THE GREAT CITY FRAUDS.
EVERYBODY remembers the story of Davidson and Gordon' those general merchants whose failure disclosed such a wonderful series of frauds in which one Joseph Windle Cole was implicated. The facts which were brought out at the time, however, did not pre- sent the story in its full magnitude ; did not tell all the strange events with completeness, or bring out the real moral. It has been reserved for one of the men aggrieved to come before the commercial public in the City and tell the whole story, as a warn- ing for the future. It is indeed a warning.• The hero of the epic as it is now told is Cole ; Davidson and Gordon sinking to quite secondary parts. We must go back to Cole's youth in order to show how he began. It will be observed that even in the names there is a remarkable interweaving of connexions. The narrative proves to us what we have long sus- pected, that in the commercial world there are two kinds of grand commerce—the real commerce, and the spurious commerce ; and, what we have also suspected, the same persons figure conspicu- ously in both kinds. We first encounter Joseph Windle Cole as clerk in the house of Forbes, Forbes, and Company, to whom he was shipping-clerk in 1835 ; in 1836, Charles Maltby, a young man of two-and-twenty, entered the same establishment as cus- tomhouse-clerk, immediately under the orders of Cole ; and among the clerks was one Sargent. In 1840, Cole was sent by the firm to India, to fill a responsible office in Bombay. About four years afterwards he returned, under the plea of ill health, and soon ceased to be connected with the house of Forbes,—being in fact summarily dismissed from their service, for reasons not stated. In 1845 he was introduced, at the house of Sargent, Gordon, and Co. to Mr. Johnson - with whom, on the 1st Janu- ary 1846, he entered into partnership : but in November 1847, while Johnson was in India, Johnson, Cole, and Co. stopped pay- ment. Their liabilities amounted to 153,0001., their assets to 71,800/. ; and the estate was expected to realize fourpenee in the pound : no fraction has yet been declared. Mr. Johnson has stated, that the very day when the firm was suspending payment, Cole transferred tangible property in the hands of correspondents at Bombay, Calcutta, and New York, with more than 10,0001., to Messrs. Sargent, Gordon' and Co. Soon after, in the same month of November 1847, this firm of Sargent, Gordon, and CO., failed for 62,2541., their assets amounting to 10,6521. Cole obtained his certificate in March 1848, and began the world again as Cole Brothers, general merchants ; two brothers figuring as partners in the firm, and acting as clerks in the office. Subsequently to this date, we find Cole connected in business with Davidson and Gordon, who had become owners of a distillery at West Ham in Essex ; a really flourishing concern, for the plant and business of which they had, in a complicated way that we need not describe, paid 150,0001. Cole had also some connexion with Mr. A. A. Lackerstein, of the firm of Laekerstein, Crake, and Co. who failed in 1847. Lackerstein's separate debts amounted to 209,000/., on which a dividend of ettl. in the pound was realized ; the balance-sheet of Lackerstein, Crake, and Co., showed total debts of 133,000/., upon which a dividend of 101d. was paid.
Lackerstein appears to have be the world again in-1850, with 1700/. ; and he absconded in March 1852, leaving total liabilities amounting to 212,0001. Another of Cole's allies was Maltby, of St. Saviour's Docks, Bermondsey ; but of this important " house" we must give a more particular account.
