The Château de Condé had already changed hands in the prospectuses before it was ever purchased. Such was one of the prime artifices in the cause that the Paris Correctional Tribunal examined in the spring of 1873: to announce the acquisition of a great estate, to vow to establish therein an asylum for the orphans of Alsace and Lorraine, and then to offer to the public mortgage debentures advertised as secured upon that very domain. Yet the estate was not the property of the company. There existed only a conditional promise of sale, encumbered by a forfeit of one hundred thousand francs should the buyer fail to consummate his tender before the thirtieth of August.
When the Gazette des Tribunaux reported the judgment, the château appeared less as the heart of a philanthropic undertaking than as the decorative front of a financial speculation. The patriotic design was not necessarily false in its initial intent, but it served to lend moral authority to figures and securities that the magistrates deemed deceitful. Behind the word “orphanage,” one had to examine the contract, the actual ownership, the agricultural yields of the domain, and the monies already gathered from the public.
An Establishment Devoid of Capital
The individual at the core of the affair presented himself under the name of Chéron, while simultaneously assuming that of Villiers, to which, according to the court proceedings, he possessed no lawful entitlement. He had already suffered bankruptcy in 1866. In the early weeks of 1872, he took premises in the Rue Bonaparte and opened an establishment styled the “Banque Catholique.” He possessed no capital of his own and had hired the very furniture of his lodging. His announcements were ambitious: the house professed to engage in vast agricultural, industrial, and commercial operations, particularly on behalf of the clergy, religious congregations, and families.
On the seventeenth of March, Chéron published the articles of the projected company. Its share capital was fixed at two and a half million francs. The shares promised a return of six per cent, augmented by a dividend of the net profits. However, the definitive constitution of the firm was contingent upon the payment of a quarter of the subscribed capital; yet, without waiting for that indispensable stage, the enterprise arrogated to itself the right to issue mortgage debentures. From this first contrivance, the timetable favored the collection of funds before the promised financial base had been established in law or fact.
The purchase of the château was subsequently broached to prospective associates. On the fourth of July 1872, a private contract was signed with several persons, among whom were the Count de Villarceau, de Faby, Dehon, and Klotz. Together, they subscribed an initial fund of twenty thousand francs to set the scheme in motion. Chéron was to acquire the estate of Condé, situated in the Eure, for the sum of one million and sixty thousand francs. A civil society was to establish there an orphanage for the children whose fathers had fallen in the war of 1870, dividing the profits derived from the exploitation of the land and the labor of the youth.
The appeal proved exceedingly persuasive, combining three things that the public earnestly desired to see united: a work of mercy, the moral restitution of a national defeat, and a lucrative placement. The prospectuses announced twenty thousand mortgage bonds at 242 francs 50 centimes, redeemable over forty years at four hundred francs. They were to yield five per cent on their nominal par value. Other advertisements spoke of a return approaching ten per cent, disbursed weekly, in gold coin and exempt from all taxation. The domain was represented as yielding three hundred and fifty thousand francs annually, exclusive of state subventions.
The courtroom proceedings exposed the decisive disparity: the property brought in merely thirty-four thousand francs per annum. Nor did it belong to the company; the title flourished before the subscribers was merely a conditional promise, burdened with a deadline and a ruinous penalty. The estate could by no means secure, as an acquired asset, that which the promoter had yet to find the means to buy.
Names That Inspire Trust
The publicity was by no means confined to arithmetic. Letters from bishops commending the charity were reproduced within the prospectuses. A committee of patronage seated alongside a Roman prelate General Martin, commanding the military subdivision of the Eure, as well as Doctor Chéron, chief physician to the Saint-Lazare hospice. The Gazette observed that the prelates had lent their sanction to a charitable endeavor, not to a commercial venture. The general promptly withdrew his name upon learning the true nature of the affair; the physician formally protested against the unauthorized use of his surname.
This divide between the approved charity and the speculative investment formed one of the fatal junctures of the prosecution. An episcopal letter of encouragement might cast an aura of respectability over a prospectus without in any way guaranteeing the solvency of the bonds. The printed name and the consent it purported to represent did not coincide. In that era, as in every public subscription, readers possessed no access to the private conversations and grave reservations that had preceded the printing.
The editor of the journal L’Épargne, Klotz, had assumed an agreement previously concluded with Destrez. He undertook to place twelve thousand bonds and to receive a premium of thirty-two francs fifty centimes per certificate to cover his promotional outlays. The money, however, did not remain solely in advertisements: upon Chéron’s arrest on the thirtieth of August, 75,840 francs had been remitted to Klotz, and 5,722 francs 50 centimes to Chéron. The judicial authorities sequestered these sums, save for ten thousand francs already disbursed by Klotz and 722 francs retained by Chéron.
Other certificates had been detached from a counterfoil register. The narrative recounts an episode wherein a holder of one hundred and ninety shares in a galleon-salvage company was approached to take up the debentures through Chéron’s agency. He consented to barter four hundred and sixteen bonds at a determined price, before their lawful character became the subject of judicial dispute. Such transactions illustrate how the securities circulated through networks of acquaintance: shareholders, intermediaries, publicists, and provincial notables.
The Judgment Distinguishes the Roles
The tribunal heard the accused over the course of two hearings, on the fourth and eleventh of March. Three had taken flight: Chéron, de Faby, and Destrez. Monsieur de Villarceau was discharged of all accusations, the court ruling that it was by no means established that he had acted with fraudulent intent. This decision is as significant as the convictions: the mere fact of having taken part in the venture or having believed in its public utility was insufficient, of itself, to constitute criminal design.
Chéron, tried by default, was condemned to five years’ imprisonment and a fine of three thousand francs. De Faby and Dehon each received thirteen months of imprisonment and a fine of one thousand francs; Klotz and Destrez were sentenced to two years in prison and a fine of two thousand francs. The decree forbids the assumption that all the actors were guilty in equal measure: some were fugitives, others suffered conviction, and de Villarceau was cleared for lack of established fraudulent intent.
In its chronicle, the Gazette reveals a mechanism far more precise than the generic word “bank” might suggest. The company did not own the château, the advertised revenues bore no relation to the actual rent-roll, the projected capital remained ungathered, and the publicity transformed endorsements strictly limited to a charitable cause into a promise of financial security. It was these discrepancies, and the distinct parts played by the participants, that furnished the bench with the material to sever mere credulity from deliberate participation in a fraud.
The château remains at the center of the cause, though it could never sustain the weight laid upon it. Before being an asylum for orphans, it was an estate whose acquisition was wholly contingent; before being a lawful mortgage, it was an unfulfilled covenant; before becoming the fountain of promised riches, it was a property whose revenue fell far short of the printed claims. The law did not sit in judgment on the moral worth of an orphanage. It judged the men and the artifices whereby subscribers had been brought to surrender their money.
The final irony lies in this disproportion: the prospectus portrayed a future whose beneficiaries were to be fatherless children, while the funds actually gathered represented but a fraction of the trumpeted millions. The name of a noble cause had invested the investment with the semblance of certainty, even while the château itself remained hopelessly out of reach. In the judgment recorded in 1873, a charitable intention could never supply the place of a deed of property.