THE KREUGER FRAUDS

Evening Star, Issue 21147, 6 July 1932, Page 3

THE KREUGER FRAUDS

INVERTED FINANCIAL PYRAMID WHERE DID THE MONEY GO ? Without exaggeration one con certainly sav that a position unparalleled in tile history of finance has been disclosed, and one can foreshadow that when the full details are known Ivar Kreugcr will be found to have employed unbelievable methods in bolstering up what, it now transpires, was an inverted financial pyramid—with the point at its base—in a foundation composed of the quicksands of deception and forgery, said the ‘ Daily Mail,’ in discussing the colossal frauds of the Swedish financier. Ivar Kreuger chose a bullet rather than face the most serious charges of financial frauds the world has ever known —frauds which have irretrievably ruined thousands of small investors in his own country and in many other parts of the world. When the immensity of the disaster is visualised, it appears amazing that one man could have obtained the vast financial power necessitated to cause it. Ivar Kreuger was able to carry on his frauds—they can be described in no other way—by reason of bis dominating personality. This enabled him not merely to impress leading politicians and bankers in nearly every corner of the earth, but also to obtam the assistance, in the majority qf cases quite innocently, of the many directors of the companies concerned. He had the reputation of keeping his own counsel—we now know why. Obviously the possibility of criminal irregularities could never have entered their minds, if and when they had any doubts these were explained away with a plausibility of which Kreuger appears to have been a master. it must also be remembered that many of these transactions were cloaked by cross entries between various institutions, presumably created solelv for the purpose. MYTHICAL COMPANY.

A striking example of this is afforded by the Kreuger and Toll balancesheet of 1930. Among the assets that the company was shown to hold at December 30, 1930, there figured an item “ Cash and Banking Account— Kr. 108,971,566 ” (£6,000,000 at par). It now appears that this _ item included a credit balance of Kr. 0t.,000.000 (£2,900,001) at par)—nearly halt tbo total —wbich the company was said to June deposited with the International Bank and Fimumui migs A.O. Danzig. . Investigation now discloses the tact that this institution, which was shown to be holding this considerable sum at December 31, 1930, was at the time not even in existence. Actually, it was created some two months later. Turning to the forged Italian bonds, apparentlv forty-two Treasury bills for £500.000 each and five debt eertiJicatcs to the value of a further £7,500,000 (a total of £23,500,000) were included among the assets of the group. 1 ho Italian signatures to these bonds are said to have been forged by Kreuger himself. £9,000,000 worth of these bonds were included among the Kreucor and Toll foreign investments. The bulk of the balance is said to have been included in the assets ot the International Match Corporation, having been exchanged for a block ot genuine German bonds held by tfiat corporation. THE ITALIAN BONDS. It transpires that Kreuger, alien questioned by directors of these companies about these Italian bonds, mlormed them that finder no circumstances whatsoever must it bo disclosed that the bonds existed, as the tad that Italy had obtained tins vast loan

would lead to serious international, complications. . Other fictitious transactions covei operations in Poland by the Garanta Company of Holland, a recret Kreuger subsidiary acquired in 1920. Jins subsidiary showed assets amounting to more than £5,000.000. Analysis now shows that these assets consisted practically entirely of money owed to the concern by Kreuger "Other companies in the g'oiip snow money owed to them by the Garanta Company to approximately this total among their assets. Further irregularities are , m connection with the transactions in Spam. These seem to have had their f b j| s in the fertile imagination ° i KreuosjIt is frequently said that truth is stranger tlum .fiction. It certainly ■rnnears that no fiction writer would ever have drawn on his imagination to the extent of suggesting sue 4-mntic frauds as those on which Kreuger built up bis international of the most distressing features is the fact that it is nowbelieved that these irregularities have been going on for many JJ 1 J j Kreuger and Toll balance-sheets have SS&fcd for v.ry many WHERE THE MILLIONS \\EMA natural question that arises is. Where can all this money have gone. It is suggested that vast sums bav . „ disbursed to those who assisted in obtaining the match monopolies on which the group’s activities were based. Furthet, it is probable that immense Lmis weVe lost i'n filing matches under cost —a method employed bj Greyer to meet Russian competition. there is the belief that millions of pounds must have been expended b\ kreuger in supporting the price of t shares of the companies of his gioup on the world’s bourses. It was essential lor Kreuger repeatedly to obtain fresh funds g? m public bv issuing shares at high P™ miums these funds being needed piobablv to cover up irregular balance-sheet entries which otherwise might have to come to light.

FUNDS FROM BANKS. To make these issues; a success, the prices of existing securities in the group had to be maintained. Funds were probably borrowed from banks lor tnib purpose, the security for the loans being shares in the group. Ibe price of these shares bad to be maintained, otherwise further cover would lune been needed. . , .11,. It will not be surprising it eventually we learn that vast sums have been utilised bv Kreuger during the past few vears for this purpose. _ And who' has lost ail this money? Investors in every part of the world, in every station of life, and a cast number'of banking institutions on the Continent and in the United States. The crash has been devastating in Sw-eden, the losses of thrifty people being far, far greater than those incurred in England m 1892 as a result of the Liberator crash with which Jabez Balfour was connected. WORLD’S LOSSES.

In France, /losses spread from her smallest of investors to her greatest and most respected banks. In Zurich and Basle, institutions are reeling from the financial losses they have incurred. ~ . . A similar talc can be tol-cl of Ainsterdam, Brussels, and many other centres. In the United States individuals and hanks have suffered colossal losses. In Great Britain the loss is believed to he much smaller, although many financial houses, trust companies, and investors aro nioinlly facing, the iact tlvat their Krenger and Toll holdings are probably worth only the value of the paper on which they are printed, while their Swedish Match shares represent possibly only the number of shillings that they cost pounds.