Great frauds in history… William Strahan’s stolen bonds

Eton-educated William Snow, AKA William Strahan, inherited a huge fortune and joined the family bank. On the face of it he was a pillar of respectable society. But he and his partners sold investors' assets to bail themselves out when they went broke.

(Image credit: © Universal Images Group via Getty Images)

By Dr Matthew Partridge

published 18 November 2020

in Features

William Snow was born in 1807, going on to study at Eton and Cambridge before changing his name to William Strahan in 1830 in order to inherit a large fortune of around £200,000 (equivalent to £18m today) from his great uncle. Two years later he joined the family bank (then known as Snow, Snow, Strahan, Paul and Paul) as a partner. Over the next two decades his wealth and social position led to his being granted the honorary title of High Sheriff of Surrey as well as being appointed to the boards of various companies.

What was the scam?

By 1850 the bank was barely solvent, even taking into account the partners’ personal assets. Over the next few years things got even worse as they made large loans to support various unsuccessful projects, including railways in France and Italy, as well as a colliery in Mostyn in Wales, which ended up requiring increasing amounts of cash. In desperation they sold bonds that they were keeping on behalf of clients, hoping that they would be able to buy them back before the clients noticed that they were missing.

By 1854 Strahan and his two other partners, John Dean Paul and Robert Makin Bates, had run out of money to steal and rumours were flying around London that the bank was insolvent. John Griffith, canon of Rochester Cathedral and one of the bank’s oldest clients, went to the bank’s offices and demanded to withdraw £5,000 (£472,000 today) in bonds that they held on his behalf. Strahan confessed that the bonds had been sold, along with other bonds totalling £100,000 (£9.45m). Strahan and the other two partners were arrested, convicted and sentenced to 14 years in prison (though this was later reduced to three years).

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

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

By the time the bank collapsed, its liabilities were £652,593 with only £127,670 in assets, leaving a deficiency of £524,923 (£49.5m). The bank’s depositors and creditors got some of their money back through the liquidation of the partners’ estates, but they would have to wait more than two decades, and even then would only get a fraction of what they were owed. Given that the bank’s dire position was mostly due to bad loans to two firms totalling £483,000 (£45.7m), the bank’s lending portfolio was clearly not diversified enough. The bank should also have been more ruthless in cutting its losses, rather than lending more money to doomed projects.

Explore More

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