FRAUDS. Frauds practised for material gain were com mon in remote antiquity and they have remained with us ever since. Wherever men have found themselves gifted with ingenuity a persuasive tongue and histrionic talent without a moral sense to restrain them, they have dishonestly turned their gifts to their own profit. Their exploits have come down to us from the very dawn of history. According to Herodotus, the mason who built the stone treasury of Rameses III. contrived a secret entrance through which he passed nightly to steal a portion of the royal . treasure. The Old Testament describes how Jacob defrauded his brother Esau of his birthright and how the Hebrews in bondage defrauded their Egyptian taskmasters of their jewels. Specimens of loaded dice have been found in Herculaneum and it is probable that in every crowded community of the ancient and medieval world there were individuals who practised fraud as a profession. In modern times frauds are not confined to persons born with glib tongues and no moral sense. They have been practised more often by men of natural probity who took the first step in the hope of retrieving themselves from financial ruin.
Frauds for personal gain must be distinguished from those perpetrated solely for mischief. The catalogue of literary f or geries is already long. The person who fabricated a grammar of the Formosan language in Dr. Johnson's time was a laborious practical joker, as were the joint authors of Wanderings in New Guinea, by "Capt. Lawson R.N.," a book which was accepted as authentic by all British learned societies except the Linnaean, because the wardroom officers of H.M.S. Basilisk who produced their book in advance of that which they had discovered to be pro jected by their unpopular Admiral, knew less about insects than they did about the fauna in fur and feathers. A later forger of travel books who signed himself de Rougemont, had been a foot man in the family of an Australian Governor. It is supposed that he was also the author of more than one imaginative book on the exploration of South America for which he took the name of Paul Fountain, but since he made some money by these literary forgeries, he might more properly have been referred to in the paragraphs dealing with frauds for profit. The person who fabricated the doggerel lines that appeared in the Times during the World War, over the name of Rudyard Kipling, may have had the mixed motive of injuring the reputation of both the poet and the newspaper.
The motives of Wenzel Hanka, who fabricated poems in the old Tchech language was purely patriotic. Other nations had old national poetry and Hanka did not wish his nation to take an in ferior place. So good was the literary form of his productions that they were admired and quoted for nearly forty years. Goethe himself was inspired by them for some of his poems. The manu script produced by Hanka appeared to date from the twelfth century, but when it was submitted to chemists they found in the colouring of the illuminated initials, Prussian blue, which was not discovered until a later date. After Hanka's death, his library was searched and the instruments used in the fraud to gether with a draft of the poems in his own handwriting were found concealed. The motives of the youth, Thomas Chatterton, who committed suicide in 177o at the age of 18, was rather to obtain a hearing than to embellish the literature of his native coun try. He, too, was no mean poet, though he was less skilled in the arts of the forger than Hanka. He had chosen for his mouth piece a fictitious monk of the 15th century whom he called Thomas Rowley.
It was scarcely possible that the modern interest in archaeology should escape the attention of impostors. Quite a factory of ancient documents alleged to have been found in tombs and in the sand of the Fayum are submitted to foreign tourists year by year. For the most part they are not unskilfully forged upon sheepskin and papyrus, though they would not deceive any quali fied expert : some are clumsily executed, as for example, the goat skins in which the eye holes have been mistaken by the forger for missing portions of the skin and he has elided a word or two to allow for them; or where he has used an ink or a kind of pen that had not been invented at the period to which the manuscript is ascribed. Hand in hand with these documentary forgeries go the scarabs and the figurines and the objects alleged to have been recovered from Pompeii and Herculaneum. Dupes are always to be found to carry such antiquities back to their pri vate museums and to defend their authenticity against every assailant.
