and if it was accurate the declaration that Travers had made was untrue and it would seem to have been almost an idle thing to ask for an assurance that there was no foundation for the statements that had been made to the Minister from the very man whose honesty was in question and unwise to have acted on that assurance.

It is true that, as Mr. Fielding stated in evidence, Travers, so far as he knew, was a reputable banker; but that was not, in my opinion, a sufficient reason for not having instituted an inquiry as to the matters which had been called to his attention. Such an inquiry could easily have been made, and the delay occasioned by it would have been inconsiderable, and such an inquiry would, undoubtedly, have resulted in the discovery of the manner in which the $100,000 had been raised and in the refusal of the Treasury Board to give the certificate.

An unsuccessful attempt was made to shew that money had been used by Travers to procure the issue of the certificate. In support of it Travers testified to the issue of a cheque for $3,000 which he said was placed in an envelope addressed to Mr. Peter Ryan, and sent to Mr. Ryan's room in the Russell House, at Ottawa, and afterwards presented and cashed.

That Ryan received this cheque or had any connection with it, if it was used for the purpose stated by Travers, was disproved.

There is, in my opinion, no ground for supposing that any improper influence was used to induce the Treasury Board to give the certificate or to induce the Minister of Finance to recommend the granting of it, and the most that can properly be charged against the Department of Finance or the Treasury Board is an error of judgment.

It was argued before me that there was a duty resting upon the Department of Finance upon receipt of the letter of the President of the Canadian Bankers Association (Mr. Clouston) (exhibit 28), which reached the department after the certificate of the Treasury Board had been given, to have taken steps to recall it, but I am not of that opinion. and know of no power in the Department or in the Treasury Board to recall a certificate.

It is to be observed that this letter contained no further information than already had been communicated to the

Minister of Finance by Sir Edmund Osler, Mr. Henderson and Mr. McCarthy..

It was unfortunate, I think, that the information conveyed to the Minister of Finance by Sir Edmund Osler and Mr. David Henderson as to the way in which the money deposited by the bank had been raised, if it was intended to prevent the issue of the certificate, was not conveyed to the Minister in writing, and it may be observed as probably indicative of their view as to the gravity of the irregularities of which they had been informed, that neither of them, though both were members of the House of Commons, when the fact that the certificate had been given came to his knowledge, called in question in the House the action of the Treasury Board or made the granting by it of the certificate the subject of inquiry.

The action of the Canadian Bankers Association in receiving, as it was said it had done, the Farmers Bank into the Association, was questioned by Mr. Fielding in his testimony before me, but his criticism was based upon an erroneous assumption as to the power of the Association to exclude from membership. On reference to the Act of Incorporation of the Association, 63-64 Vict, ch. 93D, it will be found that it had no such power, and that on the Farmers Bank becoming entitled to carry on the business of banking in Canada it became ipso facto a member of the association.

I was asked by the representatives of the shareholders and depositors to find that there was "neglect of duty on the part of the Finance Department after the" receipt of the letter of the 17th April, 1907, from Mr. G. Vankoughnet, the manager of the bank at Milton, addressed to the Deputy Minister of Finance (exhibit 5, p. 29), and informing him that promissory notes given in payment for shares were being discounted at the bank's branches and the proceeds credited to the head office, which included them in its returns as paid-up capital and issued circulation accordingly.

In consequence of this letter, the Department, on the 2nd May, 1907, called for a special return shewing (1) what part of the $375.473 paid-up capital, as shewn by the return of 30th March, 1907, was represented by promissory notes or other obligations of shareholders or the proceeds of the same of which the bank was the holder or liable on, and (2) the names and holdings of stock of such shareholders with particulars of such notes or obligations as were then current.

The return asked for was made a few days afterwards. It appears on pp. 35 and 36 of exhibit 5, and shews that promissory notes amounting in the aggregate to $59,110 given by shareholders having shares of the aggregate par value of $92,700, were included in the $375,473, and were held by the bank, and no further action was taken by the Department.

I am unable to find that in this there was any neglect of duty on the part of the Department, or to see that anything more than was done could have been done, even if Mr. Vankoughnet's letter had stated, which it did not, that the promissory notes he referred to were notes that had been given in respect of shares included in the list furnished to the Department when the application for the issue of the certificate of the Treasury Board was made.

