In the Bilston case this privilege was largely used. The Post Office Banks broke many a fall, and they set many on their feet again who otherwise would have been hopelessly overcome by the shock. Two years before it would have been sheer mockery to have told depositors, under such circumstances as those to which we are alluding, not to make a run upon Savings Banks; they had no alternative till, in 1861, that alternative was provided. It would seem, from a memorandum before us, that the authorities of the Postal Banks, without in any way seeking to prejudice the interests of the old banks, did all that was fairly possible towards reducing the disasters which have invariably and inevitably followed previous cases of Savings Bank failures. They instructed their agents, in all cases where, owing to the depredations at Bilston, Savings Bank depositors applied for advice about withdrawing their money, to recommend continued confidence in these institutions; if, however, such depositors were bent upon withdrawing their money, then to advise that it should not be asked for in cash, but by means of a transfer certificate, which would make them depositors under the Crown. The strict fairness of these instructions may be judged by the closing injunction: “Although you may fairly inform those depositors who are alarmed at this failure, that the depositors in Post Office Savings Banks have absolute and direct Government security for their money, you must on no account do or say anything to weaken their trust in the old Savings Banks.”

The last case[131] in the catalogue of this peculiar description of crimes is that which occurred at Canterbury during the year 1865. This case is indeed so recent that any lengthy description of it would scarcely be tolerated. We may well spare ourselves the trouble, for the Canterbury fraud was little else than a repetition, on a smaller scale, of the one perpetrated at Rochdale, to which we have given so much space. Nor is it a little singular that the actuary in the Rochdale case was in many respects the prototype of the Canterbury actuary: in the estimation in which both were held in their respective spheres, in their character and occupation, there are several points of close resemblance between them. In the Canterbury case we have the old story of misplaced confidence, want of check, and a constant embezzlement of considerable sums of money extending over a long series of years. The actuary and secretary of the Canterbury bank, Mr. Samuel Greaves, was for many years almost the sole responsible official; of course “he bore the highest possible character for probity and honesty”: nor will it surprise any of our readers to be told that it came afterwards to be said of this man, “from his many professions he was thought incapable of such conduct as that which was proved against him.” The Canterbury bank was established in 1816. Greaves's connexion with the institution dates from 1830, when he was appointed actuary at a salary of 40l. per annum. The salary, however, was increased from year to year, up to the time of the exposure, when it stood at the respectable figure of 200l. Originally a “hoyman,” the actuary of course, and necessarily, engaged in other pursuits than those connected with the bank; and this circumstance, in the same way that it occurred in almost every other fraud of the kind, led to the malappropriation of the money of the bank. It was another case of partial service and partial pay, and an almost unlimited command of money, when among many other business engagements it was always possible that money might be urgently needed. Like Haworth of Rochdale, Mr. Greaves undertook several agencies, among them those for the sale of coal and porter. In 1840, it seemed, from the statements of his counsel, he began to lose money in his business, and was then, to put it in the mild form chosen at his trial, “induced to abstract some of the funds of the bank to meet his pressing difficulties.” Once on the downward road, he never turned back; it was impossible to manage it. It was the old story, told with plainness by his own advocate. He took the money, with the full intention of repaying it on an early date; difficulties gathered fast around him, and still the man went on, foolishly trusting to some turn of fortune's wheel to replace him in his old position. He tried speculation, but he lost still more irretrievably; his lucky day never arrived: and at length the weight of anxiety under which the man must have laboured for twenty-five years brought him down, and with the lack of his usual vigilance came detection and exposure.

