1752: William Montgomery, small enough to fail

In the absence of a modern bankruptcy framework, underwater debtors could be clapped into prisons like the notorious Fleet. As this had the effect of overcrowding the dungeons with otherwise productive persons who were little likely to meet the theoretical obligation to repay their bondsmen, the British Parliament passed Insolvency Acts intermittently throughout the 18th century as bankruptcy holidays that would permit orderly mass discharges of debt. Given the chaotic state of record keeping there must also have been a wide swath of grey-area debtors who for the benefit of resuming economic life would bend whatever facts needed bending to slide themselves into the Acts’ safe harbors.

Our William Montgomery was one of these, who told a white lie about being abroad on the date necessary to wipe the slate clean — but found that his creditors were not so easy to forgive either invoices or prevarications, to the extent of revenging their balance sheet at Tyburn.

This Newgate Calendar entry gives us a heavy dose of editorializing and also misstates the date of Montgomery’s execution because of course it does. For the rentiers’ side of the moral preening, compare to the Ordinary’s Account.*

Executed at Tyburn, December 2, 1752 [sic], for defrauding his creditors

In a country like England, and more especially when we view the overgrown capital, though productive of crimes in fraudulent debtors, we must advocate acts of insolvency.

The good of many must be pre-eminent to the villainy of a few; and, where we find one punished for the abuse of the lenity of the legislative body, we happily find thousands of unfortunate beings rescued from the horrors of a prison, where they had long been immured without the means of support, much less were they able to satisfy the demands of inexorable creditors.

The necessity of good faith in contracts, and the support of commerce, oblige the legislature to secure for the creditors the person of the bankrupts; and in this point of view may the subject of this case, and all others who take the benefit of an act of insolvency, be considered.

The fraudulent bankrupt should be punished in the same manner with him who adulterates the coin of the realm; for to falsify a piece of coin, which is a pledge of mutual obligations between men, is not a greater crime than to violate the obligations themselves.

But the bankrupt who, after a strict examination, has proved before the commissioners that either the fraud or losses of others, or misfortunes unavoidable by human prudence, have stripped him of his substance, on what barbarous pretence is he thrown into prison, and thus deprived of the only remaining good, the melancholy enjoyment of mere liberty? Still more hard is the case of an unfortunate trader, who, disclosing his whole transactions, and offering to assign over to his creditors the remains of his stock, is cast into prison by a single hard-hearted unrelenting claimant. Yet this is constantly done in Britain.

Why is such a man cast into a loathsome prison, ranked with criminals, and, in despair, compelled to repent of his honesty? Conscious of his innocence, he lived easy and happy under the protection of those laws, which, it is true, he violated, but not intentionally. Laws are dictated by the avarice of the rich, and tacitly accepted by the poor, seduced by that flattering and universal hope, which makes men believe that all unlucky accidents are the lot of others, and the most fortunate only their share.

Mankind, when influenced by the first impressions, love cruel laws, although, being subject to them themselves, it is in the interest of every person that they should be as mild as possible; but the fear of being injured is always far more prevalent that the intention of injuring others.

But, to return to the innocent bankrupt. Let his debt, if you will, not be considered as cancelled till payment of the whole; let him be refused the liberty of leaving the country with out leave of his creditors, or of carrying into another nation that industry, which, under a penalty, he should be obliged to employ for their benefit; but what pretence can justify the depriving of an innocent, though unfortunate, man of his liberty, without the least utility to his creditors?

Then it may be in answer be said, that the hardships of confinement will induce him to discover his fraudulent transactions: an event that can hardly be supposed, after a rigorous examination into his conduct and affairs.

It will be necessary to distinguish fraud, attended with aggravating circumstances, from simple fraud, and that from perfect innocence. For the first, let there be ordained the same punishment as for forgery. For the second, a punishment with the loss of liberty; and if perfectly innocent, let the bankrupt himself choose the method of re-establishing himself, and satisfying his creditors.

With what ease might a sagacious legislator prevent the greatest part of fraudulent bankruptcies, and remedy the misfortunes that befall the innocent and industrious! A public register of all contracts, with the liberty of consulting it allowed to each tradesman — a public fund, formed by the contribution of fortunate merchants, for the timely assistance of unfortunate industry — would be the establishments that could produce no real inconveniences, but would be attended with numberless advantages.

