Fortune's Spear: Genius Fraud and Finance in the Roaring Twenties Read online

  Copyright © 2014 Martin Vander Weyer

  First published 2011 by Elliott and Thompson Limited 27 John Street, London WC1N 2BX

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  Picture credits: Newspaper articles 23 June 1922, 18 August 1922, 19 August 1922, 20 February 1923 © Mirrorpix. Wanted poster 7 March 1922 © The Times.

  Extract on page 34 © R.A Church, Kenricks in Hardware: A Family Business, 1791-1966 (David & Charles, 1969). Extract on page 45 © Margaret Ackrill and Leslie Hannah, Barclays: The Business of Banking, 1690-1996 (CUP, 2008). Extracts on pages 51 and 246 from Very Private Enterprise by Aylmer Vallance © 1955. Reproduced by kind permission, Thames & Hudson Ltd, London. Extracts on pages 57 and 149 © Harley Granville Barker, The Voysey Inheritance (1905). Reproduced by kind permission, The Society of Authors, Literary Representative of the Estate of Harley Granville Barker. Extracts on pages 98-99 © Evelyn Waugh, Vile Bodies (Chapman and Hall, 1930; Penguin Books, 1938, 1996). Notes and introduction © copyright Richard Jacobs, 1996. Reproduced by kind permission of Penguin Books Ltd, and Back Bay Books, 1991. Extract on page 279 © Death at the Bar by Ngaio Marsh (1939). Reproduced by kind permission of HarperCollins Publishers Ltd. Extract on page 293 © George Orwell, George Orwell: Essays, with an introduction by Bernard Crick. First published as The Collected Essays, Journalism and Letters of George Orwell vols 1-4 (Martin Seeker & Warburg, 1968; this edition Penguin Books 2000). Copyright © the Estate of Sonia Brownell Orwell, 1984. Introduction copyright © Bernard Crick, 1994. Reproduced by kind permission of Penguin Books Ltd. Extract on page 299 © Anthony Powell, To Keep the Ball Rolling (1983) and on page 304 © Anthony Powell, The Kindly Ones (1962). Reproduced by kind permission of Random House and University of Chicago Press. Extract on page 316 © Alejo Carpentier, Explosion in a Cathedral (University of Minnesota Press, 2001).

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  eISBN: 978-1-62873-907-7

  Library of Congress Cataloging-in-Publication Data is available on file.

  ISBN: 978-1-62636-547-6

  Printed in the United States of America

  Contents

  Bevan Family Tree

  Kenrick/Chamberlain Family Tree

  Sonnet II

  INTRODUCTION: THE MAKING OF A FRAUDSTER

  CHAPTER ONE: A KENSINGTON WEDDING

  Capital and Industry

  Pillars of Society

  The Playing Fields of Eton

  Hollow-ware and Oddwork

  CHAPTER TWO: ON ’CHANGE

  The Black Sheep

  The Junior Partner

  Bad Examples

  The Senior Partner

  CHAPTER THREE: AT HOME

  Upper Grosvenor Street

  The Veiled Politician

  City Magnate and Don Juan

  At Littlecote

  CHAPTER FOUR: THE CITY EQUITABLE

  A Wartime Opportunity

  Lords on the Board

  Crack Oarsmen

  A Nine Years’ Wonder

  CHAPTER FIVE: THE POST-ARMISTICE BOOM

  The Lucky Englishman

  A Craze for Speculation

  Eminently Healthy

  Wily Dundonians

  Partners and Directors, 1918–22

  CHAPTER SIX: BOOM TURNS TO BUST

  Back from Brazil

  The Twin Bastions

  A False Prospectus

  Hand-to-Mouth

  CHAPTER SEVEN: FLIGHT

  Ordered Abroad

  Proofs of Debt

  ‘Parle français couramment’

  All is Squared

  CHAPTER EIGHT: CAPTURE

  An Inspector Calls

  ‘My Poor Wife!’

