I must have led a sheltered life - all 68 years of it because until I read this excellent book by Frank Partnoy (Author of F.I.A.S.C.O - an expose of the inside dealings at Morgan Stanley) the name Ivar Kreuger meant nothing to me, and I would guess to most others. Boy, what we have missed! Kreuger was an extraordinary businessman quite unlike any other that I've come across before. He was handsome, articulate beyond comparison, charming, dashing and single-minded in his determination to become the most successful businessman in the whole world - and very nearly succeeded.
His guiding philosophy was "Everything in life is founded on confidence," and he set about creating an aura about himself of commercial brilliance, complete understanding of international financing, untold wealth and opulence and a coterie of friends and associates which included President Herbert Hoover, Mussolini, Presidents and Prime Ministers of a number of European countries, King Alfonso of Spain and scores of others. He discovered Greta Gustafson (later to change to Garbo) in Sweden, helped her to become an enigmatic super-star and remained one of her very few friends until his suicide.
This halo of confidence, coupled with almost non-existent rules on the accounting of public companies particularly overseas affiliates, enabled Kreuger to persuade (not that they needed much persuasion) the Blue Chip US investment bank, Lee Higginson & Co to raise tens of millions of dollars, ostensibly to make large loans on favourable terms to countries such as Germany, in return for a monopoly in matches (which was his main business) produced and sold in that country. To encourage investors in his companies he offered the promise of very high dividends, much beyond the ability of the businesses to generate, which he was only able to pay out provided new money was attracted to his businesses by Lee Higginson.
He was also abetted by some very compliant and accommodating Auditors particularly in New York, the source of his money raising, where Albert Berning of Ernst & Ernst was extremely undemanding and accepted, without evidence in most cases, the word of Kreuger on important matters of the assets owned by the group and its profits.
Then came the 1929 Wall Street crash which had repercussions worldwide, resulting in investors becoming very nervous about any sort of new investment thus cutting off Ivar's supply of new money coming in, which he needed like Charles Ponzi to pay earlier investors. His empire imploded and on March 12, 1932 committed suicide in Paris shortly before a scheduled meeting with his main creditors.
Frank Partnoy skillfully pieces together this incredible story of how one man fooled and defrauded a vast number of governments, banks, investors and famous people. Whilst these circumstances could not occur again because of much tighter and restrictive investment and corporate governance regulations, the story of Ivar Kreugar's legendary fraudulent ambitions and downfall is gripping and a fabulous read.
Where does he stand in the gallery of business deviants, such as Ponzi, and Madoff? I liked the quote in the book from Frederic Whyte who concluded that "He must surely have been the best-liked crook that ever lived."
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