Many eminent bankers, in the history of the trade of London, by an unexpected run upon their house, must have become bankrupts, and thereby embarrassed thousands, had not the Bank of England come to their assistance; but alas! The unfortunate tradesman has no one to prevent his fall. Unhappily, the most simple, the easiest regulations, await only the nod of the legislator to diffuse through nations wealth, power and felicity; laws, which would be regarded by future generations with eternal gratitude, are either unknown or rejected. A restless and trifling spirit, the timid prudence of the present moment, and a distrust and aversion to the most useful motives, possess the minds of those who are empowered to regulate the actions of mankind.

It must at the same time, be acknowledged, that the baseness of a few failures often tends to render callous the feelings of creditors.

No act of insolvency has been carried into effect without the detection of fraud. Eager to embrace its benefits, and thus rid themselves of debt, men will wade through perjury, and employ every means to accomplish their purpose.

After the destruction of the prisons in London, during the riots of the year 1780, an act was passed for the purpose of absolving all who had been confined. Of this every rascal in London was ready to take the advantage. A mere form was only necessary, to enter their names; but the signatures, that Lord Chief Justice Mansfield, to his infinite honour, ordered the lists to be printed and published, which put to rout whole hives of impostors. Names were herein found that might as well have expected to appear in the list of Gazette promotions.

A man of this description was the subject who led to this enquiry.

William Montgomery was a native of Elphinstone, in Scotland, and educated in the Presbyterian form of religion.

His father dying when he was about thirteen years old, his mother sent him to sea in a ship belonging to Alloa. Having continued in the naval line of business some years, he at length married, and opened a public house in Bishopsgate-street; and dealing largely as a smuggler, he frequently went to Holland, to bring home prohibited goods.

Quitting Bishopsgate-street, he lived some years at the sign of the Highlander, in Shadwell; but, on the death of his wife, he resolved to decline business as a publican; and having saved some money, he entered again into the matrimonial state, and taking a lodging in Nightingale-lane, he let lodgings to seafaring men.

Meeting with success, he took a shop as a seller of seamen’s clothes; but left the care of it chiefly to his wife, while he employed his own time in frequent trips to Holland, in pursuit of his former illicit practice of smuggling.

An act of insolvency passing in the year 1748, favourable to such persons as had been in foreign parts fugitives for debt, Montgomery took the benefit of it, swearing that he was at Rotterdam on the last day of the preceding year: in consequence of which, he was cleared of his debts, to the injury of his creditors.

No notice was taken of this affair till the expiration of four years, when, Montgomery having arrested a neighbour, the man gave notice of his former transactions to one of his creditors, who laying an information before the lord mayor, Montgomery was lodged in Newgate on suspicion.

Being brought to trial at the next sessions at the Old Bailey, several persons deposed that they spent the evening with him at his own house at the time he alleged that he was in Holland, in order to take the benefit of the act: so that he was convicted, and received sentence to die.

For some time after conviction he behaved with apparent signs of devotion; but asserted his innocence, and said that the witnesses against him were perjured; and in this tale he continued till the arrival of the warrant for his execution.

Being pressed by the divine who attended him to tell the truth, he persisted in the former story until the Friday before his death; but in the afternoon of that day he acknowledged, that after having been on board a Dutch vessel; in order to take his passage for Holland, he had come on shore, owing to the contrary winds.

On the following day he insisted that, “as he had been sworn according to the methods used in Scotland, without kissing the book, his crime could not come within the meaning of the act”. In reply to this he was told that the mode of administering could make no difference to the nature of an oath.

Hereupon he made a full confession of his crime, and owned that, having come on shore, he concealed himself for some weeks in his own house; then appeared publicly, saying he had been at Rotterdam: after which he surrendered himself to the warden of the Fleet prison, and obtained the benefit of the act of insolvency.

On the Sunday following, when he was pressed to declare the whole truth, he exclaimed, “What would you have me say? I have told you all the truth, and can say no otherwise than what I have done. If I did, I should belie myself, and my own knowledge.”

This malefactor appeared dreadfully shocked on the morning of execution, and wished for time for repentance, which he now considered highly necessary. At the place of execution he warned the spectators to beware of covetousness, which had been the cause of his destruction.

* Sample of the Ordinary’s take on the gravity of disappointing your creditors:

That he suffered justly, as an Example, and for a Terror to such an Undertaking again, I believe no one can gain-say …

for which Atonement can scarce, but if ever, not without the utmost Difficulty, be made: And, through this Filth, and Mire of Wickedness, must he pass, who resolves to make an intentional, a real Fraud.

What can the Man think that shall be guilty of such high Offence? ‘Tis publickly known that human Laws are determined to punish it with Death, and what is to come afterwards, God only knows.

