Great frauds in history… George Graham Rice's "adventures with your money"

George Graham Rice, AKA Jacob Simon Herzig, made millions from his dodgy share-tipping sheets, pumping up worthless mining stocks.

Jacob Simon Herzig was born in Manhattan in 1870. In 1890, he was convicted and spent the first of several spells in prison for stealing from his father’s firm in order to cover gambling debts. While inside he changed his name to George Graham Rice, who had been one of his fellow inmates. Upon release Rice worked as a journalist and betting tipster. When the authorities shut down his racing tips business, he switched to promoting mining companies, as well as writing a popular newsletter about the industry. He was convicted of mail fraud in 1911 and wrote a memoir, My Adventures With Your Money, which was serialised and then published as a book in 1913 . 

What was the scam?

Rice’s most notorious scam was his involvement with the Idaho Copper Corporation. In return for being given effective control of the company, he helped promote it by making outdated and exaggerated claims about its potential, as well as heavily tipping it in his supposedly impartial newsletters. He invented phoney sales to give the impression that the company’s fortunes were rising. As a result of his efforts, the Idaho Copper Corporation’s share price rose 15-fold, giving it a market capitalisation of more than $10m ($143m in today’s money) by September 1925. He made a profit of $1.7m ($24.4m) when he eventually sold his shares.

What happened next?

Complaints from the authorities and local businessmen led to the Boston Curb Exchange suspending Idaho Copper Corporation’s shares. Rice’s response was to sue Idaho’s state mine inspector for libel, while merging the Idaho Copper Corporation with another company and then re-listing it as the Idaho Copper Company, allowing trading in the shares to resume. Rice’s libel lawsuit was unsuccessful and by November 1927 the company had run out of money, forcing it to shut down. A few months later Rice was indicted for mail fraud and would eventually be sentenced to four years in prison.

Lessons for investors

Some investment newsletters can offer worthwhile advice, but you should check out the background and record of those writing them, as well as doing your own independent research, before acting on any of their suggestions. This is especially important in the mining and small-cap sectors, which are particularly prone to fraud and deception. The mines that the Idaho Copper Company controlled, for example, were either completely flooded or uneconomic and shareholders were in the end left with nothing. It’s also a good idea to stay away from mining companies that are being investigated by the authorities.

Recommended

What will happen to the price of gold in 2022?
Gold

What will happen to the price of gold in 2022?

Gold is traditionally the go-to asset during inflation. But with inflation at 30-year highs, it has gone nowhere. Dominic Frisby investigates why, and…
20 Jan 2022
UK inflation is at a 30-year high and it hasn’t peaked yet
Inflation

UK inflation is at a 30-year high and it hasn’t peaked yet

UK inflation has hit 5.4% - its highest in 30 years. And it could be heading higher. John Stepek explains what it means for you and your money.
19 Jan 2022
How to position your portfolio for lasting inflation
Investment strategy

How to position your portfolio for lasting inflation

Inflation is rising around the world – and with high inflation a key part of the solution to the world's debt problem, you should expect it to stay th…
17 Jan 2022
Five trends for fund investors to watch in 2022
Funds

Five trends for fund investors to watch in 2022

There is no crystal ball for investment, but these trends could help fund investors prepare for what comes next.
17 Jan 2022

Most Popular

Five unexpected events that could shock the markets in 2022
Stockmarkets

Five unexpected events that could shock the markets in 2022

Forget Covid-19 – it’s the unexpected twists that will rattle markets in 2022, says Matthew Lynn. Here are five possibilities
31 Dec 2021
US inflation is at its highest since 1982. Why aren’t markets panicking?
Inflation

US inflation is at its highest since 1982. Why aren’t markets panicking?

US inflation is at 7% – the last time it was this high interest rates were at 14%. But instead of panicking, markets just shrugged. John Stepek explai…
13 Jan 2022
Tech stocks teeter as US Treasury bond yields rise
Tech stocks

Tech stocks teeter as US Treasury bond yields rise

The realisation that central banks are about to tighten their monetary policies caused a sell-off in the tech-heavy Nasdaq stock index and the biggest…
14 Jan 2022