  Homeward Bound

  And Whose the Fault?

  CHAPTER NINE: TRIAL

  At the Guildhall

  Who was ‘Someone?’

  Window-dressing

  Muddled Away

  CHAPTER TEN: MISFEASANCE

  Mansell in the Dock

  Wilful Neglect?

  An Historic Judgment

  Stung by a Tart

  CHAPTER ELEVEN: FAMILY MATTERS

  The Prison Librarian

  Decree Absolute

  The Bogus Major

  Sheila’s Wedding

  CHAPTER TWELVE: LAST YEARS

  What Happened to Hatry?

  Russet and Asp

  The PPRS

  A Pauper’s Grave

  Exile

  ACKNOWLEDGMENTS

  BIBLIOGRAPHY

  Sonnet II

  You do believe I loved you, don’t you, Dear?

  Since we were swallowed in adversity

  It’s light enough to read the stranger’s sneer,

  For fawn and frown are weighed in oboli;

  But they’re not in accompt: your thought is all.

  In the old dancing days when people said

  I was in league with fortune, and the scale

  Tipped seemingly to humour my least need,

  Some friend would stop me in the thoroughfare

  Or mart to ask me why I walked so gay:

  “Another throw,” he’d guess, “With Fortune’s spear,”

  The whiles my heart was just with you, at play.

  And now when almost heaven itself seems vile,

  If you can still believe I still can smile.

  Gerard Lee Bevan, Russet and Asp (1929)

  INTRODUCTION

  The Making of a Fraudster

  Havana, Cuba, March 1936

  An Englishman old before his time makes his way slowly towards an open-fronted café. He walks painfully, leaning on a silver-topped ebony cane. His breath is short, his shoulders hunched, his pallor sickly beneath the brim of his straw hat.

  He reaches his customary table at the front of the café, sits with an audible sigh and a wince of pain, and flaps a hand in greeting to the waiter who will bring his customary coffee. He places the hat carefully on the chair beside him and mops his brow with a handkerchief from the breast pocket of his pale linen suit, stained at collar and cuffs by the humidity and filth of the city. Then he wipes the head of the handsome walking stick—his prized possession, his last beautiful thing, a gift from his beloved wife.

  From an inside pocket come a pair of small, wire-rimmed spectacles, which he places on the end of his nose. Anyone watching him closely might observe that he blinks continuously, as though the city’s dust is perpetually troubling his eyes. But it is a nervous tic brought on by stress; these days he worries constantly—about making ends meet, about small debts owed here and there, about the state of his own health and the future for his wife.

  He has a newspaper with him, a fortnight-old copy of The Times of London, well thumbed by previous readers. He has acquired it from the concierge of a hotel that he pass
es on his morning walk. It carries a report of King Edward VIII’s first broadcast to his subjects, in which the new monarch has spoken eloquently about the death of his father, George V, and his own dedication to his subjects.

  But our man has never had much interest in the doings of royalty—or politicians, for that matter. For old times sake he turns to the City page, scanning it for the names of companies and their chairmen whom he might once have known in London. He looks for news of Wall Street too, because his wife still owns a handful of shares there.

  Then he sees her—small, dark, animated, pretty, many years his junior—crossing the bustling street between slow-moving cabs and bicycles. She carries a basket of fruit and flowers from the market. His eyes light up as he struggles to rise from his seat, a vestige of past gallantry.

  ‘Don’t be silly, chéri,’ she says. Her accent and body language are unmistakably French. She kisses him on the cheek and moves his hat from the chair so she can sit beside him. ‘Here,’ she takes a flower from her basket, passes it under his nose, trims the stem and places it in his buttonhole. ‘That’s better. How are you feeling now? At least it’s a little cooler today.’

  Suddenly ill at ease, he reaches for his hat and pulls it low over his brow. A well-heeled tourist couple, evidently English, the woman showing the agitation of one who thinks she is lost in a foreign place, are coming into the café to ask for directions. Our man shuffles his chair slightly, turning his shoulder away from them. But the husband notices him and stares.

