Great frauds in history: Clarence Hatry
Clarence Hatry started out as an insurance clerk, but the fraud he perpetrated rattled markets across the globe.
Clarence Hatry started out as an insurance clerk before moving into business in World War I. His first success came with a reinsurance firm, the City Equitable Fire Insurance Company, which he eventually sold for more than four times his initial investment. During the 1920s he was involved in a string of companies, many of which went bankrupt. Chief among these failures was the 1923 collapse of the Commercial Corporation of London. However, Hatry's ambitions could not be contained, and by 1929 he owned a string of financial businesses, including a successful brokerage that issued bonds for local towns, undercutting established firms, and several investment trusts.
What was the scam?
Having financed consolidation within the jute-manufacturing industry and helping Debenhams to acquire a large number of independent drapery shops, Hatry tried to pull off a merger between British steel and iron concerns. Just as the deal was about to go through in the summer of 1929, one of the main backers pulled out. With his other investment trusts in severe trouble, due to a bad investment in a photo-booth company, which he tried to prop up, Hatry succumbed to the temptation to forge municipal bonds that his brokerage was underwriting, and used them to raise additional cash.
What happened next?
Despite the fraud, Hatry realised he would need even more money if the deal was to go through. After making a last desperate plea to the Bank of England for a bridging loan, Hatry was forced to declare bankruptcy. Hatry and his associates then confessed to the Director of Public Prosecutions and were immediately jailed, although one of the directors was able to escape to Italy. Hatry was sentenced to 14 years in jail at the subsequent trial.
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
The collapse of Hatry's empire was a major scandal that was later seen by many people as the trigger for the Wall Street Crash, which took place about a month later, though this seems unlikely. Hatry's demise provides a powerful lesson in the importance of cutting your losses. Had he not continued to invest in the photo-booth company he might have been able to complete the steel deal. At the very least, had he not resorted to fraud to save his business empire, he would have remained a free man.
Read more about Clarence Hatry and the Great Depression here
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.
He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.
Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.
As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.
Follow Matthew on Twitter: @DrMatthewPartri
-
Why undersea cables are under threat – and how to protect them
Undersea cables power the internet and are vital to modern economies. They are now vulnerable
By Simon Wilson Published
-
Vanguard to bring in £4 minimum monthly fee - is it still a cheap deal?
Vanguard is overhauling its charges, with DIY investors set to pay more from January. How will the fees compare to its rivals, and what should customers do?
By Ruth Emery Published
-
Christopher Columbus Wilson: the spiv who cashed in on new-fangled radios
Profiles 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.
By Dr Matthew Partridge Published
-
Great frauds in history: Philip Arnold’s big diamond hoax
Profiles 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.
By Dr Matthew Partridge Published
-
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
By Dr Matthew Partridge Published
-
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.
By Dr Matthew Partridge Published
-
Great frauds in history: Alan Bond’s debt-fuelled empire
Profiles Alan Bond built an empire that encompassed brewing, mining, television on unsustainable amounts of debt, which led to his downfall and imprisonment.
By Dr Matthew Partridge Published
-
Great frauds in history: Martin Grass’s debt binge
Profiles 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.
By Dr Matthew Partridge Published
-
Great frauds in history: Tino De Angelis’ salad-oil scam
Profiles 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.
By Dr Matthew Partridge Published
-
Great frauds in history: Gerard Lee Bevan’s dangerous debts
Profiles Gerard Lee Bevan bankrupted a stockbroker and an insurer, wiping out shareholders and partners alike.
By Dr Matthew Partridge Published