On 10 August 1869, Halley and Dubois dispatched to their client in Zurich a copy of the Figaro-Programme. The previous evening, the journal had reported a stock market rumour: the cashier of a foreign bank had, it was whispered, lost three hundred thousand francs in speculation. In their accompanying letter, the two Parisian bankers urged Sehaer to read the opening lines of the financial chronicle. The whole town was speaking of it, they added; had the public known what he had lost through their own firm, the stir would have been greater still. It was this precise date that the Court of Appeal of Paris retained, five years later, to draw the line between those transactions deemed still excusable and those that engaged the civil liability of the financial intermediaries.
Émile Sehaer was born in Switzerland in 1846. On 24 October 1866, the Banque Fédérale of Berne appointed him cashier of its sub-branch established in Zurich, with an annual stipend of 2,400 francs. In November 1867, he began to speculate on the Geneva Bourse. The chronicle records that the Genevan market soon appeared too narrow for his ambitions, prompting him to transfer his operations to Paris. He acted first through the banker Huguet, then through Delrue, a former clerk in Huguet’s employ. Halley and Dubois, themselves former clerks of Delrue, were backed by Sehaer as sleeping partners to found their own banking house; Monterossi and Boyer also received orders as remisiers, while Séraphin acted as an unofficial broker on the Coulisse.
The sums remitted by Sehaer to Paris fed speculative transactions which, according to the Gazette, swallowed several millions in less than two years. The source provides three distinct figures that must be kept separate. The headline announces 3,266,068 francs lost; the statement of the case cites a deficit of 3,266,668 francs in the Zurich till; the statement of reasons in the appellate decree puts the embezzlement committed to the bank’s prejudice at 3,250,000 francs. The article does not reconcile these discrepancies. It relates that following Sehaer’s abscondence in October 1869, justice overtook him, and the Criminal Court of Zurich sentenced him, on 2 February 1870, to eleven years of penal servitude.
The Banque Fédérale did not rest content with the prosecution of its former cashier. It lodged a criminal complaint against Halley, Dubois, Monterossi, Boyer, and Séraphin, denouncing them as accomplices in the defalcation. This preliminary investigation terminated in a dismissal of charges. Concurrently, the Bank brought a civil action for damages. It initially claimed three million francs, subsequently praying that the prejudice be assessed upon a detailed statement of claims and that a provisional award of one hundred thousand francs be immediately granted.
The Civil Tribunal of the Seine delivered its judgment on 14 August 1873. With respect to Halley, Dubois, Monterossi, and Boyer, it held that it was by no means proven that they were aware of the fraudulent origin of the funds. Sehaer had constantly held himself out as the agent of third parties whose names he was forbidden to disclose. He had caused a personal account to be opened separate from that reserved for transactions ostensibly conducted on behalf of others; his telegraphic instructions circulated openly among numerous clerks. Settlements were sometimes effected within the very premises of the Bank, whose statutes prescribed periodic audits. In the eyes of the court of first instance, such circumstances explained why the intermediaries had entertained no suspicion of fraud.
The position of Séraphin was considered apart. On 18 August 1869, he had journeyed to Zurich to confer with Sehaer. He stated during the preliminary examination that certain matters he had witnessed there had awakened his suspicions, and that he had returned to Paris with the firm resolve to wind up the operations as soon as practicable. It had nevertheless been necessary to liquidate open forward positions, and Sehaer was, he maintained, indebted to him in considerable sums. The Tribunal ruled that after this journey, Séraphin had committed a tortious fault by continuing operations and receiving fresh funds. It ordered that the damages be determined upon a statement of claims, declining for the moment to grant any provisional sum. The other intermediaries were entirely discharged of civil liability.
Séraphin lodged an appeal. He died during the proceedings, which were resumed by his two children, Marie-Madeleine and Jules, as heirs under benefit of inventory. For its part, the Banque Fédérale entered a principal appeal against Halley, Dubois, Monterossi, and Boyer, and an incidental appeal against Séraphin’s estate. Several hearings, from 23 June to 28 July 1874, were devoted to the various legal foundations of the claim.
