The Pattison Crash
last updated March 24th 2015

THE TRIAL DAY 2

"What Happend When?                        The indictment
time frame        time frame
Click on the images to expand/shrink

The only witness during the whole day was the witness from the first day - Mr James Alexander Robertsson Durham. He gave details of some of the affairs.
4 lots of brandy bought from Planat & Co, France in 1895

The brandy (totally: 550 casks 17,490 1/4 gallons, £3.468 9s 10d) was taking in stock and no credit was given to Planat & Co for the price of it then or since. The brandy was sold to different buyers (T. Pattersons & Sons, William Scott, W.R. Hood, E. Manis J.S. Moir, Sommerville, Murray & Co, Mrs Thornton) and the result was that the profits of the firm December, 1895 were fictitious inflated by £5.763 12s 8d.


Next case was with Daniaud Fils & Co, Cognac. 5882.6 gallons brandy was bought for £465 14s 1d. The price was never credited to anyone. Last day of the account (December 31st 1895) it was included in the stock. Part of it was vatted and the cognac was taken in the books at a value of £1032. Daniaud Fils & Co was paid (£465 14s 1d) by a private check from Robert Pattison. Entries had been made in the books of Pattison, Elder & Co but been deleted.

Another example was Irish whiskey from Avoniel Distillery, Belfast (in all documents spelled Avoneil).(Interesting is that the "owner turned Alfred Barnard away from his door when he called in autumn of 1886". Hence is a just a few lines in the book saying that it was a Patent Column Distillery with an output of 850.000 gallons per year. - Mr Higgins Junior from this distillery was also very active in the reconstruction attemps of Pattisons Limited).
Mr Durham gave three examples of whisky been bought and taken up at higher stock value than the purchase price. Also here Robert Pattison has partly paid with private funds.
Whisky had been bought for £958, being vatted, sold and the remainder taken into stock at a value of £1700.

The last case was 1543 gallons of whisky from Caledonian Distillery bought from Distillers Company for £885 18s 1d was taken into the duty-paid stock but the cost price did not appear in the books.

Most of these deals were done during the last 8 months ending 1895 and the result of the above tgransactions was that the profilt was fictitously increased by £12.267 13 s.

"In another transaction it appeared from the books that there had been a double sale of the same whisky, credit being take for both prices. The quantity was 300 hogsheads (Cameronbridge), and it was entered in September, 1893, as being sold by Pattison, Elder, and Co., to A. S. Murray and Co., Leith, for £1,497 4s 2d.. In June, 1895, however, the whisky was again entered as sold to James Sanderson. Slateford, for £1,652 6s 5d. There was no entry crediting the amount to Murray and Co., so that the result was the inflation of the profits by one or other of the amounts stated."
The witness also told about a sale to 6654 gallons of Gordon Whisky to R. Emmerson & Sons, Newcastle sold for £4942 2s in 1894.

The bills for this whisky were taken was taken out twice and the profit was inflated by £4317 0s 9d.
He also said that the investigation was a hard job and without the help of the liquidators it would have taken a very long time and it was only when he got access to the private accounts of the brothers he discovered the frauds.

The total amount of fictitious inflation of the profits in connection with all these transactions, prior to the end of 1895, was £22,039.

He was also asked about the promissory notes from the Clydesdale bank and said that the money "was got on the understanding that it was required for the purposes of Pattisons (Limited), whereas the prisoners had appropriated the money to their own use for payment of debts, including amounts due by Pattison, Elder and Co., London, to Pattisons (Limited)."

The next subject upon which witness was examined, was the over-valuation of stocks.
Whisky had been blended and the value had increased:



The normal valuation would be to add 5 percent per year on the cost pric, but here they used a sale price as stock value. He said that the difference of the stock value and the cost price, had inflated the profits for the year ending March, 1898, by £27,000. For that year a dividend of 10 per cent, and a bonus of 10s. per share on the ordinary shares was declared, and Robert Pattison received or took credit for £17,000, and Walter Pattison for £1,586, which, it was alleged, they obtained by means of their fraudulent misrepresentations.

The witness was cross-examined by the Mr Guthrie and asked:
     Q: What was it that made you think there was anything suspicious in the fact that they did not send cheques straight?
     A: The fact that if they had done so the entry would have been disclosed in the books, the auditor would have seen it,
         and what had taken place now would never have taken place. Most certainly the auditor would have found it out, but the               thing was done to hide from the auditor, and the clerks would have found it out too if there had been an honest one
         amongst them. (Laughter.)

     Q: Do you suggest that the whole establishment was permeated by fraud?
     A: No, but there were one or two clerks who must have been in the Pattison confidence.

He also defended Mr Greig who examined the books prior to floatation "An accountant, however, was not bound to make audit of the books when certifying profits for a flotation, as was entitled to assume that the books had been honestly kept. He was asked by Mr Guthrie if there was any duty on a person employed to value a business and replied that in England that had been the subject of litigation and had been disposed of, but there was no decision on the point in Scotland.

The witness was asked about the value of the Royal Gordon Perfection whisky. The market value was 15s per gallon but Mr Durham said the stock value was 5s 6d.
    "It was said to be a fifteen, year old whisky. There was not a grain of fifteen years old whisky in this Royal Gordon Perfection
    whisky. It could not be. This "stuff," he said, included a lot of water, and the 16s whisky also included the water.
    Mr Guthrie—So much the better price for the seller the more water that is in it. (Laughter.)
    Have you (to witness) any reason to doubt that Royal Perfection whisky is just as good or as bad the material shown on the list
    I show you?
     -Probably it is as good or bad. (Laughter.) You have, however, to make your sales before you take your profit."

Mr Durham also got questions from Mr Ure on behalf of Walter Pattison and from the Solicitor-General.
    Does it occur to you that it is an honest failure not to notice £12,000 in two months?
    — lmpossible.



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
Brian Townsend "The Lost Distilleries of Ireland"
Advocates Library/National Library of Scotland