The morning call. [volume] (San Francisco [Calif.]) 1878-1895, 1893-05-14
TISSUE OF FRAUD.
Disclosures in the Santa
Clara Failure.
FORGERY DISCOVERED
Names of Capitalists Signed to
Notes.
KEPT TWO SETS OF ACCOUNTS
Bank Commissioner Knight Unearths
the Villainy of the Man.
agement.


pended Santa Clara Bank.
1.-The worst thing about this failure is
the utter wreck it has made of public con-
fdence in Santa Clara County and the
vicinity" continued Mr.. knight. The
bank was an old one, located in the very
best section of the Santa Clara valley,
where nearly every depOsitor had both
land and money behind him. The outlook
is that the depositors will eventually lose
little or nothing and the stockholders, who
are n few in number and wealthy men,
will probably come out far better than was
ar first thought.
"The cause OF the wreck of the bank is
speculation, principally in mining stocks.
by its cashier and ice-president. The
issuing of false certificates of deposit and
the forging of the names of responsible
men to notes for money supposed to have
been borrowed is the way in which the de-
falcations we're covered.
"The examination of the banks affairs
is not nearly complete and l cannot say
what may yet develop. This / can say:
The losses will be very large and the rreg-
ularities will run back over a period of
many months"
Resuming. Mr.. knight said that lie was
convinced the worst was over so far as the
people of Santa Clara were concerned
ITO have an old established bank fail,
such as the Santa Clara, when situated in
one Of the wealthiest districts of this
State, where all the dep0sitors were land
owners and had money in other banks, ana
where the simple word of the cashier and
Yice-pTesident of the bank was good for
frcm $1,000 TO $4,000 IN the banks of
neigh boring cities, was a sh Ock, not only
to the people who placed their money in
the bank for safety and profit but TO the
financial world west OF the Sierras as well.
"The Santa Clara Bank has always been
considered a veritable bedrock formation
that no financial storm could move. Its
policy has been conservative in the ex-
treme, lis loans gilt-edged and bearing
splendid interest, and so long as the bank
and its officers were doing a legitimate
business the Santa Clara Bank was making
more money than many similar institutions
with twice its capital.
&c. C. Hayward. the cashier for many
years. and II. NJ. Leonard, the vice-pTes-
dent ard manager Of the bank, had pracii-
caly control of its affairs. Both men were
considered wealthy, especially Leonard,
whose name, as l have stated, was good
without security for more than $4,000 in
cash at the banks in San Jose.
HE gained control of the Santa Clara
Bank through the ability he displayed in
winding up the affairs Of an old savings
bank in San Jose years ago. Neither he
nor Hayward, who seems TO have been his
tool, were ever thought to be spectators.
They enjoyed the fullest confidence of not
only their neighbors but some of the
shrewdest financiers in Southern Calilor-
MIA and San Francisco
Just when Leonard and Hayward
began their emb ezzlements | cannot now
say. Their method was simple in tie
extreme. John Jones would come iD and
deposit $1,000 in cash. for W hich he would
be given a certificate of deposit, which
would never be entered in the Socks OF the
bank to his credit.
by and by Leonard, or some one else
cannot now say who, would forge note
for $1,000 loan and place it in the bank to
offset Jones deposit in case he should call
for his money. There is no question but
what many if not most of the notes held
by the bank are fOrgeries. Then Leonard.
manager of the bank, borrowed from it
S13J,000, he says, although the investiga-
tlon does not up TO date, show any such
amount.
"Well, Hayward, the cashier, died re-
Gently, and that preeipitated affairs for
Leonard, the manager The directors.
though few in number as are the stock
holders, aud all considered wealthy men,
were liable to select cashier that couldn't
be handled, and such an action would
mean almost immediate exposure for
Leonard, as we'll as the failure of the
bank. Leonard may have taken this view
of the situation, or he may not. don't
pretend to say as to that, but upon Hay
wards death Leonard promptly went into
insolvency and says he owes the bank
S135, 600.
LAS far as we have gone it seems that
the issues of false certificates of deposit
will amount TO upward of S60,O00-this
is only an approximate figure remember
and the loss 10 the bank will probably be
considerably over 100000. I believe that
the depositors will get all their money,
and while the loss will fall heavily upon
tie stockholders. still am of the opinion
that they, too, will save something out of
the wreck. But, as 1 have told you, we
are not through with the investigation,
aud no one knows what may turn up be-
fore we flush.
ITO give you an idea of the confidence
and esteem in which Leonard, the vice
president and manager of the Santa Clara
Bank was held" continued Mr.. Knight,
II will tell you what was told to me. A
few days beIore the Santa Clara Bank
failed Leonard, probably apprehensive of
Hayward's death at an early day, is said
to have gone to San Jose and from one
bank alone borrowed $4,000 In cash on
his name and reputation. 1t Is also said
that with only the same collateral he bor-
rowed on the same day $4,000 each from
two other banks.
I'm justice to Hayward, who is dead and
unable 10 answer for or against himself,
it may be said that Leonard was the man
who handled almost all the loans and
notes, If not exclusively"
Mr. Knight returns to Santa Clara Mon
day. He is firm in his belief that the San
jose banks will not be shaken in the
slightest degree by the Santa Clara failure.
He Is trying hard to look on the bright side
of the affair, but he is too thorough a bust
ness man to deceive himself for an instant.
and hence, all his statements are made
with the proviso that the end of the in
vestigation may show better state of
affairs for the defunct bank Still, no one
who talks to the Bank Examiner can heIp
but think that he will be more than salts
fed If the worst has been found up to date.
What may be or viii be done with Leon
ard, the surviving partner Of the alleged
fraudulent Spectators. no one even hazards
guess. He has gone through Insolvency
and has credited the bank with large
amount in excess of the amount the bank
books show he owes the concern. What
object he had in so doing is not just now
apparent, but may become so before the
investigation ends.
The promise held out that the depositors