Even Egyptian mummies have been fabricated with success. A Dresden doctor having purchased the corpse of a young woman, embalmed it and disposed of it as the mummy of the Queen Nitocris for a considerable sum. Unfortunately his process was defective and when the mummy, which was supposed to have re sisted the ravages of time for three millenniums, began to decom pose, the fraud was discovered. Dr. M. W. Shapira (183o-1884) aimed higher when he offered to the British Museum fifteen sheep skin strips cut from the ends of synagogue rolls 30o years old, treated with chemicals, as an earlier version of the history con tained in the Book of Deuteronomy, belonging to the 9th century B.C. He was a Polish Jew, who kept an antiquity shop in Jerusa lem. On the discovery of the Moabite stone in 1872, he had sold to the Prussian government forged Moabite pottery, which was exposed by Clermont-Ganneau, who had deciphered the Moabite stone. This scholar was sent to London to examine the sheep skins and he declared them to be a forgery, probably by four or five people. Shapira committed suicide in Rotterdam in March 1884.
Savants of reputation seem to have a vein of credulous sim plicity which makes them the natural prey of the forger. Charles, a mathematician of European reputation, was induced by a clumsy forger named Vrain-Lucas to purchase letters of which Cicero, Socrates, St. Jerome and Lazarus, after his resurrection, were said to be the authors, and these distinguished persons wrote their letters in modern French and on contemporary notepaper. Such clumsy mistakes are not uncommon. A will purporting to be signed in 1862 was written on paper bearing the 187o water mark: envelopes addressed by celebrities in the 18th century have been offered for sale, though envelopes were unknown before 1842. Red ink appears in documents dated in the 17th century though red ink was unknown before 1780.
False claims to titles and estates in England have been not uncommon. In 1824, Richard Cook laid forcible claim to the barony of Stafford by taking possession of Stafford castle for a few hours and collecting the rents of the estate. He made a "state entry" into Stafford in a hired carriage emblazoned with the Stafford arms and four horses. These were unyoked by a mob of his admirers, who drew him in triumph to his hotel. The next false claimant was Thomas Provis who laid claim to the baronetcy and estates of Sir Hugh Smyth of Ashton hall, Gloucestershire. On the trial of the action in 1853, his proof broke down, for it was shown that at the time when he alleged that he had had an interview with Lady Bath, he was actually serving a sentence in gaol for horsestealing. He was sentenced to penal servitude for years.
As an instance of the gullibility of people when titles are claimed, the case of Robert Taylor, who represented himself to be the son and heir of Lord Kennedy, ought to be quoted. This youth had been married more than once before he was 21 ; he was uneducated and common-looking, having been, in fact, ap prenticed to a chimney-sweep in Durham. Nevertheless many people were found to believe in him and a huge crowd attended his trial. He was sentenced to 21 years' imprisonment. His chief concern when sentenced was to know whether any of his wives could pursue him on his release.
The impudent claim of Arthur Orton, a Wapping butcher, to the title and estates of Sir Roger Tichborne in May 1871, aroused greater public interest than any trial of this nature before or since. Sir Roger Tichborne had been born in 1829 and educated at Stonyhurst. He was an officer in the carabineers for years. He had become secretly engaged to his cousin and this being dis covered by her father there was a stormy scene and he sailed for South America in 1852. He was then presumptive heir to the baronetcy. His uncle died while he was in Valparaiso. On April 20, 1854, he sailed for Australia in the Palma. A few days later wreckage from that vessel was picked up and none of the crew was ever heard of again. Roger Tichborne's will was proved and legal proof was given of his death. Meanwhile, his mother, unwilling to believe in his death, had advertised a reward for his discovery. Thirteen years after the loss of the Palma one of her advertisements came to the notice of a solicitor in Wagga-wagga, Victoria, who wrote to Lady Tichborne that her son was living in the town under the name of Castro. Funds having been provided for his journey, this man made a devious journey to Paris during which he went to Wapping to inquire about the Orton family and to Tichborne where he was shown over the house as an ordi nary visitor. Roger Tichborne had been a slight, narrow-chested man : the claimant weighed nearly twenty stone. Nevertheless Lady Tichborne made an affidavit that she recognized her son and she allowed him Li,000 a year until the trial. She died before the claim came before the court. The trial took up the greater part of two years. Among the claimant's witnesses were old servants, friends of the family and troopers in the carabineers. England was divided between pro- and anti-claimants. But as the trial wore on and the claimant himself was cross-examined and admitted that as far as he could remember Caesar and Virgil wrote in Greek and that lazes Deo semper meant "laws of God forever," and went on to say that he had seduced the lady to whom Roger Tichborne had been engaged—the lady being since married and being actually in court at the time—there was a wave of public sentiment against him. He lost his case and was subse quently sentenced to fourteen years' penal servitude for perjury.