This detection was effected by a Mr. Abrams, the clerk of the bank, and it is from his evidence at the trial of his superior officer that we learn the actuary's mode of operation. All the cases of fraud, it seems, were identical in character, and were effected by means of claims for withdrawals only. Every deposit reaching the bank was properly received and properly accounted for. Like Haworth at Rochdale, the Canterbury actuary carefully noted those who were generally putting money into the bank, and seldom taking any out. In the case of many of these depositors he had provided himself with forged pass-books, with the deposit column always correct, but the withdrawal side manipulated according as he himself wanted money. Suppose any of the depositors came to the bank, to deposit or withdraw a sum of money; they presented themselves to the actuary, who entered in their proper bock the proper sum, but immediately substituted a forged pass-book for the purposes of the bank. The ledger clerk received a book from the actuary to copy into the ledger, and in this way the books of the bank came to tally with the forged depositors' books. All that was necessary to carry on the frauds was that the actuary should keep a strict eye on the real pass-books of the depositors, for the discrepancies would be patent, as it eventually transpired, the moment the true books were seen. Sometimes the money was obtained with less trouble. Greaves would occasionally give himself notice that a depositor wished to withdraw a certain sum of money (and this occurred several times in connexion with a person who had deposited considerably, but never withdrawn any sum), and represented that the money was entrusted to him “to keep.” After the quasi notice had been acted upon, he would draw a cheque for the money, and the amount would be entered in a false pass-book and copied into the ledger; the luckless depositor, with her book safely by her, being in entire ignorance of the whole transaction. The utter absence of any control on the part of the managers and trustees, as exemplified in such a mode of procedure, especially considering that it came after the case of Bilston, the agitation of the last few years, and the passing of the Act of 1863, reflected the greatest discredit upon the honorary officials of the bank, though their conduct subsequently went far to atone for their past neglect.

The case is described as having excited the most painful interest in the city of Canterbury. The actuary, an old man of seventy, was tried at the city quarter sessions in October, 1865; the trustees of the bank prosecuting him on the charge of felony. The transactions were again described, but only in brief, inasmuch as the prisoner pleaded guilty. A strong memorial was presented, signed by many clergymen and tradesmen, which, instead of asking for a mitigation of sentence solely on account of his age and infirmity, put forward the following extraordinary motive for interference: “The memorialists wish so far to relieve his character from any undue opprobrium that may attach to it, by declaring that the various business transactions they individually have had with him, have always been conducted in an honourable and satisfactory manner.” At any rate, this questionable memorial may at least serve to show the estimation in which he was held by his fellow-townsmen. The prisoner was sentenced to six years' penal servitude,—six years for each of the two indictments; but, on account of his age, the years to run concurrently together.

The entire deficiency, when at length the whole of the accounts of the bank were made up, was found to be 9,300l. Happily the depositors, whom, so far as he knew, the actuary was mercilessly robbing, were ultimately secured against loss. The surplus fund of the bank, amounting to 3,500l., was applied to meet the case; the actuary gave up property to the value of 1,700l.; a gentleman who was his surety for 400l. was called upon to pay that sum, and the remainder, about 3,000l., was subscribed by the trustees and their friends. The bank was of course stopped on the defalcations coming to light, the books were called in, and the trustees sought the advice of the Government officials, as to transferring the business to the Post Office. The stipulation in this case was, we believe, that the trustees should make good the deficiency, and that then the business of the bank, which was a large one, the deposits amounting to 150,000l., should be handed over to the new establishment. Every effort was made by the Post Office, in the way we have shown in the Bilston case, to stem the tide of improvidence which generally sets in at such a time, and in this case with great success.

The frauds above described have, of course, formed the principal cases,—cases which from their flagrancy and extent have either been made the subject of parliamentary investigation, or have so occupied the attention of the press as to have become grave subjects of public discussion. Besides those leading cases, there have been, as we have before hinted, a certain number that have been concealed from the public from motives which, though they may have been open to question, we cannot characterise as wholly bad or unwise. From two Returns issued at different times on motions made in the House of Commons, we are enabled to compile a complete list of those frauds that have been officially reported to the National Debt Office. The first Return embraces the period between 1844 and 1852, and the second, 1852 to 1857. The numerous frauds of which we have already spoken, or to which we have referred, occurring before 1844, and the important ones perpetrated since 1857, are not included in the following list. The gross amount of loss would have been considerably swelled had a perfect list been possible. As it is, the following table gives the name of the Bank, the amount of the Fraud, and the amount of the Loss to depositors, so far as it can be correctly ascertained:—