Great Frauds in History: Michael Meehan’s market manipulation
Stockbroker Michael Meehan manipulated the markets, driving stock prices up and making a mint.


Michael Meehan was born in Blackburn, Lancashire, in 1892, but grew up in New York. After leaving school to become a messenger boy he graduated to selling theatre tickets.
Owing to the connections he made while selling tickets, he managed to secure a seat on the New York Stock Exchange by 1925.
Before the Wall Street Crash his brokerage firm, M.J. Meehan & Company, employed 400 people with nine offices, including one on a liner, and even after 1929 he was wealthy enough to buy his son a seat on the New York Stock Exchange for $130,000 (the equivalent of $1.99m today).
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How did the scam work?
Meehan was regarded as an expert market manipulator. He would assemble a group of investors who would agree to buy and sell the stock of a listed company between each other, giving the impression of large trading volume.
This would give the illusion of widespread public interest in the company, driving the share price up. Once the price rose high enough, they would suddenly sell out, causing the stock to collapse. One such “pool” helped drive the stock of the Radio Corporation of America (RCA) up from $85 in 1925 to $549 in 1929, making the pool $5m ($74.6m).
What happened next?
The Wall Street Crash and the election of Franklin D. Roosevelt in 1932 led to passage of the Securities and Exchange act in 1934, which outlawed most market manipulation, including the tactics that had made Meehan rich.
Nonetheless, Meehan tried to use similar “matched orders” tactics to push the price of Bellanca Aircraft in 1935 from $1.75 to $5.50 within a few months and then maintained the price while the company issued another 100,000 shares.
After a long investigation, regulators found Meehan guilty of most of the charges and banned him from every exchange that he belonged to, ending his career as a broker.
Lessons for investors
After the pool ended in October 1935, Bellanca’s price fell back down to $1.75 again, leaving those who had bought the additional shares with losses of around $300,000 ($5.6m today). While pools and matched orders have been eliminated from most major markets, illiquid micro-cap shares are still vulnerable to being manipulated in this way. So, while a rapid price rise or increase in volume can be a sign of momentum, be sure a stock’s fundamentals are solid enough to support its price.
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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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