George Haworth and the Savings Banks
We are all encouraged to put a little by for a rainy day. Indeed, governments have generally taken a proactive role in embedding the instinct to save in its citizens.
In 1817 with this in mind the then British government passed an Act empowering the National Debt Commissioners to pay 4% interest on all sums deposited with them by savings banks. Even though the amount of interest offered was gradually reduced and the maximum amount you could deposit capped – not unsurprisingly, more middle class people could afford to save than could those from the lower orders whom the Act was aimed to encourage – by the 1840s there were some 500 government savings banks serving one million depositors and with combined assets of some £30m. One such was the Rochdale Savings Bank.
Actuary and manager of this institution was one George Haworth, a Quaker and former cotton master, who was known for his “uprightness and strict integrity” and because of his generosity was well liked by employees and others. He had been in post for 20 years, claiming that he devoted his time “as a matter of charity”. Although the 1817 Act intended funds deposited with savings banks to be invested in government securities, in practice the managers had sole discretion as to how to use the money. And this is where Haworth saw his opportunity.
Haworth set up two sets of books, one of which was for public consumption and the other, a cash book and a private ledger in which he detailed the thousands of deposits which he had diverted for his own purposes rather than the bank’s. The one thing that a successful swindler is not is immortal. When Haworth croaked in 1849, the trustees, who must have been asleep at the wheel, discovered that there were “deficiencies” of around £71,000, about three-quarters of the bank’s total deposits. The embezzlement had been going on for some ten years or so.
Not all was lost. Haworth’s estate yielded £16,000 and the trustees subscribed £17,000 in conscience money but depositors were still out of pocket to the tune of £38,000. Of those affected by Haworth’s peculations were 1,014 women, 539 labouring men, 191 sick clubs and 1,184 under the age of twenty-one.
Such was the size of Haworth’s embezzlement that it made front page news and the government of the day launched an investigation into the affairs of all of the savings banks. Reporting in 1852 the investigators revealed that some £160,000 had been “lost” at eighteen banks between 1845 and 1851. The report also revealed an astonishing level of laxity amongst trustees who rarely, if ever, supervised the executive of the banks. Even returns to the National Debt Office were full of holes – the ledgers of Cuffe Street Bank revealed 320 deposits of between £100 and £150 whereas the official return showed deposits of £13,173!
Those who were rumbled included John Johnson, a wealthy colliery owner, who got away with over £10,000 from the St Helen’s Savings Bank, Thomas Smurwaite, a well-respected wine merchant, who salted £3,000 away from the Scarborough Savings Bank and David Jardine, a draper, who embezzled £2,000 from the Dartford Savings Club. In pretty much all of the cases the embezzler had followed Haworth’s simple but effective ruse of keeping two sets of books and relying on the doziness of their bank’s trustees.