The New York herald. [volume] (New York [N.Y.]) 1840-1920, 1878-12-13
The Ring that Used the Money Of the
City of Glasgow Bank.
EXTRAORDINARY REVELATIONS.
How Rotten Firms Were
Kept Alive.
MILLIONS OF POUNDS SQUANDERED

The extraordinary network of fraud and deceit by
which the City of Glasgow Bank has been wrecked
and thousands of innocent persons ruined is being
gradually laid bare. This week the affairs OF smith.
Fleming 4 Co.. of London. Bombay and Kurrachee,
and Matthew Il Thielmann, of Glasgow and Leith.
have been under the legal microscope, and amount
of commercial rottenness has been exposed which has
seldom been equalled. Smith, Fleming Il Co. at one
time did magnificent trade with the East Indies and
their wonderful prosperity reached its climax in the
three years Immediately preceding the outbreak OF
the Franco-German war, when their houses--in Lon
don, Bombay and Kurrachee-earned among them an
average of $50 per This could not
20 on forever The turned and in 1870 the firm suf
of heavy losses BY the failure of their
Liverpool eorrespondents-Nicol,D uckworth Co.
who had been specializing III cotton. they lost
EGGS 900 They also suffered severely by the depres.
sion caused by the Franco-German war; and their
losses by that ultimately amounted to ESQ, GOO
At this time Smith. Fleming & Go. were indebted to
the City of Glasgow Bank for 900 cash and
fl22 900 credit but these sums were fully secured
the bank need have lost nothing if the firm had sus-
pended. they thought of doing. But it did not
suit the bank let smith, Fleming Co. collapse,
and the partners themselves had still laundering
after the rich profits of their three big years. They
could reason. the head of the firm Mr. j.
Fleming. told his creditors. why such earnings
IL
maintained particularly having regard to the very
low level TO which prices of goods and produce had
fallen in consequence of the war" Eventually
Fleming to Glasgow. and here is his own &C.
count of how they managed business
on THE DOWNWARD TRACK.
went to Glasgow and had q long interview with
the manager and several of the directors, at which
our position was very freely discussed, and
stoppage by all strongly deprecated. Unfortu-
naeiy INV partners and did not regard our position
as n
sstance, provided it could be given condtionally
as to preserve our money making power did not
ask assistance. but whe, it offered did not feel
justified in refusing it, provided it could be rendered
in manner which 1 considered essential to secure
success. Much discussion took place. and when it
seemed to Inc that the magnitude of the difficulties
and the corresponding requirements were not fully
appreciated and that the proposals then made of
rangement were calculated in my Judgment TO bring
all concerned into dscredit, refused to go on and
left the l was, however requested to return.
aud ultimately consented undertake what / knew
must be long aud arduous, although believed not
useless struggle upon assurance being given OF efiec-
tual assistance.
From that day onward the firm of Smith. Fleming
& Co. were the slaves of the bank. They toiled on.
but recovered the shock which their credit
ceived in 1872 In the eight succeeding years they
added to their losses f9000 00 not to mention the
large which they had to spend in commission
and interest bills and which they could only pay
by the assistance of the managers of the bank. They
kept the bank regularly informed the state Of
their affairs, submitted their balance sheets and all
other documents and bolstered up year after
year by fresh advances. At the meeting of creditors
Fleming severely cross-examined by Mr.. Abra-
hams. who represented the Credit Ly onnaise:-
Mr.. AbrahaIns-Can you tell us whether during the
last year you made profit in your trading Have
you made any profit since 1870 Altogether think
have.
Have you made any profit the London bus:-
ness?-I think not.
You put down your losses on your trading in Lon
at Of L
am
Were you in the habit of making balance sheets
each half year;-Ws made trial balance sheet for
the last time the 30th of June
Therefore take it that on the 3oth OF June
last having made trial balance sheet, you knew the
state of your affairs?-Yes.
And You knew that you owed more than you could
ays-We knew that We owed ,0Oo more than We
could pay.
Why did you not stop payment then?-Because
was prevented from doing so by the Glasgow Bank.
That II a corporation who prevented you'll don't
think ought 10 mention the
think you had better consult your legal advisers
Mr. Fleming. after consultation stated that Mr.
Robert stronach manager OF the City of Glasgow
Bank. the gentleman who induced him not to
stop before.
He told you not to stop paynent?-Not exactly I
told him must stop and he said mo. don't stop;
we VIII fluid yon in funds to keep on"
Did they know in what position you were?-Per-
fectly. saw Mr.. Sronach last in September In las
gov, and he prevented me stopping payment by pro-
yiding the money to meet certain scceptances
asked you these questions because my clients ad-
vancc their money after July. and IL stopred
payment when YOU wanted To they would mot have
appeared here to-day. We're these bills holding out
some bills printed in London and sent Bombay
10 the firm there with the amount filed in They
III London.
FICTITIOUS BILLS.
Some further questions brought out the fact that
bills amounting TO f34s 500 had been drawn by the
partner in Bombay and sent to London to the credit
OF the London firm in order to keep down the appa-
professed to be for value received and that the lat
ter statement added in the bank Mr. Abrahams
then put some further questions with the object OF
bringing into view the dividend dec AIRED by the
bank =
Yau are shareholder in the City ~ Glasgow Bank do
Iou know the amount Of tho dividend they paid last
You know that you owed them 900 that time
Did yoa any remarks 10 Mr. that you ow ed
million and hall q the bank and could pay it'll did
Did Jon No; eoS.ut X other creditors your
petition besides NJ strona'h '.-Aoi never
not consult themf-No.
that the firm Of Smith, Fleming Co. had been
driven into reckless courses by the pressure put on
them by the bank and II ultimately agreed to
iquldate their affairs ~ arrangement ana not in
bankruptcy. Their liabilities amount to 81. 1926 $50,
while the assets not expected TO exceed E2o5 Js2
RECKLESS SYSTEM
Tho case q Matthew q Thielmann is somewhat diff
fercnt Ia character from that OF Smith. Fleming N
Coz but u so brings out III strong relief the ruInous
system Of reckless advances pursued by the bank
with the vcw - warding on the inevitable collapse.
Matthew Ihielmann formed only link In the
chain, being merely the go-betwceu from James Nor
ton. ~ james Morton CO. who had unlimited credit
with the bank, - William Hay. sons 4 Co., grain
merchants. Glasgow, who had unlimited powers Of
spending money and were always calling for more The
whole story told IN the Glasgow Bankruptcy
Court Monday by Thomas Matthew, the senior
partner. Matthew 4 Thiclmann started business ~
grain and commission merchants in Glasgow and
Leth with capital Of $4,000. For many years bus
jness pr0spercd and in 1864 their capital had more
than doubled In that year William Hay, Sons x Co.,
who had had small transactions with the firm for two
years were unable to meet of their bills. con
kultati0n took place with the result that r Thcl.
became partner without capital. of tho Hays,
aud In consideration OF the partnership, Matthew Il
Thiolnann agreed 20 supply them with the means OF
going some largo transactions IN grain took place
between the two rns after the partnership neO-
tiatiOns but their relations afterward OF an
almost exclusively financial character. BY 1853, in
which year Hays grain mill was burned, the Hays
IL = 49, l. IL