New-York tribune., 1911-12-24
HOW A BANK IS LOOTED
Probe of Borough institution
May Reveal New Methods.
SAYS S50O,0O0 WAS TAKEN
According to j. T. Mahoney, Off
GERS Lifted Out Cash by
Every Possible Means.

When the Borough Bank probe begins Tn
Room OF the Borough Hall, Brooklyn, on
Wednesday. the state Banking Department
expects 70 disclose methods as peculiar,
startling and irregular as any that were
shown by the investigation OF tho Union
Bank Of Brooklyn jeremiah T. Mahoney'
who has been designated by George G. Van
Tuyl. ir state Banking superintendent.
TO act Us attorney for MIR. Van Tuyl In the
probe. says that the bank was looted OF
more than S5OJ,Ooo before It's first failure.
The officers and directors. Mr.. Mahoney
said Yesterday. seeing that the failure was
inevitable. simply went into the bank and
lifted out the cash and all the quick assets
by every known means, and even by some
that had not at that time been discovered
by the most expert Brooklyn bankers. one
of the means used was the familiar one OF
making real estate loans far beyond the
value Of the property. An instance Is given
of company composed Of directors Of the
hank buying a piece Of property for $4,000
and few days later borrowing $1,000 on
II from the bank. The property was sub
sequently sold by the bank under foreclos-
ure proceedings and brought s25,c0o.
After the bank had accumulated large
amount of real estate in this way the dlrec-
tors formed a company 20 take over the
banks s real estate holdings. The company
gave it's bonds in payment. and the bank
still has the bonds among its sO-caled
assets. Many Of the directors borrowed
money from the bank on their notes. The
bank still mas the notes. Some Of the notes
we're forged. The bank holds one note for
$4,000 forged by one of the directors.
When tho bank was reOpened after the
first closing these forged notes and other
worthless accounts were carried as part of
the assets I'm what was termed the restitu-
ton account, and caused the second clos
ing. It is largely the story Of tho Union
Rank over again, with Some special frills
added by the ingenious officers and direc-
tors OF the Borough Bank.
While IL is not believed by Mr. Mahoney
and the state Banking Department that
many penitentlary terms will result from
the investigation on account of the statute
Of limitations il IS the opinion of Mr.. Van
Tuyl that the people Of Brooklyn who lost
their money through the failure Of the
Borough Bank have right 90 know why
the bank closed and who was responsible
for the loss of their money. This inquiry
is intended 10 tell them those things and to
bring out the material for civil and Grim
tnsl action where possible.
II Is hoped, also. that the probe OF the
Borough Bank, in connection with that Of
the Union Bank. will result IN drastic
changes in the state banking laws which
will prevent in the future such lootng as
took place IN these two banks. Edward J.
Graham, Superintendent Van TuyIs sec
ond deputy. who has been designated TO
preside at the hearings. is a lawyer, and
il is expected that under his direction the
points that will be particularly valuable
i'm showing the necessity for changes in the
banking law will be brought out.
Mr.. Mahouey is attorney for the Banking
Department in the liquidation of the Bor-
ough Bank, as well as In the forthcom-
ing probe lie said yesterday that he
thought it, would be possible 10 pay the dc
positors iu full within two years. The bank
has deposit liabilities Of approximately
$4,000 and other liabilities Of about $4,000
Tho assets have a face value of 81, 200 0OD
Things are not so hopeful for the de-
positors Of the Union Bank. The outlook
for them is that they may get something
like 20 per cent of their money in the next
five or six years.