How did it begin?
Born in 1846 in Stafford near Birmingham, Wright became a preacher before moving to Canada in 1870 and spending two decades promoting American mining companies. Facing multiple shareholder lawsuits, he returned home in 1889. In 1894 he set up the London and Globe Company, which focused on acquiring mines and shares in various mining companies. Touting the companies boosted their shares, allowing him to sell at a profit. He earned enough to be able to spend £250,000 (£28.4m in 2018) on buying Lea Park (now Witley Park) in Surrey in 1896, followed by an estimated £1.15m (£130.7m) on renovating it.
What was the scam?
Most of the companies that the London and Globe invested in were firms that Wright was promoting; the company also took punts on other mining companies, most of them worthless or overvalued. To maintain the illusion that it was making money, Wright falsified London and Globe's balance sheet, exaggerating the value of the mines that it owned and omitting liabilities. To enable it to keep paying dividends he also began to "juggle" cash between London and Globe and his other firms.
What happened next?
The failure of several mines that Wright had promoted, as well as revelations that he had been making payments to journalists, meant that by 1898 people were starting to ask questions about his business empire. As London and Globe's losses and debts mounted, its position became unsustainable and it collapsed in 1900, after Wright announced that it would no longer be paying dividends. Although the authorities refused to press charges, a private prosecution brought by investors caused Wright to be convicted of fraud in 1904. He committed suicide to avoid seven years in jail.
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
London and Globe's massive debts meant shareholders were wiped out, while creditors only got back a fraction of their money.Investors in the 13 companies that Wright had promoted lost around £8m (£846m). Whitaker was also notorious for his use of "guinea pig" directors and public figures (including a former viceroy of India) who lent his scheme credibility but lacked the financial knowledge or the inclination to scrutinise what he was doing. A board filled with celebrities or family friends is always a red flag.
-
UK inflation slowed again in March – but a rate cut could be some months awayThe latest Consumer Price Index (CPI) data came in at 3.2% for March. This was slightly higher than some economists expected, but takes us closer to the Bank of England’s 2% inflation target.
-
Pension vs property: which option provides the best income for your retirement?News With the cost of a comfortable retirement on the rise, future retirees need to weigh up which strategy offers the best returns. But is a pension a better bet than property?
-
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.