Notwithstanding the irregularities on the part of Travers and his misconduct in connection with the application for the certificate, which I have mentioned, the evidence satisfies me that if the bank had been prudently and honestly managed there is no reason why it should not have succeeded. The promissory notes that had been given by subscribers were for the most part good and were subsequently paid, and while it is true that if the certificate of the Treasury Board had not been granted the money of the shareholders and depositors would not have been lost, the efficient cause of that loss was the recklessness and fraud of those entrusted with the management of the bank, and not the granting of the certificate.

One of the first acts of Travers after the certificate had been obtained, was to cause a fraudulent entry to be made in the books of the bank as to the expenses incurred by the provisional directors, by writing down the amount of them, which was at least $46,543.71, to $32,127.71, the difference being concealed by treating as cash on hand three sums of $3,000 each, represented by cheques and obligations of persons who had subscribed for shares which had not been, if they were to be so treated, credited to capital account, and taking the remaining $3,978 and the $1,500 bonus paid. to the Trusts and Guarantee Company, less $62 received from other sources, out of the money borrowed from the Trusts and Guarantee Company.

VOL. XXXIII. C.L.T.-12

The subsequent management of the affairs of the bank. was characterized by gross extravagance, recklessness, incompetency, dishonesty and fraud, and has resulted in the entire loss of the paid-up capital and the whole of the deposits, and that after allowing for all that can be extracted from the shareholders on their double liability, a loss amounting to no less than $1,806,437, making a record unparalleled in the history of any bank of Canada, or, as far as I am aware, in any other country.

It is unnecessary to do more than state in general terms in what way these losses were incurred, as full particulars of them will be found in the carefully prepared and exhaustive statements of the liquidator, Mr. Clarkson, which accompany my report, and in which will also be found a history of the Keeley Mine transaction, in which a loss approximating $500,000, as afterwards mentioned, was sustained by the bank.

Subject to deductions in respect of some of the items of sums amounting in the aggregate to $42,377, during the short career of the bank, the bad debts amounted to $598,565; the operating losses, including the cost of printing bank notes and stationery, to $281,119; the organization expenses, to $87,279; the sums stolen by officers of the bank, after deducting what has been and is expected to be recovered from sureties, to $134,118; the dividends paid, to $50,772; the losses on expenditures on bank premises, fixtures and furniture, to $108,801; the loss on the purchase of the Keeley Mine, to $509,886, from which, however, is to be deducted what may ultimately be realized from the sale of it; loss on the purchase of stock in the Keeley Mine Company, $15,000; besides other losses amounting in the aggregate to approximately $63,274.

The amount of the capital subscribed and paid up and the extent of the liabilities and the value of the assets of the bank appear in a statement prepared by Mr. Clarkson, which is annexed to my report, and is marked exhibit 96.

Before concluding my report, it seems to me proper to mention some matters as to which evidence was adduced, and which have formed the subject of public discussion, and to state my conclusions as to them.

It was shewn that the World Newspaper Printing Company had a credit with the bank for a considerable sum, and that money was kept on deposit at the bank bearing interest

by the Treasurer of Ontario, and it was alleged that the credit was given by Travers on the understanding or agreement that in consideration of it being given the company should use its influence with the Provincial Government and its Treasurer, to induce them to make deposits with the bank, that the company did use its influence to that end, and that its efforts resulted in the deposits that were made by the Treasurer or some of them being made.

Most of the transactions between the company and the bank were carried on on behalf of the company by Mr. Greenwood, who was its managing director.

Mr. Greenwood was a witness upon the inquiry, and correspondence between him and Travers and between him and the Provincial Treasurer was put in evidence.

My conclusions as to these matters are:

1. That while it is probable that Travers thought that the giving of the credit which he gave to the company would result in such influence as the company could bring to bear upon the Provincial Treasurer to induce him to make deposits with the bank being used, and that Greenwood knew that Travers so thought, and promised to use that influence, there was nothing in the nature of an agreement that as a consideration for giving the credit it would be used, and there is no reason for thinking that had the promise not been made the credit would not have been granted.

2. That if any such promise was made it was not communicated to the Provincial Treasurer, and that he was not made aware that it had been made, and that in making deposits with the bank he acted with nothing in view but the public interest, and the making of a fair distribution of Government deposits between the banks carrying on business

in Toronto.

I may add that since the inquiry was entered on the whole of the indebtedness of the company to the bank has

been paid.

It is proper also to say, in conclusion, that Travers appears to have thought the Keeley mine a property of immense value, and that by the sale of it all the losses which had been incurred would be met, and that he appears to be still of

that opinion.

All of which is respectfully submitted.

W. R. MEREDITH,

Commissioner.

Toronto, 21st February, 1913.