The following is a re-print of a past column by former Advertiser columnist Stephen Thorning, who passed away on Feb. 23, 2015.
Some text has been updated to reflect changes since the original publication and any images used may not be the same as those that accompanied the original publication.
Last week’s column considered the Federal Bank in Guelph and Walter Cutten’s Guelph Banking Company, which the Federal Bank supported.
The Federal Bank failed in January 1888, but a consortium of other chartered banks stepped in with financial support while the business was wound up and the accounts transferred to other banks.
W.H. Cutten and his Guelph Banking Company had no such saviour. The liabilities of his private bank totalled some $85,000 (equal to at least $8 million in today’s money), composed of $20,000 due to the Federal Bank, $40,000 to four local investors who had loaned Cutten the money in 1884, and $25,000 to the public in deposits. In addition, he had an unknown amount of his own money invested in the bank.
Matters came to a head when the liquidators of the Federal Bank indicated that they wanted the $20,000 loan repaid. Cutten had no cash, no ready way of finding any, and had his best collateral already pledged to the Federal Bank. On Monday, Jan. 30, 1888, he posted a scrawled notice on the door of the Guelph Banking Company, located in the Wellington Hotel building on Wyndham Street.
In careful legal phrasing, betraying Cutten’s training as a lawyer, he indicated that the business was going into liquidation as a result “of the winding up of the Federal Bank and losses sustained.” Depositors, who wanted some indication of when they might get their money, had to be content with the words, “Particulars whereof will be made known in due time to parties interested.”
Notices in similar words ran in the Guelph daily newspapers that evening. Cutten refused to provide details to anyone, but the Guelph Mercury commented, “As Mr. Cutten was a keen financier and lawyer he doubtless ran risks and made money where more conservative men would not, but some of his risks have eventually turned out rather disastrously.”
More serious were the rumours that Walter Cutten had expropriated deposit money for his personal use.
The Monetary Times was more direct in describing Cutten’s problems, tracing them to reckless investments with “A.T. Kerr, of unsavory reputation.” Kerr, a Toronto stock broker, had left Guelph after selling his banking business to Cutten in 1881. The two had maintained business contacts ever since.
That Cutten tiptoed on shaky ground had been the subject of gossip for a couple of months. A reporter for the Guelph Herald asked a Guelph Township farmer why he continued to leave his money on deposit at the Guelph Banking Company.
“Well, you see, he was paying 6 per cent,” replied the agrarian, “and besides, I thought with such a fine block [of buildings] and a fast horse that he was perfectly safe!”
What the farmer didn’t know was that the horse was not paid for, and the real estate was mortgaged in triplicate.
On Feb. 9, the Federal Bank issued a writ against W.H. Cutten for $20,000. Meanwhile, Cutten’s erstwhile business partner, A.T. Kerr, had his day in court in Toronto, charged with obtaining loans under false pretences from the failed Central Bank. After several appearances, the case was dismissed when the prosecution failed to produce all its witnesses.
Cutten soon had his own day in court. On Feb. 28, 1888 he was arrested on a charge of obtaining money on false pretences. His friends put up bail at once. The next day he was on the street again, in a frantic and futile attempt to put his affairs in order.
The charge arose from a loan Cutten’s Guelph Banking Company had made to Thomas Caraher, a Guelph Township farmer. Caraher had gone to Cutten’s office to pay the loan when it fell due on Dec. 31, 1887. What Caraher didn’t know is that Cutten had assigned the note to A.S.D. Hill as collateral on a $4,000 loan from Hill to the Guelph Banking Company. Cutten had put the payment into his own pocket.
A few weeks later, Hill tried to collect payment on the note a second time from Caraher. The truth emerged at the preliminary hearing, and Cutten was bound over for trial, two of his friends putting up $1,000 bail.
Two weeks later, things got worse for Cutten. William Kay, a wealthy retired farmer, laid three separate charges against Cutten, claiming he had been bilked out of $5,600 in total. The first was a mortgage. Cutten had asked Kay for a $3,000 loan, offering a second mortgage on his house and other real estate.
Kay agreed, but later found that Cutten had debited his account for $3,500, not $3,000. Later he discovered that Cutten already had given two mortgages on his real estate, which totalled more than the market value. Kay’s mortgage was worthless.
