THE LONDON AND GLOBE FINANCE CORPORATION (Hansard, 19 February 1903)

§ MR. LAMBERT (Devonshire,) South Molton
In bringing this Motion 348 before the House I wish to say, in the first instance, that I have no interest whatever in any of the companies which will be the subject of this discussion. I am not, and never have been, a shareholder in any of them, and 349 I take the matter up absolutely as a public question, because I think if it is not fully investigated that public confidence in joint-stock enterprise must be at an end. If such things as I will disclose to the House can be done, then an immediate alteration of the law ought to be called for. It has been stated that the reason why a public prosecution has not taken place is that certain exalted personages have been mixed up in these matters. I do not believe a word of that, and I am sure that the Attorney General would not allow himself to be influenced by any such circumstances. I regret to have to bring this matter before the attention of the House, as the House is not quite the place to try it, because one feels there is no defence; but I am obliged to do it because the question whether the persons connected with these companies should be prosecuted or not rests with the Attorney General, and he has refused to act. On the 16th August the Public Prosecutor wrote to a correspondent stating that he was acting under the directions of the Attorney General. Therefore, as a public prosecution must be set in motion by the Attorney General, it is only here that we are able to put the facts before him. I do not intend to indulge in any rhetoric, but I will simply state the facts as taken from the Report of the Official Receiver and Liquidator, Mr. Barnes. There are three companies mixed up in this matter — the London and Globe Financial Corporation, the British American Corporation, and the Standard Exploration Company, involving a capital of &5,000,000. The London and Globe was registered on the 1st March, 1897, with a capital of &2,000,000. It had an aristocratic directorate, including two lords, one baronet, and another gentleman, Mr. Whitaker Wright, who controlled the whole concern. Mr. Whitaker Wright had 67,650 shares originally, and disposed of 65,150, and he had only 2,500 when the company was wound up. The first balance sheet was produced on the 9th September,1898. It showed an estimated profit of &989,000, a realised profit &182,000, and a paper profit &807,000. A dividend of 15 per cent. was paid, and &500,000 was put to the reserve. The second balance sheet was produced on the 30th September,1899, and showed a profit of &275,000; a dividend of 10 per 350 cent. was declared, and the reserve fund of &500,000 was kept intact. In that report the directors state:— The directors propose to limit future dividends to 10 per cent. per annum, and by this means the directors believe the shares will be taken out of the speculative category, and soon be classed as an investment security from which the proprietors can count on receiving a specific return with unfailing regularity. This was fifteen months from the previous balance sheet. It purported to show a profit on the previous year's transactions of &463,672. Yet the report stated that great financial depression had existed during the year, and that market values had heavily declined, and that in the case of this company a very large sum had been written off for depreciation, but, thanks to the new business transacted during the period, the balance to the credit of the profit and loss account might be considered satisfactory. This is the point to which I wish to direct the attention of the House. I take the figures as given, precisely, by the Official Receiver, without any ornamentation on my own part. This balance sheet was produced on the 5th December, 1900. Early in October Mr. Worters, then the principal accountant of the London and Globe Finance Corporation, prepared a draft balance sheet to the 30th of September which showed heavy losses. This Mr. Worters handed to Mr. Whitaker Wright, who immediately changed the accountant, and replaced Mr. Worters by Mr. Malcolm. And then Mr. Barnes goes on to say: "Between the 1st October and the 5th December, 1900, numerous transactions took place between the London and Globe and its allied companies, the effect of which was to improve the position of the London and Globe by over &1,000,000 sterling." Mr. Whitaker Wright, as managing director of the London and Globe Corporation, sold large blocks of shares to allied companies, of which he was also a director, to the extent of &1,000,000. One of these