There was a mingling of the practical joke and the fraud for profit in the exploit of the ex-convict, William Voigt, who in 1896 assumed the uniform of a captain in the First Prussian Guards and, having collected a force of eleven genuine soldiers, entered the town hall at Koepenick, confiscated the funds of the munic ipal treasury and sent the burgomaster and the treasurer under military arrest to Berlin. He was sentenced to four years' imprisonment.
A parliamentary enquiry was held in Nov. 172o and as a result, Aislabie, chancellor of the exchequer and several members of parliament were expelled the House. The crash had followed the collapse of Law's bubble in France. John Law of Edinburgh, had been made controller general of the French finances upon the strength of a scheme for an East Indian and Mississippi Com pany by which the national debt of France was to be paid off. In 1716 he opened a bank in his own name. The shares rose to 20 f old their original value and in 1719 they were worth 8o times the amount of all the current specie in France. In 172o the whole fabric of false credit collapsed, spreading ruin throughout the country. Nine years later Law died in poverty at Venice.
Company and banking frauds were commoner during the first half of the 19th century than they are now. They were due generally to the misplaced confidence of directors in their servants. Walter Watts, an assistant clerk in the Globe Assurance Office, on a salary of £200 a year, succeeded in robbing his employers un detected for years and in leading a double life quite unknown to them. He owned houses in London and Brighton; entertained largely; gave balls and suppers, and even controlled two of the London theatres without a whisper of his real identity reaching the ears of his employers in the city. His defalcations amounted to £70,000. He ended his life in a convict prison.
Hard upon his heels followed Robson, chief clerk in the Crystal Palace Company, on a salary of £150 a year. He too entertained largely in the West End. He wrote plays good enough to be given in London theatres and he dressed fashionably and maintained a smart carriage. His directors were aware of this, but they accepted his story that he had been lucky on the Stock Exchange. His income was really derived by creating fictitious shares in the company's stock. All went well with him until the head of his department asked him one day to produce certain scrip which he had made away with. He said that he had taken the certificate home. His chief insisted upon accompanying him to his house and while he waited, Robson escaped by the back door to Sweden where he was arrested for extradition. His defalcations proved to be £27,000 and he was transported for 20 years.
Robson's conviction caused a profound sensation in the com mercial world and the great undertakings began to look into their affairs. The Great Northern Railway Company became uneasy when it discovered that larger dividends had been paid than the capital warranted. Their books were well-kept and in a published report they stated that "they had every confidence in their regis trar, Mr. Redpath." Yet this trusted servant had issued no less than £200,000 of fictitious stock. He invented new shareholders, endowed them with forged stock for which the dividend passed to him. Redpath is interesting as a psychological study: he was an open-handed philanthropist who would forge a share certificate and sign a cheque for a charity within the hour. He was a collector and a patron of the arts, given to lavish hospitality, but his great est luxury lay in giving to the poor. His downfall was dramatic. On the platform of a railway station he was passing the chairman of the company who was in conversation with a certain peer and he raised his hat. The peer stopped him and shook hands. "What do you know of our clerk?" enquired the chairman. "Only that he is a charming fellow who gives the best dinners in London." Struck with uncomfortable surprise, the chairman ordered an investigation and Redpath fled to Paris, but he returned volun tarily, stood his trial and was sentenced to transportation for life.
