FORTUNE CLASSIC: A 3-part series on the life and death of Ivar Kreuger by Fortune Editors @FortuneMagazine December 25, 2014, 6:44 AM EST E-mail Tweet Facebook Google Plus Linkedin Share icons This series by the poet Archibald MacLeish first appeared in Fortune’s May, June, and July 1933 issues. It describes the life, career, and suicide of Ivar Kreuger, one of the great financial swindlers. You can read a summary of the article here. THE stair smelled as it had always smelled of hemp and people and politeness—of the decent bourgeois dust. After the linoleum smell of the ship and the harsh, acrid, dampish smell of the boat train the air had a friendly, almost an intimate, taste. Mr. Kreuger breathed it softly as he went down around the caged-in column of the ascenseur. He had a delicate sense of smell for flowers and cities and fabrics and wines and foods. Paris was always this faint odor of hemp under the odor of dust and Cologne water. It was very quiet on the stair on the soft carpet. Mr. Kreuger tasted the silence and the Paris smell. Paris was after all a home—one home—as much his home as any other after fifty years and many journeys—as kindly to return to, say, as London or as Berlin or as Stockholm—or as Kalmar even with its wooden houses by its milk-blue sea. At the bottom of the stair Mr. Kreuger pushed the glass-paned door. The March dusk was already darkening the passage, and the window of the concierge’s loge was light. Madame Veron, busy at her switch-board among the hanging cages of her birds, looked up to smile. Madame Veron had been sitting there for years, for ten years, lifting up her head to smile. And for ten years Mr. Kreuger, smiling back, had turned the clicking latch to ask for mail, to pat the children’s heads, to make his courteous inquiries in his courteous, well-articulated French for Madame Veron’s loud canaries and Monsieur Veron’s hardy Touraine cough. But today he did not answer. He heard the sullen traffic on the bridge and the trams go westward on the Cours la Reine. He saw the façade of the Grand Palais. The air was cold with the raw wind and the evening. He stepped across the high oak sill of the doors, stood still a moment, turned to the left, went on. The street had a strange look, an unfamiliar look, from the wide sidewalk. Mr. Kreuger, in all his years of the Avenue Victor-Emmanuel III, had never walked. There had always been a car at the door, a taxi waiting. But now the distance was not long—not so far as the Rond Point where the Avenue crossed the rolling traffic of the Champs-Élysées. He had seen the gun-store windows often turning left by the door of Poiret’s onetime shop where the rich American women talked along the curb. There was a sign in front like a target with the words “Tir Gastinne-Renette.” There were rifles in the windows and dueling pistols hung in pairs and English guns. It was a few steps in the gathering dusk—three hundred meters. A clerk received him in the lighted shop. “Monsieur desires … ?” “An automatic—a revolver—it makes no difference which.” Monsieur was very calm, in no way excited, nothing to make a man suppose… “Perhaps the 6.35 mm. Browning?” The 6.35 mm. Browning was too small. “The 7.65 then?” “Non, plus gros! Plus gros!” “The army type? The 9 mm.?” Yes, the army type. Monsieur was familiar with the action of these arms. He was aware of the law which requires the sale of cartridges by the box. He bought four boxes. He gave his name and address: Mr. Ivar Kreuger, Numéro Cinq Avenue Victor-Emmanuel III, au troisième. He dropped the heavy package in his pocket and went out. That evening Mr. Kreuger did not eat. He was suffering from a heavy cold, one of those colds which a March crossing of the Atlantic and a drafty train and a Paris chill can give a man. He would not admit even to Jeanette his housekeeper that he was ill. He hated illness. But he sat alone in the furnished salon at the flat desk playing solitaire … THE morning was Saturday, twelve March, a sunless, white-skied, pale spring day. In the Salle de l’Horloge over at the Quai d’Orsay, Aristide Briand, unembarrassed in death, exposed his ironic face to the long stares of his countrymen. The Seine, swollen with a springtime flood, sucked at the arches of the Pont Royal. There was a cold wind with the smell of the charcoal stoves blown thin and gusty past the stale cafés. From the salon au troisième at Numéro Cinq Avenue Victor-Emmanuel you could see the raw light on the roof of the Grand Palais and the open ground with its gravel and its plane trees and the new buds swelling on the trees. By nine o’clock the hum of the taxi wheels had started on the asphalt and Mr. Kreuger, writing at the salon desk, writing three letters, two in Swedish, one in English to Krister Littorin his friend, could hear the wagons on the Cours la Reine. He ended the letter to Littorin—”Goodby now and thanks. I.K.” By ten o’clock the noise of the wheels was louder. Over on the Quai d’Orsay the waiting crowd turned shoulders to the wind. The Seine boiled back against the pointed piers. The light blew on the roofs in thin, blank, spinning tatters. Au troisième at Numéro Cinq a youngish Swede was rising from his chair. Ivar would not forget the meeting at eleven in the Hôtel du Rhin? He spoke in English, thickening the words. The tall man at the desk leaned forward smiling, shook his head. Ivar would not forget. The door closed. Minutes passed. Miss Bökman, Mr. Kreuger’s secretary, came, sat down, talked briefly, went again. At eleven the bell of Ste. Clotilde echoed in the rue Las Cases and down the Boulevard St. Germain. The doors of the Salle de l’Horloge were shut against the crowd. The room at Numéro Cinq was very still. Through the closed windows the passing cars and the children’s voices under the plane trees sounded far away and faint. Mr. Kreuger laid his three brief letters on the desk. To one he pinned a telegram. The telegram had come from Stockholm: Mr. Kreuger was to meet the Bank of Sweden’s representatives in Germany on March thirteenth—tomorrow. The doors of the apartment were all closed. Jeanette had gone to do her marketing. Mr. Kreuger drew the bedroom blinds evenly and neatly to the sill. He smoothed the unmade bed-clothes and lay down. The street sounds had grown fainter through the darkened blinds. Looking up he saw the fat, gold stucco cherubs in the ceiling corners of the room. Odd witnesses! He turned his black coat back and laid aside the leather-covered large gold coin above his heart. For a long time he had worn it there as fetish or as guard against some shot, some madman. Across the river at the Quai d’Orsay the diplomats at Briand’s bier stood looking at the dead, preoccupied face. Mr. Kreuger snapped a cartridge in the army type, the 9 mm. He placed his feet together neatly side by side. He shot himself an inch below the heart. Two hours passed. The telephone rang once, rang twice, subsided. Jeanette, returned from marketing a little before twelve, told Monsieur Littorin calling from the Hôtel du Rhin that Mr. Kreuger had gone out—then later that Mr. Kreuger was asleep. Jeanette had seen him lying on the rumpled bed. Monsieur kept calling, he was urgent. Mr. Kreuger was expected, the gentleman expected Mr. Kreuger and he had not come. Would someone go and waken Mr. Kreuger? Jeanette had called him but he did not wake. At one Monsieur Littorin himself, Miss Bökman by his side, drove up. Together they went in, Jeanette behind them. The room was dark and Littorin, groping toward the bed, put out his hand. Jeanette could hear him there. She heard his voice cry: “Il est mort.” She pulled the blinds back. Silent, his feet together neatly on the spread, his left hand on his abdomen with the thumb cocked upward, his right arm straight against his side, a little blood, a very little blood, below his heart, Mr. Kreuger lay along the unmade bed. All that afternoon, known only to a dozen unknown men, he lay there. All that afternoon, his bedroom windows scarcely out of hearing—well within hearing if the street were still—of the Champs-Élysées and the humming wheels, the long, neat shape of Ivar Kreuger lay there on the tumbled bed. And all that afternoon, known to the waiting newspapers of the world, the small, dead, humble body of Aristide Briand rode from the Quai d’Orsay across the bridge, across the Place de la Concorde, west by the Champs-Élysées to the Arc, south by the Avenue Kléber to the Trocadéro. After it came four hearses piled with flowers. Behind it walked the representatives of nations. Bayonets every ten meters saluted it. Pacifists demonstrated in its honor. Photographers snapped it from the housetops and the trees. Reporters wrote its passage for the world. Cables waited for its journey to be done. And when, next morning, the Sunday morning, the thirteenth day of March, the presses of the world ran out their Paris date lines not Aristide Briand went rolling down their columns to the grief and admiration of mankind but Ivar Kreuger, Roi des Allumettes, creditor of nations, master of finance, lay shockingly, inexplicably dead in two-inch, shrieking headlines on a printed page. BETWEEN those two dates of death and publication Ivar Kreuger’s body kept a strange incognito. By one o’clock Littorin and Miss Bökman and the Verons knew it was there. By two o’clock the Swedish banker Oscar Rydbeck and the Lee, Higginson partners Colonel George Akers-Douglas of London, Mr. N. Penrose Hallowell of Boston, and Mr. Donald Durant, seated waiting for the living Kreuger at a lunch table in the Hôtel du Rhin, had heard of the other Kreuger for whom it was no longer necessary to wait. A little after two Mr. Gunnar Ekström in the Match Palace in Stockholm had made out Rydbeck’s agitated message on the Paris phone. Between two o’clock (which was nine o’clock in the morning in New York) and three o’clock (which was ten o’clock in the morning in New York) the New York partners of Lee, Higginson had read a cable signed “Donald Durant” instructing them that Kreuger had “died suddenly” and that no announcement must be made until the Paris police made their announcement. By three o’clock Commissary Felix Mangaud of the St. Philippe du Roule poste of the Paris police had been informed by an agitated gentleman of foreign extraction that a certain Suédois, a Monsieur Kreuger, had died in the Avenue Victor-Emmanuel and that there were no police in the poste of the Grand Palais due to the funeral of Monsieur Briand so that it had been necessary to come to St. Philippe du Roule to report, and that it was imperative to keep the news from the general public during the ensuing hours since the European Exchanges were all closed but the New York Exchange, it being Saturday, was open until noon. (“One agreed that it would be lamentable if the European owners of Kreuger paper should have the opportunity to deluge the New York Exchange with selling orders and that it was therefore desirable to withhold announcement until after five.”) Between three o’clock (which was ten o’clock in New York) and five o’clock (which was noon in New York) partners in New York brokerage houses received telephonic and cable notifications from Paris to the effect that short operations in the securities of the Kreuger group might be expected to yield an interesting return. By four o’clock Dr. Marcel Grilles had authenticated the manner and cause of death and the telephone operator at the Swedish Legation had told nervous countryman after nervous countryman that the Minister was out … the Minister was out … the Minister was at the funeral … the Minister was at the funeral of Excellency Briand. By five o’clock friend after friend was climbing the three long flights at Numéro Cinq Avenue Victor-Emmanuel in the odor of dust and politeness and eau de Cologne and friend after friend was descending to the chirp of the canaries with a troubled face. And finally at six o’clock in Paris, an hour past the Saturday closing of the New York Stock Exchange, the police reporters, dozing in the press room of the Sûreté Générale in the Place Beauvau, twelve minutes by easy walk from the poste in the corner of the Grand Palais, were shocked into wakefulness by the brief and cool announcement that Ivar Kreuger, Grand Officer of the Legion of Honor, was dead in Paris and dead by his own hand. THE news had broken. There were telephone calls, boys running, typewriters clicking. The cables picked it up. Istanbul editors, amazed into forgetfulness of the government ban upon notices of suicide, ran the story in full. Stockholm read it at seven o’clock, standing on the street corners, shouting in the cafés, peering over shoulders on the trams. New York and Mexico City and Bogotá had it a little after noon. Shanghai and Yokohama heard it at four the following morning. American investors read it across the front pages of their Sunday papers. Headlines ran the world. “IVAR KREUGER DÖD,” sprawled across the top of the Göteborgs Handelstidning. Le Temps read: “MORT DE M. IVAR KREUGER.” In the Berliner Tageblatt, it was “KREUGER’S LETZTE TAGE.” The London Financial Times had “TRAGIC DEATH OF MR. IVAR KREUGER FOUND SHOT IN HIS PARIS FLAT.” The New York Times printed a two-column front-page flag: “IVAR KREUGER A SUICIDE HIS STOCKS HEAVILY SOLD SWEDEN TO PROTECT TRUST.” Bogotá and Yokohama and Sydney ran the news. The forty countries of the world where Kreuger’s match trust operated echoed with it. Story followed story. And to the stories succeeded editorials. Said the London Times in its first leader, the leader sacred to the demise of statesmen: “The man who was driven on Saturday to this last act was no common adventurer caught up and cornered at last by the self-defeating ingenuity of his devices … A man of ambition but no vanity, Mr. Kreuger seems to have had no weakness of the kind that brings weaker timber to wreck … Least of all does personal suspicion light upon him in his last day.” To the New Statesman “… he was a very Puritan of finance.” The conservative Economist saw him as the hero of an æschylean tragedy: “… a man of great constructive intelligence and wide vision who planned boldly, yet on a basis which seemed to be protected by carefully devised safeguards, and who for once seemed about to combine with the profits of private enterprise a real contribution to the welfare of nations.” He was “no gambler on a gigantic scale in the world’s bourses, no mere “promoter’ in quest of personal profit at the expense of sucking dry the enterprises to which he laid his hand.” L’Illustration found that “Ivar Kreuger a payé de sa vie la foi profonde qu’il avait dans la possibilité de recréer l’harmonie économique du monde.” The Journal of Commerce, readily admitting that “no man could be expected to foresee the multiplied catastrophes that have over-taken the world of late,” nevertheless felt it “a great misfortune that the modern form of corporate organization lends itself so easily to a concentration of control in the hands of one or a few men, carrying with it responsibilities too great for the endurance of the average human being in times of stress and strain.” Not even Pravda, professional doubter of all capitalistic morality, doubted Ivar Kreuger. “The individual capitalist, finding no way out from the crisis, may shoot himself. Capitalism as a whole, also finding no way out, prefers to shoot others. Japanese imperialism… ” But the world was not reading editorials. In Stockholm a fashionable wedding party broke up and the Crown Prince, called from a Masonic meeting where his son was to be inducted into higher orders, rushed to the Palace. In Paris Premier Tardieu summoned Count Ehrensvärd, the Swedish Minister, to a long conference. At Nice, Count Folke Bernadotte whispered in the King’s ear and the King left his unfinished dinner. In New York on Monday morning sales of Kreuger & Toll certificates totaled 673,000, a third of the session’s dealings, and the sale of one block of Kreuger securities constituted