Burlington weekly free press. [volume] (Burlington, Vt.) 1866-1928, 1902-09-25
AGAINST A DISCHARGE
Referee Deberville's Findings in
the Knott & Closson Case.
Baukrupts Concealed Their True Finan-
cial Condition with Fraudulent In
tent and Swore Falsely as to
Their Liabilities.

Referee George w. Deberville has com
peted his report on the application for
the discharge and specifications of OBJ
jcctions in opposition thereto In the mat
ter of Knott IL C1osson, bankrupts. The
report Is an exhaustive one and covers ~
typewriter pages. Every count Is con-
siderod In fun and a complete history OF
the case made The report was filed
Tuesday with George Il. johnson, clerk Of
the United States Courts. The referee rec
cmmen1s that the discharge be denied.
In closing the referee sums up the case
as follows:
Some ten days or more were consumed
in this hearing on discharge. The referee
allowed counsel a large latitude in the ex-
animation of the bankrupts and their
books Of account. records. memoranda,
ETC.. In connection with their business that
the whole truth of this matter might be
sifted and brought to light. The bankrupts
have been fairly heard and fairly treated
While Mr. Fits. counsel for the Directing
creditors, was searching in his inquiries.
he was charitable in his manner and con-
duct. Many questions being put to the
bankrupts about their own business mat
ters, matters that they knew best and
only, were illustrated that witnesses might
not be misled in answering. The referee
ruled that the bankrupts might explain
any ambiguity in their testimony, and
counsel for the bankrupts, were alert to
see that this ruling was faithfully Oh
served. The referee was patient in listen
ing to all the testimony and observant OF
the manner and candor of the bankrupts
and the witnesses testifying and the hear
ing was concluded with a record of about
$40 foioS of testimony with some twenty
or more exhibits. This testimony has been
carefully reviewed and studied by the ref
cree with briefs of counsel in the case.
Mr.. Fits three-page brief calls the referee g
attention to certain evidence in support
of the counts in the specification. Mr..
Tafts three-page brief claims that the
counts Of the specification are not estah-
ished and calls the attention of the ref
cree to the evidence by folio. The tcstl-
mony referred to does not support Mr..
Tafts contention but quite the other way.
The referee has stated such facts and cir
cumstances, following each count in the
specification as a basis of finding the facts,
but the facts of each count are found from
all the testimony in the whole case includ-
ing the exhibits.
In considering the general charge made
by the Directing creditors that the bankrupta
failed to keep books or records shown !
their true financial condition and in con
temptation of bankruptcy, 1t appears In
the first place, that these bankrupts did
not keep any cash book, so that at no time
during their partnership could their Gus
toners or any person, even the bankrupts
themselves, tell their true financial stand
ing. Expert Pratt has testified to the only
way their true financial condition could
be ascertained and how ascertained by
him. No distinct book of bills payable
or receivable were kept by these bank
rupts showing their liabilities or credit
from that source. In the second place,
these bankrupts kept no book of profit and
loss, showing the profit made by the firm
IN dealings with their customers or losses
sustained by the firm in de ling with their
toners. No book of profit and loss was X pit
by them showing the profit made by tile
firm in dealing with their brokers or losses
sustained by the firm In dealing with their
brokers' These bankrupts kept no books
or records in their ONCE showing their long
and short holdings in the market for their
customers from day to day or from time
to time, so that no customer nor other
person nor even the bankruprupts them
selves could tell their standing as a bust
ness house. from a failure to keep these
aforementioned books. Bankrupt Knott
kept no book account record or mem
orania showing the dealings with his wife,
Anna Nj. Knott The financial dealing with
his WIFE amounted to many thousands of
dollars and continued up to the time of the
failure. Customers or other persons had
no means of finding out the fact that
Knott was paying his wife's debts and
that the wife was paying his debts. from
any books of account kept by him, Knott,
or by any books, records or memora nda
kept by Knott & Closson. for bankrupt
Knott testifes that no such books were
ever kept. No book. record. or memoranda
was kept showing the relation of debtor
and creditor existing between the firm Of
Knott & Closson and +. L. Knott & Co.
Now did these bankrupts fail to keep
books of account or memoranda with
fraudulent intent to conceal their true
financial condition in contemplation of
bankruptcy? The books kept by said bank
rupts and turned over to the trustees,
showing their dealings with their custo-
mers. do not show their true condition.
financially or otherwise. as disclosed by
the expert analysis, but a fraudulent and
fictitious condition. Was this failure to
keep books with fraudulent intent? These
bankrupts entered on their books sales
and purchases of commodities In the mar
ket for customers and sent the customers s.
statements showing that they had bought
and sold such commodity at such a price
for the customers account and risk, when,
in fact. they did not buy or sell the article
mentioned, but took the customers money
for the transaction. Such a statement OF
facts taken from the evidence warran a
finding that 1t was fraudulent and 10 other
inference can be drawn from the evid ence