  ‘I say,’ he whispers, nudging. ‘That chap looks awfully familiar. I’d swear I used to know him in the City.’ And a few moments later, glancing over his shoulder as they leave the café: ‘It’s that chap in the City Equitable business, I’m sure it is. Used to be rich as Croesus and frightfully respectable. Ran off across Europe disguised as a Frenchman and ended up in jail. All over the ’papers in ’22. God, doesn’t he look old? What was his name?’

  His name, in fact, was Gerard Lee Bevan, and his wife’s name—his second wife and former mistress, that is—was Jeanne. At the time of this imaginary encounter he had no more than six weeks to live. He had indeed been rich as Croesus, and a man of great reputation in the Square Mile and beyond as chairman of the City Equitable Fire Insurance Company, senior partner of the old-established stockbroking firm of Ellis & Co, son of the founder-chairman of Barclays Bank and scion of a great banking dynasty.

  How and why he fell from that plinth to end his days a broken man in a rackety Caribbean watering hole is the subject of this enquiry.

  But this is not a whodunit. There is no doubt that Gerard Lee Bevan committed the offences for which he was sentenced by Mr Justice Avory in December 1922 to seven years’ penal servitude, nor that those offences constituted serious episodes of fraud. There might be a question as to whether any of his associates ought to have gone to prison with him, but only one—Edmund Mansell, general manager of the City Equitable—was ever charged with related criminal offences, and he was acquitted.

  Likewise, it is important to ask whether Bevan’s fellow directors of the City Equitable were culpable in a non-criminal sense for allowing him to get away with the things that he did, over a period of several years; they too were let off the hook, in a court case which for many years defined the limits of directors’ responsibilities. But that Gerard Bevan was guilty as charged is a matter of fact, and since there is not much mystery involved in reaching that conclusion it is probably helpful to the reader to begin with a simple summary of what his offences were and how they came about, so that the detail makes more sense as it unfolds.

  Bevan spent the bulk of his City career, which began in 1894, as a stockbroker. Ellis & Co had always been conservative in its way of doing business, but when Bevan succeeded as its senior partner in 1912 he had ambitions to make it much less so. In particular, he wanted it to play a more aggressive role in flotations of stocks and bonds. He also had his eyes on international markets, and was developing growing networks of contacts in North and South America and continental Europe.

  The outbreak of the first world war forced him to put his aspirations for Ellis & Co on hold, but brought him a different opportunity. A young man called Clarence Hatry offered to sell him a controlling stake in a fire reinsurance company, the City Equitable, which was poised for expansion because the war had forced the withdrawal from the London market of the previously dominant German and Austrian reinsurers.

  Bevan grabbed that opportunity with both hands and made a great success of it. He led the City Equitable into marine reinsurance as well as fire, and watched the upward march of its premium income, profits and dividends to shareholders—many of whom were his friends, acquaintances and Ellis & Co clients.

  Meanwhile, he formed a close association with Clarence Hatry, who—though he too would later go to prison for fraud—was at this stage emerging as a brilliantly creative corporate financier despite the constraints of wartime capital markets.

  When the war ended, the stockmarket came spectacularly back to life. In the post-Armistice boom of 1919–20, Bevan, Hatry and a rather unlikely and comical third associate, the celebrated Boat Race rowing coach Peter Haig-Thomas, worked together on a series of lucrative corporate mergers and flotations.

  In each case Hatry’s Commercial Bank of London did most of the brainwork, while Ellis & Co was the appointed broker to the issue. Bevan frequently took a seat on the board of the floated company and recommended its shares to his stockbroking clients, who were happy to follow his advice. The City Equitable came in on the deals as an underwriter—and sometimes as an eager investor in its own right.