the “largest single transaction on the New York Stock Exchange on record”; bonds of Kreuger & Toll and International Match were off twelve to sixteen points from the low level to which the heavy selling of Saturday (on private Paris information) had forced them, and Kreuger stock prices dropped by three to five points. In Basel the Bank for International Settlements met to discuss the impending crisis. Back in Stockholm the Swedish Parliament convened hurriedly at midnight on Sunday night. In Warsaw there was a run on Kreuger’s Polish American Bank. In Revel in Esthonia, M. Margus, director of the Esthonian Match Monopoly, killed himself. In London a Mr. Trevor Allen, author of Underworld, was dispatched to Stockholm to “find out the truth about Kreuger.” In Berlin the Industrie und Privat Bank closed its doors … THE days passed. Kreuger stocks fell. Kreuger companies tottered. Kreuger’s name went back and forth over the cables of the Atlantic and the Pacific. People talked Kreuger, read Kreuger, asked one another about Kreuger in subway trains and on the porches of Riviera hotels. And Mr. Kreuger himself, neat and patient in his close black suit, lay waiting still in the bedroom in the Avenue Victor-Emmanuel, two nuns watching turn and turn about in the corners of the room and a respectable sergeant of police downstairs with the canaries in the little loge. No word had come from Stockholm—no devoted sister to attend him—no directions for embalming—no orders to remove—no word whatever. FOUR days went by and still there was no word. And for four days the tongues went and the stories of the dead man grew. Kreuger, mysterious in his death, was, it appeared, mysterious also in his life. He had committed his whole life to no one man or woman. He had committed it in parts to many. And the act of his death, like a chemical thrown into a solution, had precipitated facts unknown even to his closest friends. The central story, the official account, was clear enough. Born in 1880 of a bourgeois German family long domiciled in the little Swedish wooden town of Kalmar on the Baltic, Kreuger had worked through grammar school and technical college, emigrated to America at the age of twenty, tried real estate and wire stringing, worked on a bridge in Vera Cruz and on the Flatiron Building, Macy’s, the Metropolitan Life Building, the St. Regis, and the Plaza in New York, tried his luck with a construction company in London in 1903, started a Johannesburg restaurant, served a hitch in the British Militia at the Cape, toured the Far East, passed three gay months in Paris at the age of twenty-four, swung back to Canada and the States, worked on the Syracuse Stadium, and ended up in Sweden in 1907 with no money, a sound knowledge of reënforced concrete, and an ambition to rebuild the city of Stockholm after the American heart’s desire. THE rest had been one of the great success stories of the age. At thirty Kreuger had started business for himself, joined forces with a young Swedish engineer named Toll, run away with the building business in Stockholm (where Kreuger must be credited with a large part of the excellent modern construction which the city now boasts), extended his interests into Finland, Russia, and Germany, run his capital from 1,000,000 kronor up to 6,000,000 kronor, turned to the match business in 1913, formed Swedish Match in 1917 at the age of thirty-seven in the face of enormous and worldwide difficulties, restored to Sweden her predominance in match production lost during the War, extended his operations into every European country except Spain, Russia, and France and to sixteen non-European countries, bought or built 250 match factories, increased the capital of Kreuger & Toll to 76,000,000 kronor in shares and 588,050,293 kronor in reserves, set up fabulous subsidiaries in America, acquired absolute monopolies in fifteen countries, de facto monopolies in nine, and market dominance in ten more, associated with himself the great banking names, with very few exceptions, of Europe and America, lent almost $400,000,000 to fifteen countries including France and Germany at a time when European countries were desperately short of credits and American credits were no longer to be had, made possible by his loans the monetary stabilization of Rumania, the purchase of seed grain in Latvia, the construction of railroads in Esthonia, and the repatriation of refugees in Greece, paid large and steady dividends to his stockholders, and received the public thanks of France for his part in the Curtius Tardieu negotiations at The Hague. His interests touched the world at every point. His real-estate concern was responsible for the development of the Kungsgatan, Stockholm’s principal street. His telephone company, the Ericsson, had factories in twelve countries and concessions in five. His Swedish Pulp Co. was the largest European producer of sulphite and sulphate pulp. His newspapers included the Svenska Dagbladet, one of the best papers of Scandinavia. His Boliden Mining Co. controlled the gold fields of northern Sweden. His great holding company, Kreuger & Toll, owned one-fifth of the stock of Grängesberg-Oxelösund, one of the greatest of iron-mining companies, and through Grängesberg had interests in North African mines which, with the Swedish, dominate the free iron (i.e., iron not controlled by individual steel companies) of the world. Through Kreuger & Toll he had also stray minority interests in the Skandinaviska Kredit Bank and the Stockholms Intecknings Garanti Bank, while his own banks were set up in Paris and Amsterdam and Berlin and Warsaw. The Swedish Film Industry Co. was one of his companies. Seven to eight per cent of the stock of SKF (ball bearings) was at one time his. He strode the world, the Scandinavian world at least, like a colossus. And the mere recital of the names of his companies was enough to make the man in the Café Cecil ask the stranger beside him why—and for the tenth time, why—such a man, the master of so great a world, should now have killed himself? BUT not all the stories that filled those days while Ivar Kreuger lay in the Avenue Victor-Emmanuel with his neat shoes side by side were tales of action. People talked of his fabulous wealth: of his penthouse (romantic word to the cinema-bred European) at 791 Park Avenue, Manhattan, where trees grew on the roof and the bedroom was like a lady’s bedroom in a French house and the bath was walled in pink marble with a sea-bottom scene above and a tiny tub; of his apartment in Berlin on the Pariser Platz; of the twenty-room flat on the top of his new Banque de Suède Building in the Place Vendôme with four guest suites and a pent-shaped library and roof gardens and greenhouses and a special hotroom for orchids and a breakfast corner by the 17th century oeil-de-boeuf window looking out across the Place; of his two Rolls-Royces and his three motor boats (one of which could go sixty miles an hour), of his monogrammed silk underwear in shades of tan, of his dinner parties with antique gold snuffboxes for place cards and armfuls of orchids and carnations for the ladies as they left and fireworks and hired singers … Mr. Kreuger lay in the bedroom and the talk went on. People who had never talked about him before contributed their concierges’ observations, their neighbors’ glimpse, their mistresses’ confessions. He had looked like this … He had looked like that … Few people had any knowledge how he looked. Few had seen him. Even the illustrated papers had failed to plaster his face over Europe, and the press had muffed him. (He hated the press—and subscribed to all the clipping bureaus he could find.) It was said that women did not like him, did not find him “attractive,” that he was “tall and pussy,” that his voice had “a peculiar trumpeting sound,” a sort of bray. That was one story. The other story gave him a beautifully cut long nose, a mouth of the type called “classic,” a gentle, level, persuasive voice, the typical Swedish breadth from nose to cheekbone, and a high and well-curved head. But these were literary exercises. The truth was that few of the few who knew him could describe him well. His face faded out of memory. No one seemed able to recall his eyes—only his big-boned Swedish frame filling a doorway and the porous pallid skin of his face strangely fat above so gaunt a body. There was something obscurely female—but not feminine—about his features, something neither commonplace enough to recall by resemblance to another face nor sharp enough to remember for itself—as one remembers a Wilson or a woman like the Duse. What survived was not a head but a manner—an embarrassing trick of talking with the mouth drawn back in a kind of canine grin, a way of twisting the neck, a gracious, gentle courtesy in speech, a habit of asking questions as personal and disarming as his own answers would be dignified and deprecatory. What survived was a myth—a Ulysses-like hero (Joycian, perhaps, rather than Homeric)—a man who without gesture, without eloquence, could talk figures in the four languages of the world until his hearers delighted to believe—a man whom the French bankers, more in envy than in stricture, had called l’oiseleur, the charmer of birds. NOT even the scenario writers of the Pacific Coast could have put together a more desperately appropriate figure than the remembered Kreuger. He had all the tricks, all the mystery, all the brute, spectacular, klieg-lighted success the most banal producer in Hollywood could demand for a big-time business hero. His powers of memory were such that he would amuse himself on the Train Bleu for hours writing down the quotations on a given stock for a year and making only fractional mistakes—such that a balance sheet once recited to a given listener could be recited to the same listener twelve months later. His calmness was incredible—no one had ever heard him raise his voice. His modesty was an axiom. His secrecy was a tradition. His success was the greatest the living world had seen … Small wonder the young French novelists to whom every man is a possible occupant of a possible literary category put Mr. Ivar Kreuger down for the great Romantic of the industrial age. And small wonder, too, that stories of his sensuality spread like grass fire. Sensuality is the reverse of industrial greatness in this cinema world and Kreuger without a dozen mistresses would have disappointed the audiences at Grauman’s Chinese where Hollywood first-nights its films. It made little difference that Madame Veron sniffed at all such tales: “… since he was such a sober gentleman that he didn’t even have a pair of brown shoes, nothing but good black ones which cost around 600 francs a pair and which he always tied with his own hands into a little bow that spread out like wings—he was always very neat about the feet.” It also made very little difference that the other tenants at Numéro Cinq had seen him in evening dress at the very most a half-dozen times in ten good years. The part was written beforehand. Vice was de rigueur. And the stories spread. At first they spread in whispers. Ingeborg Hassler—Ingeborg Eberth—was the heroine of one. In middle March of 1932, while Mr. Kreuger lay in the Avenue Victor-Emmanuel and the voices talked, Ingeborg was a middle-aged, not still lovely woman with a still quite pretty nose. But twenty years before, in 1912 or 1913 when Kreuger & Toll was capitalized for a mere two million kronor and Ivar Kreuger was beginning to travel into Finland and Germany and Russia, Ingeborg was a bright and slender girl, a charming compagne de voyage. And such for twenty years she had remained—a well kept, satisfied, not young, not growing younger, almost wife. Once, charmed with an engineering Dane, she had changed her name to Eberth and gone off. She had not stayed. Ingeborg was the heroine of one romance but there were many others. Stockholm was full, had been full for years, of stories of dancers, whores, prima donnas, other men’s wives, orgiastic dinners, little iron doors at the tops of stairways, desks full of gold handbags and diamond brooches, photographs inscribed “to darling Ivar,” thousand-kronor notes handed to women on the street, and other similar fancies. The tales had not had much currency before the twelfth of March. Of the Roi des Allumettes one spoke with circumspection. But the 9 mm. army-type Browning had brought them all out, and with them a few historic facts—the fact of an Irish mistress in Paris, an American mistress in New York, an English mistress in London, and a scattering of mistresses over the capitals of the world. The whispered rumors of Kreuger’s homosexuality, which had been popular in Paris and not altogether unknown among the hearty Yale and Princeton bankers of New York who distrusted the virility of a man with a taste for orchids, vanished overnight. Kreuger was accepted as a rake. As a rake he satisfied the proprieties. The millionaire, the Match King, and the rake! IT ALSO fitted the proprieties to make the rake a glutton and a sot. And the echoes of the 9 mm. brought in stories enough to prove the case. In Paris at his apartment he ate, to be sure, next to nothing, had no favorite foods, dreaded growing fat, and left in his cave no champagne at all and only a few bottles of Château Yquem and Burgundy. In New York, in his dining room draped like a Tennysonian barge, he took what Hilda Åberg cooked for him and little enough of that—only a second helping of dessert. And at public banquets he ate less than a dieting woman and drank not at all—a half glass of dry white wine, lifting and twisting and smelling his brandy glass after dinner only to set it down. But nevertheless it became known bit by bit that he was not altogether abstemious. He had loved champagne. He could drink bottle after bottle of Veuve Cliquot without visible effects … Sweets overmastered him … Once at dinner he had gulped an entire bowl of chocolates before the soup was served … Once after a business coup in Berlin he had given himself a feast at the Adlon eating a chocolate soufflé, caviar, bouillon, and an ice—in that order … It was delightful to remember how, in spite of all this, he had regularly released to the Swedish press a bulletin informing the world that Mr. Kreuger was a hermit, that everything Mr. Kreuger did was for the good of the country, that Mr. Kreuger led an ascetic life. Not all the accounts, however, fitted the Hollywood preconception. True enough, it was said that he had had the head of Napoleon worked into his ex libris and that he was fantastically generous, paying impoverished musicians large fees to perform for his guests, lending huge sums to former competitors, helping his friends in secret and almost without thanks, indulging in a kind of orgy of charity to such a point that Oscar Rydbeck, director of Swedish Match, complained that Kreuger’s “great weakness was to like to do good to others—not that he wanted to be thanked or even identified …” But although generosity and the head of Napoleon are characteristic props in the Great-Man drama, flowers are not. And the great passion of Kreuger’s life was flowers. He had a lonely woman’s taste for lilies of the valley, rosebuds, and cattleyas. His gifts to women were winestocks heavy with grapes and bunches of dark red carnations. And a rose or an orchid in a narrow jar was a necessity on any desk where he might work. Distinctly flowers were an oddity. And there were other quirks. Sports, for example, and clothes. The great industrialist should have an itch for golf, and wear a white tie or a pair of slacks as smartly as some imitation archduke photographed on the Riviera. But Kreuger had no taste for golf and no aptitude for costume. If he played tennis at all—and he rarely did, preferring competitions in the catching of small, inert white fish with every successful haul rewarded by a silver cup—if he played tennis at all he played in blue pants, suspenders, and a derby hat. And