From: Bill Day

To: MSRNA members at large

In the essay “Embezzlement at the Bank” I summarized the early history of the Bank of Nova Scotia and described a significant embezzlement by James Forman, shown above, the Bank’s first Cashier. The Bank’s shareholders learned details of the scandal at a “numerously attended” special meeting, on 9 August 1870, at which the defalcation was estimated at $320,028.06. [1] A week later, the Editors of the Halifax Morning Chronicle discussed who should be held accountable for the swindle. [2]

1. The Bank of Nova Scotia
   

2. “A gentleman holding high social rank was Cashier in the Bank of Nova Scotia. His salary was large, and there was consequently no such temptation to steal presented to him as that which frequently besets the underpaid servant and the nameless vagabond. He was pious as Sir J. Dean Paul [3], and in consequence bore an excellent character in the community. Yet all the while he was a thief. Day after day for thirty years, he was engaged in stealing moneys which should have been given over to the stockholders of the Bank. Discovery menaced him every day, but still he speculated, risking the stability of the Bank, the ruin of its heavier shareholders, and his own disgrace. His was not the paltry embezzlement of a few dollars, which has before now sent some needy clerk to the Penitentiary, but a gigantic theft, for during his years of service in the Bank, he appropriated to his own use nearly three hundred and fifty thousand dollars.
   

3. “That Mr. Forman was allowed to pursue his path of dishonesty unchallenged is disgraceful to the President and Directors, whose duty it was to watch over him. They had the supervision of his accounts, and had they not been blind or careless, his first fraud would have been his last in the Bank, and today the shareholders would have had to regret a loss paltry compared to that of which they now complain. Mr. Forman’s operations were not so cunningly conducted that they could not be easily discovered. It was well known that he was engaged in heavy speculations, and that his expenditures were far too great for one of his means. Yet the suspicions of those drowsy Directors were not aroused.
   

4. “There is a way to punish the Cashier defaulter. It is a pity though there is no way to punish the criminally careless Directors. They are morally responsible for the losses of the shareholders, who entrusted them with the guardianship of their interests. No careless clerk, no foolish storeman could have committed blunders less excusable than those of the Directors of the Bank of Nova Scotia. The trusted business men who managed that institution have allowed three hundred and fifty thousand dollars, or thereabouts, to slip through their fingers, and it is high time they should either resign their positions or be ejected from them. Their criminal carelessness has gone far to spread financial ruin in Nova Scotia. Their business was extensive and profitable; their capital was large; their shareholders, in general, wealthy and liable for double the amount of their stock; and yet, by their sloth, they allowed the Bank to be brought to the verge of bankruptcy.
   

5. “The statement of the Bank accounts so far have been unsatisfactory –– unsatisfactory because the losses were not fairly and fully stated, and the assets were multiplied by valuations of Forman’s property, which, in our opinion, were extravagant, and the alleged increase in the value of the Bank property, which, in this case, we believe purely imaginary. For their own sakes, both Directors and stockholders should make a clean breast of the whole matter. Should they acquaint all interested in the Bank, in any way, with the facts –– that the whole Bank rest has gone and that even the capital stock has been invaded, noteholders and intending stockbuyers would not remain as they are now, victims of a silly mystification. Let the fact be heralded abroad by the honest men connected with the institution, that the Bank, save for its increase of business, stands now in a worse position than when its shares sold at par.
   

6. “The bank is, as far as we can learn, able to meet all the demands upon it. It will probably continue to do a business second to none in the Province. It still commands the fullest confidence of the shrewdest commercial men in the community. But it will not do so long unless there is a complete change in its management. Its present Directors, with few exceptions, should be called upon to resign unless they have the good grace to do so without being asked, and in their places should be put men whose laziness and confidence in seeming integrity will be less unbounded than were those of the late managers.
   

7. “As for the unhappy man who swindled for so long a period, and to such an extent, it is difficult to say what should be done with him. He is old and ill. The anguish he must suffer is in itself a heavy punishment. Yet while we imprison the urchin who steals an apple we should not pardon the well-informed able man who steals hundreds of thousands of dollars. This matter rests with the Government and the stockholders to a great extent. If they are willing that such a gross swindle should go unpunished by the law, perhaps the rest of the community will be satisfied. Perhaps they will not.” [2]
   

References and Notes

    [1] Halifax Morning Chronicle, Halifax, NS, 10 August 1870, page 2, column 2.

    [2] Halifax Morning Chronicle, Halifax, NS, 16 August 1870, page 2, column 1.

    [3] “The present Baronet, Sir J. Dean Paul, during the last few years, has been a prominent character amongst the straight-laced Exeter Hallites. Every one he expected should go to Church, willing or not; he was strong on foreign missions, and down on all sorts of Sunday trading, work or amusements, excepting the usual routine of supplying the Sunday desires of his own class.” Excerpted from a letter by H. G. to the Editor of the New York Daily Times, published 18 July 1855. Copyright © The New York Times. Available online.

    [4] The photograph, shown above, of Joseph Foreman is from p. 21 in Joseph Schull and J. Douglas Gibson, The Scotiabank Story: A History of the Bank of Nova Scotia 1832–1982. Macmillan of Canada, Toronto, Canada, 1982. xvi+421 pp.