  It was conventional for reinsurance companies to hold most of their capital and reserves in the form of highly liquid British government ‘gilt-edged’ stock—that is what their shareholders and the insurance companies who were their chief clients would have expected to see in reinsurers’ balance sheets. But the City Equitable under Bevan’s leadership reduced the proportion of its assets held in gilts in favour of acquiring a portfolio of far more exciting investments elsewhere.

  So far so good. The reinsurance company’s investment policy was far from transparent, but no one was complaining about the results. Some people in the City may have thought Bevan’s way of doing business rather cavalier, but that was often the reputation of successful stockbrokers of that era. Hatry was getting rich, and Bevan was getting even richer than he already was, while his clients and fellow City Equitable shareholders were prospering too.

  At successive annual general meetings, praise was showered on Bevan as a titan of the modern City, a financier with the Midas touch. But when the stockmarket became more turbulent and prices started to fall in 1920, new issues became much harder to place. Securities created by Hatry and placed by Bevan were often unmarketable—that is, there were no genuine buyers in the market to match against sellers.

  To maintain the impression of an active market, Bevan would buy the shares that clients of Ellis & Co wanted to sell, and either sell them to the City Equitable or make loans from the City Equitable to Ellis & Co to provide the stockbroking firm with sufficient cash to pay its clients and hold on to the shares until new buyers turned up in the market.

  In flotations, he would sometimes encourage the original family shareholders of the company being floated to buy more shares in the market, thus encouraging the impression of healthy demand for the issue, against a guarantee that Ellis & Co would buy the shares from them if there were no other willing buyers.

  He was able to do these things at will, without protest from his partners at Ellis & Co or his fellow directors at the City Equitable, because he had complete personal control of both businesses, and neither had the sort of internal controls that might have stopped him. Nor was there any challenge from their auditors, and most of his directors and partners genuinely had no idea what he was up to.

  At the City Equitable, a small committee to which the board of directors delegated all investment decisions did no more
than rubber-stamp whatever Bevan chose to do with the company’s cash and borrowings—often after the fact and in breach of the committee’s own limits. At Ellis & Co, Bevan’s four junior partners had little or no knowledge of how he financed their business or invested its capital, which gradually dwindled away as a result. To the extent that Bevan needed the co-operation of the general manager of the City Equitable, Edmund Mansell, he secured it by allowing Mansell to draw extraordinarily large sums of money for himself from the company to fund his own extravagant lifestyle.

  As a result, Ellis & Co came to owe the City Equitable almost a million pounds and Mansell owed it over a hundred thousand, while the City Equitable ended up owning a portfolio of investments wholly unsuitable for any insurance company. Bevan made matters worse by using City Equitable funds alongside his own to invest in other ventures which caught his fancy, including Claridge’s Hotel in Paris and a vast Brazilian cattle ranching enterprise.

  All this remained opaque to the other partners of Ellis & Co until the point was reached at which Bevan had effectively destroyed their firm. It was hidden from the directors and shareholders of the City Equitable by a sleight of hand in which government stocks, bought and sold within a matter of minutes and never actually held in the City Equitable’s custody, appeared in the annual balance sheet where the full extent of the loans to Ellis & Co ought to have been shown.

  As market conditions deteriorated against a background of worldwide economic slump in 1921, Bevan’s manoeuvres became increasingly desperate and his life began to disintegrate. He gambled in casinos, lived with a succession or possibly a combination of mistresses, and borrowed money wherever and whenever he could.

  As his situation failed to improve, Bevan took a distinct step into criminality. Having acquired several smaller reinsurance companies, he asset-stripped them to generate cash that was channelled illicitly to Ellis & Co, at the same time floating them on the stockmarket under a new holding company, City Equitable Associated, with a largely fictional prospectus—and thus scooping more cash from investors with which to hold creditors at bay.

  This house of cards was impossible to sustain. The City Equitable could no longer pay its claims, and was besieged by rumours of financial difficulties. By the end of January 1922—having concealed its insolvency for many months—the City Equitable was bust. Likewise, Ellis & Co was in ruins.