no matter how he dressed he never lost the awkward middle-class look of his Kalmar background. Moreover, his indoor relaxation was not bridge but poker (in which he was crazily successful) and he lacked the frills of art which, like the white paper on the chop bone, make the great industrialist tidier to handle at a social meal. There were those who said he was intimately acquainted with the classics of England and France and Germany as well as with the classics of Sweden. But there were also those who said that he cared for one book only. Voltaire’s Charles XII. And it was agreed that though he had the European’s mysterious respect for grand opera, he cared nothing for the theatre, never went to museums, and bought his painters (the world’s most famous and the world’s most ill-assorted) by ordering them, like matches, $50,000 worth at a time. AND so the stories went and the anecdotes with them—anecdotes true and anecdotes false—true anecdotes of Mr. Kreuger’s visits to the White House and of his optimistic talks with Mr. Hoover. Probable anecdotes of Kreuger killings in dollars in ’20 and Kreuger killings in I. G. Farbenindustrie shares in ’25. Questionable anecdotes of the Viennese chemist Dr. Ringer (never heard of since) who had invented the allumette éternelle (capable of igniting 600 consecutive times, wet or dry), and how Kreuger’s men had first sought to buy it and, failing that, to circulate depressing reports: “Savez-vous? L’allumette éternelle ne s’allume pas!” Historic anecdotes of his victory over Morgan in 1928 when he enabled the French to pay off, with money borrowed from him at 5 per cent, money borrowed from Mr. Morgan at 8. Well-founded anecdotes of his horror of contagion—how he spread a handkerchief over the cushion of the car when he traveled and washed his fingers after touching a dog and kissed his hostess’ hand above the wrist where none had kissed before him. Believable anecdotes of his cure of syphilis in Vienna in 1913, and of his fanatical interest in the disease. Authentic anecdotes of the devotion of his servants and the adoration of his concierge who believed that within two years monuments would be erected to him all over the world. Undoubted anecdotes of his subsidies to all the parties of his native state from Conservative through to Communist. Endless anecdotes of all kinds and of all colors. And mixed with the anecdotes the pompous phrases of the German psychologists and the Russian psychologists and the Swedish psychologists. And mixed with the phrases and the psychologists the rumors. The rumors started very early. It was inconceivable to the Swedes, however much they might believe it, that anyone as rich as Kreuger should really shoot himself. It was also doubtful to the French. The French and the Swedes are practical people of long experience in the world and even the fact that twenty witnesses including the French Minister in Stockholm, the Swedish Consul General in Paris, the Baron Drachenfels, the Viscount N. de Rochefort, and a dozen or so of Kreuger’s closest friends and most familiar servants had seen the body—even the fact that Kreuger had been identified by his friend Gunnar Cederschiöld and his housekeeper Jeanette Barrault by the injured and crooked forefinger of his left hand—even the fact that none of Kreuger’s intimates doubted his death was insufficient to convince the public. A perfect epidemic of strange tales broke out. There was the story of the three nuns. Kreuger was a Protestant and there had been two nuns to pray over him. Which was sufficiently strange in itself. But when the nuns came out there were three nuns … Then there was the story about the natural son. The natural son (Mr. Kreuger’s natural son, of course) was engaged to a young lady. The three of them dined together Friday night. Saturday morning the young lady, who had started immediately for Rome, died mysteriously on the train. And the son had never been seen again—had vanished. He was much Kreuger’s length and weight, the son … And then there was the story of the special cigars shipped to Sumatra days after Kreuger died. It was true that Mr. Kreuger never smoked cigars—that he smoked cigarettes, Maryland, paquet bleu and paquet jaune and paquet gris. Nevertheless, there was the story of the cigars … THE rumors went from mouth to mouth and the anecdotes rattled out on the typewriters and the name Kreuger went back and forth over the cables—and Mr. Kreuger himself lay very still and neat and patient on the bed in the darkened room with the professional veilleuses in the corners and the muffled sound of the taxi horns coming in by the curtained windows. And at last the telegram from Stockholm came. It was not at all too soon. The left side of his face had started to go; the cheek was turning violet. ON THE seventeenth of March, the fifth day since his suicide. Ivar Kreuger, decently prepared for the journey by Mr. Bernard Lane. Cincinnati-born embalmer, and properly dressed in a new and not-yet-paid-for suit, rode across Paris to the Gare du Nord. Above the casket was a blanket of flowers presented by the Swedish Consul Mr. Nordling, by the Baron de Scheve, by the Viscount de Rochefort. On the eighteenth the dark French funeral car was attached to the Stockholm express in Hamburg. On the nineteenth it crossed the Baltic ferry. On the twentieth it drew into Stockholm. It was observed in Stockholm that the coffin, contrary to the established usage in these matters, had a small glass pane. The rest was ritual. On Tuesday the twenty-second day of March gentlemen from all parts of Europe, from England, from America, dressed themselves in the black cloth and white ties of Scandinavian grief and drove to the Crematorium of the North Cemetery outside the city of Stockholm. They were very important men. The 275 names of their invitations included the great of European industry. They drove slowly in a long, black line of shiny cars. They took their seats in a chapel banked with orchids, with lilies, with cyclamens, with roses in wreaths carrying on broad ribbons some last and kindly message to the departed soul. They sat there while the double door swung open—while eight tall chauffeurs in the uniform of the Match Trust bore in the light wood coffin with its load of lilies of the valley. They heard the level speaking of the parson. They heard the sobs in the silence of the room, the long Te Deum, the voice of Madame Pålssön-Wettergren of the Swedish Opera breaking with the final phrase of the Handel Largo. They saw the coffin sink to the furnaces below and old white-headed Ernst and Jenny Kreuger standing at the coffin’s head throw in, each one, a flower. They saw young Donald Durant, his face set, the American Minister’s extra high silk hat between his hands, lean forward toward the sinking coffin. And they turned and filed out through the chapel door with solemn, grief-touched faces like mourners after any other death … It was very sad. And very, very strange. So great a man—so rich a man. Why should a man so rich and great have died by his own will? … Among the funerary offerings was seventy-five dollars’ worth of expensive flowers sent by the International Telephone & Telegraph Co. on the personal order of Colonel Sosthenes Behn. Part 2. On March 22, 1932, ten days after his suicide in Paris, Ivar Kreuger‘s funeral was held in the North Cemetery of Stockholm. IVAR KREUGER, heavy between the eight uniformed chauffeurs of the twenty-second of March, was a victim of the depression, a martyr of the economic wars. No one doubted that. Pravda did not doubt it. J. P. Morgan & Co. did not doubt it. Not even Ivar‘s brother Torsten with his hollow, lupine face, not even Carl Lange the mysterious bookkeeper, not even Sven Huldt who signed his Amsterdam wires “Svensson,” not even Bror Bredberg with his ambiguous Zurich companies, of which the imposing gentlemen in the black suits and the white wash ties had never heard, doubted it. Torsten Kreuger and Carl Lange and Sven Huldt and Bror Bredberg might pronounce the word “martyr” with a special emphasis all their own. But none of them would doubt the word “depression.” And neither, for that matter, did Mr. Donald Durant of the firm of Lee, Higginson & Co., bankers, the American Minister’s extra high silk hat between his fingers. Mr. Durant had much to think of as he sat there in the odor of lilies of the valley staring at the light wood box. But doubt of Ivar Kreuger was no part of his thinking. He had liked Ivar. Indeed in a way he had loved him. It was he who had met Kreuger in 1922, who had visited his factories in Sweden, who had arranged for the flotation of his American issues, who had telephoned him, talked to him, dined with him, entertained him over ten profitable and expanding years. It was not easy to sit there staring at the reticent coffin while a Swedish soprano choked on a phrase of Handel. And it was not easy, Ivar being dead, to estimate the future of his house. (His house and he himself and his partners and their families held upward of eight millions of the dead man’s stocks and bonds.) None of it was easy. But doubting Ivar was another thing. Doubting Ivar meant forgetting all the profits and the brilliance and the companionship of the first nine years and thinking only of the last week in February and the first two weeks in March of 1932. And it was precisely those three weeks of which Mr. Donald Durant was most unwilling to think as Pastor Bokander repeated the “from everlasting to everlasting, thou art God,” and Concert Master Turicchia played the Adagio from the Sonata Pathétique. Not only then but for many days thereafter Mr. Durant believed there must be some interpretation of those weeks—some honorable meaning. The telephone company matter for example. Mr. Durant had been in Cornwall-on-Hudson on February 21, the Sunday. And George Murnane his partner had called him from Brookville down on Long Island. Gordon Rentschler, president of National City, had been talking to Murnane—something about the I. T. & T.-Ericsson deal of the summer of ’31; something aboutKreuger‘s representations (on the basis of which Colonel Behn of I. T. & T. had paid Kreuger $11,000,000 for a block of Ericsson stock) not being “borne out”; something about Colonel Behn wishing to rescind and Colonel Behn and Rentschler thinking Lee, Higginson ought to know. Murnane had asked him to come down at once. And he had gone. And together they had called on Ivar at his apartment. About five o’clock. And Ivar had been very strange, hysterical, on the verge of tears. And they had asked Ivar about the discrepancy—they had told him that Colonel Behn had said there was a discrepancy on one item of 27,000,000 kronor that was down as cash in Ericsson’s possession whereas actually there was only a claim against Kreuger companies in that amount. And Ivar had said it was all right; it was only an error of translation; it would be all right. And Ivar was very strange, answering the telephone when no one was calling and asking people to come in who weren’t knocking and sitting in his chair and falling asleep for a few seconds and getting up again and saying over and over he was going mad and couldn’t remember … AND then there had been the $4,000,000 loan falling due on the twenty-seventh of February which Ivar had been unable to pay. But that was because the money hadn’t come in from Country Y (Country Y was Spain) and Ivar had said he thought the Spaniards were trying to retrade the monopoly contract and he was going to send a man down to see about it … And after that there was the $50,000,000 of German bonds belonging to International Match which were supposed to be deposited in a bank in Germany and Ernst & Ernst, the accountants, had asked Ivar where they were and Ivar had explained that they had been put in the hands of another of his companies so that it was just “transferring them from one pocket to another, since all the companies were in one group,” and Ernst & Ernst had told Durant and Durant had made Ivar promise to have the bonds put back and later Ivar had shown Ernst & Ernst a cable in German saying the bonds had been put back, and that was on a Friday and on Monday Ernst & Ernst sent their agents to the bank in Berlin to see and the bonds weren’t there … And all that had happened in two weeks’ time. And afterwards on the Ile de France Ivar had been very nervous and ill. And then in Paris he had shot himself. It was all very complicated. Or perhaps it wasn’t complicated at all. Perhaps … But against the nine years and the brilliant deals and the charming companionship … Mr. Durant rose with the rest as the light wood box sank slowly under its weight of flowers to the furnaces beneath. He thought of his last glimpse of Ivar at the Gare St-Lazare, one foot on the running board of a taxi … Ivar Kreuger heavy between the eight uniformed chauffeurs of the twenty-second of March was a victim of depression. And Ivar Kreuger two days turned to ash was still a martyr of the economic wars. But when the third day came, the day traditional in folk lore for the rising of the dead, the fame of Ivar Kreuger had begun to change. For on the third day, the twenty-fifth of March, the Investigating Commission made its preliminary report. This committee, consisting of six men among whom were Björn Prytz of SKF, Jacob Wallenberg, private banker, and Professor Martin Fehr of the Riksbank, had been appointed by the government on March 17. It had met on March 18 and retained Price, Waterhouse & Co. as accountants. And it later continued its examination until May 24, when Kreuger & Toll was thrown into bankruptcy. Meantime the Stockholm police had intervened and early in May an independent examination as to International Match had begun in New York before Referee Ehrhorn acting under §21A of the Federal Bankruptcy Act. Eventually a second New York investigation under §21A was begun before Referee Davis as to Kreuger & Toll. And both these New York examinations together with the Stockholm police inquiry and the committee’s inquiry as revived by the Administrator in Bankruptcy of Kreuger & Toll continued throughout the summer. Price, Waterhouse also continued its labors after the committee was dissolved limiting itself however, in the interest of all parties, to a fact-finding investigation. The preliminary report of the Investigating Commission on the twenty-fifth of March was a mild but disquieting document. “The preliminary results of the inquiry seem to indicate,” said the solid chairman Mr. Nothin, “that the position of the company is not strong … The company’s weak position is naturally in eminent degree a consequence of the great fall in the value of its assets. To what extent other circumstances may have contributed cannot be ascertained until later.” Other circumstances? Bondholders in America reread the passage. Patriotic Swedes sweat under their high, stiff collars. And Lee, Higginson issued to investors a nervous leaflet in which it was announced with perfect if somewhat unconvincing truth that “the conclusion reached … is strongly at variance with the company’s published reports.” But even so the world was troubled. Economists in Scandinavia recalled to mind an anxious remark of the Danish economist Professor Birch, lecturing at Copenhagen in 1931: “The ship of that country [Sweden] carries too dangerous a cargo: I speak of Mr. Ivar Kreuger.” Investors in Holland reminded themselves that so far back as 1929 Mahlers Bank had severed relations with Kreuger on the ground, frankly stated, that it regarded as suspicious its failure to obtain information on an essential point. Bankers in America remembered—or imagined—that the grim and gone Stettinius had warned against the Match King years before—a warning which, if ever given, his partners in the House of Morgan, intent upon the acquisition of Kreuger‘s Ericsson Telephone for Morgan’s I.T.