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Had a chance to watch the movie version of the real thing the other night on TCM. A movie 'torn from the headlines' that's unfortunately unavailable on tape or DVD.
The Match King: Ivar Kreuger, The Financial Genius Behind a Century of Wall Street Scandals
Charles Ponzi, Bernard Madoff, R. Allen Stanford, Ivar Kreuger.
Kreuger? Who's he?
Frank Partnoy tells us about the Swedish financier who outdid Ponzi, Madoff and the Texan Standford in an elegantly written biography "The Match King: Ivar Kreuger, The Financial Genius Behind a Century of Wall Street Scandals" (PublicAffairs, 304 pages, $26.95).
Ponzi's scheme was penny ante compared with Kreuger's machinations, which resulted in a grand illusion that lasted more than a decade and saw Kreuger lending money to European governments and creating financial instruments that are still in use today. The New York Times Co., for instance, uses "B" shares, which have only a fraction of the voting power of "A" shares. This concept was created by Kreuger, as were privately customized, over-the-counter derivatives, now a multi-trillion dollar market, Partnoy says.
Complex foreign exchange options were another Kreuger invention, now widely used today in transactions totaling trillions of dollars. Hybrid debentures? Kreuger invented these and they're widely used by many financial institutions and companies such as Avon.
Kreuger (1880-1932) was a civil engineer by training and a financier, entrepreneur and industrialist by instinct. In 1908 he co-founded a construction company called Kreuger & Toll. In a world where wooden safety matches were a basic necessity, he built a global empire based on his Swedish Match Company. He negotiated match monopolies with European, Central American and South American governments and used these monopolies as platforms for his financial empire.
Like Madoff, Ponzi and Standford, he promised and delivered -- for a relatively long time -- larger than usual dividends to his investors. Like the others, he appealed to the greed which seems to be embedded in the geneitic makeup of just about everybody.
Even the Great Depression didn't slow down Kreuger; from 1929 on until his suicide in Paris in 1932, he was a rare success story, or so it seemed, at a time when the financial world was disintegrating. He was a man of great personal charm, Partnoy says. He could charm the birds out of the trees -- and money out of the wallets of his investors.
Kreuger was a celebrity who dated his countrywoman Greta Garbo, built a magnificent mansion in Sweden, traveled first class on the best ocean liners and had apartments in New York and Paris. Newspapers and magazines vied for interviews and his success engendered jealousy among financial competitors, especially Jack Morgan of J.P. Morgan & Co.
Biographers are always intrigued with their subjects -- even falling falling in love with them -- and from my reading of "The Match King," I detect more than a little admiration for Kreuger from Partnoy, especially in his "Coda" at the end of the book.
The conventional wisdom was that Kreuger was a common crook, just like Ponzi. This explanation, Partnoy says, is "too simple. It ignored the real wealth Ivar created throughout his career, and the real businesses he established, not only in matches, but in telecommunications, mining, commodities, and film. It ignored Ivar's financial innovations, and the crucial fact that his companies paid double-digit dividends for more than two decades before they collapsed. In contrast, Charles Ponzi's scheme lasted just a few months."
The key to Kreuger's success in U.S. financial markets was establishing a relationship with a prominent investment bank and Ivar charmed his way to the top, gaining the confidence of Donald Durant, a partner of Lee Higginson & Co. in New York. In the early 1920s, Lee Higginson was one of the most prestigious banks in the world, just behind J.P. Morgan and ahead of Goldman Sachs and Lehman Brothers, Partnoy writes.
"Lee Higg," as it was called, had its roots in Boston and was widely respected. Once he established himself with the firm, Kreuger set out to find himself a compliant accountant. His search ended when he befriended A.D. Berning, a C.P.A. and junior functionary at Ernst & Ernst and had them do the books in the U.S. for his International Match Co. Ivar paid for European trips for Berning and his wife, further cementing the relationship.
Since many of Kreuger's financial entities were registered as off-shore subsidiaries in the tax havens of the time -- another one of the Swede's innovations -- the work Berning performed was little more than signing off on his financial statement, prepared by an equally accommodating Swedish accounting firm.
Bernie Madoff must have studied Kreuger's life thoroughly, since he used an obscure and accommodating accounting firm in New York City.
Partnoy's biography is worth reading if only because much of what he describes, including the collapse of Lee Higginson and the creation of the Securities Exchange Commission a few years after Ivar's suicide are cautionary tales for today. Of course, as Vonnegut so aptly phrased it, we'll probably be surprised again by yet another incarnation of the original Ivar Kreuger.