The failure of the Liberator Society brought to light defalca tions by Jabez Balfour, Hobbs and Wright of two million sterling. The Liberator Building Society had been bankrupt for some 15 years, but the fact was concealed from the shareholders. When Balfour joined it he was a member of the House of Commons with a considerable estate in Oxfordshire. The arrest of Wright and Hobbs, his partners in the fraud, warned him what was coming. He resigned his seat, gave his sister a power of attorney, and fled with all the ready money in notes and gold that he could lay his hands upon. His chosen asylum was the Argentine where he pur chased a brewery and felt comparatively safe, since the Argentine Government had refused to grant his extradition. The case was fought from court to court for twelve months, but at last the supreme court adjudicated against him. Even then there were desperate attempts to rescue him. His trial dragged on for months in England, but he was eventually sentenced to 14 years' penal servitude.
The London and Globe Company frauds of the early 'nineties were the work of Whitaker Wright, an Englishman who had spent many years as a mining engineer in Philadelphia. He returned to England in 1889 and began at once to float companies. His method was always the same—to rob the companies in which he was concerned and to conceal the facts under a cloud of compli cated details. The directors of the London and Globe Company were puppets in his hands and believed everything that he told them. The crash came in 1903, when Wright was charged with issuing a fraudulent balance sheet and on Jan. 27, 1904, he was sentenced to 7 years' penal servitude. While the judge was pass ing sentence he swallowed cyanide of potassium and died before he could be removed from the courthouse.
The reasons that impelled John Sadleir to take to crime are unknown. He was frugal, not given to hospitality or to excesses and no one knew how the money that he stole from his customers was spent. He began life as a solicitor in Tipperary and was con nected with a long-established private bank that bore the name of his family. As a member of Parliament he rose to be junior lord of the Treasury and to be associated with various financial under takings in the City. As chairman of the London and County Bank he developed its business and made no attempt to rob it, but when his family bank suspended payment it was found that his defalcations exceeded £400,000. He had issued false stock in the Swedish railway of which he was chairman to the value of £r5o,000 and had forged thousands of false acceptances put into circulation through his creatures. The first hint of suspicion came when he resigned office. His credit was shaken and the drafts of his bank were dishonoured. When ruin seemed irretrievable his body was found lying on Hampstead Heath poisoned with prussic acid. He left behind him letters expressing contrition.
The failures of private banks such as Strahan and Paul, the Royal British, and the Eastern Banking Corporation were all due more or less to the same cause—the partners using their customers' deposits for private speculation. In the case of the City of Glas gow Bank, which failed in 1878, the directors had issued false balance sheets and declared dividends when the bank was insol vent. When arrested it was found that several of the directors had enormously overdrawn their private accounts. They were sen tenced to very moderate terms of imprisonment. The Union Bank of London was robbed by its cashier, Bullinger, over a period of more than 15 years of the enormous sum of £263,000 and the directors had not discovered it. Bullinger's method was to produce a forged passbook instead of the real Bank of England passbook for inspection. He was a steady unobstrusive man with no vice except a passion for gambling through outside brokers. He made no defence and was sentenced to 54 years' penal servitude.
The Rev. Dr. Dodd, a canon of Brecon and chaplain to George III., obtained funds from moneylenders by forging his former patron, Lord Chesterfield's, signature. Nothing might have been heard of the transaction had the document not been shown to Lord Chesterfield who denied its authenticity and allowed the forger to be arrested. In his extremity Dr. Dodd refunded the money. Nevertheless he was convicted with a strong recom mendation to mercy. Dodd was a fashionable clergyman of the day and a noted preacher and courtier. All London joined in a petition to the King. Dr. Johnson himself became his champion. but with King George III. they cried to deaf ears. "If Dodd is pardoned, it will be said that the Perreaus were murdered," said his majesty, being unable to appreciate the difference between the two cases. The poor chaplain was hanged at Newgate pour ing forth paeans of praise upon the king.