General merchants transact a great part of their business on the basis of documents representing merchandise in dock. These warrants are issued by the wharfinger as soon as the property is lodged, and they are returned when the property is delivered they therefore practically constitute vouchers by the wharfinger, whose whole authority they bear, stating that property of such and such a description exists in his custody. It is evident that if a gene- ral merchant can obtain the use of a wharf completely under his own control, such documents might be of the greatest advantage to him. It was in 1852 that Cole discovered exactly the kind of place that he wanted, the beau-ideal of such a property, fabulously convenient. If Dickens had introduced it into one of his stories, people would have said that writers of fiction could always make circumstances suit their wishes. In St. Saviour's Dock, Bermond- sey, was a wharf known as Hagen's Sufferance Wharf. On each side of it lie wharves belonging to Messrs. Groves and Son ; that firm having a right of way over the space between. Messrs. Groves and Son possess very extensive warehouses, with a broad frontage to the river. The Sufferance Wharf presents a very narrow front- age ; there is nothing to 'distinguish it from the .two wharves on each side ; it is, as it were, completely mixed up with those two wharves, between which it is only a gap. This wharf Cole * "The Great City Frauds of Cole, Dadson, and Gordon, fully Ex- posed. By Beton Laing, Assignee to Cole's Estate. Mann Nephews, Corn- hill." The "pamphlet" itself—an octavo volume of 226 pages—is a cu- riosity. It has not been advertised ; we do Dot remember to have seen a notice of it anywhere but in the City article of the Times; it is designed principally for circulation in the neighbourhood of Cornhill ; yet the first edition of it was sold out in two days. But we do not wonder ; rt reads like a stirring romance of Real Life in the City ; being, like Godwin's Caleb Williams, remarkable for having scarcely a trace of dove" in it, though a heroine does appear slightly in a latter stage of the eventful story. rented, at 1301. a year, from Mrs. Mary, Hagen ; and in it he placed his former clerk, ostensibly as an independent wharfinger. The two men were,slightly connected by marriage ; at first, Malt- by was temporarily engaged by Cole at a salary of one pound a week, his highest salary at.any time appears to have been 2001. a year. He was the perfect creature of his chief—humble, pliant, faithful, trustworthy, and tenacious of Cele's interest. Maltby very soon represented to his neighbours that he was Cole's agent; that he had large quantities of metals coming to his wharf—more than he could store in the small shed which he possessed ; and he asked them to let the metal be placed, on their ground-floors, he weighing and stowing the goods and receiving the landing charges, Groves and Son having all the rent. Groves and Son cheerfully agreed to this not inequitable arrangement; and Maltby was fairly established as Cole's agent ; Cole kindly inducing importers as much as possible to send their metals to " his friend Maltby." This was Cole's position in 1852, when he appears to have com- pleted the machinery required for his great designs. His con- nexions were extending; and even the misfortunes of his allies were used as opportunities. Lackerstein and Co. had a few war- rants in the hands of Messrs. Seton Laing and Campbell ; and shortly after the absconding of Lackerstein, Cosmo William Gor- don called upon Messrs. Laing and Campbell, stating that the warrants which the bankrupt had left were the property of Cole; who wished to be introduced to Messrs. Laing and Campbell, in order that he might pay the amount of the. advances ; and he was suffered to take up the warrants, on payment of 23261. But here he had effected a most important introduction, which the great "general merchant" turned to large account. About this time there was a demand in the market for cochineal ; Cole gave orders to his new. customers, Laing and Campbell, for large purchases ; which were paid for. Some further transactions followed ; but Cole had not been introduced to the firm more than a month be- fore he began in the usual course of. business to obtain advances upon warrants representing spelter or other metals or goods lodged at wharf. In July 1863 he obtained a loan of 41,0001. on the security of warrants representing goods lodged at Flagenhi Sufferance Wharf, St. Saviour's Dock. If anybody, desired to see the goods: represented by these warrants, they could go down to the wharf, and Maltby would show them the goods lodged by his friend Cole. If the goods were on Hagen's Wharf veritably, then and there they could be seen ; if they were on Grove and Co.'s wharf, there also they could be seen, still in Maltby's custody. But who could know where to draw the line between Maltby's wharf and Groves and Co.'s wharf ? Suspicion, however, was at last aroused, and by degrees the peculiar arrangement was dis- covered. One instance will suffice.. There was a certain amount of metal—fifty tons, which was landed at Maltby's wharf, and ac- tually lodged in the wharf of Groves and Son. Groves and Son issued warrants for 50 tons of metal, deliverable to Cole, Brothers ; Maltby also issued warrants for 50 tons of metal, to Cole, Bro- thers ; and Maltby likewise issued warrants for 50 tons of metal deliverable to " the importing merchant " ; making in all 150 tons out of fifty. The Hagen Wharf warrants were used by Cole fer.the purpose of obtaining advances; Groves and Son's war- rants were used for the sale or actual transfer of goods ; so that the "general merchant" carried on a very extensive business in genuine goods, and a still more extensive trade in cash advances on fictitious goods. . This course necessarily came to an end. On the 19th June 1854, every merchant on 'Change was startled by the intelligence that the house of Davidson_ and Gordon, hose transactions were Down to be of enormous extent, had /ailed, and that the princi- pals had absconded. Cole stopped payment on the 27th of June.: on that day Maltby disappeared, hastening to Ostend. Checks in Cole's- hand-Writing were afterwards found to have circulated between various banks, a supply of ready cash finding its way to his pocket ; and he disappeared. A reward of a hundred pounds was offered for his apprehension ' • and on the 19th of-July he was arrested entering his offices in Change Alley, by Forrester. the police-officer ; who had, however, kept in the background, and stationed a man in the disguise of a common labourer to watch the offices and detain " the party." On Cole were found two genuine warrants for goods, and sixteen representing 30,000/. on Hagen's Wharf goods. One of Davidson and Gordon's creditors, Mr. Beard of Manchester, undertook their pursuit, after a police- man had discovered them at Neufchatel, and failed to arrest themy for want of an extradition treaty with Switzerland. The creditor; however, followed them from Neufchatel—tracked them in private houses, in inns, and along.the road—into Piedmont, to Genoa' and Naples ; arrested them at Naples, sent-them on to Malta, where they were discharged on technicalities ; and had them_ re- arrested at Southampton. He tracked them through all sorts of difficulties,—the connivance of a Swiss police ; the aid afforded by &Madame Fornachon and her daughter Ida, who writes lively and affectionate letters. In like manner, Mr. Seton. Laing pursued Cole through all the technicalities of the law through the pas, siveness of a principal creditor, or the technical difficulties which hampered the action of the City and their legal officers. Every, body knows the sequel of that part of the story—Cole's con- demnation and sentence to four years of penal servitude,. and Davidson and Gordon's sentence to two years' hard labour.
