Fraudsters and Charlatans (35 page)

The purely nominal position of the company directors was fully exposed at the public examination, which commenced in January 1902. Asked what the directors did at board meetings, Macleay replied: ‘We confirmed past transactions of the managing director,' and Worters, asked if the directors ever saw the company books, said: ‘Not to my knowledge. They may have seen the outsides.'
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Gough-Calthorpe, director of both Globe and Standard, and present when on 16 November 1899 £250,000 had been transferred from Globe to Brit-Am, had supposed ‘that the Globe was so rich it could afford to do anything'.
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The reasons for the transfer had not been explained to him, but he did not think he would have understood if it had been, ‘as it was a matter of City finance'.

‘May I ask what were the duties of the directors?' asked Mr Barnes.

‘As far as I could ascertain my only duty was to sign my name many thousands of times to the share certificates,' replied Gough-Calthorpe.

‘You did not guide the policy of the company in any way?'

‘Oh dear no!' said Gough-Calthorpe.
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When the companies were finally wound up, it was apparent from the report of the Official Receiver that assets worth £5 million had been irretrievably lost in just two years. Total debts were close on £3 million, with payments to creditors ranging from a few pence to a few shillings in the £1. The shareholders had lost everything.

Whitaker Wright took the stance that he maintained to the end – he was innocent of any wrongdoing, and his actions were simply standard business practice. Errors had been made by the accountants, for which he was not responsible. He had more difficulty in explaining away payments made to financial journalists. These were disguised as share deals, the shares having being sold at a discount and repurchased by the company. Wright denied all accusations, but Barnes proved him a liar by producing the contract notes. Wright simply shrugged these off – journalists, he said, would not take an interest in a company unless they owned some shares. Barnes pointed out that in the case of one contract the repurchase had taken place on the following day. When the inquiry closed at the end of February, it was clear that the failure of the companies had been the responsibility entirely of Whitaker Wright, and, although failure was not in itself a crime, attention now focused on the false balance sheets, and both press and public felt that there was ample material here for a criminal charge. The difficulty was that in 1899 and 1900 it was not a criminal offence to issue a false balance sheet.

Wright stood firm, pinning his hopes on legal proceedings to recover damages of £1,000,000 from the syndicate, but in June 1902 the final decision went against him. Wright must have known that, in England at least, he was finished. Quite what he did over the next few months is unknown, but by the end of 1902 the outward trappings of substantial wealth had disappeared. The yachts were sold, and his estate, by now heavily mortgaged, was vacated. The family relocated to nearby Tigbourne Court.

Meanwhile, efforts were made by the shareholders and creditors of Globe to persuade the Attorney General, Robert Bannatyne Finlay, to authorise legal proceedings. On 20 December 1902 stockbroker John Flower, a leading campaigner for the prosecution of Whitaker Wright, received a letter from the Treasury stating that papers he had transmitted to the Attorney General ‘contain nothing to alter his conclusion that this case is not one which should be taken up by the Director of Public Prosecutions'.
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The decision was deplored by the financial press, and questions were asked in the House of Commons, but Prime Minister Balfour merely regretted that company law was inadequate to deal with the matter, an anomaly he promised to rectify. Flower was persistent, however, and he organised meetings of interested parties to raise funds for a prosecution under the Larceny Act of 1861, under which it was an offence to make a false statement with intent to deceive or defraud. Early in 1903 Flower was able to apply for a direction to prosecute before Mr Justice Buckley. Wright became increasingly concerned. The hearing on 17 February was adjourned, and on 19 February the case was discussed again in the House of Commons. On the following day Wright drew a cheque for £500, and on 21 February he sailed for France, reaching Paris four days later. His wife kept him informed by telegram of the progress of the proceedings. On 5 March she cabled: ‘Case to prosecute settled today: everything looks bad.'
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Wright quickly packed his bags and cabled back. ‘Give Florence five hundred pounds she sails tomorrow Friday evening will meet her Havre forward no more letters.'
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He was on the run. ‘Florence' was Florence Browne, Whitaker Wright's American-born niece, who was to be the go-between in her uncle's flight from justice.