&T., had never heard. Punsch drinkers in Stockholm repeated stories of a strange smell of wax in the Crematorium as the coffin sank. And friends of friends of friends of the eight chauffeurs who had carried Mr. Kreuger in over a carpet of green fern to the crowded chapel whispered that never, never had there been a coffin quite so light. But the talk of the twenty-fifth and the twenty-sixth and the twenty-seventh of March was merely rumor, merely guesswork. It was not until the report of Price, Waterhouse & Co., accountants, was read in the Second Chamber of the Riksdag just before midnight on the fifth of April that suspicion changed to certainty. Price, Waterhouse’s phrases were colorless and dry: the December 31, 1930, balance sheets of Kreuger & Toll “grossly misrepresent the true financial position of the company,” the fraudulent entries were made “under the personal direction of the late Mr. Kreuger“; Continental Investment, the vital organ of Kreuger‘s U.S. International Match Corp., was in the same condition; profit-and-loss accounts had been cooked for years … Even Lee, Higginson gave in. The accountants’ statement, they told investors, must be accepted “as evidence that gross frauds have been perpetrated by Mr. Kreuger.” Suspicion, with the sixth of April, changed to belief. And belief became action. Stockholm was, at one stroke, the financial capital of the world. Accountants and bookkeepers and lawyers and creditors and financiers piled into the city on every train. Lee, Higginson, International Match, Banque de Paris, Crédit Lyonnais, British Match, Higginson & Co., International Telephone & Telegraph filled the Grand Hotel with their representatives. Auditors and experts, protective committee agents, rival protective committee agents, New York lawyers, German treasury officials, diplomats, newspapermen, novelists climbed aboard the Nord Express at Victoria Station, or rattled up from Berlin across the Ohio-like farming country of North Prussia to Sassnitz and the Baltic ferry and rolled on from Trälleborg through the fertile and wooded lands to find themselves at last twenty hours by rail from the nearest great city in a town of 500,000 souls and another world—a kind of bourgeois paradise with clean and quiet streets and few automobiles and a conventional palace and long arms of the Baltic reaching in along neat quays and well-dressed sober people who waited in line for taxis and crossed the streets at their proper intersections and drank good beer and German hock and sometimes sweet sauterne (when the pocketbook permitted)—a city of much food and dinner anywhere from five to eight with a liqueur glass of snaps and a great quantity of raw fish, dried fish, sausages, and pickled beets for hors d’oeuvres and the three wines served at once and no retreat from the ladies afterward and tea at 10 P. M.—a world of fine modern buildings and sunset at 2:58 on December 21 and no sunset at all in June but a kind of twilight and half day through the night and snow until April and skiing country out of a man’s back door and the Café Royal looking like a Moorish court and the Gyldene Freden downstairs in an old cloister with good food and bad air like the cellar restaurants in Nuremberg—a society in which theatres began at eight and American movies ran in English with flashes of explanatory Swedish and Greta Garbo was not loved and the great winter sport was watching the King play tennis at the Tennis Stadion (not that the stockholm-arna liked to see the King, who was only moderately popular and always had to win, but because the King could be counted on to play with the best players)—an exceedingly law-abiding and honest and unmoral country with the highest illegitimacy rate in the West and the laxest auditing laws on earth and the greatest mutual confidence conceivable and not the smallest toleration for sexual peculiarities or business faults. AND while the creditors and the accountants and the lawyers were filling the Grand Hotel and finding their way along the quays and picking up enough Swedish to order a beer or direct a taxi, the police were rummaging Kreuger‘s drawers in his apartment in the Villagatan and finding letters and documents so compromising they could never be published, and the Investigating Commission was sending Minister of Justice Johan Hellner down to Rome with a package of forty-seven bonds amounting to some £28,668,500 issued by the Italian Match Monopoly with a guaranty by the Italian Government, and Mussolini was explaining to Minister of Justice Johan Hellner with some heat that the signatures on the bonds were forgeries and that the Italian words were even misspelled and that the Match Monopoly had no authority to issue bonds in any case. And eventually on April 15, one month and three days after Ivar Kreuger had slipped the muzzle of the army-type 9 mm. under his vest, it was announced to an already hysterical world that the great financier, the creditor of governments, the floater of $250,000,000 more or less of American issues through American bankers was not only a suicide and not only a bankrupt but a common and a very clumsy forger of bad bonds. Hell, in the expressive phrase, broke with that news. Within two hours of the announcement Björn Prytz of the Investigating Commission had three callers—the German Minister asking that the German transactions of Kreuger be verified as his government suspected the dead man of traffic with the Nazis, the Polish Minister demanding that the Polish conversations be examined as his government suspected Kreuger of bribing the dead finance minister Glowacki, and the Spanish Minister protesting that the Spanish dealings must be aired since his government suspected Kreugerof improper dealings with the dead dictator Primo de Rivera. Within two days the Spanish papers had printed the story of how Kreuger had given Senator José Serran 2,500,000 pesetas to buy the largest Spanish match company for him in violation of Spanish law and how Senator Serran had fled to Italy with the money and had been arrested and how Kreuger had stopped the prosecution. Within a week the suicides were coming in—a municipal clerk who had bought Kreuger & Toll on the twelfth of March when the big boys were unloading and who was found with his wrists cut; another clerk, his savings wiped out, dead in the Humlegarden opposite the Eden Palace Hotel; a leading baker Sievertz, his money lost; a lumberman of Bavaria, one Ferdinand Steinbeiss. And with the suicides came the arrests. A certain Bror Bredberg whom no one knew was dragged up from Zurich charged with manipulating the books of Kreuger companies of which no one had heard. An individual named Victor Holm was pulled out of Holland for entering on the books of the mysterious Dutch Kreuger & Toll a deposit in a bank which did not exist. A personage answering to the syllables Sven Huldt was held for dressing up the balance sheets of something called the Netherlands Bank for Scandinavian Trade which was said to be a Kreuger bank. A bearded bookkeeper named Carl Lange was held for his Kreuger activities in connection with a company called Garanta. Unknown name followed unknown name. Outlandish companies spelled themselves out of unheard-of alphabets. And just when the Stockholm-arna were beginning to wonder whether Kreuger‘s companies really were Swedish after all the lightning struck at home. Accountant Wendler was apprehended. Accountant Hennig followed him. Directors Erik Sjöström and Nils Ahlström of Kreuger & Toll were taken in. And finally brother Torsten himself was charged with falsification and offenses against the bankruptcy act. Half Kreuger‘s principal officers were under suspicion. AND the whole structure of the state was shaken. Prime Minister Ekman was forced to resign because of his denial of the receipt by his party of gifts from Kreuger shortly before Kreuger was granted an important credit by the Swedish Riksbank. The foreign exchange reserves of the bank were weakened and the powerful financiers, the Wallenbergs, were foxed to intervene. Municipal tax collections fell by 10 per cent and membership in the Communist Party doubled. Many of the richest men of the country were bankrupt. The King’s brother Carl, father of the Crown Princesses of Norway and Belgium, moved into humble quarters. Old Ernst Kreuger left his apartment on the Strandvägen because his telephone rang so continually with curses for his son. Nils Ahlström sold his horses and the racing season collapsed. Women who had known Kreuger had then telephones disconnected. Kreuger‘s furniture and pictures and towels were sold at auctions in Stockholm. London, Paris, Amsterdam, Berlin—the Stockholm auction turning into a society levee with rich women and grocers wrangling over skillets and with steel scissors engraved “Ivar Kreuger” going at $12 to devout purchasers of the holy relics while motorboats brought $180 and $162 and Kreuger‘s $70,000 seaside so-called love nest went for $8,750 to a Stockholm brewer. In Manhattan the Irving Trust was appointed receiver for International Match on the thirteenth of April and International Match filed a voluntary petition in bankruptcy on the nineteenth, while rival protective committees set up by Lee, Higginson and by minority bondholders wrangled and a score of lawyers’ offices, known and unknown, bid for their share of publicity and fees. In Rome the Pope on May 19 issued an encyclical warning that “The love of money is the root of all evil.” BUT these events, encyclicals and suicides and bankruptcies and auctions, were merely consequences, repercussions. They explained nothing. They interpreted nothing. Given the default ofKreuger, they were bound to happen as broken walls are bound to fall after an earthquake. The real question was still in the summer of 1932, as it had been on the twelfth of March, the earthquake itself. What was it precisely that had happened? Was Ivar Kreuger really a common crook or was there an explanation of some kind? If he was a crook, how long had he been a crook? And above all why had he killed himself at the precise moment when he did kill himself? What had forced his hand? And these questions no man in Stockholm or out of it could yet answer. There were still as many rumors as there were mouths to repeal them. And only the employees of Price, Waterhouse & Co. were in a position to apply to rumor the hard edge of fact. History, in the days when history was made by the generals and the prime ministers, was written by the historians. History in an industrial world is written by the accountants. And Price, Waterhouse all through the summer and fall of 1932 was engaged on one of the longest chronicles of industrial dynasties ever undertaken. In the Swedish Match Co. palace with its lovely Diana by Milles and its world clock which showed the time in all the great cities of the world and its loud-speaker telephones and its elaborate electric signals and its curved board room and its exquisite paneling, thirty men and a dozen calculating machines and hundreds of ledgers and great stacks of correspondence and 150 sacks of waste paper saved at the last moment from Mr. Kreuger‘s office were collaborating in the writing of fifty-seven fact-finding reports which when finished would stand in two piles to a man’s waist and tell a story such as no historian, old style or new style, had ever written before—a story as amazing for its confirmation of facts previously believed as for its revelation of facts which not even Kreuger‘s closest banking associates had previously guessed. The facts confirmed had to do with Kreuger‘s career prior to the years 1923 and 1924 when he first met the representatives of Lee, Higginson and was for the first time subjected to the opportunities, not to say the temptations, of the New York money market of the ’20’s—the money market which was concerned rather with the manufacture of stocks than with the manufacture of goods, rather with the needs of the banker than with the needs of production. What the accountants discovered as to that period was that Kreuger‘s career in the years from 1911 to 1923 or 1924 had been approximately what the world believed it to be. It is true that the final report of Price, Waterhouse states that the total earnings of Kreuger & Toll, International Match, Swedish Match, Dutch Kreuger& Toll, and Continental Investment over fourteen and one-fourth years were equivalent to only about 1 ½ per cent on the relative average capital and that “the manipulation of accounts goes back at least as far as 1917.” But these statements taken alone and without explanation are distinctly misleading. The 1917 “irregularity” was a debit to Kreuger of items aggregating 1,098,000 kronor which were “not verified” but, as the liquidators of Kreuger & Toll have pointed out, position of Kreuger‘s companies down to the end of 1924 had not been “much undermined” and “the Swedish Match Company was still on the whole a sound business which justified the book value of its shares—about 140 per cent (the Stock Exchange price at the end of the year being about 168 kronor) …” As for the average earnings of 1 ½ per cent over fourteen and one-fourth years, this figure is largely explained by the situation after 1924, not by the situation before. IN OTHER words Kreuger the builder and Kreuger the Match King were not frauds. Both existed. Kreuger & Toll was without doubt the most successful building company in Scandinavia. It revolutionized Swedish building. And it made large and apparently justifiable profits—204,000 kronor on 1,000,000 kronor capital in 1912, 185,000 kronor exclusive of Finnish profits on the same capital in 1913, 405,000 kronor on 2,000,000 kronor capital in 1914, etc., etc. The same thing is true of the beginnings of the Match Trust. Sweden prior to the War had been the great match-producing country of the world. During the War it had lost its markets rapidly due in part to tariffs and in part to the unfair competition of other nations such as Japan which was manufacturing near Kobe matches “made in Tidaholm, Sweden” and swamping the East. A price war was on and only by standardizing Swedish matches so as to force out imitations and only by building factories back of tariff walls could the Swedes regain their control of the industry. This Kreuger accomplished. He had already in 1913 merged the seven leading factories of the Kalmar district, and in 1917 he combined this group with the Jönköping group, which had already begun rationalization of the industry, forming as a result Swedish Match. To accomplish this end Kreuger & Toll was turned into a holding company (the building business being transferred to a separate organization) and its capital stock increased from 6,000,000 kronor to 16,000,000 kronor and reserves from 4,000,000 kronor to 21,000,000 kronor. It thereupon took over about one-fourth of the stock of Swedish Match (120,000 shares and Swedish Match was incorporated with a capital of 45,000,000 kronor and 61,740,000 kronor of reserves. Swedish Match at once began purchasing chemical factories, timberland, and factories abroad until it had run the number of the latter up into the hundreds. And the result of the new administration and the new centralized control was that Swedish exports which had at one time fallen to 49 per cent of 1913 rose to approximately 95 per cent of 1913 while the Swedish Match Trust alone made and sold about two-thirds of the world’s matches. Throughout this entire period from 1917 to 1924 the Swedish Match Co. continually paid dividends of 12 per cent or better and Kreuger & Toll paid dividends of 20 per cent or more. It is true that the enormous Kreuger & Toll profits shown were not all made out of matches. A part was made out of such speculations as Kreuger‘s 1917 dollar purchases on which he is said to have netted 10,000,000 kronor by 1920. But it is nevertheless true that Kreuger was in 1924 a great industrialist, that he had inaugurated one industry and rehabilitated another, and that his companies were approximately what they represented