Bankers' Magazine and State Financial Register

Thus it will be perceived, that of the entire avails of the bank, embracing a large amount invested in real estate, estimated above its value, and a much greater sum in the course of litigation and in the hands of attorneys for collection, there remains the enormous sum of one hundred and seven thousand and thirty dollars and seventy cents, to be accounted for.

But in order that you may be in possession of the facts as they really exist, it will be necessary to explain some recent transactions in which the financial officer of the bank was the principal actor.

During the investigation, and before the court had appointed the receiver, the Cashier presented to one of the Agents the following notes:

E. Croswell's note, dated on demand 13th Oct., 1847, endorsed Theodore
Olcott.

E. Croswell's note on demand, dated Nov. 30th, 1847, endorsed Theodore Olcott,

$20,000 00

8,125 00

John Keyes Paige, President, endorsed Theodore Olcott, Treasurer, dated 5th Oct., 1847.

6,775 47

2d Sept., 1847,

6,491 57

H. Dwight, draft, dated July 14, 1848, on Cashier of Canal Bank Albany, in favor of E. Croswell, only

50,000 00

$91,392 04

At or about the time the above was handed in, it was remarked by Mr. Olcott that he was in possession of a power of attorney from the "Pratt Bank of Buffalo" to borrow and loan money on their account, and that he had borrowed from the Canal Bank about the sum that appeared there due from the Pratt Bank, and desired that the amount of the notes be passed to their credit, and then their account would necessarily be balanced.

This explanation did not appear satisfactory or plain enough to justify the agents in balancing the account of the Pratt Bank without a more explicit and full examination of the whole matter. It was but a few days until information was received from the gentlemen owning and managing the Pratt Bank of Buffalo, that they had many months since closed their business transactions with the Canal Bank of Albany, and that they had no knowledge of a single business transaction of any kind or character subsequent to the 15th day of May last, when they made a draft of over $4,000, the amount then due them, on the Canal Bank, in favor of the Messrs. Washburns & Co., of this city

Thus it will be seen that the pretended indebtedness of the Pratt Bank,

was only a cover for a large loan made from the funds of the Canal Bank to a few of its directors.

A correct statement, made from the books as they will appear, deducting the sum of $91,309,44 reported as being due from the Pratt Bank of Buffalo, and leaving in the hands of the agents notes of E. Croswell and others not enumerated in the resources of the bank.

The foregoing shows that the bank, on the day of its failure, had previously squandered nearly two-thirds of its capital, $198,340 14. Besides this, the Directors had borrowed, without a shadow of security, the enormous sum of $198,340 14, independent of their liabilities as endorsers for $174,950 29.

It cannot be disguised that illegal and improper practices have been for some years perpetrated by the officers of the bank, for which the sufferers demand satisfaction, and justly require that the utmost penalties of the law regulating such institutions be enforced.

It will be seen on a careful examination of schedule J., marked "Cash Items," "Teller's Drawer," hereunto anuexed, that a system of peculation has been practised by the Teller, in constantly absorbing a large portion of the funds belonging to the bank, the use of which enabled him to discount checks and notes for particular favorites, besides having an individual indebtedness of more than thirty-five thousand dollars.

The Special Agents herewith present, in order that you may understand more satisfactorily the extent of the deficiency in detail, a copy of the statement of the Canal Bank, sworn to by John Keyes Paige, President, and Theodore Olcott, Cashier, on the 19th day of April last. The statement is copied from the original on file in the Comptroller's office, verbatim, giving some alterations and corrections that did not appear upon the printed copy:

Statement of the condition of the Canal Bank of Albany, on the morning of the 4th day of March, 1848.

Sworn to 19th April, 1848. James I. Johnson, Com. of Deeds. Among the "cash items" of the teller were found two checks, one dated Jan. 1st., 1849, for $4,577, signed J. L. Crew, (teller of the bank,) and one dated July 1, 1849, for $4,280, signed J. T. Crew by J. L. Crew." These checks were held by the teller as cash, and so counted daily in balancing his account. It will be observed that one of the checks is dated 1st of July, 1849, and the special agents desired him to explain why he appropriated the funds of the bank, and substituted his own check, dated about a year in advance; to which he replied that "he was frequently away from home, and in travelling he did not know how or when death might overtake him, and that he took this precaution that his executors might have ample time to settle his affairs before his indebtedness could mature.”