(Amazon book review)
The Match King: Ivar Kreuger, The Financial Genius Behind a Century of Wall Street Scandals
Charles Ponzi, Bernard Madoff, R. Allen Stanford, Ivar Kreuger.
Kreuger? Who's he?
Frank Partnoy tells us about the Swedish financier who outdid Ponzi, Madoff and the Texan Standford in an elegantly written biography "The Match King: Ivar Kreuger, The Financial Genius Behind a Century of Wall Street Scandals" (PublicAffairs, 304 pages, $26.95).
Ponzi's scheme was penny ante compared with Kreuger's machinations, which resulted in a grand illusion that lasted more than a decade and saw Kreuger lending money to European governments and creating financial instruments that are still in use today. The New York Times Co., for instance, uses "B" shares, which have only a fraction of the voting power of "A" shares. This concept was created by Kreuger, as were privately customized, over-the-counter derivatives, now a multi-trillion dollar market, Partnoy says.
Complex foreign exchange options were another Kreuger invention, now widely used today in transactions totaling trillions of dollars. Hybrid debentures? Kreuger invented these and they're widely used by many financial institutions and companies such as Avon.
Kreuger (1880-1932) was a civil engineer by training and a financier, entrepreneur and industrialist by instinct. In 1908 he co-founded a construction company called Kreuger & Toll. In a world where wooden safety matches were a basic necessity, he built a global empire based on his Swedish Match Company. He negotiated match monopolies with European, Central American and South American governments and used these monopolies as platforms for his financial empire.
Like Madoff, Ponzi and Standford, he promised and delivered -- for a relatively long time -- larger than usual dividends to his investors. Like the others, he appealed to the greed which seems to be embedded in the geneitic makeup of just about everybody.
Even the Great Depression didn't slow down Kreuger; from 1929 on until his suicide in Paris in 1932, he was a rare success story, or so it seemed, at a time when the financial world was disintegrating. He was a man of great personal charm, Partnoy says. He could charm the birds out of the trees -- and money out of the wallets of his investors.
Kreuger was a celebrity who dated his countrywoman Greta Garbo, built a magnificent mansion in Sweden, traveled first class on the best ocean liners and had apartments in New York and Paris. Newspapers and magazines vied for interviews and his success engendered jealousy among financial competitors, especially Jack Morgan of J.P. Morgan & Co.
Biographers are always intrigued with their subjects -- even falling falling in love with them -- and from my reading of "The Match King," I detect more than a little admiration for Kreuger from Partnoy, especially in his "Coda" at the end of the book.
The conventional wisdom was that Kreuger was a common crook, just like Ponzi. This explanation, Partnoy says, is "too simple. It ignored the real wealth Ivar created throughout his career, and the real businesses he established, not only in matches, but in telecommunications, mining, commodities, and film. It ignored Ivar's financial innovations, and the crucial fact that his companies paid double-digit dividends for more than two decades before they collapsed. In contrast, Charles Ponzi's scheme lasted just a few months."
The key to Kreuger's success in U.S. financial markets was establishing a relationship with a prominent investment bank and Ivar charmed his way to the top, gaining the confidence of Donald Durant, a partner of Lee Higginson & Co. in New York. In the early 1920s, Lee Higginson was one of the most prestigious banks in the world, just behind J.P. Morgan and ahead of Goldman Sachs and Lehman Brothers, Partnoy writes.
"Lee Higg," as it was called, had its roots in Boston and was widely respected. Once he established himself with the firm, Kreuger set out to find himself a compliant accountant. His search ended when he befriended A.D. Berning, a C.P.A. and junior functionary at Ernst & Ernst and had them do the books in the U.S. for his International Match Co. Ivar paid for European trips for Berning and his wife, further cementing the relationship.
Since many of Kreuger's financial entities were registered as off-shore subsidiaries in the tax havens of the time -- another one of the Swede's innovations -- the work Berning performed was little more than signing off on his financial statement, prepared by an equally accommodating Swedish accounting firm.
Bernie Madoff must have studied Kreuger's life thoroughly, since he used an obscure and accommodating accounting firm in New York City.
Partnoy's biography is worth reading if only because much of what he describes, including the collapse of Lee Higginson and the creation of the Securities Exchange Commission a few years after Ivar's suicide are cautionary tales for today. Of course, as Vonnegut so aptly phrased it, we'll probably be surprised again by yet another incarnation of the original Ivar Kreuger.
