17026. Security Bank (Watertown, NY)

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Total amount $1,770.902 98 From this should be deducted the following, fictitiously so carried, viz: C. H. Peirce $52,452 25 C. Ralston 11,356 52 A. H. Doughty 154,810 74 Security Bank of Watertown 24,831 50 F. H. Jones 2,000 00 Rollins Bros, & Co 18 000 00 F. W. Huedekoper 354,470 28 620,524 29 Actual amount of loans $1,150,378 69 According to Mangam's testimony, Pierce had failed in 1873, and all that had been collected since was the interest and dividends on the collaterals. These collaterals were $52,800 of first mortgage bonds of the Wabash, Decatur and East St. Louis Railroad, and $9,100 of funded coupon certificates of the same road, worth altogether about $43,000. The collaterals to the Ralston loan were forged bonds. In proceedings against the forgers, something was recovered which has been credited; whether the bank will recover more or have to return what had already been obtained, depends on a decision of the Court of Appeals, not yet made. Of the collaterals to the Jones and Rollins Brothers loans, $145,000 are first go'd mortgage bonds of the New-Jersey and New-York Railroad Company, claimed by the receiver of that company, and $9,000 to the New-York Central Railroad Real Estate bonds, apparently forgeries. Mr. Mangam says he has been so informed, but does not know it, and has made no inquiries, though he admits it was his duty, the person obtaining the loan having failed. He considered that loan of no value until the reconstruction of the New-Jersey and New-York Company. He believed Jones was not wealthy. The loan to the Watertown Bank was made in 1875, and soon after the bank failed. No effort has been made to realize on the collaterals, which were insufficient as security. They embrace $10,000 of mortgage bonds of the Davis Sewing Machine Company of Watertown. The Sewing Machine Company claims these, and seven of the bonds, $7,000, never received the signature of the president of the company. ### ILLUSTRATING THE PRESIDENT'S METHODS. The Doughty loan illustrates the president's methods. It grew out of a series of loans made to Theodore Berdell, between November 15, 1871, and November 7, 1872. Berdell failed in 1873. The collaterals were inadequate, and the company had nothing to do but to realize what it could and charge the deficiency to profit and loss. Instead, it carried the securities to June 2, 1874, and then made a nominal sale to A. H. Doughty, at twice their market value. Berdell then owed, with interest, nominally, $151.695. This sum was then ostensibly loaned to Doughty, on Berdell's securities. Mr. Best quotes Mr. Mangam's testimony to show that this was only a sham transaction, the bank being obliged to insure Mr. Doughty, who is Mr. Mangam's brother-in-law, from an loss in the transaction, as it was done for the benefit of the company. The securities were Walkill Valley Railroad, and Mr. Mangam expresses a belief that at some time in the future they will bring their face value. With regard to the F. W. Huedekoper loan, Mr. Best makes Mr. Mangam's testimony show that it is purely fictitious, and is remarkable chiefly on account of the large amount involved, $354.476 28, and the widespread deception which it reveals. The bonds appearing as collaterals were bought by Huedekoper preparatory to a foreclosure. He was not to be held bound for any deficiency or ize loan. Part of the collaterals were bonds a Indiana division of the Chicago, Danville et Vincennes Railroad. They were turned in, and an assessment on them was paid by the Trust Company on the reorganization of the railroad company. The assessment was charged to Huedekoper as a loan. The origin of the loan was a sale by W. B. Shattnek, agent of the railroad company, of 300,000 of the first mortgage bonds of that company to the National Trust Company, at 85. Mr. Shattuck was then a trustee of the Trust Company. The prices he paid for the bonds ranged from 77½ to 80 per cent. Default was made on the bonds in 1873. In 1874 the railroad company agreed to take back the bonds at cost and interest, if the Trust Company would loan it the money on them as collateral. The railroad company offered the Bloomfield mortgage as further collateral. The railroad company failed to keep its promise, and the Trust Company sold the collaterals and bought them, and then this transfer was made, so as to give it the form of a loan. This amount was, December 4, $354,470 28. Charges have been mode since which increase it to $356,020 23, against which the Trust Company has collaterals worth probably $158,956 23, showing a loss of $197,064 05, of which President Mangam was well informed, for he had made sales of the same class of securities only a few weeks before. Mr. Best says: "The foregoing fictions, classified under the head of loans, make up a chapter of financial history which, it is to be hoped, is without parallel. The culpable nature of the acts, taken in connection with the deceptions which they comprehended, is apparent, and it is unnecessary that I should write one word either in condonement or in condemnation." ### LOANS LEGITIMATE BUT REPREHENSIBLE Mr. Best next calls attention to several transactions which may be legitimately called loans, yet, in their character and bearing, they are nearly as reprehensible as those before mentioned. In 1871, loans aggregating $12,000 were made to two persons. In July, 1874, the balance of principal unpaid was $6,335 20, the arrears of interest amounting to $1,355 23, in all $7,890 48. The collateral to this was 125 shares of Jefferson Iron Company stock, having then no market value. These loans were closed Jul. 3, 1874, the stock having been apparently sold for $2,000, but it was immediately made to do duty as collateral for a new loan for $7,890 48. In August, 1876, a loan was made to J. J. Gray, of $132,000. Other loans and credits were made to him, but the credits were charged to other persons. A trustee insisted on calling in this loan. The President simply charged $59,303 to James Brady, trustee, leaving $85,308 still in the name of Gray. After copious extracts from Mr. Mangam's testimony as to this loan, Mr. Best says: "The duplicity of Mr. Mangam in these transactions is made painfully prominent by his own testimony. He loaned $144,606 on collaterals of the nominal value of $206,900, of which $33,900 was represented by old stock of the Mis-ouri Pacific Railroad, worth little more than waste paper. Of the remainder, there were $175,000 of the third mortgage bonds of the same road, which Mr. Mangam admits were not paying interest. Indeed, of all the securities only $23,-