Fraudsters and Charlatans (34 page)

The buying-up of huge blocks of Lake View shares was putting a strain on Globe, and Wright was eventually obliged to shore up the company with a loan of £500,000, which he borrowed from a group of stockbrokers he later referred to as ‘the syndicate'. The security for the loan was a block of Lake View shares, which the group acquired at £11 per share, with, according to Wright, an agreement that they would not sell until the share price rose to £17. Unfortunately for Wright, the stipulation was not included in the written contract for the loan, but is hard to imagine that he would have entered into such a compact without knowing that the syndicate had agreed not to flood the market with Lake View shares until the moment it suited him. Wright continued, as he had done for Le Roi No. 2, to buy up all available shares in Lake View, yet it seemed to him that, despite his efforts to corner the market, there were always plenty of shares available, and the price did not rise as he would have hoped. He eventually discovered that the syndicate was selling its holdings and that he had been buying back his own shares all the time. He must have known before the crash came that he was bound for disaster, yet he was already laying plans to soften the blow with other people's money. At the end of December 1900 Globe was subject to claims on the Stock Exchange of £968,000 on the Lake View speculation, which it was unable to meet. No more cover-ups were possible. The crash hit the stock market like a thunderbolt. Twenty firms of stockbrokers were unable to meet their obligations because of non-payment of their accounts, and were declared defaulters. Many of these firms were ruined, and even those that survived only did so after suffering enormous losses. It was later estimated that hundreds of small investors were bankrupted by the collapse of Whitaker Wright's companies, and thousands more saw their savings disappear. Individuals who had been managers or accountants in the Globe empire, and knew nothing of Wright's manipulations, found their future careers blighted by the cloud of suspicion and distrust that naturally attached itself to their financial dealings.

The year 1900 had been an unhappy one for Lord Dufferin. His eldest son had been killed at Ladysmith in January, and the following April the trusted secretary who had been with him for twenty years also died. With the decline in Globe's value in 1900 Dufferin decided to stay on as chairman and not shirk the responsibilities that fell to him. He was to pay a heavy price. Soon after the shareholders' meeting in December, Dufferin learned that his third son had been wounded in South Africa. Here at least was a reason to give up the chairmanship that everybody could understand. Resigning all his City interests, he booked a passage to South Africa. A few days later came the news of Globe's failure, which he later described as ‘an indescribable calamity which will cast a cloud over the remainder of my life'.
¹⁷
He cancelled both his resignation and his voyage, and, duty-bound to a fault, agreed to chair the public meeting, fully expecting to be verbally torn to pieces.

On 9 January 1901 an extraordinary general meeting of London and Globe was held at the Cannon Street Hotel. Although fixed to start at noon, the shareholders began to arrive shortly after 10 a.m., and the great hall and galleries were soon crowded. It was estimated that some 2,000 people were present. Wright had already tried to defuse criticism by issuing a statement claiming that the assets of the company were sufficient to pay more than 20
s
in the £1. Shares of Globe, which in 1897 had been changing hands for 45
s
, were being bid for on the stock market at 7
s
in anticipation of an eventual payout. As the directors entered the room, they were greeted with cheers and a few hisses. When Dufferin rose to speak, however, it was clear that his personal popularity was undented, especially as he was a substantial shareholder. If there had been errors of judgement, he said, the policy of the board had been honest and within the powers granted by the company's constitution. He urged the shareholders not to permit Whitaker Wright to assume full responsibility for what had happened, since he ‘had never met anyone more devoted to the service of those with whose interests he was charged'.
¹⁸
Finally, he expressed his gratitude to the shareholders for the patience and generosity with which they had listened to his observations. It was an emotional speech and it was greeted with loud cheers.

