Swedish conman Ivar Kreuger built his fraudulent match empire on 'the foolishness of people'. As with Robert Maxwell, few twigged until after his death.
If you're over 60, chances are you'll have heard of Ivar Kreuger, the Robert Maxwell of the 1920s. Kreuger ran a global empire, lied to investors, and, upon his untimely death, received a hero's burial. Then, a few weeks later, everyone found out what he'd really been up to. That he doesn't enjoy greater infamy is doubtless down to two factors: his nationality and business. Back in the old days it paid to be from a country that counted. But Kreuger wasn't a Brit, nor a Yank, nor even a German - he was a Swede. Moreover, his chosen sector was hardly glamorous. In those pre-disposable lighter days, Kreuger's primacy earned him the title 'the match king.'
Having spent most of his 20s working abroad as a civil engineer, Kreuger returned home to found the United Swedish Match Company in 1913. Phosphor-tipped tapers were clearly his calling and, during the first world war, Kreuger worked ruthlessly to dominate the Swedish match industry. Examples of his unscrupulous attitude abound: an uncle's signature was obtained on a contract after a bout of heavy drinking and, when Swedish Match merged with a larger rival, he duped his counterparts into believing his shares were far more valuable than they were, thus dominating the resulting company. After the war, Kreuger speculated, expanded and entered dubious covert agreements with Sweden's top bankers.
Yet his shareholders remained blissfully oblivious: he paid handsome dividends and the books looked more than healthy, though this was wholly down to his embellishments and elegant prose. Often Kreuger's fellow board members would press him for more information but he invariably palmed them off with very little. Kreuger was charismatic cool incarnate; if something didn't bother him, nobody else really wanted to worry about it either.
It was these qualities coupled with his courtly European manners that made Kreuger the darling of Wall Street on his many fund-raising visits to New York.
Kreuger benefited like nobody else from the '20s boom. Using money, largely from American investors, Kreuger loaned funds to European governments still reeling from the first world war; the price he exacted for his favourable interest rates was a monopoly on match production or import. Having acquired 10 factories for a loan of $6 million to Poland, Kreuger lent the French Pinochet government $75 million: he got unlimited import rights and Pinochet a stable franc. Kreuger's empire grew apace: $185 million secured him monopolies in Estonia, Latvia, Yugoslavia and Romania. It should not be imagined that Kreuger did no good - on the contrary, the loans he advanced to these countries helped shore up their crumbling economies.
When his highly unusual modus operandi was queried, Kreuger would reply that 'I have built my empire on the firmest ground that can be found - the foolishness of people.' He was right: when, in 1929, he declared a net profit of $30 million on gross receipts of $80 million, few questioned him. The select cabal of New York and Stockholm financiers who had an inkling of the real situation kept their mouths shut: not only did Kreuger make silence worth their while, but they too believed at least part of the Kreuger myth.
The crash of 1929 marked the end of the boom, but Kreuger's share price escaped relatively unscathed. Indeed, two days later, he announced with characteristic brio that he would be lending Germany $125 million; the final sum, lent in 1930 when he was at the very peak of his powers was $200 million, of which $30 million came from his own pocket. Kreuger weathered 1930 well, buoyed up by his 250 factories in 43 countries and around 80% of the world match trade. But by 1931 it was clear that the Depression would last longer than expected. Kreuger's trademark high dividends were increasingly difficult to meet and his investors were becoming irate.
By early 1932 Kreuger realised the game was up; he travelled to Paris where, on March 12, in his salubrious apartment, he shot himself.
Much like Maxwell, Kreuger's reputation survived him briefly. 'No common adventurer' gushed The Times, 'a very puritan of finance' eulogised the New Statesman, though the Economist outdid them both by likening Kreuger to the hero of an Aeschylean tragedy. Three and a half weeks later, Price Waterhouse, the forensic auditors, revealed that Kreuger had grossly over-represented company assets. It soon emerged that he had counterfeited $142 million worth of Italian government bonds. Between 1917 and 1932 he had inflated the earnings of his real and unreal companies by a quarter of a billion dollars. Of the real revenues, hundreds of millions had disappeared, much of it on kickbacks, blackmail demands and his costly tastes in property, possessions and women.
The collapse of Kreuger's empire ruined thousands of people, including many of his own countrymen: his demise was a double blow for the Swedish - their financial wunderkind had been a charlatan of Chaucerian dimensions.
But what was perhaps even more worrying than the scale of Kreuger's shenanigans was that, were it not for the length and severity of the Depression, he would probably have got away with it.