Advertisement

Great frauds in history: John Sadleir

John Sadleir’s multiple deceptions destroyed the Tipperary Joint Stock Bank, ruining its shareholders and forcing many into bankruptcy.

John Sadleir, the son of a wealthy Irish farmer, was born in 1813, followed by his brother James two years later. John initially pursued a legal career, but the brothers went on to set up the Tipperary Joint Stock Bank in 1846, which was run by James. The brothers were also politically active John entered parliament in 1847; James in 1852. John was a leading figure in the Independent Irish Party, which pledged not to serve in office. He was elected and accepted a place in a coalition government from 1852 through 1854. His decision to hold office despite being elected on a pledge not to caused outrage.

What was the scam?

The Tipperary Joint Stock Bank was successful in the beginning, but John's greed started to get the better of him and he began stealing from customers to fund private speculation in land, railway shares and later in the commodity markets. To fund his losses, which eventually totalled £1.5m (£137m in today's money), he mortgaged his property to multiple creditors, including a £247,000 (£22.7m) overdraft with the Tipperary Joint Stock Bank, which also guaranteed many of his other loans. He also began selling forged shares in the Royal Swedish Railway Company, which he was a director of, as well as arranging for the Tipperary Joint Stock Bank to issue additional shares to English investors using a fraudulent balance sheet.

What happened next?

By the start of 1856, the credibility of both Sadleir's empire and the Tipperary Joint Stock Bank were crumbling. With creditors demanding repayment, and newspapers publishing allegations of forgery, John committed suicide on Hampstead Heath on 17 February 1856. Although he left a letter absolving his brother of any blame, it quickly became obvious that James had been fully aware of what had been going on, and he decided to flee the country, spending the rest of his life in exile in Switzerland. He died in 1881.

Lessons for investors

John Sadleir's multiple deceptions eventually destroyed the Tipperary Joint Stock Bank, which quickly folded with liabilities of more than £380,000 (£32.8m) in excess of its assets. Because limited liability had not then been widely introduced, the bank's shareholders, including the 70 English shareholders who had bought shares based on the fraudulent accounts, not only lost their money, but were also liable for the bank's debt. Many were either ruined or forced into bankruptcy. Generally, the lesson to take home is that it's not a good idea to buy into a bank when the largest creditor is the brother of the managing director.

Advertisement
Advertisement

Recommended

The MoneyWeek Podcast: how to age well and profit from the “longevity dividend”
Investment strategy

The MoneyWeek Podcast: how to age well and profit from the “longevity dividend”

Merryn talks to economist and author Andrew J Scott and discusses how we can profit from the "longevity dividend" as we live longer; why we need to re…
6 Aug 2020
Three mistakes to avoid when investing on Aim
Small cap stocks

Three mistakes to avoid when investing on Aim

Investing in Aim shares can produce spectacular returns. But as Michael Taylor of Shifting Shares explains, you have to have your wits about you.
5 Aug 2020
Too embarrassed to ask: what is “real return”?
Too embarrassed to ask

Too embarrassed to ask: what is “real return”?

MoneyWeek's latest "too embarrassed to ask” video explains what a real return is and why it's so important for investors.
5 Aug 2020
How safe are your dividends?
Income investing

How safe are your dividends?

Dividend investing can be a great strategy. But how can you avoid the stocks that are liable to cut your income? Phil Oakley explains.
4 Aug 2020

Most Popular

Eagle Lightweight GT: the reincarnation of the E-type Jag
Toys and gadgets

Eagle Lightweight GT: the reincarnation of the E-type Jag

Jaguar’s classic E-type sports car has been reinvented for the modern age. The result – the Eagle Lightweight GT – is a thing of beauty.
7 Aug 2020
Platinum: the precious metal that looks set to play catch-up with silver and gold
Silver and other precious metals

Platinum: the precious metal that looks set to play catch-up with silver and gold

Gold and silver continue to soar, but there's still time to get in. And there's another precious metal that looks set to go on a bull run too, says Jo…
7 Aug 2020
UK house prices hit a new record high – can it last?
House prices

UK house prices hit a new record high – can it last?

Despite the pandemic, UK house prices have hit a new high. John Stepek looks at what’s driving the surge in prices, and what it means for house prices…
7 Aug 2020