transactions, which I take from the Official Receiver's report, is worthy of notice. On the 29th of November, two months after this company was shown by its accountant to have sustained a heavy loss on its year's transactions, there was a board meeting held of the Standard Exploration Company, when Mr. Whitaker Wright, and one other director only, bought 105,102 shares from the London and Globe 351 Corporation. The amount of this transaction was &1,392,600. Surely this was an enormous transaction for a company to enter into when only two directors were present, and the managing director of the company which bought the shares was the managing director of the company which sold them. This only took place about six days before the balance sheet was prepared. The total transfers from the London and Globe to the Standard Exploration Company amounted to no less than &1,603,000. That is to say, between the times when the London and Globe Company found its accounts showed a loss and the time when the balance sheet was drawn up these transactions were entered into solely for the purpose of preparing the balance sheet finally issued to the shareholders. Although these transfers to the extent of &1,603,000 took place, none of the brokers gave their consent to them, nor were they consulted in any way about them. They were carried out, says Mr. Barnes, by the new accountant on the 5th of December 1900—the very day this balance sheet was issued. On the 29th of December, the whole of the entries relating to these transfers were written back and the liability of the brokers retransferred to the London and Globe Corporation. This, the House will agree, is certainly a matter that should be enquired into. Let me take another point. Just after the balance sheet of 1899 the London and Globe Corporation practically surrendered &250,000 worth of shares to the British and American Corporation. That was just after the London and Globe Corporation had prepared its balance sheet and circulated its accounts. Just before the issue of its next balance sheet its solicitors discovered that this transaction was ultra vires, so they again credited their own company with this &250,000, which happened to operate very favourably so far as the London and Globe Corporation was concerned, because they had given away the money just after the issue of one balance sheet and had taken credit for it just before the issue of the next. Another point to which Mr. Barnes drew attention was that there was an omission of London and Globe liabilities to the amount of &119,769, which was explained as having been due to an over- 352 sight, no entry having been made in the books of the London and Globe Corporation. The shares stood in the balance sheet of the company as of the value of &2,332,682 Cs. 1d. It was rather curious that the penny is brought in, because the value of these shares was enormously inflated. Of that Mr. Barnes gives us an instance. He says 410,238 Standard Exploration Company shares were valued at &415,362, or at 20s. 3d. a piece, whereas they were only worth in the market from 9s. 6d. to 10s. 6d. That is another matter which, I suggest, requires a great deal of elucidation. I come to another point—the Victoria Gold Estates Company. This was a London and Globe Corporation promotion. The London and Globe Corporation gave the chairman of the company &500 in shares to become the chairman; that gentleman occupies one of the most respected positions, and bears one of the most honoured names in the country. By some financial jugglery they sold part of the property to two companies promoted by the London and Globe, and on the 3rd of December, 1900, two days before they published their balance sheet, they asked the Victoria Estates Company for an advance of &75,000 in cash, and I here observe that the 200,000 shares in the company held by the London and Globe, and the 80,000 held by Mr. Whitaker Wright, are treated on the same basis. That was a fraud on the London and Globe Corporation, and Mr. Barnes says by these operations the London and Globe converted an asset of &200,000 into one of &764,000, and increased its profit by &564,000. That was done for the purposes of the balance sheet. Now I think we come to something more astonishing, because I find, in order to show a respectable balance at its bankers, in the balance sheet, the London and Globe not only obtained this advance of &75,000, from the Victoria Estates Company but on the 5th of December, the day when the balance sheet was issued, it obtained a loan of &25,000 for two days from a firm of stockbrokers, for which the company paid &500. I ask the House whether this is not a case for enquiry. In that very year the company was purported to have made a profit of &463,672, and it had brought forward &295,459, thus showing a total in hand of &757,182, and they were obliged to go, in order to 353 dress their windows or to provide a respectable balance at their bankers, and pay &500 for a loan of &25,000 for two days.
