Henry Fauntleroy was born in London in 1784, the son of banker William Fauntleroy, the managing partner of Marsh, Stracey, Fauntleroy and Graham, also known as the “Berners Street Bank”, after the London street on which it was located. Henry joined the bank at the age of 16. He was so successful that, when his father, who was one of the founders, died in 1807, the other partners decided to let Henry take over the management of the institution, on a generous salary, even though Henry was only 23 at the time.
What was the scam?
During the first seven years of Henry Fauntleroy’s management, the bank’s position steadily worsened. Fauntleroy was able to hide this from his partners by manipulating the bank’s figures, but the institution was on the verge of going under by 1814.
In desperation, Fauntleroy noticed that many of Berners Street’s clients owned large amounts of government bonds held outside the bank, but with the interest paid into their accounts. By forging their signatures he obtained control of the bonds and sold them, using the money to cover the bank’s debts and fund his lifestyle, while making regular payments into their accounts.
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What happened next?
The impact of paying £16,000 a year in interest, as well as his increasingly extravagant lifestyle, meant that, when one of his victims died in
1824, Fauntleroy did not have enough money to replace the missing bonds. When he suggested that the executors continue to let the interest payments be paid into an account at Berners Street Bank, they became suspicious and began to investigate, quickly discovering the embezzlement. As a result, Fauntleroy was arrested, convicted and then executed for forgery (which was at that time a capital crime).
Lessons for investors
Fauntleroy was convicted for the theft of £20,000 (£1.7m in today’s money), he confessed to stealing £170,000 (£15m), and historians now think he may have sold a total of £400,000 (£35m). Either way, his theft led to the bankruptcy of the Berners Street Bank and huge losses
for the victims of the embezzlement. Given the possibility of identity theft, or just the occasional honest clerical error, it’s always a good idea to check your accounts occasionally to make sure that everything is in order and that there are no unexplained disappearances or shortfalls.
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
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