Whitaker Wright's address to the meeting was probably one of the most important speeches of his life. Unable for once to rely for popularity on the promise of golden prospects, he set out to win the day with pure force of personality. He started with some good news. The directors ‘had practically arrived at an arrangement with the creditors of the company . . . and . . . “with a long pull, a strong pull, and a pull all together” their good ship would soon be off the rocks and sailing once more in smooth water'.
¹⁹
Wright, who liked to take full personal credit for success, generously offered to take responsibility for failure, and then proceeded to blame it on everyone else. He blamed the mine engineers for an inaccurate report, he blamed the war for lack of confidence, and most of all he blamed the syndicate. He proposed to adjourn the meeting until 14 January, by which time all the company's debts would be settled and he would be able to announce a scheme of voluntary liquidation followed by reconstruction to ensure future prosperity, pledging ‘his health, his strength, his life, and as far as might be his private fortune, to carry the enterprise to a successful issue'.
²⁰
There were rousing cheers from the floor, although not everyone was convinced. A Mr Seal suggested appointing an independent committee to look at the company's affairs, but was shouted down by Wright's supporters. Seal, who realised that any reconstruction scheme would require the shareholders to advance still more funds, commented: ‘If . . . they were prepared to throw their money broadcast into the sea, let them do so – nothing in the world perhaps would stop them until they had further adversity and further distress.'
²¹
Wright was defiant, and his lies were bold: ‘We are not afraid of investigation. We have not a single transaction to cover up – everything is open to the light of day.'
²²
He himself, he claimed, had at first suggested the appointment of the official receiver, but the creditors and shareholders had implored him not to do it because (and here he raised a terrifying spectre) if that course was taken the shareholders would get nothing. The meeting voted for adjournment and closed with three cheers for Lord Dufferin.

The press was less sanguine about Globe's prospects. The
Pall Mall Gazette
summed up the meeting: ‘there were generalities on assets, much skilful handling of an audience, various vague promises as to the future and that was all.'
²³
The
Daily Mail
was blunter still: ‘The directors' attempt to have a voluntary winding-up is a little too transparent, and is the usual device of directors of companies when there is something to hide.'
²⁴

In May, with Globe shareholders still waiting for the proposed reconstruction scheme to be announced, Brit-Am suspended operations owing to ‘complications . . . in which liability is claimed against the corporation for the same shares in several directions',
²⁵
and the financial papers demanded that all three companies of which Wright was the guiding spirit should be compulsorily wound up. At the end of May it was announced that Brit-Am was unable to meet its obligations, and on 3 June Sinclair Macleay, as chairman of Brit-Am, presided over a stormy meeting where it was explained that the company's failure was a result not of its own mismanagement but claims made against it following the Globe crash and ‘complications' on the Stock Exchange. He proposed voluntary liquidation to be followed by reconstruction. This proposal was seconded by Whitaker Wright, whose contribution was greeted by hisses. One shareholder, a Mr Stavacre, said he regarded the conduct of the company as ‘a disgrace to the commercial world',
²⁶
but a Mr Atkinson urged the meeting not to be ‘led away by any spiteful feeling toward the directors' and said that a compulsory liquidation would ‘wipe his shares off at once'. A cynic from the floor cried out: ‘They are wiped off already.'
²⁷

Whitaker Wright addressed the meeting, attributing the Globe crash to ‘the treachery and default of members of the Stock Exchange',
²⁸
a comment that caused an angry outcry from the floor. Proposals for the reconstruction of the Globe business would be announced later in the month, and the company had ‘practically sold the Baker Street and Waterloo Railway for £500,000'.
²⁹
He advised shareholders not to ‘cut their own throats and rush hastily to a decision which they might regret afterwards'. The new company would, however, have to do without him. ‘Nothing under the sun would ever induce him to be a director again in any company in the city of London.'
³⁰
Once again, and to the regret and astonishment of the financial press, Wright carried the day, and the meeting voted for a voluntary liquidation to be carried out by a committee. When on 13 June dissenting shareholders petitioned for the compulsory winding-up of Brit-Am, it was revealed that the company had substantial creditors and only £157 in the bank. Soon afterwards Standard, too, went into liquidation.