I have taken all these figures from the Official Receiver's return. I have not put in any of my own, because I know there can be no defence here. I am certain the Attorney General will not defend this matter. I have shown that this company, when their accountant showed that they had a balance against them, superseded the accountant; that they found, just before they issued their balance sheet, that a gift they had made to an allied company of &250,000 was ultra vires, and that they had to bring it back; that that coincided almost with the issue of the balance sheet; that they transferred from the London and Globe to the allied companies, the Standard Exploration Corporation and the British and American Corporation, no less than &1,603,456, as to which the brokers were never consulted, and were never informed that such a thing was going to be done, and that, moreover, some three weeks after the whole thing was written back to the London and Globe Finance Corporation. I have shown to the House that &119,769 was omitted from the balance sheet; that the valuation of the shares, &2,332,632 0s. 1d., was greatly inflated; that they manipulated 200,000 &1 shares, of which they only possessed 50,000, to secure a cash balance; that they transferred an asset of 250,000 shares into an asset of &764,285, and I have shown the House how they goy together the money to show a decent cash balance at their bankers. I ask the House whether this was not a case to justify a prosecution. Twenty-three days after the last of these transactions the whole thing collapses and they are unable to meet their liabilities. That is the case that I put to the House, and I am sure, as reasonable men, they will see that here is material for the Public Prosecutor. The Lord Chief Justice said through no fault of Mr. Barnes the investigation of this matter was not satisfactory. That is the opinion of the Lord Chief Justice.
I do not wish to make any charge, but it is well known in the City that a Member of the Government is a sleeping partner in this company. I know that that would not influence the hon. and learned Gentleman, but there is the fact. 354 The whole history of the 'Globe' and its allies, which may be said to have been typified by, and to have culminated in, this remarkable balance sheet, appeared to the ordinary business man, when he had mastered its leading features, to be fully deserving of that investigation in a Court of Justice which he assumed it would receive. He goes on to say— By failing to prosecute in this case the Attorney General is taking a grave responsibility. I could go into other matters, but I will not. I must say, however, that the Standard Exploration Company issued a prospectus, which has been described by Mr. Justice Kekewich as cunning and tricky, and not only misleading, but distinctly false. The Master of the Rolls would not be able to differ from the conclusion of Mr. Justice Kekewich; and Mr. Justice Romer said the prospectus was untrue in fact, and that Mr. Whitaker Wright's evidence was vague, unsatisfactory, and contradictory. If this had been a bank manager, or a bank clerk with a salary of &100 a year, the law would have been upon him at once. There ought to be no difference. The majesty of the law should not be stern in the case of the law should not be stern in the case of the poor, and doubtful and hesitating in the case of the rich. There have been aristocratic gentlemen mixed up in this affair. I am very sorry for it, but if men with noble names allow themselves to be connected with companies they must take the consequences of their action. If they use their names as bird-lime for the unwary investor they must take the responsibility, as they draw the salaries. The middle-class "Nonconformist swindler," as he has been called—Jabez Balfour— was brought home to this country and prosecuted. What is sauce for Jabez Balfour must be sauce for the London and Globe Finance Corporation. We are entitled to have the facts of this case probed to the bottom. Fraud and falsification have been openly alleged. Either these directors are much-maligned men or they deserve punishment, and I ask the Attorney General to allow a jury of twelve British men to decide that question. I beg to move.