Let this then the Fate of poor Montgomery deter all others for the future from attempting a Breach of such an Indulgence, if ever it should please the Legislature to grant one again. And tho’, in a former Part of these Sheets, he did not scruple to say, he was not the only one who feloniously laid hold of the Benefit of the last Insolvent Act, yet Charity engages to think better Things, and to hope there is not an Instance of the like Kind to be met with in England.

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1761: John Perrott, bankrupt debtor

On this date in 1761, John Perrott was hanged at Smithfield for fraudulent bankruptcy.

Perrott was one of the bare handful of British subjects executed during the last century that bankruptcy legislation officially came with hemp teeth; he’s sometimes noted as the last bankrupt put to death, although in reality, he was simply the most famous of the last few.

John Perrott hanged at Smithfield (detail view; click for full image). From here.

He got famous in the usual way.

A once-reputable merchant who blew his fortune in the late 1750s? That backstory does not get you into the Newgate Calendar.

Fortune blown by siphoning creditors’ money to shady mistress, then refusing to divulge the particulars? Now you’re talking. It’s a wonderful vignette in the annals of moralism to find Perrott on the eve of his execution keeping mum on the subject because he had already received his last Sacrament — the inference being that in speaking, he would only sully his soul with a lie.

It was an aggravating position for his creditors, who had reason to believe that there remained recoverable cash, in the hands of his “Mrs. Ferne” or elsewhere.

Creditors always get stuck in a bind when debt goes bad.

The death penalty for bankruptcy has a long and illustrious history, back to the Roman Twelve Tables with its Shylock-like right for the aggrieved lenders to cut the debtor apart into parts proportional to their lost investments, de debitore in partes secando.*

Still, that stern corporal stricture has tended to run up against the simple fact that creditors are financially interested parties whose benefit is almost always better served by keeping their debtor among the living where he might be capable of repairing some part of his bond. Slavery, therefore, was often preferred by the ancients and retains a symbiotic relationship to debt to this day: to force the service of a debt, make a man your slave; likewise, to force someone into slavery, make him your debtor. Human traffickers love this tactic.

At any rate, English bankruptcy law as it evolved was a strange hybrid of public (criminal prosecutions) and private (creditors initiated and paid for the prosecutions). Bluffing a charge at the Old Bailey was just one potential strategem in the contentious relationship between borrower and lender, and not the most effective one, as this Duke law journal article (pdf) by Emily Kadens notes:

“[I]f this Bill Pass,” [critics of a 1706 bankruptcy measure] warned, “it will never be executed.” The latter prognostication turned out to be virtually correct. Creditors prosecuted infrequently because of the severity of the punishment and the cost and difficulty involved. Even when creditors did bring lawsuits, juries may have been reluctant to convict not only because of the penalty but also because they understood the potential for fraud in the bankruptcy system itself … A man was made a bankrupt by the ex parte declaration of a person claiming to be a creditor … The alleged bankrupt had no right to object … In the meantime, his alleged creditors had taken possession of his assets, leaving him nothing with which he could fight his case, unless he committed a felony by concealing his assets or had friends or family support him.

That fraud aspect was essential to making it, as Perrott did, so far as the gallows; plain-vanilla bankruptcy was not in itself a capital offense, but a debtor hiding his assets in the process changed matters. The law distinguished the accidental bankruptcy (e.g., the ship with your imports sunk) from the larcenous: “To the misfortunes … of debtors, the law has given a compassionate remedy,” Blackstone notes. “But denied it to their faults.” Which is not to say that many, many debtors did not indulge these “faults.”

It was nearly two full years from the time Perrott sat his lenders down in a tavern in — naturally — Cheapside to give them the bad news that he was a little bit short, until the time he met the hangman. In that span, auditors picking through the wreck of his estate gradually became aware that the numbers didn’t add up, and his bum business practices (selling 20% below cost to obtain ready cash) still left up to 17,000 missing pounds unexplained.

By the by, the emergence into the investigation of a paramour, who then turned out to be hiding Perrott-issued banknotes, transformed an ordinary bankruptcy into one of those felonious asset-concealment situations. (And, into fine tabloid fodder for the broadsheets.) When Perrott wouldn’t come clean with the whereabouts of his purloined boodle, his creditors had him up on hanging charges. And when Perrott still wouldn’t come clean — Sacrament and all — he stiffed his lenders at the last by leaving them no way to recover their swag.

Hopefully, Mrs. Ferne was worth the trouble.

* More discussion of the Roman jurisprudence here.

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