The second charge was a payment of $1,500 that Kay had sent to a man in Walkerton through the Guelph Banking Company. The funds never got to the recipient. The third charge concerned a $600 payment to pay off a mortgage. Kay and an associate gave this money to Cutten, who in turn was to have paid it to a certain Miss Leslie of Puslinch. These funds disappeared into Cutten’s pocket.
This time, his friends were slow in showing up with bail. Unlike a common thief, though, Cutten was allowed to spend the time in his own house, under the watch of a constable assigned to the job. The outraged editor of the Mercury wrote that, “The public probably don’t care much where Mr. Cutten puts in this time, but they are anxious to know how this special privilege was granted to him and on whose authority.”
Kay’s charges against Cutten were laid out at two hearings in Police Court. He was bound over on charges of fraud for the spring assizes, to be held in May 1888. Cutten’s friends eventually came forward, and he was free on bail until the trial.
Walter Cutten’s trial, on four separate charges of fraud and misappropriation, took place on May 4. The session lasted only a couple of hours. Henry Peterson argued the case, concerning the $3,000 Kay mortgage, for the crown.
As crown prosecutor, Peterson failed to produce any of the documents – receipts, bank books and mortgages – to back up the case. This evidence had all been available at the preliminary hearing.
A. H. Macdonald, Cutten’s lawyer, was able to argue successfully that there was no proof that Cutten had received any of the money, and that there were inconsistencies in the evidence of witnesses. The judge dismissed the first charge against W.H. Cutten.
The second charge was the one of misappropriating the $1,500 that Cutten was instructed to transfer. This time Justice Rose, the presiding judge, offered a curious ruling that the law did not cover the evidence in such a transaction, and dismissed the case.
The two remaining cases were put off until the fall assizes, one at the request of the crown attorney and the other at Cutten’s request. The fallen banker was free until Nov. 7.
The case of the missing $600 mortgage payment came up first. Kay and his associate testified that they had given Cutten the money along with their instructions. Unfortunately, Miss Leslie did not appear. Someone had sent the crown attorney a message that she was not feeling well.
A.H. Macdonald, Cutten’s lawyer, argued that there was no evidence to prove the facts, and that instructions to a trustee had, by law, to be given in written form, not verbally. Judge McMahon offered the opinion that there was no evidence to show that Miss Leslie did not receive the money, and instructed the jury to give a verdict of “not guilty” without deliberation.
In its account of this session, the Mercury commented that, “It seems rather peculiar to the average layman that the crown counsel showed so little interest in the case as not to procure the evidence of Miss Leslie, whose testimony was vital to substantiate the facts.”
The final case was that of the loan payment given to Walter Cutten by Tom Caraher. This case proved to be far more complicated than had appeared at the preliminary hearing. Caraher had given Cutten a promissory note, and Cutten in turn had used this note as collateral for money he was borrowing. The judge heard lengthy and technical legal arguments on Cutten’s behalf by A.H. Macdonald and Hugh Guthrie.
Justice McMahon pondered the matter briefly, then stated that he did not think the evidence was sufficiently clear to leave the matter to the jury to decide. He directed them to return a verdict of “not guilty,” which was immediately done. Walter H. Cutten left the court that afternoon a free man.
William Kay undoubtedly headed the list of those who lost money in the Guelph Banking Company. The three cases before the court totalled $5,600. He also had money on deposit in the Guelph Banking Company, and heavy legal bills after its failure.
Further down the list were the depositors in the bank, a couple of hundred of them, whose accounts added up to some $25,000. I have found no further details of the case, but it is probable that they received nothing. Cutten had mortgaged his real estate for more than its market value, and had pledged virtually all his remaining assets as collateral to the Federal Bank.
Cutten seems to drop from sight in the years after the trial. He may have supported himself and his young family (he was only 44 at the time of the trails) at some clerical job, though this would have meant a severe diminution of his extravagant lifestyle. Alternatively, he may well have managed to hide assets from bailiffs and creditors, or he may have survived on the private charity of friends and relatives.
In 1897 he dusted off his old shingle and resumed work as a barrister, his occupation before the ill-fated diversion into banking. Walter H. Cutten died in Guelph in July 1915.
*This column was originally published in the Wellington Advertiser on Feb. 11, 2000.