The Pattison Crash
last updated July 21st 2014

THE TRIAL - DAY 1
"What Happend When?                        The indictment
time frame        time frame
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The trial against the two brothers started on Monday 8th of July 1901.
The indictment was 41 pages long and 84 persons was on the witness list. Some of them were not heard but other were added (see witness list). The productions were 526 and the weight of them was about 7 tons, and special racks had been built for them.

The indictments had four main counts or heads of charge
1) A fraudulent scheme to defraud persons taking shares in Pattisons Limited based on showing bigger profits than they really were.
    Subdivisions:
        - The prisoners omitted from the books certain entries
             - Six charges - whisky sold to a particular purchaser was again sold to another purchaser without crediting the first buyer                or debiting the goods account.
        - Certain dealings by which the profits were fictitously increased.
        - Certain whisky sold twice to Messrs Emmerson & Sons
        - A false balance sheet was presented in the prospectus whish misled share holders.

2) That they obtained about £39.000,- from the Clydesdale bank, which instead of going to Pattisons Limited went to their own accounts.
3) Overvaluations of whisky resulting in a false profit and loss account and balance-sheet 1898 which induced the company to declare a dividend of 10 per cent and a bonus of 10s and induced shareholders to retain shares to their great loss.
4) That they have defrauded Archibald Tower Arrol, Alloa of the value of a large quantity of whisky

Robert and Walter Pattison
The counsel for the Crown was: Mr Kincaid Mackenzie Solicitor-General (also Mr Scott Dickson and Mr A.L Maclure)
Mr Kincaid Mackenzie
Robert Pattison was represented by:Mr C. J. Guthrie and also Mr Clyde.
Mr C.J Guthrie
Walter Pattison was represented by: Mr Alexander Ure M.P.
Mr Alexander Ure
(It was planned that Walter should be represented by Mr Shaw - also M.P. but due to the crisis in the Liberal Party he had to resign)

Mr Ure defending Walter Pattison challenged the relevancy in the indictment on all its four counts:
    1st charge: "The first charge accused the prisoners of having attempted to deceive the public by putting forth a false prospectus, a prospectus false in respect that it contained a certificate of profits signed by accountants which to a large extent overstated the amount of profit in the concern. It was said that the accountings were deceived in granting that certificate, but it was not said that the prisoners were accused having deceived the accountants"
    2nd charge: "The second charge was that the prisoners were guilty of embezzling, in respect that they appropriated to themselves £39,000 odd of money belonging to the limited company. His objection that charge was that it was not relevantly averred that the £39,102 did belong to the company".
    3rd charge: "The third charge, that the prisoners had concocted a false profit and loss account and balance-sheet 1898 with intent to defraud the shareholders, he objected to on the ground that there was no relevant averment of falsification and fabrication, because all that the prisoners were charged with was overvaluing two lots of whisky. Secondly, it was not stated that the fabrication of the accounts was done for the purpose of gain to the prisoners and loss to the company." He also stressed that the brothers never took out the dividend in cash.
    4th charge: "His objections to the fourth charge in which prisoners were alleged to have defrauded a man named Arrol, of the sum of £6443, the value of a large quantity of whisky, was that there was nothing done by the prisoners to cause Arrol to lose his money; on the contrary, the loss was due solely to the failure of the limited company. No facts were set forth to infer fraud."

The Solicitor-Generals reply was:
    1st charge: "the accused published the accountant's statement that the accounts of the company were correct, while knowing that they were not, constituted itself an indictable offence."
    2nd charge: "With regard to the second, the Clydesdale Bank charge, counsel said the bank advanced the money on the representation, as they averred, that it was required for the company's purposes. It would have been perfectly legitimate if they could have applied it to the company's purposes, but what they did was to discharge the debts against them, and made their indebtness to Pattison Limited, so much the less. That, he held, was a perfectly good averment."
    3rd charge: "regarding the falsification of the accounts was that the accused had valued certain quantities whisky at £37000. while they well knew it be only worth £10000. To issue a false document to shareholders, though no loss resulted, was in itself a relevant criminal charge"
    4th charge: "The fourth charge the learned counsel submitted, as clear a charge of fraud as could be made, and he contended that whatever might be the result the case should go to trial on the averments they stood". The sales of the whisky (To Magnus M'Lean) was not reported when it was done and when the bills for the same whisky (To Archibald Arrol) were due the brothers siad that it was unsold.

Mr Guthrie defending Robert Pattison said:
    1st charge: "there was no suggestion that the books were any way falsified, or kept back, or that any of he cases founded upon there was not full information in the books open to any persons who chose to apply their minds to them.
    2nd charge: "that involved that there should have been something done which resulted in benefit to the accused and injury to the persons said to be defrauded. It might have been sufficient if their friends were able make out either the one or the other, but as narrated by themselves, neither was there any resultant benefit to the Pattisons nor was there any loss to Pattison Limited."
    3rd charge: "to the charge relating to the over-valuation of certain whiskies, counsel contended that it was a case where many kinds of whisky had been blended in certain proportions, with the result that some people might say that they were completely ruined, and other people, for instance the man who had done the blending, might consider that constituents had been brought together which had produced a result of highest value. It was a pure case for the exercise of opinion ranging from small to very large amounts, according to the particular tastes and notions of particular persons" He also stressed that also without the so called overvaluation the profit was sufficient to pay the dividends and bonus.
    4th charge: He referred to Mr Ure and said that it was a joint account between Pattison and Arrol and it was never intended that Mr Arrol should get the whisky. The deal was that he would part of the profit when it was sold. The injury was caused by the liquidation.

Reference was also drawn to a similar case 20 years earlier (City of Glasgow Bank collapse 1878).

Then the Court adjourned for luncheon.
The Lordship decision was that none of the objections by Mr Ure and Mr Guthrie were well founded and he repelled them. He asked the prisoners if they were guilty and the "they replied in clear tones in the negative".

First witness was Robert Roy MacGregor, clerk in the office in the King's nad Lord Treasurer's Remembrancer who confirmed that the company was entered in the Registrar of Joint Stock Companies for Scotland.

Mr James Alexander Robertsson Durham, chartered accountant in Edinburgh, had after the crash examined the books prior to and after to the flotation. He first told about the floatation 1898 and then he compared the profits in the prospectus (certified March 5th 1896 by Carter, Greig & Co, Accountants) and the real profits:
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This gave a difference of about £8000 per annum the false and true profits.
He had gone through the three first charges but not the fourth (Arrol).
He described in detail several cases where whisky has been paid to private accounts of Robert Pattison instead of the company. He also made clear that the clerk who made the entries in the books must have known that it was wrong and he put in R.P..P (=Robert Paterson Pattison) to identify that he got instructions from him.

Next day ->


Sources:
Belfast News-Letter - Monday 27 February 1899
Dundee Courier - Friday 17 March 1899
Aberdeen Journal - Friday 17 March 1899
Aberdeen Journal - Saturday 08 April 1899
Glasgow Herald - Tuesday 18 July 1899
Birmingham Daily Post - Tuesday 18 September 1900
Edinburgh Evening News - Friday 12 October 1900
Edinburgh Evening News - Thursday 03 January 1901
Manchester Evening News - Monday 08 April 1901
Edinburgh Evening News - Monday 08 July 1901
Yorkshire Evening Post - Tuesday 09 July 1901
Advocates Library/National Library of Scotland