Evening star., 1915-04-13
would be followed II tho practice in ques-

would be followed II tho practice In ques-
ton was considered OF even doubtful pro-
priety. No response ever came. The
board Of directors. mystified by his con-
duct, so unlike that Of any normal official
DESTROYS of upbuilding the interests con-
fded to his care, addressed letter to
him. asking for an explanation Of eer-
tain vague charges contained In his let
teYs and saying that so far as their In.
formation went the officers had answered
his Inquiries fully. freely and frankly.
and seeking in good faith TO know what
they should do, in their capacity as di-
rectors, TO improve the methods OF the
bank. His reply was that your artiese
inquiry Is understood and appreciated
''His letters were so expressive OF
malignant purpose as TO discourage
any hope Of satisfying him and so Of
fensive In language and insulting IN
fusal to make reply. long before that
step was taken. Every letter was re-
quired to be sworn to by all OF tne
officers. the controller declaring thaS
he would not accept the statement OF
any one of them under oath The ON
GERS were suddenly. and without op-
portunity to refresh their memories
from records. questioned aoeut trans
examination they found their recol-
lections to have been inaccurate In any
Particular, and they sought voluntarily
to make correction. they were re-. accnsed os,sd
be distorted into the appearance OF
being inconsistent with some other
statement or fact was forthwith taken
as proof of an attempt at deception.
Finally. the conclusion was reached by
the officers. directors and their attor-
neys that the situation was hopeless
and nnbearable. and notice was given
that the bank would stand upon lts
legal rights.
"The entire investigation has develop
ed nothing that tho officers of the RIGGS
National Bank are not glad to submit
to the Judgment of any dispassionate
person who will examine the facts. The
controllers fury has finally centered
upon two accounts which have stood
upon the books of the bank IN the
names of Glover n Flather' and 'Flath-
er &. TTIather, and were finally con-
solidated in the latter. We desire to
make statement about these accounts
The Riggs National Bank was or
ganized In 1895. and took over the busi-
ness Of Riggs e. Co. private banking
firm which had been In existence since
1895. The latter firm loaned money
freely on real estate, which 1t had a
right to do. II not only made such
loans for the investment OF Its own
funds, but to supply Its customers. and
had an important clientele which looked
WAS characteristic of Washington
banks that an unusual proportion Of
their deposits. as compared with other
cities of it's size, were not commercial
deposits. but belonged to individuals
who were not in active business. These
patrons. living upon salaries or other
fixed incomes, would allow their de-
posits to accumulate to a degree, and
then convert them into securities, per-
haps borrowing upon these securities
part of the purchase price until pay
ment in full could be made from future
income.
When Riggs & Co was converted
into a national bank this class of pa
irons could not be accommodated in
the same way as of old. because ma
tional bank may not make real estate
loans. Not that there is anything dis
reputable or against public policy in
the making of real estate loans, but
the law does not permit the funds be-
longing to a national bank to be in
vested or employed in this way. The
bank. however. was naturally desirous
of providing accommodations for this
class of customers, SO as to retain their
bank accounts. At that time there were
only six stockholders of the Riggs Ma
tional Bank. and nrm including Ave
OF them. known as Glover. Hyde, John
ston & Others was orga nized to con-
tinue handling the investment business.
The sixth stockholder, Mr.. p. Francis
Riggs. preferred not to join the real
estate firm. This Arm continued the
real estate loan business upon its own
capital, dividing the earnings among
it's members.
All Profits to Bank.
This situation continued until 1902.
about which time there was considerable
distribution Of the bank stock, and to
avoid the appearance that officers Of the
bank were dividing their attention be-
tween the bank and private business, the
frm OF Glover. Hyde. Johnston & Others
was dissolved. officers Of the bank
however, still desirous Of serving the Gus
toners OF the bank who looked to them
for investments, continued TO make loans
In quantities sufficient to supply this de-
mand, and the commissions Gall Of which
were paid by the borrowers) were carried
on tho books of tho bank. and thus be-
came the property of the bank nego-
tiate.
This practice was followed until 1906.
when a bank examiner suggested that
while there was no actual violation Of
law the commission account gave that
appearance. and at his suggestion a new
account WAS opened in the name Of
Father & Plather.
brokerage fees earned by Messrs
Glover and Father through their per-
sonal membership on the Washington
Stock Exchange were carried into the ac-
count Of Glover a Father organized. also
at a'ruggestion Of bank examiner All Of
o,
ever. from time to time transferred to the
profit and loss account Of tho bank or
used for bank purposes.
1T will be seen that the officers vere
transa citing on their personal responsible
ity. and without the use OF bank funds
certain business which the bank was not
allowed by law to transact, and were vol
unfairly giving the fees TO the bank
There was no evasion Of the law, how
ever. for the essential feature Of the in
hibition is that bank funds shall not be
employed in such business.
Controller Objects.
In the oourss Of his dragnet investi-
cations tho controller developed these
accounts OF Grover q Flather and
'Flather q Father and wanted an ex-
PLANTATION Of them. II was given. as
above. Not finding anything eiso more
important to find fault with the con.
troller made his attack here. He seema
to have conceived that he could convict
these officers OF one or the other of two
| offenses, VIZ. Of doin business Of
ficially that was ultra v1res, In which
! case he might be able to forfeit the
charter of the bank. or Of having In
one particular instance passed into the
Glover & Father account an item OF
properly earned. This ono item con-
sisted of profits made on a transactio
In governme ent bonds, IN which case the
usual routine was followed and the
profits reached the bank through the
account of Glover a Father In other
words. he thought he could make II
appear either that tho bank was dofna