themselves to be. It is also true that the accountants’ examination proved that Kreuger had learned, and had already begun to practice, the classic technique of high dividends and fragrant statements as a lure to investors and that he was no more scrupulous than another in the management of his affairs. But by and large, so far as concerned the first two acts of the Kreuger career, the auditors’ findings bore tradition out. It was when the third act, the last eight years, was reëxamined that the colors changed. WHY they changed it was no part of the accountants’ duty to determine. Why Ivar Kreuger, to that date a moderately honest man and an industrialist by profession, became with 1923 and 1924 an immoderately dishonest man and a stock promoter by trade, no balance sheet could say. Certainly neither the accountants nor the banking acquaintances of Lee, Higginson & Co. have suggested that Donald Durant and Fred Allen, solid and unimaginative bankers that they were, took Ivar Kreuger up upon a mountain and showed him the kingdoms of the world. Nor can the amateur psychologists persuade the business associates of the Swedish Match King that, beginning with 1923, the colossus lost his mind. The more probable explanation is the much simpler explanation that when, in that year, Kreuger with his passion for power discovered, through and not by Lee, Higginson, the New York glut of gold and the inexhaustible New York appetite for stocks he also discovered the superiority of the stock market to the match factory as a means of conquest. If that discovery implies a weakening of the mind then there were many other Wall Street idiots in the ’20’s. Nor is the fact that he made use of methods in his stock promoting which were foredoomed to discovery if the market turned an evidence of madness. Other men before Kreuger have believed their schemes were fateproof and have believed it with less reason than Kreuger had. For it was always a prime consideration in Kreuger‘s plans that some day—and some day not too far—the Swedish Match Monopoly would become a monopoly of the world, in which case all his claims and frauds and thefts would be made good. And the Kreuger companies came within gunshot of that goal. But whatever the cause of change the change took place. In 1923 and 1924 Kreuger & Toll changed from a productive entity to a Stock Exchange show window. And it was from the years 1923 and 1924 on that the accountants were compelled to destroy all preconceptions and rewrite in its entirety the story of Kreuger‘s life. PRICE, WATERHOUSE began its investigations of that period with the three central beams of the Kreuger house—Kreuger & Toll, Swedish Match, and International Match. These companies were as open and clean as the columns of a Greek porch. Kreuger & Toll was a super-holding company owning Swedish Match. Swedish Match was a holding company owning match factories in various parts of the world and owning also International Match of New York. And International Match, founded in 1923, was again in turn a holding company owning other and numerous match factories in other and numerous countries of the earth. All that seemed clear enough. But the accountants had not gone very far in their examination of these three timbers of the structure before they began to find that the seeming cleanness and openness were a pure illusion. From a distance the beams stood clear. But close to they were caught, like the timbers of a dusty barn, in a mesh and tangle of spider-web subsidiaries such as no accountant, since the great Promoter’s Era began, had ever before been called upon to unravel. Some of these subsidiaries were real, some were a set of books, some were a name; but name, books, or reality the entries spun back and forth, the debit and credit items tangled from roof to wall. One, the great net of the N. V. Financieele Maatschappij Kreuger& Toll (Dutch Kreuger & Toll), was everywhere. Another, Continental Investment A. G. hung between International Match and the rest of the structure. Still others filled in the corners and sent long threads out to twist and turn and disappear. Some, particularly Dutch Kreuger & Toll, were known to the investing public by name but not by function. Others, like Continental, were known vaguely to the directors of the principal concerns which owned them. But the great majority, International finance Syndicate, Finanzgesellschaft fur die Industrie, Mercator, Union Industrie A. G., Netherlands Bank for Scandinavian Trade, Administrate Maatschappij voor Algemeene Nijverheids Waarden, Société Financière Suisse et Scandinave, A. G. Standard, Commercial & Industrial Properties Corp., Handels A. G. Wega, were merely names in the minds of their own officers. And marvelous names. As William H. Stoneman puts it in his excellent book, they were “the creation not only of a swindler but of a master linguist.” The “linguist” speaks for itself. As for the “swindler.” Price, Waterhouse was not long in coming to that epithet. It was discovered, first of all, that most of these companies had been set up by Kreugeragents who were unknown even to his own associates. One was Bror Bredberg, a bookkeeper, who founded Finanzgesellschaft and four other companies and eventually succeeded (being one of the few men so to succeed) in stealing from Kreuger himself. Another was Carl Lange, a bank clerk with a doubtful record who set up and ran Garanta. Another was Sven Huldt, who specialized in Dutch dummies, including Dutch Kreuger & Toll. And another—for not all were petty bookkeepers—was Kreuger‘s brother. Torsten Kreuger must, it appears, be credited with a very complete and able comprehension of the whole web. SHORTLY thereafter the reason for the inconspicuousness of these gentlemen was discovered. Their whole and simple duty was merely to keep their books as Kreuger should direct them. Bror G. B. Bredberg, for example, was a clerk and stockbroker who had been sent down to Zurich in March, 1923, at a salary of 20,000 francs Swiss to obey orders. In Zurich with the assistance of Walter Ahlström and with two checks for 1,500,000 francs Swiss and 1,000,000 francs Swiss he registered a company called the Finanzgesellschaft. A few days later Torsten Kreuger appeared and Bredberg with Torsten Kreuger and Ahlström moved east to Vaduz, capital of the minute principality of Liechtenstein where, with the same checks used to register Finanz, they registered the Union Industrie A. G. with Bredberg as board of directors, managing director, and accountant. After which creative act Torsten Kreuger removed 2,450,000 francs of the company’s capital for the purpose, as he said, of acquiring match factories in Poland and Czechoslovakia. Later in 1926 Bredberg, Ahlström, and one Henggeler formed a certain Handels A. G. Wega in Zurich and in 1928 Bredberg and Henggeler took over a Vaduz company, renamed it A. G. Standard with Bredberg as board of directors, managing director, and accountant, and increased its capital from 80,000 to 1,000,000 francs. A. G. Standard had a subsidiary called Standard Trust Fund which Bredberg also ran, and after 1926 or 1927 he took on the books of A. G. Mercator which had moved from Basel to Zurich. Continental was formed in much the same way but by Kreuger personally. That company which was eventually to bleed American investors through International Match of $88,000,000 was founded in Zurich in 1923 by Kreuger and his Swiss-American secretary Hoffman with a capital of 60,000,000 francs of which sum 1,000,000 francs was in cash, 9,000,000 in checks, and 50,000,000 in a guaranty of Swedish Match executed by Kreuger himself. Hoffman was the board of directors. Once the company was registered, Kreuger and Hoffman left Switzerland with its capital in their brief cases and eventually Continental was transferred to Liechtenstein where the Prince’s finance minister obligingly made a deal to limit the company’s taxes. As to funds, none of these companies, as the accountants quickly found, had any real assets. The credit balance of 112,570,696.93 Dutch florins shown by Dutch Kreuger & Toll at the end of 1930 was a pure fiction and the reserve of 280,316,949.21 Dutch florins meant nothing since all cash received was immediately transferred to Kreuger & Toll. (The liquidators of the latter company found that Dutch Kreuger & Toll had “never earned real profits.”) The mission of Dutch Kreuger & Toll as of all the others was to “hold” nonexistent properties and to “owe” nonexistent debts so as to dress the balance sheets of the holding companies and persuade the investors of Europe and particularly of America to buy their stocks and bonds. Kreuger & Toll and Dutch Kreuger & Toll, for example, published a consolidated balance sheet. The accountants found 140 entries on the books of Dutch Kreuger & Toll affecting Kreuger & Toll which were not on the books of the latter company, and seventy-four on the books of Kreuger & Toll not on the books of the former. In the same way there were sixty-eight entries on the books of Swedish Match affecting Kreuger & Toll balanced by no corresponding entries on the books of Kreuger & Toll. The aggregate of such one-sided credits and debits on the books of Kreuger & Toll, Continental, Swedish Match, and Dutch Kreuger & Toll alone was 2,738,361,820 kronor!* THE method of operation may be gathered from the lurid testimony of Mr. Bredberg before the Stockholm police. Bredberg kept the books of Finanzgesellschaft on instruction from Kreuger who would turn up in Zurich now and then and give orders as to entries, handing over, in some cases, actual securities to be kept in the safe or handing over on other occasions written statements that the documents in question had been deposited for Finanzgesellschaft somewhere else. Also each year before closing the books Bredberg would visit Stockholm with a draft balance sheet which would be edited by Kreuger and by Kreuger‘s auditor Wendler. Dining 1928 Bredberg, on instructions from Stockholm, credited A. B. Förenade Svenska Tändsticksfabriker and Kreuger & Toll with a total of 6,000,000 francs Swiss debiting the Eddy Match Co. When he visited Stockholm early in 1929 he asked Wendler what the Eddy Match Co. was. Wendler didn’t know. But the entries stood nevertheless and eventually “Eddy Match” stood debtor on Bredberg’s books in the amount of 31,000,000 francs Swiss. Entries on the books of Union Industrie were of the same complexion. At one time and another Bredberg carried for that company real estate in Berlin for which he had never seen the title deeds and a note for 18,000,000 francs Swiss signed by E. D. Lehmann with interest at 12 per cent although he had no idea who Lehmann was and although he never received payment of the interest. He also carried a check of Kreuger‘s for 350,000 francs Swiss although he had been ordered not to present it and although the period of its validity had long expired. And from 1929 on at Kreuger‘s direction he speculated on the New York Stock Exchange through a company in Zurich (which Kreuger, unknown to Bredberg, owned). Kreuger gave Bredberg no instructions as to buying and selling, merely telling him that he wished him to gain a thorough knowledge of the Exchange and its securities. The cost of this knowledge to Union Industrie was 1,000,000 francs Swiss. IN THE same way Carl Lange speculated with the money of A. G. Mercator, a Kreuger dummy, on Kreuger‘s instructions, using the Stock Exchange firm of H. Hentz & Co. What Lange’s schooling cost Mercator is not divulged but it cost H. Hentz & Co. $28,000 when the fabric collapsed. Lange also emulated Bredberg’s bookkeeping feats with Garanta and signed in 1925 at Kreuger‘s request a balance sheet showing assets of 46,000,000 Dutch florins and a debt to International Match of 45,000,000 Dutch florins—neither assets nor debt having, so far as he knew, any existence. And Sven Huldt of the Netherlands Bank for Scandinavian Trade did his bit in like manner. On December 31, 1926, and December 31, 1927, having been shown by Kreuger certain documents in unknown languages which he did not attempt to read, he signed a deposit receipt staling that the bank held a contract between International Match and the Polish State and a second deposit receipt crediting Continental with possession of a Spanish match monopoly and a certificate for installments paid by Spain to Continental showing a balance in Continental’s favor of 200,000,000 pesetas. Later, on December 31, 1929 (Mr. Huldt seems to have had a penchant for working New Year’s Eve), having taken from Kreuger‘s hand and briefly held a packet of not over 5,000,000 francs of French rentes together with a few deposit receipts which he did not count, Huldt signed a deposit receipt for French rentes in the enormous sum of 400,000,000 francs. But perhaps the palm for bookkeeping ingenuity must go to one Victor Holm, director of Dutch Kreuger & Toll, who deposited on December 31, 1930, 34,000,000 Dutch florins in the International Bank & Finance Co. of Danzig, which bank was not formed until January 2, 1931! THE purpose of these various institutions in Kreuger‘s scheme of things was of course quite simple—much simpler than the scheme itself. Kreuger‘s intention, as we have observed, was to sell stock and bonds. To sell stock and bonds he required persuasive statements. To prepare persuasive statements he needed willing debtors and amenable depositees. And to secure willing debtors and amenable depositees he needed the existence of a dozen-odd desk-drawer corporations. The administration of the scheme was also simple. It was merely necessary to keep the various spiderwebs from short-circuiting by an exchange of information between their personnel. And that Kreuger insured by establishing himself as the only point of common contact and by breaking up intimacies or friendships between his various employees as rapidly as they were discovered. All Kreuger agents signed a pledge of secrecy upon entering his employ and business intercourse between officers of Kreuger & Toll and Dutch Kreuger & Toll was strictly forbidden. With insulation assured the rest was bookkeeping. What Kreuger desired was what his hero Charles XII of Sweden had desired—a strong front and a great mobility. The mobility was achieved by such devices as entering the same asset on the books of several companies, crediting one company without charging another, omitting from the balance sheet amounts borrowed, entering the purchase of nonexistent securities backed by a certificate from another corporation that the securities in question were deposited there, passing numerous items through Kreuger‘s personal account, entering a sale of existing securities from one company to another at a price above the book value to simulate a profit, and entering as an asset on the books of a parent company a claim against a subsidiary which was in reality Kreuger himself or of which the only asset was a claim against Kreuger. And with mobility thus assured the front took care of itself. For example about 425,000,000 kronor of assets shown on Kreuger & Toll’s 1930 balance sheet were created by fictitious gains shown over a period of years by such methods, and more than half the company’s net profit for that year was the product of bookkeeping not match selling. And the same technique was used in the payment of dividends. The fat and seductive dividends of International Match came partly from profits made by charging Garanta 24 per cent on its alleged indebtedness in International and charging Continental, on its indebtedness, anything up to 16 per cent. The actual cash might come from any source: from Continental, from Swedish Match, or from Kreuger & Toll. It made no difference to the obliging treasurer of International. KREUGER‘S policy as a stock seller was to show a strong earning capacity, high dividends nicely related to profits, insignificant current liabilities, and a fat surplus. And the fake companies provided the tools. If