The Victory Bond Scheme for which Horatio Bottomley was sentenced to a term of penal servitude was an ingenious method of exploiting patriotic enthusiasm and the gambling instinct at the same time. The Victory Bonds were issued by the Govern ment at £5: Bottomley invited subscribers at £i or more, on the understanding that the interest should be drawn for as a lottery and the capital investment should remain intact. So strong was the bait that some 30,00o people trusted him with their money at the rate of £ i o,000 a day.
The poor suffer no less from fraud than the rich investor. The confidence trick in its various forms is still practised in the London streets and public houses. So various and intricate are the devices of the modern cheat that new schemes come to the notice of the police nearly every day. Struggling farmers and even labourers still fall victims to the wiles of the "Spanish prisoner" writing from Valencia, though the fraud has been so often exposed in the press ; but the lure of hidden treasure—of obtaining something for nothing—will always find a victim. The mock auction in which confederates are seen bidding furiously for worthless still flourishes in London. The f ortune teller is never long without a client; the quack doctor or the vendor of patent remedies without a patient. Even habitual inebriates are made to contribute their quota, for among the advertised remedies for intemperance is a compound of 98% of sugar and 2% of common salt, sold at a fantastic price. The menace of Bolshevism has produced bands of Russian impostors who peddle forged documents to foreign embassies. As long as dupes continue to abound, the vultures are never far away.
(B. T.) Dubious investments are apparently marketed in America more expeditiously than anywhere else on the globe. It is said that a Frenchman hoards his savings, an Englishman buys a home or consols, but the small American investor's guiding principle seems to be a mixture of gambling, a desire to get something for nothing, and to become rich without work. This principle, according to Andrew Mellon, secretary of the U.S. Treasury, has caused a loss of $1,700,000,000 annually in the United States, in financial ventures alone. Americans depend upon "head lines" for information, and believe statements because they are in print. A business in itself is that of marketing "sucker lists," of various nationalities. Brokers sell them at 1 cent a name, and so sure are persons once "fleeced" to be good prospects again that swindlers pay over 5 cents a word for lists of veteran victims. Names and addresses of corporation stockholders are also sold by "sucker" list dealers.
The department of business research of New York university made a survey in 1927 of a selected list of professional and business men in 15 States during three years, and found that the average investment in unsound securities was over $1,190 per person, the average loss $1,100. In the three years surveyed 418 persons lost $435,00o. Generally, they were lured by dividends of 8% or over, and the purchase of unlisted common stocks of oil, automobile and mining companies. The following are the factors said to have induced such purchase (numbers refer to persons) : Hope of extraordinary gain, 218 ; salesman's persuasion, I I 2 ; confidence in the company, 83 ; own judgment, 55; "tips" on the stock market, 37; stock bonus, 27; appeal to social position, 23 ; offer of trade, 16; hope of recovering past losses, 14. Total persons reporting, 401; total mentioning two or more factors, The swindler's business has increased since the World War, owing to the high wages paid to industrial workers, general prosperity and the sale of corporate securities to small investors begun in the patriotic Liberty Loan drives and continued by many corporations selling stock to employees on instalments. Persons who before had placed their savings in banks thus learned new methods. The swindler offered to take Liberty Bonds in payment for his stocks, bonds and real estate. Most fraudulent schemes and methods are ancient ; but their presentation changes daily. As classified when detected some are listed below:— Blind Pool or Participating Syndicate.—Promoters of this scheme tell their victims that they deal only in high-class securi ties, and can "work the market" because the pool managers are "among the great financial wizards of Wall street" (New York's financial district). They promise 24 to 120% yearly dividends on money put in the "pool" to be invested as the managers think best. These "syndicates" probably never buy or sell stock. Oper ated by an honest banking firm as a form of investment trust, syndicates may help the investor, but an unscrupulous "outfit" can make them extremely dangerous.