Among the many transactions which have come to the knowledge of your special agents, the following is deemed of importance enough to communicate:—

Mr. W. M. Ostrander, of Syracuse, came to the city on the 8th of July, (two days before the bank failed,) calling at the Canal Bank, and requested that the cashier would discount for him three notes for $2,500 each, he was informed that he would discount them and gave Mr. Ostrander a blank check to sign in order to draw the money, which done, the Cashier gave him $7,500 in Canal Bank bills. Mr. Ostrander returned home, and hearing of the failure, immediately returned, expecting that he would have no difliculty in exchanging his bills for the notes, but to his astonishment was informed that the Mechanics' and Farmers' Bank held the notes, and claimed that they had discounted them, and they produced a check on that bank, signed by Mr. Ostrander, showing that he had signed a check on the Mechanics' and Farmers' Bank, instead of the Canal Bank, the business having all been transacted in the Canal Bank. Mr. Ostrander still declares that he never had any communication with a single individual connected with the Mechanics' and Farmers' Bank, in any way in relation to the loan.

A transaction connected with the account of M. R. Eames, will further expose the mismanagement of this bank. It appears that Eames called at the Canal Bank a few days before its failure, and left for collection two notes and one draft, and at the same time drew his check for $3,000, and authorized the Cashier to place the same amount of funds in Buffalo, subject to his order, agreeable to the arrangement which existed be

tween him and the Cashier; after Mr. Eames had left the bank, the Cashier states that he was informed by one of the clerks that Eames' account was overdrawn, and he therefore discounted one of the notes, amounting to $1,800, signed Stephen Paddock, and endorsed M. R. Eames, to make the amount good. It is denied on the part of Eames that his account was overdrawn, and asserts that he was entitled to credits sufficient to make a balance in his favor without any reference to the Paddock note. It also appears that this note was discounted by the Canal Bank on the 8th July, and rediscounted on the same day at the Mechanics' and Farmers' Bank, and is now held by them, it was protested on the 15th iust., and Paddock has been sued for the payment of the same.

The account of Edwin Croswell shows a balance due him (without any reference to the notes and checks which he owes,) of $20,826,10, to make this, a credit had been made of $25,000, either on Monday afternoon or early on the morning of Tuesday, (the day the bank failed.) On enquiring, the teller stated that he was unable to say whether the credit was made on Monday afternoon or Tuesday morning, that nothing in the form of a deposit was received by him from Mr. Croswell, but that he was directed to give the credit on his cash book by the cashier. The cashier thinks that there was some mistake, and that this credit should not have been given. This credit being deducted leaves Mr. Croswell's account overdrawn upwards of $4,000.

In connection with this, it is proper to state the circumstances under which the bank hold a bond and mortgage, (held as collateral,) given by Mr. Croswell on his house and lot in Elk street; the bond and mortgage is dated August 1, 1842, and is given for $6,500, and was found by your agent not recorded; the explanation given is, that at the time it was drawn it was not considered of much importance, inasmuch as the property was already mortgaged for about its value.

It cannot be expected, nor will it be pretended, that this report will be accurately correct, or to be relied on other than as an approximation towards what may hereafter be ascertained to be correct. The individual acting as book-keeper for the last two years, has, for some cause grossly neglected his business, and consequently the books of the bank have been left in a mystified and confused condition. A great portion of the accounts have been incorrectly balanced, entries to wrong accounts, credits entered on the debit side of the ledger, entries made on the cash book from $100 to $500 short of the amount received, and blunders and errors of like kind on almost every page of the books.

Thus it will be seen that it will require a long time, with patient investigation to bring the accounts to a position when they can be properly settled and finally adjusted.

During the examination of the teller under oath, by the Attorney General, the cashier was informed that during the afternoon of that day he would also be examined in relation to matters connected with the bank. Accordingly a note was sent to his house, with direction to appear that afternoon at 3 o'clock, to which no reply was received, nor a reason given for his non-appearance. He was also notified to appear on the following Monday, but he still neglected to appear and was not examined. The necessity is to be regretted that has thus compelled your agents

in this investigation to communicate facts that may injure the feelings or wound the sensibilities of those connected with the persons alluded to, either by the ties of friendship or kindred; but they owe a duty to the innocent victims of rapacious speculation, to the fair reputation of the city and its institutions, which duty they have performed with a conscientious endeavor to merit approbation from those who love truth and revere justice.