proof were needed that the whole web of fraud was created for the purpose of selling Kreuger securities it would be found in the fact that no such company was set up during Kreuger‘s career as an industrialist and that the first of the fake companies dates from the beginning of his career as a stock promoter—from the year of his first association with New York investment houses and the New York investing public. It was in 1923 that Continental was set up. And it was in 1923 that Kreuger made his first offering in New York. But fake companies and glib bookkeeping are not enough to sell fifteen issues of shares and bonds, with some issues amounting to $50,000,000, over a period of nine years. There must also be expansion, industrial conquest—something to spread across the annual statements to capture the public imagination. And that material also Kreuger found. And found in the most public and most publicized place on earth—the chancelleries of Europe. In the old legends of Kreuger‘s life his enormous loans to governments against match concessions played a large and spectacular part.Kreuger was the man who had lent almost $400,000,000 to the nations of the world at a time when credits had dried up and Europe was starving for money. He had been praised and blamed by critics who saw only the loans and thought nothing of the purpose. Biographers said, are still saying, on the one side that he showed the greatness of his heart in permitting Greece to repatriate her Levantines at the mere cost of a match concession, and, on the other, that he displayed the weakness of his judgment by overextending himself and by establishing, under color of concessions, foreign competitors to his own concern. But such criticism and such praise loses sight of Kreuger‘s objective. He was not interested in Levantines or competitors. He was interested in finding an occasion, a public occasion, an exploitable occasion, for an issue. And his bankers were with him. On September 7, 1929, Donald Durant, referring to the proposed German loan, cabled Kreuger that there were “high hopes some time in the future of using the German bonds as a brilliant excuse for a secured debenture issue.” BUT, for that matter, all the government loans were a glittering excuse. And a brilliant innovation as well. For Kreuger was the first banker to invent a device whereby a private loan to a foreign power could be insured against the aptitude of foreign powers to “forget” their private obligations. By the simple mechanism of tying up his loan with the grant of a match monopoly and making the royalties on the match monopoly (which he was to pay the borrowing government) security for the service of the debt (which the borrowing government was to pay him) he put it in his own power to pay himself. And thus provided not only for a banker’s profit on the loan and a match maker’s profit on the concession but for complete security for both. While, in addition, he advertised himself and his companies in a way, and with a prestige, which made the early sales of his securities child’s play. Prestige explains the loans to France and Germany which carried certain valuable concessions but no absolute monopolies. And prestige justified them both. Kreuger‘s success in supplanting J. P. Morgan & Co. as banker to the French made him for a time the unquestioned leader (whatever old-line financiers might have thought of him) in world finance. And had the German loan not fallen foul of the depression of 1929 it is quite possible that Kreuger would today be alive and full of honors. After all it is no small thing for a private individual to lend $384,000,000 to fifteen countries including a loan of $75,000,000 to France and one of $125,000,000 to Germany. The Medicis did much less at the height of their power. These loans were: BUT not even government loans were enough for Kreuger‘s purposes. It was also necessary to expand in industry itself. And beginning in 1926 and 1927 when the great offerings of Kreuger & Toll and Swedish Match and International Match were made in New York and in Europe, Kreuger began to buy into iron and pulp and telephones and newspapers. He acquired his interest in the iron mines of Grängesberg-Oxelösund in 1926 and in the North African mines (through Grängesberg-Oxelösund) in 1927. In that year he also got control of the newspaper Svenska Dagbladet. In 1929 he formed Swedish Pulp, holding company for the most important sulphite and sulphate pulp producing companies in Europe, and acquired control of the Boliden gold fields. And in 1930 he secured his hold upon L. M. Ericsson Telephone Co. which he had begun to buy in 1925. Meanwhile through his Federal Match and Vulcan Match companies in the U.S., and by such devices as the fake Commercial & Industrial Properties Corp. he was secretly buying the Ohio Match Co. and the Union Match Co. And through his agents he was acquiring 350,000 shares of Diamond Match. A campaign which, if not interrupted, would eventually have given him control of the match industry in the U.S. But all these acquisitions, these loans, these concessions had but one meaning in the eye of history as written by the accountants. They were justifications. They were excuses. Only on that hypothesis is the German loan explicable. Only on that hypothesis can the web of fraudulent companies be understood. And only on that hypothesis can any estimate of the last phase of Kreuger‘s career be made. From and after 1923 his match industry made relatively small advances. But between 1923 and 1931Kreuger‘s companies sold a variety of shares, “B shares,” debentures, participating debentures, convertible debentures, and gold bonds; $250,000,000 worth in America alone. The whole list of flotations is as follows: 1923. International Match, $15,000,000 twenty-year convertible 6 ½ per cent gold debentures at 94 ½ per cent. Sold in America. 1924. Swedish Match, 90,000,000 kronor par value “B shares” (i.e., shares with 1/1,000th vote each, invented to avoid Swedish prohibition of foreign ownership of real property) at 125 per cent. Sold mostly in Sweden and England. 1924. International Match, 450,000 shares participating preferred stock issued in exchange for the 6 ½ per cent debentures. 1925. International Match, 450,000 shares participating preferred at $45 per share. Sold in America. 1925. Swedish American Investment Corp., $15,000,000 par value preferred stock at $99 per share. (U.S. share: $12,276,000.) 1926. International Match, 450,000 shares participating preferred at $50 per share. Sold in America. 1927. Swedish American Investment Corp., $3,000,000 par value preferred stock at $108 per share. (U.S. share: $2,700,000.) 1927. Kreuger & Toll, 22,000,000 kronor par value A and B shares at 525 per cent. Sold in Europe. 1927. Swedish Match, 90,000,000 kronor par value B shares at 23O per cent. Sold in Europe. 1927. International Match, $50,000,000 twenty-year 5 per cent convertible debentures at 98 ½ per cent. Sold in America. 1928. Kreuger & Toll, $38,000,000 in participating debentures (invented to circumvent Swedish tax laws). Sold in part in America ($14,070,000). 1929. Kreuger & Toll, $26,000,000 in participating debentures offered to holders of old. (U.S. share: $12,300,000.) 1929. Kreuger & Toll, $50,000,000 par value’ secured debentures at 98 per cent. Sold in part in America ($27,000,000 par value). 1929. Kreuger & Toll, $55,600,000 in participating debentures and B shares offered to holders of old. (U.S. share: $17,700,000.) Additional $28,000,000 in debentures purchased by American syndicate. 1931. International Match, $50,000,000 ten-year convertible 5 per cent gold debentures at 96 per cent. Sold in America. 1931. Swedish Match, 90,000,000 kronor par value shares at 150 per cent and 60,000,000 kronor par value 5 per cent, twenty-five-year debentures. Sold in Europe. 1931. Kreuger & Toll, 80,833,340 kronor par value of participating debentures (exchanged for controlling stock in Boliden Mining Co.). (Of these issues almost all shares and debentures put out by International Match were sold in the U.S., netting about $150,000,000, while 50 per cent of the money raised by Kreuger & Toll came from American investors.) HISTORY written by the accountants, then, turns the great success story of the Kreuger legends inside out. Instead of the Roi des Allumetles we are presented with the Prince of Promoters. And instead of the victim of the depression, the martyr of the economic wars, we are left with Ivar Kreuger, swindler, dead by his own hand. And dead with reason. For the reports of Price, Waterhouse & Co. make it clear that the tragedy of which the last expression was the army-type Browning and the tumbled bed was no product of the crash of ’29. Its first act was played six years before. It was already inevitable before the Coolidge Era had run out. And though the collapse of values between November, 1929, and March of 1932 may have precipitated the event they no more caused it than the Witches in Macbeth caused the assassination of Duncan. All that is necessary to an understanding of the real causation of the tragedy is a reading of the books of International Match for the years 1924 and 1925 and 1926. What Kreuger was playing was nothing more subtle or more intelligent than the old Ponzi game. He was paying dividends out of capital. And trusting to more capital to make good the loss. And there was no possible outcome but disaster. The only question was how long disaster could be deferred. Already by the year 1928 Kreuger had himself begun to guess how long. The second issue of Kreuger & Toll “participating debentures” in that year was not fully subscribed and Kreuger gave his guaranty for 2,665,000 kronor. By March of 1929 the guess had become a probability for in that year the Kreuger & Toll debenture issue failed of subscription and Kreuger, taking over the balance, gave guaranties for 13,830,000 kronor. And in November of the same year the probability had edged into the field of certainty for Kreuger had had to take over half the issue of 110,000 B shares ofKreuger & Toll and part of the debenture issue, giving guaranties totaling 85,213,000 kronor. On these four issues Kreuger & Toll had actually received 101,738,000 kronor less fresh capital than its statements showed. And without fresh capital the Ponzi game would never work. Moreover Kreuger himself had pledged his personal credit for the unsubscribed balance. And in addition had engaged at great cost to himself and to his companies in supporting operations to maintain the market for each issue as it appeared. OCTOBER, 1929, is the date of catastrophe. From that time on, and with an increasingly rapid fatality, events which Ivar Kreuger could no longer control beat in upon him and eventually beat him down. In the pages of Æschylus the recurrent strokes of destiny would be inescapable and swift. In the columns of the accountants they have still their certain and inevitable tragedy. What Kreuger himself thought of his situation may be guessed from the fact that it was in the fall of 1929 with 101,738,000 kronor of guaranties on his hands and 101,738,000 kronor of capital shortages on, or rather under, his companies’ books that he undertook to lend the German Government (which had not yet ratified the Young Plan and was moreover in ill odor thanks to the rise of Adolf Hitler) the enormous sum of $125,000,000—$50,000,000 to be paid in August, 1930, and the balance on May 29, 1931. Nothing in Kreuger‘s career has more amazed his many biographers than this suicidal loan made in the shadow of the great depression to a nation with impaired credit by a man whose securities would not sell. But in fact nothing is more logical. Only by an act of desperate courage capable of restoring his slipping prestige could Kreuger ever extricate himself. And the German loan was precisely the art required. Not only did he make the gesture. He even agreed at the request of Curtius and Tardieu, bickering at The Hague, to defer his own issue to finance the loan until the Young loan had been floated. And, piling Pelion on Ossa, he took a share of the Young loan, $14,952,000, for himself. Had the times changed, had the gods been kinder, that act of insolent daring might have succeeded. As it was it came within a stone’s throw of success. The French, instigated by some divinity, redeemed their loan in April, freeing $75,000,000 of much needed cash. And the August, 1930, installment of $50,000,000 was duly paid. But as the twenty-ninth of May, 1931, drew on it became more and more apparent that there was to be no further intervention of a god. Unless Kreuger himself should do the intervening. And Kreuger had nothing with which to intervene. Not even the vast sum of 432,000,000 kronor which, as Price, Waterhouse found, he had appropriated from his five principal companies could save him. Of that sum. 101,738,000 had gone into the purchase of unsubscribed portions of his own issues. Other millions had none into supporting operations. Millions more were being poured into old borrowings to expand the shrinking collateral. Millions had been paid out in dividends, thrown into unsound investments, and tied up in long-term loans. Seventy-five million dollars (280,000,000 kronor) of new money was as unthinkable as seventy-five billions. Short of a miracle the jig was up. IT WAS Kreuger who performed the miracle. And out of the emptiest hat. Or rather out of the Italian coat-of-arms on the flap of an old envelope, a little ink, and forty-six embossed and printed sheets. The envelope came from Kreuger‘s drawer. The printed sheets were provided by an honest Stockholm printer who believed he was aiding Kreuger in one of his best transactions—one which would “contribute to the sentiment of the Geneva Conference.” And the ink Kreuger himself applied sitting late in the great office at the Match Palace laboriously and clumsily forging the signatures of Signori Mosconi and Boselli to £28,668,500 of worthless Italian bonds. Nine million pounds of these bonds were wedged into the statement of Kreuger & Toll for 1930, a loan was arranged with the Skandinaviska Kredit A.B. And the German installment was paid. The crisis was passed. But another crisis immediately replaced it—the July dividends. To meet them Kreuger determined upon what was to him the most desperate act of his career—the sale of the controlling interest in his Ericsson Co. It was as though Napoleon had offered to partition his empire. But Kreuger had no choice. He went to America in the summer of 1931, arranged for an exchange of stock between I. T. & T. and Ericsson and the payment by the former of $11,000,000 and, in August, borrowed $4,000,000 more from the National City, the Bankers Trust, the Union Trust of Pittsburgh, and the Continental Illinois for his immediate needs. From New York he returned to Stockholm. Kreuger & Toll must have 40,000,000 kronor. There was no collateral—only stock in the Boliden gold mines and that stock was already pledged to Skandinaviska. There was only one way out, to “borrow” International’s $50,000,000 of German bonds, pledge them with Skandinaviska, free the Boliden stock, pledge the Boliden stock with the Riksbank, tell the Riksbank that Kreuger & Toll was in danger, and force the Riksbank to lend him the 40,000,000 kronor. And that he did. The “borrowing” of International’s $50,000,000 was covered by £19,000,000 of the forged Italian bonds. And the public was told that Kreuger & Toll’s indebtedness would be down $20,000,000 in September. But there was no truce with fate. Danger now threatened in New York. I. T. & T. was threatening to send auditors to Stockholm to check the Ericsson books. On December 22, 1931, Kreuzer reappeared in New York. Boliden was the card. Largely out of his own head and without reference to the books he there dictated the annual report of Kreuger & Toll for 1931, painting a picture of the Boliden mines which was calculated to sweep another score of New York millions into his empty tills. But New York in January, 1932, was in no mood whatever to respond. And while he waited, while he listened, while he talked, the blow had fallen. The game was played. I.T.