A Bank President Accused of Looting His Own Vault

In a suit begun by Deputy Collector of Internal Revenue James P. Gleason against H. W. Wheeler and the Pacific Mortgage Company in the superior court yesterday, Gleason asks to recover a large amount of promissory notes and valuable real estate. Gleason charges Wheeler with having looted the Commercial National Bank of large sums of money.

Gleason states in his complaint that through false and fraudulent representations Wheeler sold to him, on August 24, 1894, one hundred shares of the capital stock of the Commercial National Bank at the par value of $100 each. Gleason claims that in payment for the stock he gave Wheeler eight promissory notes, six for $1,000 each and two for $500 each, all bearing the date of August 25, 1894, and made payable four years after date. Another note for $2,500, payable to the Commercial National Bank ninety days after date, he says, was given to Wheeler together with deeds to lots 5 in block 7, and lots 7, 8 and 9 in block 64, of Central Seattle. The notes, he says, were secured by fifty shares of the purchased stock.

Gleason says that Wheeler made many fraudulent representations to him. Among other things, it is claimed Wheeler represented to Gleason that the actual value of the stock in the bank was 20 per cent above par; that the bank had a reserve; that the securities held by the bank against the National Investment Company, the Puget Sound Lime Company, the American Investment Company, the Sidney Hotel Company, and the H. W. Wheeler, W. T. Chalk and D. T. Penny loans were as good as gold and every dollar collectible, and that every other security of the bank was in the same class; that the bank was in first-class financial condition and was doing a paying and profitable business. Wheeler, who was president of the bank, further represented to Gleason, according to the complaint, that he was obligated to the bank in the sum of $6,500, and that the note for $6,500 given by the plaintiff to the bank was given for the purpose of taking up and assuming the obligation, and that he would not draw any funds whatsoever from the bank upon the note. Wheeler also promised and represented that he would remain in the bank and retain at least $10,000 worth of stock.

Gleason alleges the truth of the matter to be that at the time he purchased the stock it was absolutely worthless, having little or no value. The bank, he says, had no reserve fund, and the obligations of the National Investment Company, the Puget Sound Lime Company, the American Investment Company, the Sidney Hotel Company, the Pacific Manufacturing Company and the Wheeler and Chalk loans were worthless, while the Penny loan was of little value. H. W. Wheeler and his brothers, L. H. Wheeler and Lee Wheeler, were, Gleason alleges, the principal owners and holders of the stock in each of the corporations, and the loans made by H. W. Wheeler as president were made with the knowledge that they were insolvent and their securities of no value whatsoever, and for the purpose of deriving the benefits of loans personally through the corporations, 'and had thereby cheated, looted and defrauded the bank of large sums of money and caused the same to suspend business.' The bank, according to Gleason, was about to suspend at the time he purchased the stock, and did suspend soon afterwards.

Wheeler, it is alleged, knew all of these facts. He was not obligated, it is claimed, to the bank upon his promissory note in the sum of $1,500, as he had stated, or in any sum greater than $1,200, which note Wheeler took up and withdrew $700 from the bank, replacing it by the $6,500 note drawn by Gleason in favor of the bank.

The Pacific Mortgage Company, according to the complaint, was organized by Wheeler for the purpose of covering his illegal transactions and for the further purpose of preventing his creditors from reaching property conveyed to the Pacific Mortgage Company by him and held by the company in disguise and in the place of the defendant. On November 15, 1894, Gleason states, Wheeler conveyed the lots which he gave to him as part payment for the stock to the mortgage company.

Upon discovering that he had been a victim of fraud, Gleason claims to have demanded the return of his property and notes, offering to return the bank stock he held. Wheeler failed to accept Gleason's offer and is now negotiating, it is said, to place the notes given him by Gleason in the hands of innocent purchasers, and the mortgage company is trying to get rid of the real estate. Both Wheeler and the mortgage company, it is alleged, are insolvent.

Gleason wants them enjoined from selling the notes and the property, and asks the court to compel Wheeler to turn over the notes to the custody of the court until the final determination of the action. If Wheeler has already negotiated the notes, the plaintiff asks to have the negotiations cancelled. When the case is finally brought to the attention of the court Gleason desires to have the notes and property given to Wheeler returned, also the $2,500 note given to the bank.