Great frauds in history: Albert Grant
Albert Grant made his money buying worthless companies and using fraud, hype and manipulation to sell them to the public at vastly inflated prices.
How did it begin?
Born Abraham Gottheimer in Dublin in 1831, Albert Grant set up the Mercantile Discount Company in 1859, which failed two years later. In 1864 he set up a brokerage house, Crdit Foncier and Mobilier of England, which he used to promote various companies that he helped float on the stock exchange. By 1865 he was rich enough to own a large mansion in Surrey, get elected to parliament as MP for Kidderminster and buy Leicester Square as a gift to the public. He was also created an Italian baron in 1868.
What was the scam?
Albert Grant made his money buying worthless companies and using fraud, hype and manipulation to sell them to the public at vastly inflated prices. Perhaps his most notorious case was his involvement with the Emma Silver Mining Company in 1871, where he helped a consortium involving US senator William Stewart float a Utah mine on the stockmarket. As well as paying the distinguished geologist Benjamin Silliman $25,000 ($530,000 in 2018) to certify that it was "one of the great mines in the world", Grant even bribed the financial editor of The Times to let him write articles puffing the company under a pen name.
What happened next?
Despite scepticism from mining journals, the favourable coverage in newspapers and financial magazines, along with monthly dividends coming from silver that had been apparently been mined, propelled the value of the Emma Silver Mining Company to £5m (£457m today). However, in the summer of 1872, disaster struck when a manager claimed that a flood had shut down production and a rival was insisting that Emma's silver ore was in fact its own. While the company briefly limped along thanks to its dividends (funded by a loan from one of the directors) these were suspended and by 1873 the firm had collapsed.
Lessons for investors
Even counting dividends, shareholders only received a fraction of their investment back. Litigation would lead to the collapse of Grant's empire and his bankruptcy in 1877. By 1876 the value of the 37 companies that he floated had declined from £25.1m in 1872 to only £5.6m a loss of nearly £19.5m (£1.8bn in 2018). A major red flag that might have alerted investors was the promises of huge dividends, at one point equal to 80% of the original share price.