On 30 July the first meeting of the creditors of Standard was held under the chairmanship of Mr Barnes, the Senior Official Receiver, and for the first time the cloak of obscurity thrown over the dealings of the Whitaker Wright companies was pulled aside and the public were able to see what lay beneath. It was not an attractive sight. The directors had lodged a statement showing assets of £1,160,000 and liabilities of £362,000. As far as the assets were concerned, the figure was based on estimates made by the directors, ‘and he was afraid that they were quite impossible estimates'.
³¹
Fourteen mines valued on the balance sheet at £767,000 were not earning any income. Many of them had had no money spent on them, and several should be regarded as having no value at all. He also revealed, to the astonishment of the investors, that none of the properties supposedly owned by Standard had ever been transferred to the company, all of them still remaining in the names of their original companies or those companies' liquidator. The investments in shares were valued at £61,860, but most were being held as security by the liquidator of Globe. Most of the shareholders' money had been lost in Stock Exchange speculation. More shocking still, while these vast speculations were going on, no record of purchases and sales could be found in the company's books. As if this was not enough, Barnes now told his listeners that he had to refer to another matter he regarded as ‘extremely serious',
³²
the transfer of Globe's open speculations in 1900 to Standard and the writing-back of the transaction on 13 December. To date he had not received a satisfactory explanation of these activities.

Finally, he advised the shareholders to ‘consider among themselves whether there was any property worth saving, and whether it was worth while to put more money into the concern. . . . calmly and dispassionately'.
³³
No one was feeling either calm or dispassionate. Strong words were used in the ensuing discussion, and at one point several shareholders rose to their feet and, addressing those directors who were present (Whitaker Wright was wisely absent), ‘referred in vehement language to the conduct of the company's business'.
³⁴
There were to be no more compromises. The meeting voted to retain the Official Receiver as liquidator.

Wright was still director of Le Roi Mining Company Limited, whose directors, on reading the revelations, politely asked him to resign. He refused, and they were obliged to hold a special meeting to remove him. Fresh petitions were now presented for the compulsory winding-up of Globe, which Wright tried to avoid by sending out proposals for reconstruction, but no one now believed him, and the winding-up order was made. At a meeting on 16 December 1901, Barnes revealed that Globe had unsecured creditors of £1,142,000. Assets were estimated at £424,000, but unfortunately these were partly made up of claims against Brit-Am and Standard totalling £210,000, which could never be realised, and shares valued at £121,000, which were worth rather less.

Barnes described how Globe's funds had been dissipated in speculations, and exposed the complex cross-dealings that had taken place between the Whitaker Wright companies to make Globe appear solvent. There was virtually no mention of these enormous movements of debts and assets in the minutes, and he was satisfied that none of the other directors knew what Wright was doing. The meeting closed with the feeling that, shocking as the revelations were, the truth was beginning to emerge, and there was something the angry creditors had to look forward to: the courts had ordered that Whitaker Wright should submit to a public examination.

Lord Dufferin's sense of personal responsibility for the Globe crash led him, despite his own losses, to offer compensation to some of the shareholders. Touched by their unexpectedly friendly spirit, he remained grieved at the effect of the crash on his wife, and that her ‘life should be thus suddenly overshadowed, just as we thought to enjoy the evening sunshine of our days in our happy home'.
³⁵
Early in 1902, his energies exhausted, Lord Dufferin was compelled on the advice of his doctor to take to his bed. From there he continued to follow the inquiries, and on 22 January, now realising that he had been duped by a rogue, wrote to the Official Receiver stating that the Lake View speculations ‘were entered upon without my knowledge and consent. . . . I should have considered myself highly criminal if I had knowingly consented to the shareholders' money being gambled away in such a manner'.
³⁶
He promised that, should he recover, he would offer himself for examination. Soon afterwards he suffered a relapse, and on 12 February he died.