Aus:
The Economist, 10. November 1866. S. 1306–1308.
Schließen

There seems no end of the railway scandals which this crisis will detect. While money is plentiful it can be borrowed, and used to pay dividends, debenture interests, any one in fact whom it is convenient to pay. But when money cannot be borrowed, these claimants become first irritable, then importunate, finally aggressive, upon which the latent sin is at once discovered. In the case of the North Brit. Railway no debentures have been issued in excess, no Act of Parliament intended to protect lenders has been violated, but a series of erroneous accounts have been palmed upon the shareholders and the public, and confirmed by dividends distributed, on the faith of which ordinary shareholders believed they had an excellent property, and preference shareholders – in several sets – lent money to the concern. The fraud here is a business, not a legal fraud; it consisted in publishing false figures, not in transgressing Parliamentary limitations. The North British is a very large railway and has many branches; more than 700 miles aggregate length, and an authorised share and loan capital of more than £22,000,150. Like so many railways in England, the North British has always been before Parliament, in a series of contests with the Caledonian etc … For a long times time its dividends about 3% p. annum. But the Committee of Investigation find that they have been procured by „manipulation“. The accountant is examined:

„You have stated that from your examination of the revenue accounts of Jan. 1865, you found that the revenue was some £36,000 deficient to pay your preference dividends? – Yes. – Did you report that to Mr. Hodgson (the chairman of directors) or to Mr. Rowbotham (general manager)? Yes. – Before the January accounts were published? – Yes, I required instructions what to do. … I was told the dividend must be paid under any circumstances. That day or a day or 2 afterwards, I was told to bring out a dividend of 21/4% that half year. (these instructions given by Mr. Hodgson.) – How did you do that? By making these cross-entries? Yes.[“] Mr. Rowbotham confirmed this. He was „cognizant of the irregularities in the accounts, and that dividends were declared and paid which had not been earned; but that he did not order or instruct the operations by which the balance-sheets were to show results unwarranted by the position of the co, and that the instructions on that point emanated directly from the chairman to the accountant. He also stated that, although he is the recognised medium of communication between the board and the department of accounts and audit, he did not convey |107 to any member of the board his knowledge of the irregularities.“ Herr Hodgson in seiner published defence, in reply to the Investigation Committee, says: „it would manifestly have been impossible to obtain or maintain the value of the railway without a temporary departure from the strict rule, whereby the limits of expenditure out of revenue and out of capital are defined.“ Und daher North British pumpte sein Geld on preference stock and debentures, because the accounts of the Co. looked well.

so that 31/2 × the capital of the Co. has been borrowed of victims of the „regulated“ accounts.

Hodgson seems to think that shareholders are necessarily benefited by false puffing accounts. But shareholders are a very fluctuating body. The shares of A become to[-]morrow those of B by transfer. Daher diese accounts a fraud on the buyer for the gain of the seller.

The mode in which the entries were managed was, that a certain amount of expenses which ought to have been by the halfyear were charged to various „deferred“ accounts. Das Investigation Committee says: „Apart from carrying to capital sums which should properly have been put to revenue, complicated and elaborated exertions have been made to conceal a large amount of expenditure under the head of suspense accounts, consisting of ‚line renewals‘, ‚line suspense‘, ‚surplus property‘, otherwise ‚postponed expenditure‘, ‚locomotive suspense‘, ‚suspense account, N. 2‘, ‚suspense account, 1863‘, and ‚contingent account‘. (‚Life‘, half the brokers of England think, in regard to railway accounts, ‚is not long enough to understand such things.‘) Purpose dieser entries, to bring out the intended dividend.[“]

The Persons most to blame are the Auditors. Hätten sie ordentlich zugesehn, so discovered daß die dividend paid out of borrowed money.

Aus:
The Economist, 10. November 1866. S. 1316.
Schließen This latest development of railway misdoings has communicated fresh alarm to the minds of holders of railway stocks and shares. Auf dieser Basis renewed die Bear manoeuvres, wie früher mit den Bankshares, most of which have recovered from the unauthorised reports. … Unless the money market alter very materially, not in price, but in character, it will be impossible to renew the greatest part of the maturing railway debentures.