In the event Buckley's decision was not made until 10 March, when he directed the Official Receiver to institute a prosecution against Whitaker Wright. A summons was quickly obtained, but when an official was sent to Tigbourne Court he found only Mrs Wright, who declared with gracious dignity that her husband was an honourable man and had gone to Egypt for the sake of his health. Soon afterwards banknotes known to have been in Wright's possession were found in Paris, and he and Florence were traced to Le Havre, where it was found that on 7 March they had booked a suite under assumed names on a liner,
La Lorraine
, bound for New York. Wright's distinctive description was cabled to the New York police, who boarded the liner on its arrival. Wright submitted quietly to arrest, and, charged with being a fugitive from justice, was taken to Ludlow Street Jail. Florence, left standing on the pier with the luggage, eventually took a cab to a hotel. Questioned by the police, she maintained that, of the money (£710) found on Wright's person, £100 was hers and £500 had been provided to her by Mrs Wright. Eventually, £600 was returned to her and she was released. What she did thereafter is unknown.

After several months of fighting extradition proceedings, Wright agreed to return to England voluntarily. Arriving on the
Oceanic
at Liverpool on 5 August, he was placed on an express train and faced the London magistrates that same afternoon. His defence counsel, Richard Muir, who later achieved considerable distinction as Senior Counsel to the Treasury, was a man who, having taken up the cause of a client, would always believe the best of him. Muir deplored the suggestion ‘promulgated by the baser class of newspaper'
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that his client had confessed his guilt by absconding. Wright, he said, had simply decided to start a new business life in America. His eloquent pleading was successful, and Wright was granted bail of £50,000.

Early on, Muir decided that it would be in the best interests of his client to have the case heard not at the Old Bailey but at the civil court in the Strand, before a special jury who would be more likely to understand the financial intricacies. It was a decision that would have momentous and unexpected consequences. The trial opened on 11 January 1904. Wright arrived dressed in the flowing frock coat of a City man, a little thinner and greyer than the public remembered him, and sporting a small pointed beard known as an imperial. Since it was a civil court, he was permitted to sit in the well of the court among his legal advisers. For a time, it seemed that he was the calmest person there.

The prosecution team was formidable. Rufus Isaacs (later First Marquess of Reading) was experienced in complex financial cases, with a mind that was able to follow a multitude of separate threads while keeping the overall picture clear. His approach would be essential in steering the jury through the maze that was Whitaker Wright's financial dealings. He was quiet, courteous and unruffled. ‘His tactics', wrote his son, ‘were never to bludgeon his man, but to lead him gently and politely to destruction.'
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The crown witnesses were to be examined by Horace Avory (later Mr Justice Avory), who was also adept at handling the complexities of such a case.

Justice Bigham (later Lord Mersey), who was to hear the case, was for Wright an unfortunate choice. It became obvious in the early stages of the trial that he was hostile to the defendant, and made frequent interruptions, usually to clarify dubious transactions for the jury's benefit, though he could not resist the occasional stab of dry humour. When Isaacs showed how the 200,000 £1 Victorian Gold shares were manipulated to a value of £800,000, giving a paper profit of £600,000, Bigham's comment was: ‘I observe that they did not propose to pay any of it in dividend.'
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Isaacs's opening statement was a masterpiece, detailing exactly what manipulations had taken place. The jury, even if unable to commit the torrent of figures to memory or make notes in the time available, were still left convinced that there had been a series of complex transactions in which every cheque had been signed by Whitaker Wright. Expert witnesses were now produced – Mr Waterlow, who had printed the accounts and spotted amendments in Wright's handwriting, cashiers, who testified as to the cheques drawn by Wright, and Globe's secretary, who took minutes at Wright's dictation of a directors' meeting that had never happened. Arthur Russell, the senior examiner to the Official Receiver, was a particularly devastating witness as he laid bare the maze of transactions unrecorded in the company books, all with the unmistakeable touch of Whitaker Wright. The assets of Globe, said to be worth £2,332,632 in the company's 1900 accounts, had, he told the court, been found to have a value of nearer £1 million. Lawson Walton, who led Muir for the defence, did his best. When Bigham commented that many of the companies promoted by Wright were ‘only shadows', Walton protested that there were boards and shareholders in each case. Bigham retorted that ‘if there were real boards he would like to see the minute-books'.
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Henry Malcolm was questioned about losses on sales of shares that had been treated as depreciation, thus giving the false impression that the shares were still the company's property. He was an uncooperative witness, and it was with some difficulty that Avory extracted from him the admission that the entries in the books had been made on Wright's instructions. With the prosecution case complete, Walton called his one and only witness for the defence: Whitaker Wright. Before he did so he asked Mr Justice Bigham to agree that the cash in Globe's bank of £534,000 at 5 December 1900 was genuinely the property of Globe. ‘There are two ways in which these things may be regarded,' observed Mr Justice Bigham, making his own opinion very plain. ‘It may be what you may call justifiable window dressing, though I do not like it. Or it may be a scheme to throw dust in the eyes of the shareholders.'
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When Wright entered the witness box he declined a seat, preferring instead to stand and lean forward with his arms on the box. He answered Lawson Walton confidently, boasting of the early success of his companies, and insisting that nothing was ever done without the unanimous agreement of the directors. Bigham interrupted frequently.