§ MR. SOARES (Devonshire,) Barnstaple
formally seconded.

§ THE ATTORNEY GENERAL (Sir ROBERT FINLAY, Inverness Burghs)
At the beginning of his speech the hon. Member referred to a certain rumour, which he said he did not believe, to the effect that the absence of action by the Director of Public Prosecutions was due to the connection of some exalted personages in this case. I am not surprised at the hon. Member bot believing that rumour; the only thing I am surprised at is that he thought it worth referring to. There is not one vestige of truth in the rumour. Although I do not complain of the hon. Gentleman saying he disbelieves any such idea, I do think hon. Members ought to be very careful how in their places in this great assembly they ever mention rumours of that kind lest ignorant people should suppose there is something in them, otherwise they would not have been mentioned in this House. I think there ought to be a great sense of responsibility on the part of any Member of this House before he even thinks fit to mention matters of this kind here, lest he should give them a fictitious importance. The whole thing is absolutely baseless. The hon. Gentleman in other parts of his speech referred to the fact that aristocratic gentlemen were mixed up in this case. Who those aristocratic gentlemen may be I do not know.

§ MR. LAMBERT
I said aristocratic directors.

§ SIR ROBERT FINLAY
Who are they?

§ MR. LAMBERT
Shall I read out the names? As the hon. and learned Gentleman has challenged me, I will read the names from the Official Receiver's list. (The hon. Member read the names of the directors of the London and Globe Finance Corporation, and of the directors of companies promoted by it, and in which it was financially interested, to whom qualification shares were presented.)

§ SIR ROBERT FINLAY
The hon. Gentleman has read out the names of a great many gentlemen, many of whom 356 were not directors of the London and Globe Finance Corporation, and several of whom are unfortunately now dead. All I can say is that, be they aristocratic or plebeian, it would not make the slightest difference in my decision in regard to the matter of a prosecution. I confess I think it is a matter for grave observation that any Member of this House should condescend to insinuate that the connection of aristocratic gentlemen with any case has in the slightest degree influenced the action of the Attorney General. I am sure there is not an hon. Gentleman in the House who believes it, and it is a matter for very grave observation and for the reflection of the hon. Gentleman in his calmer moments that he should have stooped to make such an insinuation.

§ MR. LAMBERT
I did not make any insinuations. You challenged me.

§ SIR ROBERT FINLAY
The hon. Gentleman made no insinuations! Then I think it is unfortunate that he should have referred to the fact that aristocratic gentlemen were connected with the case. If he made no insinuation, why did he refer to it?

§ MR. LAMBERT
Because it was the fact.

§ SIR ROBERT FINLAY
The hon. Gentleman in another part of his speech said that a member of the Government was connected with a firm which had something to do with some of these transactions. Did the hon. Gentleman by that mean to suggest that the fact that a member of the Government was connected with a firm which had something to do with some of these transactions had anything to do with there not being a prosecution in this case?

§ MR. LAMBERT
Certainly not. I wished the matter to be probed to the bottom in order to show that there was not complicity.

§ SIR ROBERT FINLAY
I put it to every hon. Member in the House whether, when an hon. Member says that a member of the Government is associated with a firm which had something to do with these transactions and that he wants the 357 matter probed to the bottom in order to show that that member of the Government had no complicity, that was not an insinuation? I leave the hon. Member on this point to the judgment of the House and to his own sense of what is becoming when the heat of debate has passed away. I put it to the House that it is a very serious matter that any member of this great and honourable assembly should use his position here for the purpose of putting forward insinuations, in themselves absolutely baseless, and to which no one of any experience or judgment can attach the slightest importance, but to which some ignorant people may attach importance when currency has been given to them by a Member of this House.
The hon. Member entered at some length into the character of the transactions connected with the London and Globe Finance Corporation. Those transactions no one for one moment will defend. Everyone must feel that in their nature they were most reprehensible, and that the persons concerned in them deserve very severe judgment to be passed upon them by all who value commercial integrity and honour. But the question is not one of civil liability. The question is not one of inquiry or investigation. The hon. Member throughout his speech spoke of the propriety of there being a criminal prosecution by the Director of Public Prosecutions as if that were synonymous with an inquiry into the facts connected with these companies. Every hon. Member, more particularly those associated with the profession to which I have the honour to belong, will realise that there is all the difference in the world between a case being proper for inquiry and thorough investigation, and its being proper to institute a criminal prosecution on behalf of the Director of Public Prosecutions.
The question to be determined when the Attorney General has to settle whether the Director of Public Prosecutions should take up a particular case, is not whether inquiry and investigation would be desirable, not whether inquiry and prosecution would be a popular thing; the Attorney General has laid upon him a very serious and responsible duty,—viz., that of determining whether in his 358 opinion the Director of Public Prosecutions should take up a case which involves the making of a criminal charge against certain persons. By the Motion of the hon. Member the House is asked to affirm that it regrets a criminal prosecution was not instituted against the directors of the London and Globe Finance Corporation. That is a very different question from desiring that such transactions as those to which the hon. Member has referred should be probed to the bottom. I am sure everyone in the House agress with the hon. Member when he says that it is desirable that such transactions should be most thoroughly probed, but I desire the House to realise the difference between that question, and other question which will come before the House for decision on this motion—viz., whether a criminal prosecution should have been taken in hand by the Director of Public Prosecutions.
And, it being half-past Seven of the clock, the debate stood adjourned till this evening's sitting.