Pittsburg dispatch. [volume] (Pittsburg [Pa.]) 1880-1923, 1891-09-04
DIRECTORS GO FREE.
Judge Ewing Hands Down an 0pin-
ion in the Great Penn Bank Case.
HARE AND SEVERANCE MUST PAY.
The Burden of the Blame Is Placed on
President Riddle.
EXCUSES FOR THE DIRECTORS ACTS

The directors of the Penn Bank are no
liable for the failure of that institution, bu
two of the directors will have to pay bacl
deposits which they drew out at the tim,
of the crash. That was the substance o
Judge Ewing's opinion handed down yes
terday. The case has been in the courts o
Allegheny county since 1887. Judg,
Ewing's decision closes the cases SO far a
this county is concerned, but it will now b,
. taken up to the Supreme Court. Their,
were ,673 pages of testimony taken in the
case, and the opinion of the Court cover,
100 pages. 1t says:
In relation to the withdrawal of the de-
posits of the directors of the Penn Bank, the
Master said their action was wrong, as al
funds then in the bank and constituting
part of its assets should have remained for
proper distribution. The parties drawing
would then be liable respectively to the e1-
tent of the funds each drew. This is nd.
mitted by them, for they have since settled
with the assignee, paying him the amounts
with interest.
This is a correct finding and sound law, ,ex-
cept the last sentence, which is not the fact
as to Thomas Hare and Samuel Severance,
who admit they have not paid back the
money they drew out, did not pretend they
had and undertake a refusal. The other di-
Tectors did pay back the money so drawn
out with interest thereon. Whatever may
have been the knowledge or belief of the d.
rectorS prior to the Goth day of May. 1854,
they knew on that day before the money
was drawn that the bank was wreck and
wholly insolvent. These men were there as
directors in the bank. As such they OBJ
tanned this certain knowledge of the insol-
vency of the bank. 1t was the duty of the
board and each member thereof to at once
endeavor to secure the equal distribution of
the rema lining assets among the creditors.
In the CONSERVATION of the moment these
men lost their heads: they obtained then
and there from the bookkeeper the precise
amount of their respective balances, and at
the last moment of open doors, If not after
the doors were closed to other parties, they
drew out their balances.
FIRST IMPULSES NATURAL.
can understand how, under such circum-
stances the impulse of the moment would
be for each man to save from the wreck
what the bank owed them, but the sober
second thought should have impelled all to
do what majority did, pay back to the as
signee for distribution what had been drawn
out under such circumstances. The fact
that the money drawn by Thomas Hare was
g denosit by Thomas Hare g. Son makes no
difference in any aspect of the case 1t was
drawn by director in full knowledge of the
insolvency of the bank. Thomas Hare is
liable on said account to pay the assignee
S37l6 %, with interest from May 26 1854.
a
with interest from May &C. 1884
We hold the directors must exercise or
dinary care and prudence III the administra-
ton of their bank, and that this includes
something more than acting as mere figure
heads. They are not excused from the duty
of reasonable supervision, nor ought they be
permitted to be shielded from liability be-
cause from want of knowledge of wrong
doing, If that ignorance is the result of gross
inattention. But the question still remains
what is want of reasonable care and dill
gence in this case The directors are not
charged with malfeasance. 1t is not claimed
participated in the gigantic operations of
Riddle, the President, and others to bull
and bear the oil market. or they aided him
IN abstl3cting the funds for this purpose.
The evidence fails to show negligence on the
part of the directors in selecting sufficient
corps Of officers to transact the business of
the bank, and it shows that Riddle and
Reiber came TO them well recommended
from their original position in the bank and
that by dlligent and supposed faithful per-
formance Of their duties they received sub
sequent promotion to the positions they oc-
cupied. when it appears that the larger por-
tion of the abstraction of the money oc-
CURED. ..
RIDDLE THE ONE TO BE BLAMED.
Itis further in their favor that Riddle, the
first cashier and afterward President had
good reputation for honesty and ability as
fnsncier in the community generally, occu-
pying other positions of trust during his
connection with the bank. The evidence
also shows that Mr.. Riddle must have bad'a
great personal magnetism and ability to
make favorable impression on those with
whom he came in contact. An anus
ing feature of the evidence is the large num-
Der of those deceived by him who claim to
have been his intimate friends. who sup
posed he communicated to them, of course
cOuf1dentially, all he knew, and scarcely
any story seems to have been doubted by
g
ury story was swallowed readily.
These directors. according to the
testimony, individually and collect
lively had such confidence in him and
in the "big bank" which he and they were
building up that nothing but the crash of
May g. 1884, when the empty shell collapsed
over their heads, aroused the slightest sns-
picion of either his ability or integrity. The
directors sat daily to pass upon applications
for discounts. On Monday of each week a
of assets and liabilities was pre-
sented TO them. Usually by Mr.. Riddle, at
times by Mr.. ReIber, when he was nominally
cashier. The directors say they believed
these statements to correctly set forth the
deposits and liabilities as well as the assets
and yet for years these statements were
false in this, that over
drafts or demands loans were habit
ually omitted from the statements of
SSetS and the amounts of these over
drafts were substTacted from the transient
depositors and thus made them appear less
and this discrepancy was enormous for
three years or more, usually running up in
to hundreds OF thousands of dollars and
thus they say they were deceived. Testi-
nony was taken of bank officers to show
that this Is the customary way of making
such statements, i. e., leaving out overdrafts
v hen deducting them from the individual
deposits. Bank officers who are accustomed
10 make such reports, either to their direc-
tors or to the public: would do well to read
and ponder well over certain Sec
lions of the Criminal Code of Pennsylvania
md learn that they have been guilty of a
highly penal offence. 1t is a bad custom
that neither time nor precedent can Justify,
and 1t is an old story in fraudulently bank
rupt banks in this community.
RELIANCE ON SWORN STATEMENTS.
Each morning formal statement was laid |
before the directors, which falsified the liza |
Oilities often by some hundred thousand
lOllars, Yet in their sublime faith in Mr.,
Riddle, they would not make five-minute |
of the individual ledger which |
Eouid have shown the falsitv of the state
nents, ana at rapid glance would have 1
,hoWh an aialmlnS appearance of over |
Traits to doubtful parties. In addition, for |
iOme years prior to the failure Riddle pub
ished in most Of the Pittsburg papers under |
'ath OF t5e cashier and attested by the |
lames OF three directors, statements of the /
Ssets and liabilities, which were close to a
rue statement OF amounts, and which diff |
cred from these weekly statements of sew
,ral hundred thousand dollars on each side
They also printed and circulated in large
numbers cards with the statement thereon |
Is published in the papers, and those cards
we're living around in the bank
1t is practically impossible that any of
hese directors who could read did not see
10Th the publication in the paper and the
ards. The enormous deficiency between
hese published statements and the weekly
ia tenlents would seem likely to attract the
t:ention of anyone interested. The direct
RS admit they saw the published cards and
tatements, but did not examine them, and
imposed they corresponded to the weekly
tatementS.
THE directors say, one and all, that over