&T.’s auditors in Stockholm had discovered that an asset item of 27,000,000 kronor cash on the books of Ericsson was really only a claim against Kreuger companies in that amount and Colonel Behn had called on Kreuger to explain. There was no adequate explanation. And on February 21, Donald Durant, up at Cornwall-on-Hudson, had heard Murnane’s voice on the telephone and gone breathless to New York … THE catastrophe was complete, more Complete than even Durant would have understood had he permitted himself to weigh the facts he knew. For Kreuger had not only squeezed the last sponge of credit dry. He had also played the market. He had been playing it for two years, using the funds of Kreuger & Toll and the services, under one name or another, of most of the brokerage houses of New York. From the Chase Bank alone $2,942,000 was paid out to Hallgarten & Co., H. Hentz & Co., Lazard Frères, Goldman, Sachs & Co., Kidder, Peabody, and Anders Jordahl who acted asKreuger‘s agent and who maintained an account with Eastman, Dillon & Co. Mercator, in an account guaranteed by Kreuger personally and operated through H. Hentz & Co., lost $808,000 between August, 1931, and March 15, 1932. Société Financière pour Valeurs Scandinaves en Suisse of Geneva and Société Financière Suisse et Scandinave A. B. of Stockholm also had accounts with H. Hentz Co. and lost heavily. And Kreuger dealt with Harris, Upham Co. with whom he deposited $400,000 worth of Kreuger & Toll American certificates, and with Eastman, Dillon, with which company his accounts lost $504,000. Millions of dollars were gone, how many exactly no one now can say. And gone in support of a fatally falling market. Kreuger, so he told Eastman, Dillon, Believed he was fighting a French bear pool which had illegally borrowed 300,000 shares of Kreuger & Toll from the secretary of a French count absent upon the Riviera. And six days afterKreuger‘s death one Jacques Barrault was in fact arrested in Paris for selling Kreuger & Toll stock he held as security for a loan. But Barrault or no Barrault, it was not a French pool Kreuger was engaged in fighting. It was a destiny Kreuger himself had made. And on the twenty-first of February that destiny broke his will. Durant had called it sickness. But Kreuger was not sick. Not sick as Durant used the word. Not sick for doctors. He was too near death. There on the twenty-first of February was Kreuger in New York, his credit gone his Ericsson contract rescinded, his reputation impugned, losing millions on a falling Stock Exchange, issuing falsely comforting statements, borrowing a last feeble $1,200,000 from Swedish banks to pay interest on debentures, pledging 350,000 shares of Diamond Match to extend his $4,000,000 loan from National City Bank et al. and trying to make sense while the men from Lee, Higginson called to advise him to take a rest. The telephone was going day and night. Hilda Åberg, the housekeeper, was buying an alarm clock to waken him for transatlantic calls past midnight. People were coming in to see him at all hours. He began smoking—lighting cigarettes rather—and playing solitaire sitting at his desk. He was more and more nervous. One day he came in with a package forty inches long. He stood it in a corner in his bedroom. For several days in stood there. Then it had been opened. Hilda saw the Strings upon the floor. The night before he left he was telephoning and telegraphing and sending messengers with wrong addresses and saying What is it? What is it? At two-thirty in the morning Hilda woke up and the lights were on and he had none. In the morning there was some candy on the table in a box—some candy from a night-owl tearoom over on Lexington Avenue. Hilda went in to waken him at eight. He was lying on the bed fully dressed, only his coat off and his shoes beside him on the blankets. He refused to change his clothes, although every morning it was his custom to change. When he came out to breakfast there was shaving cream smeared on his tie. Hilda went in to make his bed when he was gone. There was a slip of paper on the table by the bed. It said: “I am too tired to continue.” Telegrams came in. The telephone was ringing all day long but he was not there. He was not there or at his office. At three-thirty he came home and asked if she had packed his things. He had said nothing about packing. “Hurry.” he said. “The boat sails at six.” The next day when he was none Hilda opened the tall package forty inches long. It was a loaded rifle. KREUGER sailed the fourth of March on the Ile de France. The bankers let him go. Why they let him go, why they did not suspect him, why for eight years they had not suspected him, they themselves have never cared to say. That question we must come to in its turn and answer for ourselves. The fact is, on the fourth of March they let him go. Only Durant and Hallowell accompanied him. And while he was at sea, pacing the pine decks in a hazy wind, Miss Bökman his secretary received in Paris a letter in Kreuger‘s hand dated the twentieth of February. Things did not look particularly bright—he wanted to leave her something while he could. There were three $10,000 bills in the letter. That was the fifth of March. The sixth she had a radio asking her to disregard the letter. On Thursday the tenth the Ile de France made Havre at 11 P. M. There were cables for Kreuger and a delegation of French bankers from a Paris banking house. One of the cables was from Herbert Dillon of Eastman, Dillon telling him that selling had increased and asking for additional security and for explicit informal ion about Kreuger & Toll’s finances. As for the bankers, they had come down in answer to a radio from Kreuger inquiring if he might borrow 20,000,000 of their francs. Their house, a private bank, had long been angling for his business. They waited feverishly, their fountain pens bursting with ink, their checkbooks eager in their pockets. Kreuger received them in his compartment on the train. Unfortunately he had changed his mind. He did not need the 20,000,000 francs and he had made it a rule never to borrow money that he did not need. Their faces fell. “However,” said Mr. Kreuger, “I do not wish to give you your trip for nothing. I am myself a little short of cash. I will take 5,000,000 francs.” The gentlemen were delighted. The 5,000,000 francs was delivered to Numéro Cinq Avenue Victor-Emmanuel III. The note was to be signed the next day—any time—at his convenience. The early boat train reached Paris at noon on Friday and at 2:30 in the afternoon Littorin, Victor Holm of Dutch Kreuger & Toll, and Bergenstråhle, Wendler, and Hennig, his accountants, met inKreuger‘s apartment. Kreuger seemed to follow the discussion at first but later his mind appeared to wander. Feeling in the room grew tense, Hennig, a paid accountant and an underling who had never dared to question Kreuger‘s will, finally screwed up his courage to say that there were some who could not understand where the money for the Italian bonds had come from. Kreuger made no reply. Hennig, desperate, pushed the question: “Are they authentic?” Kreuger walking absently up and down the room stopped and gave him a long look. “Yes,” he said … At 3:45 Kreuger and Littorin drove to the Hôtel Meurice and went to the room of Oscar Rydbeck, head of the Skandinaviska bank. ‘There Kreuzer explained that his difficulties were due to his illness and to the bear pool operating in Paris with the stolen shares. Rydbeck asked if the Italian bonds might not serve as basis for a loan. No, for Kreuger had bound himself neither to sell nor pledge them … But would not the Italian Government buy them in? … Kreuger would have to go to Rome for that himself … Then why not go? … It would take so long a time … All the more reason then to start at once … The subject was dropped. AT FIVE Littorin drove Kreuger to the Avenue Victor-Emmanuel and left him there in the salon in the gathering dusk. Littorin then went on alone to the Hôtel du Rhin. At the Hôtel du Rhin Durant and Hallowed showed him a statement Kreuger had prepared in New York—a statement of expected earnings for 1932 and 1933. The statement was quite wrong. It was eleven when Littorin left, only to learn from Schéle, one of Kreuger‘s agents waiting in the lobby, that large demands were to be made the next day by brokerage houses in New York. At ten the next morning Littorin went to Kreuger‘s flat. He had known Kreuger a long time. He was very fond of him. Their letters to each other were always filled with affection. He stood in the door of the salon looking at the white-lipped, smiling face. He spoke as gently as he could of the earnings statement he had seen the night before. Kreuger was also quiet in his chair: “It was probably not a good idea to give that statement …” Littorin was moved: “Whatever you have done,” he said, “whatever you have said, and whatever you have written, you should understand that you are surrounded by true friends who wish you well …” He stood there waiting in the door. He turned to go. Ivar would not forget the meeting at eleven at the Hôtel du Rhin? Ivar would not forget … Part 3. THERE have been three mysteries of Ivar Kreuger. There was first the romantic mystery of the suicide. Between March 12, 1932, when Kreuger killed himself in Paris and March 25, 1932, when Kreuger‘s insolvency was suggested in Stockholm, the questions ran to the causes of his death. Why in God’s name had he done it? Was it the strain of the World Situation? Had it been a woman? Blackmail? Syphilis? Was it true that a letter from a famous actress was found crumpled in his hand? The solution of that mystery was not difficult. Ivar Kreuger killed himself because, his companies bankrupt, his credit gone, his forgeries on the verge of discovery, and his stock-market operations disastrous, he had no decent alternative. There was second the morbid mystery of the scandal. Between March 25, 1932, when the insolvency was suggested and November 28, 1932, when Price, Waterhouse & Co. published its certificate of fraud, the world concerned itself with the odor of his misdeeds. When had he gone wrong? Had he always been an impostor? How much had he stowed away? Was he only a swindler; wasn’t he perhaps something worse? A pervert? A murderer even? A solution of that mystery is also possible. Ivar Kreuger was a relatively honest and extremely able builder and industrialist until he was subjected to the temptations of the New York money market of the ’20’s. There was finally the tragi-comic mystery of the dupes. After November 28, 1932, when the Price, Waterhouse final report was published, interest turned to the Kreuger victims in New York. How had he gotten away with it? How had he taken in half the investment bankers and most of the brokerage houses in Wall Street? How had he hoodwinked a board of directors seating some of the most impressive names in America? Was he a hypnotist? Were his victims fools? Or was it the system? Was the whole practice of international investment banking as it had developed in Wall Street a practice so negligently controlled and so ignorantly conducted and so artlessly naïve that any pompous promoter with a European wardrobe, an impressive port, and a pretty, if financial, French could milk it at his pleasure? That final mystery was and is the most stubborn. Approximately $250,000,000 was invested in Kreuger securities in the U.S. Three-fifths of that amount was invested in issues of the International Match Corp. whose directors were Frederic W. Allen, director in thirty-one corporations including Otis Elevator, Chase Bank, and I.T.&T.; Donald Durant, director in seven corporations including Continental Securities; Henry O. Havemeyer, director in thirteen corporations including Chase Bank and Kennecott Copper; Francis L. Higginson, director in thirteen corporations including General Electric and International Paper & Power; Adrian H. Larkin, senior partner in Larkin, Rathbone & Perry, lawyers, and director in six corporations including U.S. Industrial Alcohol; John McHugh, chairman of the executive committee of Chase Bank, the world’s largest bank, and director in seventeen corporations; Samuel F. Pryor, director in thirty-one corporations including Chase Bank and Air Reduction; and Percy A. Rockefeller, nephew of John D. Rockefeller and director in forty-nine corporations including Bethlehem Steel, Consolidated Gas of New York, and National City Bank. The entire $250,000,000 of shares and debentures, both International Match and Kreuger & Toll, was marketed either directly or indirectly through Lee, Higginson & Co., a private banking house formed in Boston in 1848, leader in railroads in the great period of rail expansion, prominent in Calumet & Hecla in the copper age, instrumental in building American Telephone & Telegraph and General Electric in the era of electricity, powerful in the reorganization of General Motors and the establishment of Nash Motors in the decades of the automobile, training school par excellence for the younger sons of the rich, and the possessor, down to the publication of the Kreuger audits, of one of the most honored reputations in American banking history. Underlying these $250,000,000 of debentures and shares were the corporate statements of Kreuger & Toll and International Match, the latter signed by Ernst & Ernst, one of the best-known firms of chartered accountants in New York and at one time or another accountants for Coca-Cola, Chrysler, Firestone, Time, Inc., Otis Steel, Republic Steel, Reynolds (R. J.) Co., Timken Roller Bearing, White Motor, and many other important corporations. And the holders of these $250,000,000 of debentures and shares included not only widows and not only orphans but banks (Continental Illinois and City Bank Farmers Trust and First National Old Colony of Boston) and universities (Harvard and Yale and Brown and Syracuse) and religious foundations and labor unions and museums and solid corporations like Corn Products and Vanadium and executors and estates and a great majority of those shrewdest of all securities buyers, the professional trustees of Boston. (A few selected holders are given in an Appendix, page 76.) And yet and in spite of all these facts, in spite of the accountants, in spite of the house of issue, in spite of the directors, the whole $250,000,000 is today in default, the default is due to the most flagrant swindle perpetrated upon any body of American investors in our time, recovery of any considerable proportion of the sum invested is doubtful, estates and trust funds, particularly in Boston, are decimated, banks all over the country suffer from impaired credit, families have been ruined, individuals have failed, and one of the great American investment houses has been liquidated. Compared to this third and final mystery, this mystery of Kreuger‘s success in swindling the American public of the better part of $250,000,000 under the noses of a board of experienced and reputable directors and with the unwitting coöperation of a great banking house and before the acute eyes of various European and American accountants, the mystery of the suicide is patent and its explanation obvious. But of Kreuger‘s success in duping New York bankers, to say nothing of his lesser successes in duping the bankers of Switzerland and France and England and his native Sweden, no explanation has to date been publicly offered but the explanation that the New York bankers were dupes. Cornered by the questions of Mr. James N. Rosenberg, attorney for the trustee in bankruptcy of International Match, the directors of the corporation came back and back in their self-justification to Ivar Kreuger. They had relied on Ivar Kreuger and on Ernst & Ernst. And Ernst & Ernst, it seemed, had relied on Ivar