Born in 1860, Horatio Bottomley lost both his parents by 1865 and spent five years in an orphanage in Birmingham. He became an office boy in a firm of solicitors, and by the age of 23 was a partner in a transcription firm. Over a career spanning four decades he would find fame (and notoriety) as a company promoter and proprietor of the ultra-nationalistic magazine John Bull. Despite several bankruptcies, his skills as an orator saw him elected to Parliament twice and he was considered for a cabinet post.
What was the scam?
Bottomley was involved in several failed companies, and narrowly escaped being convicted of fraud at trials in both 1893 and 1908. The swindle that finally brought him down involved the Victory Bonds Club, which was set up in 1919. Bottomley claimed that for a minimum investment of £1 (compared with £5 for the underlying bonds), subscribers would get the chance to win prizes from a lottery funded by the interest payments. Bottomley used the money in a bid to rebuild his media empire, as well as to fund an extravagant lifestyle.
What happened next?
Bad investments, poor administration, and the high level of expenses meant that the club could only survive if it could find new investors (turning it into a de-facto Ponzi scheme). Unfortunately for Bottomley, investors started to lose confidence in the scheme, pulling their money out. In 1921 Reuben Bigland, Bottomley's former business partner, published a pamphlet attacking him and the club. After Bottomley lost a libel case against Bigland, he was arrested by the police, convicted of embezzling £170,000, expelled from Parliament, and served five years in prison.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Lessons for investors
Some club members who withdrew their money ended up being overpaid due to slipshod records, but those who stuck with the scheme only received back a fraction of their original investment. Always be sceptical about charismatic or charming company owners or fund managers. Bottomley was adept at getting people he had conned to invest additional money in other schemes in the promise that this would help them recover their losses never a good
-
House prices rise 2.9% – will the recovery continue?House prices grew by 2.9% on an annual basis in September. Will Budget policies and ‘higher-for-longer’ rates dent the recovery?
-
Nvidia earnings: what to expectNvidia announces earnings after market close on 20 November. What should investors expect from the semiconductor giant?
-
Christopher Columbus Wilson: the spiv who cashed in on new-fangled radiosProfiles Christopher Columbus Wilson gave radios away to drum up business in his United Wireless Telegraph Company. The company went bankrupt and Wilson was convicted of fraud.
-
Great frauds in history: Philip Arnold’s big diamond hoaxProfiles Philip Arnold and his cousin John Slack lured investors into their mining company by claiming to have discovered large deposit of diamonds. There were no diamonds.
-
Great frauds in history: John MacGregor’s dodgy loans
Profiles When the Royal British Bank fell on hard times, founder John MacGregor started falsifying the accounts and paying dividends out of capital. The bank finally collapsed with liabilities of £539,131
-
Great frauds in history: the Independent West Middlesex Fire and Life Assurance Company's early Ponzi scheme
Profiles The Independent West Middlesex Fire and Life Assurance Company (IWM) offered annuities and life insurance policies at rates that proved too good to be true – thousands of policyholders who had handed over large sums were left with nothing.
-
Great frauds in history: Alan Bond’s debt-fuelled empireProfiles Alan Bond built an empire that encompassed brewing, mining, television on unsustainable amounts of debt, which led to his downfall and imprisonment.
-
Great frauds in history: Martin Grass’s debt bingeProfiles AS CEO of pharmacy chain Rite Aid. Martin Grass borrowed heavily to fund a string of acquisitions, then cooked the books to manage the debt, inflating profits by $1.6bn.
-
Great frauds in history: Tino De Angelis’ salad-oil scamProfiles Anthony “Tino” De Angelis decided to corner the market in soybean oil and borrowed large amounts of money secured against the salad oil in his company’s storage tanks. Salad oil that turned out to be water.
-
Great frauds in history: Gerard Lee Bevan’s dangerous debtsProfiles Gerard Lee Bevan bankrupted a stockbroker and an insurer, wiping out shareholders and partners alike.
