FINANCIAL ROGUERY

Hawke's Bay Tribune, Volume XXIII, Issue 81, 17 March 1933, Page 9

FINANCIAL ROGUERY

THREE FAMOUS TRIALS MILLIONS Of POUNDS LOST. DEFRAUDING THE INVESTOR. The story of three notorious frauds in English commercial history was related in entertaining fashion by Mr. Julius Hogben in an address on “Sellers of Gold Bricks,’’ given before the Auckland Creditmen ’s Club. The speaker said the nature of these financial crimes pointed to obvious weaknesses in New Zealand company law, as there was nothing in the Companies Act to prevent similar frauds being perpetrated in the Dominion. “How is it that financial rogues are able to obtain money from the public?” asked Mr. Hogben. “Almost invariably they inspire the people’s confidence by a display of wealth and respectability, winning the faith of the investing public with the lure of great profits.”

Tho amazing case of Whitaker Wright was a typical instance, said Mr. Hogben. Born in England in 1845, he wcut to America as a mining assayer when he was 21 years of age, purchased a mining claim and sold it at a profit, and was a millionaire when he was 31. “After tho first 10,000 dollars, tho rest was easy,” ho was reported to have said, and the story of his financial transactions proved how true was his boast. VAST SUMS SPENT ON LUXURIES. Wright returned to England in 1889 and started upon a prosperous career of company promoting. In 1894 he launched a “holding” company, tho London and Globe Einauce Corporation, which dealt in tho shares of a large number of other companies Which it promoted. His profit as a result of the formation of the company was £238,436. He soon became famous on account of his lavish expenditure on luxuries. He bought a country house at Lea Park, Surrey, where he spent vast sums in levelling hills because they obstructed the view, building a private theatre in tho grounds and constructing artificial lakes. He was an enthusiastic billiards-player and built a beautiful billiard room underneath one of the lakes. He also acquired a mansion in Park Lane and filled it from basement to ceiling with art treasures.

In 1897 Wright acquired the assets of his promotirg companies and floated a new London and Globe Corporation on a larger scale. Ho “rigged the market” to suit himself and used part of his own money and all his companies’ money for purposes of speculation. In 1900 came liquidation and exposure. He was charged under the criminal law with issuing a false balance-sheet to deceive the public. He was sentenced to 10 years’, imprisonment, but took poison, and dropped dead after hearing the sentence. “It might seem extraordinary that a man facing such a grave charge should have a bottlo of poison in his possession,” said Mr. Hogben, “but it need cause no surprise when it is known that during the whole of the time he stood in the dock he carried a loaded revolver in his hip pocket!” HORATIO BOTTOMLEY. The case of Horatio Bottomley was a sensation of more recent memory. Said to bo one of the greatest orators England produced during the war, ho attracted the public by the lure of profit and tho gambling spirit. His generosity was notorious. Some of the people upon whom he lavished money ho scarcely knew and his tips to servants were on an extravagant scale. It was common, for instance, for him to tip railway porters £l. Bottomley’s method was to found “holding” companies and he was several times prosecuted and acquitted before his final downfall. When he was adjudicated a bankrupt in 1911 ho formed the Northern Territory Syndicate, Ltd., into which he put all his money in the names of himself and his manservant, with the result that his creditors had no claim upon his wealth, lie founded the Hansard Union and the Joint Stock and Financial Corporation, the public entrusting him with approximately £20,000,000 of its money, for which the owners were still waiting. Bottomloy spent his immense profits on racehorses and newspapers, including John Bull. “VICTORY BONDS.” The Victory Bond clubs, which he founded, brought, about his defeat. People of all grades of society were invited to purchase bonds and participate in a gigantic lottery with the expectation of winning £20,000. “Thousands of people applied for those bonds, the money coming in at the rate of £lOO,OOO a day,” said Mr. Hogben. “Everybody knew Bottomloy was honest. He said so. He told the tale to every jury he appeared before and he advertised it in his paper. In 1922 he was convicted on 23 charges of fraud and was sentenced to seven years’ imprisonment.” Gerard Lee Bevan floated tho CityEquitable Fire Insurance Company, Ltd., in 1908 with a capital of £50,000, subsequently increased to £375,000,

said Mr. Hogben. The company gained tho confidence of tho public because of the distinguished personnel of its board of directors. It gathered up a large insurance business and then Bevan received the authority of the directors to invest in the shares of other companies. BEVAN’S ENORMOUS LOSSES. The sum of £229,000 was invested by tho directors in a Paris hotel and £135,000 of the capital was lost: £71,000 was put into United Brass and £70,000 of it was lost; went into a ranch in Brazil and £345,000 was lost. The company lent £llO,OOO to its general manager, who filed a petition in bankruptcy. It lent £350,000 to its brokers, of whom Bevan was senior partner; it lent £9329 to Bevan personally and to a concern called tho Saskatoon Grain Company it lent £9OOO, which it did not get back. But Bevan saw to it that tho insurance company paid handsome profits. Then came exposure and imprisonment. “The New Zealand Companies Act has not been substantially amended for 30 years,” said Mr. Hogben, “yet certain changes arc urgently needed to protect the investing public from frauds of the kind I have mentioned.” Since the Bevan trial the English law had been altered to make the directors of a company liable for a company’s dishonesty, and a similar alteration was required in New Zealand. Mr. C. J. Tanks, who moved a vote

of thanks to the speaker, said it was obvious something needed to be done to strengthen the existing legislation and make it impossible for rogues to defraud the public.