But even yet we have not told the whole of the story. A wonderful leniency and facility appear to attend the steps of limn who thus defraud their creditors if they act upon a large scale and live as men do who have -the command of thousands .a year.
It was by laxity in the appointment of assignees that Lackerstein was enabled to abscond, and that the great City frauds were not cut short in 1852. It turns out that the fraudulent character of Cole's proceedings and of the warrants for goods at Hagen's wharf was known to an important creditor as early as the 13th of October 1853, eight months before Cole stopped payment. Ac- cording to Cole's own account, Overend, Gurney, and Co. un- luckily sold some warrants representing goods which Davidson and Gordon could not deliver : this occurrence induced Cole to tell Mr. Chapman, partner in the house .of Overend, Gurney, and Co., " everything." In the course of the conversation, Mr. Chapman turned round, remarked to Gordon that he had always looked upon him as an example in the City of a business man ; but, he added, " I am sorry to find, Gordon, that you are a thief." On an examination before Mr. Ballantyne, Mr. Chapman half dis- claimed these words. " When we approached the subject, I have no doubt whatever that those words which were quoted were used by me : I believed you to be an upright man, I now only look on you as a thief.' I dare say that might take place, though I do not remember it." Subsequently; he disclaimed them more posi- tively ; but at the conclusion of an examination on the 23d of October in the Central Criminal Court, Mr. Chapman said that his house "determined to take to steps to press for payment of the debt " ; " we determined to remain perfectly passive, without coming to any understanding of any sort, kind, or description, with either Cole or Gordon—we did remain perfectly passive until the bankruptcy." Let us look at some things that follow after taking this " passive" position, Messrs. Quilter and Ball, the accountants, make a report on Cole's account with Overend, Gurney, and Co. The total advances remaining due from Cole on the 5th of Oc- tober 1853 were 195,655/. ; against this balance the firm held 323,2301. in warrants, real or fictitious, the real being worth 54,0001., the fictitious 269,0004 From the 5th of October Messrs. Overend and Gurney began " to realize" on the securities in their hands ; which ultimately produced the actual sum, of- 54,1381., leaving them still creditors to the amount of 141,5161. On the 18th of November 1853, they received from Cole, Davidson' and Gordon, a promissory note for 120,0001. payable-on demand. Sub- sequently to October 1853, Messrs. Overend, Gurney, and Co. made further-advances, and the bankrupt made further deposit of securities ; the nett result being. that the debt was reduced by these dealings to 19,082/. They actually provided " cash and spelter" 46304 " to assist the -bankrupt to deliver 400 tons of spelter which had been- sold by them on fictitious warrants pre- viously,to their discovery of the spurious duality of these docu- ments.' It is not to be denied that Cole did meet with astound- ing leniency !
These are but the fastigia of the great commercial epic ; but they will enable the reader to understand the magnitude of the in- terests at stake, and the moral. See what immense sums are staked, and lost,—always representing the property of others who have been sacrificed. Davidson and Gordon were involved for a sum of nearly 500,000/. ; Lackerstein represents a gross deficit of 550,0001. ; Cole's cash transactions amounted in the course of hie operations to nearly 4,500;0001. Messrs. Overend and Gurney passively and even mildly put up with a loss of 120,000/. A most painful and instructive fact which the recital discloses is the envious mingling of characters the "mixing up" of men like Cole, Gurney, Davidson, Beard, Gordon,- Maltby, Chapman, Groves, and Lackerstein. They appear in a kind of commercial morris-dance, moving in transactions-which it is difficult to dis- entangle the one from the other. Unquestionably some of these persons were quite unconscious of the strange relations amidst which they lived ; some were for the pursuit of justice, rigidly, through every difficulty; others were partly cooperating with the bankrupt swmdlers.
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