‘Why did you as a director of the Globe sell to the Standard? Why should you roll the profits of one company into the lap of another?'

To which Wright's weak reply was: ‘Lord Loch wanted us to have as many liquid assets as possible.'
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(Lord Loch had died in June 1900.)

Wright's attitude, as it had been during the public examination, was that all his activities were standard procedure and anything untoward was someone else's fault. The system of valuing mining shares was ‘not his invention',
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and it was not he but the accountant who was responsible for errors on the balance sheet. The real guilty people were the mine engineers, who had, he claimed, been in collusion with people in London and given false information.

When Rufus Isaacs began his cross-examination, Wright, determined to appear unconcerned, leaned casually back on the rail behind him and adopted the same brazenly confident air as before, claiming that it was ‘a mere coincidence' that he had gone to America after receiving the telegram from his wife. When Isaacs demanded to know why he had been at such great pains to bring cash into Globe's 1899 balance sheet, Wright declared: ‘You will never get me to the crack of doom to admit that there is anything the matter with the 1899 balance sheet.'
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Isaacs suggested the shareholders would be more impressed with the company's aims to pay a regular 10 per cent dividend if they saw the cash on the balance sheet, to which Wright said: ‘I am not responsible for the inferences the shareholders may draw.' Isaacs eventually got Wright to admit that market value had very little to do with his balance sheets, and then confronted him with his own statement at the 1899 meeting that shares were written down to the lower of market value or cost. His reply – ‘It is the sort of statement that 99 chairmen out of a 100 would make at a shareholder's meeting' – was greeted with laughter.
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Questioned further, he stated that this was ‘a slip of the tongue',
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his usual explanation when caught out in a lie. Piqued at Isaacs exposing the failure to record transactions in the minutes, Wright declared that he was not responsible for the minutes. ‘Would counsel like him to be chairman and secretary and everything?'

‘No,' replied Isaacs. ‘I think you were quite enough.'
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As Isaacs ruthlessly picked apart the complex network of lies and manipulation, Wright's confidence withered, his lips twitched nervously, his eyes appeared sunken and his great bulk seemed to shrink and sag. More and more questions were answered simply with ‘I don't know'. Eventually he subsided onto the chair placed for his use ‘and remained a huddled heap of weariness for the rest of the afternoon'.
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Denials of wrongdoing and attempts to shift the blame onto others became less and less convincing.

On 21 January, as the trial moved into its ninth day, Mr Justice Bigham told the court that there had been attempts to interfere with the course of justice. He supplied no details, but the court was left with the impression that efforts had been made to bribe the jury. He issued a stern warning to the offenders, and Wright once again went into the witness box, where Isaacs savaged him about the claim made at the 1900 meeting that the shares appeared in the balance sheet after £1 million had been written off for depreciation.