Elizabeth Bigley was born in Ontario, Canada in 1857. In 1879 she was arrested for forgery for passing off worthless cheques to merchants, but was acquitted on grounds of her age and insanity. She later worked in Cleveland, Ohio as a psychic, calling herself Madame Lydia DeVere. In 1889 she was again arrested and this time convicted of forgery and spent several years in prison before being pardoned by the then governor of Ohio (later President) William McKinley in 1893. By 1897 she was back in Cleveland, living under an assumed name, with her new husband Dr Leroy Chadwick. He married her believing her to be the illegitimate daughter of wealthy industrialist Andrew Carnegie.
What was the scam?
The now Mrs Chadwick claimed that Carnegie felt so guilty about not publicly acknowledging her as his daughter that he was willing to give her large amounts of money. After exhausting her husband’s fortune, she persuaded several local banks and wealthy individuals to lend her money. As collateral, she provided promissory notes signed with Carnegie’s name and an unopened package supposedly containing a trust fund of $7.5m ($207m in today’s money) in railroad shares and bonds. In reality, Carnegie was unaware of her existence and the notes were forgeries. The money funded an extravagant lifestyle, which enabled her to borrow even more.
What happened next?
Her generosity with money won her many admirers, but her creditors grew anxious and, by November 1904, banker Herbert Newton sued for repayment of a $190,000 ($5.63m) loan. Carnegie disowned both her and the notes, and her railroad bonds and shares were found to be worthless. Early in 1905 she was arrested carrying $100,000 in cash and sentenced to several years in jail, where she died.
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Lessons for investors
Estimates suggest Chadwick may have borrowed as much as $1.3m ($29.6m) backed by $12m ($355m) in forged Carnegie notes. Her creditors recovered only a fraction of this. The Citizens’ National Bank, which had loaned $240,000 ($7.1m), was forced into liquidation after its depositors withdrew their money, demonstrating the importance of doing proper due diligence. Even if Chadwick had been a genuine heiress, it was an incredibly irresponsible decision to lend a sum that was four times the bank’s actual capital to a single person.
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