The Bank advanced three distinct grounds. First, it sought to exercise Sehaer’s own rights to recover sums paid in settlement of gambling debts. Secondly, it maintained in its own right that the fault of the intermediaries had directly caused its injury. Finally, under another provision of the Civil Code, it claimed restitution of payments made with embezzled monies. The Court rejected both grounds sounding in restitution—those relating to gaming and to monies received in good faith—but retained civil liability for fault. It found no evidence that Séraphin had rigged market prices or taken the opposite side of the orders entrusted to him. It likewise held that unlawful encroachment upon the statutory monopoly of official stockbrokers was not established: whenever transactions reached fruition, official brokers had been duly employed. As for funds received prior to 10 August, the Court allowed that they had been consumed in good faith in the settlement of accounts or brokerage commissions.
Yet the Court did not halt at this initial period. In its view, the intermediaries might well have believed at the outset that Sehaer was acting on behalf of a wealthy capitalist. He maintained two separate ledgers—one for vast speculative operations, the other for his personal dealings—and incessantly repeated that he was merely an agent. The remittances sent from Zurich appeared to corroborate this tale, and the openness with which orders were transmitted bore little resemblance, according to the decree, to the conduct of a cashier seeking to conceal his misdeeds.
Other signs, however, ought to have shaken this confidence. Sehaer sent banknotes in uncertified, uninsured letters, despite the warnings of his correspondents. Two letters, containing respectively ten thousand and twenty thousand francs, went astray in the post without his actively seeking to trace them. Those intermediaries who had travelled to Zurich had seen a youthful cashier of twenty-two years, living modestly upon a slender salary. Finally, in a letter dated 13 May 1869, Sehaer had expressly instructed that the notes of the Banque Fédérale should be exchanged only in parcels of five thousand francs, and never presented by one and the same person. The Court considered that, to men seasoned in financial affairs, such an extraordinary precaution clearly betrayed the illicit provenance of the paper.
The newspaper issue of 9 August transformed these disparate clues, in the Court’s reasoning, into a suspicion thenceforth impossible to dismiss. The report recounted the loss of three hundred thousand francs by the cashier of a foreign bank. On the morrow, Halley and Dubois transmitted the clipping to Sehaer, observing that his losses with their house would have caused an even louder stir had they been made public. The Court deemed that none of the intermediaries could have failed to apply the rumour to their own client. It ruled that from 10 August onward, they must at the very least have suspected that the funds sustaining Sehaer’s reckless play were drawn from the till committed to his custody.
Séraphin’s journey to Zurich on 18 August merely confirmed this chronology without marking its inception. In July, he had executed orders for Sehaer resulting in a loss of 635,315 francs. The Court held that the explanations exchanged during that interview must have been decisive. Séraphin had admitted under judicial examination that his suspicions were then fully aroused, while maintaining he intended to wind up the business as soon as feasible. The tribunal of first instance had selected that visit as the starting point of his civil liability; the Court of Appeal carried the common fault back to 10 August, the date of the letter dispatched by Halley and Dubois.
The Court did not, however, convert this civil fault into a criminal conviction. It recalled that the primary injury flowed from Sehaer’s defalcations, and that the Bank was itself answerable for the laxity of its internal supervision and control. This institutional negligence had to be weighed in assessing the quantum of damages. The operative part of the decree condemned the intermediaries and Séraphin’s heirs to indemnify the Bank, the precise amount to be established upon a subsequent statement of claims based on the sums received from Sehaer after 10 August 1869 for his stock exchange dealings. The Court further granted a provisional award of one hundred thousand francs. Joint and several liability was apportioned into two groups: Halley and Dubois on the one hand, Monterossi and Boyer on the other, each jointly bound with the heirs of Séraphin.
The Bank’s criminal complaint against the brokers had thus miscarried; its civil action succeeded upon far narrower ground. The Court did not rule that they had engineered the embezzlement, nor that they had manipulated market prices. It reproached them for having persisted in transacting business for Sehaer and receiving his funds once a grave suspicion had become inescapable. The threshold adopted by the decree rested upon the date of a press squib and a confidential letter. The report discloses neither the final sum of damages, which remained to be proven, nor the specific grounds of the earlier criminal dismissal. Yet it illuminates with stark clarity how a rumour once published may, in the eyes of the civil judge, irrevocably transform the legal nature of a commercial relationship.