(Amazon book review)
Though a lowly Chicago street cleaner, Swedish immigrant Paul Kroll (Warren William) is ambitious and unscrupulous. When a fellow employee is fired (due to one of Kroll's schemes), Kroll convinces his foreman (John Wray) to keep him on the payroll (officially at least) so they can split his salary. Soon there are eight "phantom" workers, and Kroll and his partner have amassed $460. However, Kroll has been romancing his partner's wife, Babe (Glenda Farrell), behind his back.
Meanwhile, he has also been lying to the people of his hometown, telling them what a successful businessman he has become. As a result, when the local match factory is in trouble, his uncle begs him to return and save it. Kroll gets Babe to withdraw the money he has stolen, deceiving her into thinking they are running away together, then leaves her behind as he sails away to Sweden.
Back home, he cons the local bank into giving him a loan to buy a second match factory so he can merge them. Only his friend Erik Borg (Hardie Albright) knows the truth about Kroll's "success", so Kroll recruits him as his all-too-trusting second in command in his expanding business. Eventually, Kroll owns all of the match factories in Sweden. However, his ambitions do not stop there. Using information he obtains from beautiful, well-placed women he has charmed, he gains official match monopolies in first Poland, then Germany and other countries by offering loans to cash-strapped governments and bribes to corrupt officials.
One day, while dining with Ilse Wagner (Claire Dodd), one of his conquests, he is dazzled by the beauty of star actress Marta Molnar (Lili Damita). Despite her initial rebuffs, he goes to great lengths to win her heart, even hiring a celebrated "gypsy violinist" to serenade her. So enamored is he that he dangerously neglects his business, financed by an ever-growing series of loans.
However, he reluctantly returns his attention to his company. One of his agents discovers an eccentric recluse named Christian Hobe (an uncredited Harry Beresford) has invented an everlasting match, so Kroll has him locked away as a madman.
When the stock market crashes, Kroll can no longer obtain a bank loan. In desperation, he buys $50 million in fake Italian bonds from forger Scarlatti (Harold Huber), whom he then dumps in the middle of a lake to drown. With the bonds as collateral, he obtains a $40 million loan from an American bank. Then he thinks of retiring. He asks Marta to marry him, only to discover that, in his frequent absences, she has fallen in love with Trino, the gypsy violinist. Much worse, his forgeries are detected, and his American loan is canceled. Kroll shoots himself on the balcony and his body tumbles into the gutter, where he started.
http://en.wikipedia.org/wiki/The_Match_King
Meanwhile, he has also been lying to the people of his hometown, telling them what a successful businessman he has become. As a result, when the local match factory is in trouble, his uncle begs him to return and save it. Kroll gets Babe to withdraw the money he has stolen, deceiving her into thinking they are running away together, then leaves her behind as he sails away to Sweden.
Back home, he cons the local bank into giving him a loan to buy a second match factory so he can merge them. Only his friend Erik Borg (Hardie Albright) knows the truth about Kroll's "success", so Kroll recruits him as his all-too-trusting second in command in his expanding business. Eventually, Kroll owns all of the match factories in Sweden. However, his ambitions do not stop there. Using information he obtains from beautiful, well-placed women he has charmed, he gains official match monopolies in first Poland, then Germany and other countries by offering loans to cash-strapped governments and bribes to corrupt officials.
One day, while dining with Ilse Wagner (Claire Dodd), one of his conquests, he is dazzled by the beauty of star actress Marta Molnar (Lili Damita). Despite her initial rebuffs, he goes to great lengths to win her heart, even hiring a celebrated "gypsy violinist" to serenade her. So enamored is he that he dangerously neglects his business, financed by an ever-growing series of loans.
However, he reluctantly returns his attention to his company. One of his agents discovers an eccentric recluse named Christian Hobe (an uncredited Harry Beresford) has invented an everlasting match, so Kroll has him locked away as a madman.
When the stock market crashes, Kroll can no longer obtain a bank loan. In desperation, he buys $50 million in fake Italian bonds from forger Scarlatti (Harold Huber), whom he then dumps in the middle of a lake to drown. With the bonds as collateral, he obtains a $40 million loan from an American bank. Then he thinks of retiring. He asks Marta to marry him, only to discover that, in his frequent absences, she has fallen in love with Trino, the gypsy violinist. Much worse, his forgeries are detected, and his American loan is canceled. Kroll shoots himself on the balcony and his body tumbles into the gutter, where he started.
http://en.wikipedia.org/wiki/The_Match_King
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