Kreuger‘s Stockholm accountant, Wendler, and on the books of International Match. And in the last analysis, when all the equations were solved out, there remained only Ivar Kreuger. The extent of that reliance, like the faith of the Christian martyrs, is all but incredible in this more skeptical and meager year. The directors of International Match, for example, relied on Ivar Kreugerin a way which was little short of mystical. They relied on him to appoint the directors and regulate the affairs of the company’s subsidiaries. They relied on him to handle and dispose of huge sums raised by the company’s financing They relied on him to manage in Stockholm and with a purely Swedish executive committee the company’s affairs. They relied on him “to make and enter into contracts on behalf of the corporation.” They relied on him “to execute any and all instruments of transfer of any part of the personal property of the corporation.” And they asked few questions. There is no record that they ever asked for a statement of the company’s real quarterly earnings. On the contrary they accepted the transfer to New York each quarter of an amount just sufficient to pay the dividends due. There is no record that they ever asked to see the company’s match concessions. (“There would be so many languages,” as Mr. Pryor put it, “and I only speak one …”) It “never occurred” to one of them at least to have a physical count made of the company’s securities. And one director had never even heard of Garanta which, with a capital of $200,000, owed International $18.020,000. Nor did he know anything about International’s wholly-owned subsidiary and $88,000,000 debtor, Continental Investment, other than the fact that it was a holding company (“I felt it was a holding company”). THE directors, in other words, relied on Kreuger. And as did the directors so did the corporation’s bankers. Lee, Higginson relied on Ivar Kreuger for information. And generally accepted without question the information Ivar Kreuger gave. When Lee, Higginson issued its International bond statements on “information and belief” the “information” was the information supplied by Kreuger (or, what came to the same thing, by his Swedish accountants). And when Kreuger in 1931 supplied Lee, Higginson with a “confidential memorandum” on match concessions in which were listed investments of $28,979,577 in “X country” and $27,830,600 in “Y government” and $9,500,000 in “Z,” Lee, Higginson solemnly accepted and conscientiously guarded the weighty secret together with its code explanation that “X” was Italy and “Y” was Spain and “Z” was the Diamond Match. That there was no Italian concession and no Spanish concession the bankers never learned any more than they learned by independent report the state of the match factories International was supposed to own. Or any more than they discovered for themselves with the aid of a pencil and an old envelope that if Swedish Match and International (which did, at the most, two-thirds of the world’s match business) were making, as Kreuger claimed, a net of $30,000,000 they were making it out of something other than matches—the world gross receipts of the match business being only $107,000,000. As with the bankers and the directors, so with Ernst & Ernst. Ernst & Ernst audited the books of International Match but, in accordance with the apparently approved practice of their profession, they depended for items relating to International’s great foreign subsidiary, Continental, upon Kreuger‘s Stockholm accountant, Wendler, who in turn relied for many of Continental’s assets uponKreuger‘s Man Friday, Sven Huldt. The firm’s certificate attached to the 1925 report, for example, read: “We hereby certify that we have examined the books of account and record of International Match Corporation and its American subsidiary company at December 31, 1925, and have received statements from abroad with respect to the foreign constituent companies of the same date. Based upon our examination and information submitted to us it is our opinion that the above consolidated balance sheet sets forth the financial condition of the combined companies …” etc., etc. On other occasions Ernst & Ernst “tabulated” (but did not certify) data received inter alia from Kreuger for the preparation of such documents as the Lee, Higginson Kreuger & Toll circulars of the fall of 1928 and the spring of 1929. And whenever additional information as to debatable items was required it was from Stockholm that such information came. When Ernst & Ernst, for example, observed in the books of International Match a debt due from Garanta in the amount of $18,020,000 and requested of International Match evidence of the financial responsibility of the debtor, a cabled balance sheet was supplied from Sweden showing Garanta’s surplus at $150,000. And the only information, other than Wendler’s audit reports, received by Ernst & Ernst as to the assets of International Match’s chief debtor, Continental (the books of which company they did not personally audit), was such information as Kreuger or his agents vouchsafed them—an impressive glimpse of Primo de Rivera’s signature on what was said to be a contract in Spanish or a certificate of deposit for 400,000,000 francs of rentes in something magnificently entitled “The Netherlands Bank for Scandinavian Trade.” But if it is clear, as it is too sadly clear, that Messrs. Lee, Higginson et al. the bankers and Messrs. Pryor and McHugh and Rockefeller et al. the directors and Messrs. Philip Dexter and Robert H. Gardiner the bond buyers severally and jointly and rashly and immoderately relied on Ivar Kreuger, and if it is clear that they relied upon Ivar Kreuger in good faith and in sincere belief and to their own enduring sorrow, it is nevertheless not clear precisely why that extraordinary and fatal confidence was given. It is true that Mr. Kreuger was a charming man. It is true that when Mr. Pryor went to Stockholm in 1930 in Mr. Kreuger‘s absence and when Mr. Pryor was lunched by the Stockholm bankers “at one of the large restaurants,” everyone spoke beautifully of Mr. Kreuger—so beautifully that Mr. Pryor had “never heard a man more beautifully spoken of by everyone. I remember somebody offered a toast to their most distinguished citizen, Mr. Ivar Kreuger.” It is true that when Mr. Percy Rockefeller returned from Stockholm in 1925 he said that “he was never more impressed than he was with that organization. It seemed almost too good to be true; every man seemed to be functioning wisely.” It is true that Mr. Francis Higginson had talked with people about the general reputation of Kreuger in the U.S. and in England and in France, “and everywhere I got a perfect reply, rather an exceptionally perfect reply.” It is true that when young Mr. Gordon Blackstone, who had done a lot of accounting for the Rockefeller estate, went over to secure a few facts in 1927 and when young Mr. Gordon Blackstone failed to get his facts, “Mr. Kreuger was unusually polite and while he vetoed giving me information, he gave me what I considered valid reasons for it; therefore I didn’t question him at all.” It is true, in brief, that Ivar Kreuger was one of the most delightful and persuasive men whom anybody had ever met. “The doubt never occurred to us,” testified Director McHugh, chairman of the executive committee of Chase, “as to the correctness of anything. We had no doubt as to everything being all right.” But unfortunately charm, although it may explain mistaken marriages, New York mayors, and a few Presidents of the U.S., will not, in all seriousness, serve to explain how a match manufacturer from an unimportant European city was able over nine years to dupe the international financiers of New York and walk off with $250,000,000 of the country’s cash. Granted that the charm was sufficient, even in Kreuger‘s last weeks when the wrapped rifle already stood in the corner of his Park Avenue bedroom, to persuade a young partner in the firm of Kuhn, Loeb that next year Kreuger was going to make them all millionaires. Granted that the French had called him l’oiseleur, the bird charmer. Nevertheless Mr. McHugh and Mr. Pryor and Mr. Rockefeller and Judge Larkin and Mr. Allen and Mr. Higginson were not young partners. And neither were they birds. Moreover charm as a solution of the mystery runs into the obstinate and irrefutable fact that while it may explain the acquiescence of the Americans it does not explain the actions of the Swede. Commercial charm is the weapon of the vulgar swindler, the goldbrick man, the faker who wants something for himself. But Kreuger, although he pumped the better part of a quarter of a billion dollars out of America and into his own companies and enterprises abroad, was contemptuous of money for its own sake, lived, as one of his American banker friends put it, like “a cheap bank clerk” (which is to say, in the argot of the ’20’s, like a man of considerable but not spectacular wealth), and was chiefly remarkable for the extravagance with which he gave money away to his friends, his acquaintances, his competitors, and even to perfect strangers. To explain the deception of the American financiers on the ground that they were taken in by Kreuger‘s charm is to imply that Kreugerwas a mere swindler out for their gold and with art enough to persuade them to relinquish it. But the implication will not hold. It was something other than money that Kreuger wanted. And it was something other than money that he persuaded his victims to give up. A man, particularly the director of forty-nine corporations, does not permit himself to be duped out of power by a nice smile and a set of even teeth. OBVIOUSLY the simple and Hearstian thing to do with the whole mystery would be to solve it with the ugly charge that none of these respectable gentlemen were in fact deceived at all, that bankers and directors and accountants knew all about Ivar Kreuger‘s maneuvers, and that if Mr. Kreuger‘s associates were silent they were silent because they had participated in the spoils. Doubtless the soap-box orators have long since adopted that easy explanation. The only difficulty is that the facts do not support it. The facts are that though persons with an access to Mr. Kreuger‘s books should have suspected the truth there is no evidence whatever that they did. Price, Waterhouse & Co., the accountants who conducted the Kreuger post-mortem, say of the Kreuger & Toll reports: “We do not think more need be said about these published accounts except that the manipulations were so childish that anyone with but a rudimentary knowledge of bookkeeping could see the books were falsified,” and the same accountants add as to Dutch Kreuger & Toll: “Entries in its general books were palpably false, few entries even looking reasonable on the surface…” Moreover there were irregularities in the issue of Kreuger securities which might well have come to the attention of the American houses of issue. For example, the 1929 issue of 57,916,660 kronor of Kreuger & Toll debentures failed of subscription by 14,672,360 kronor and Kreuger, to avoid a public acknowledgment that the issue was a failure, bought in his own debentures. This was accomplished by the purchase of “rights”—largely on the American market and through Lee, Higginson. Durant of Lee, Higginson assumed that these purchases were being made by a “European syndicate” which Kreuger was supposed to have formed to support the market. But Price, Waterhouse observes as to this whole affair that “the true situation was not disclosed to the public since an announcement was made that the issue was fully subscribed. It is difficult to believe that it was not generally known in financial circles … although it is, of course, quite possible that the extent to which the issue had failed was unknown to the issuing banks. However this may be there is no room to doubt that some of the issuing banks were parties to an arrangement whereby subscriptions were recorded which did not result in Kreuger & Toll receiving new money.” But although it may be true that Mr. Kreuger‘s bankers and associates should have been put on notice by his books, or should have been curious about his later security issues, there is nevertheless no affirmative evidence that they were. Nothing tends to show that Lee, Higginson or the International directors ever so much as looked at the reports of Dutch Kreuger & Toll or that they read the published reports of the parent Kreuger & Toll even with that “rudimentary knowledge of bookkeeping” to which Price, Waterhouse refers. While, as for Ernst & Ernst, it is clear that the only books personally examined by that firm were the books of the American companies, and that the books of the American companies, taken alone, showed nothing irregular. As Mr. May of Price, Waterhouse put it to the Senate Investigating Committee: “Anybody seeing only a part of the picture may be not in the least blameworthy for being deceived.” Aside from the fact that on March 2, 1932, whenKreuger was already to all intents and purposes a dead man, Donald Durant of Lee, Higginson prepared a letter for Kreuger to sign saying that he (Kreuger) was “willing to cause to be brought about changes in the corporate practices and bookkeeping methods” of the three chief companies and their subsidiaries “to the end that more definite information will be currently available and to the further end that these corporate practices will approach more nearly the methods understood in the United States,” there is no evidence that anyone in Lee, Higginson was even remotely aware of Mr.Kreuger‘s bookkeeping methods. Nor is there any certain evidence that Lee, Higginson was aware of Kreuger‘s irregularities in the other and more obvious matter of supporting his own stock issues and reporting, as subscribed, stocks which he had been forced to buy himself. There is, in other words, no legal proof that any of Ivar Kreuger‘s associates in the flotation of his American securities had any actual knowledge of the real nature of his manipulations. There remains the question of negligence. But negligence in such a context means very little. To say that the partners of Lee, Higginson were negligent in failing to know that these various issues had not been subscribed, and in failing to know that Kreuger‘s statements to the contrary were false, and in failing to know that Kreuger & Toll had not in fact received the new money it pretended to have received, or to say that the directors of International Match were negligent in failing to ascertain what properties their company owned and where their company’s money went and what quarterly profits their company made is to throw a little frankness but no great amount of light upon the mystery. For one thing, the negligence of the directors in this connection is merely the charm of IvarKreuger in reverse: it was because Kreuger was so plausible that the bankers were so slack; it was because of the “engaging frankness,” as the chairman of the Committee on Stock List put it, ofKreuger & Toll’s statements that the New York Stock Exchange so readily listed his securities. And, for another thing, wholesale negligence of these proportions is not an explanation but a symptom. One man may be negligent, having been less careful than the standard of his community. Three men or ten men may be negligent, constituting still a minority and an exception to general conduct. But when a whole board of directors and a whole firm of bankers and a great list of investment houses and a whole entourage of financiers are all negligent together the word negligence ceases to have any further meaning. A man is negligent at common law only when he fails to conform to the standards of the conduct of the medial man, the “reasonably prudent man” of his time and place. And if the reasonably prudent man of a given country and a given time has lost his prudence, negligence has lost its savor. BUT if neither negligence nor guilty knowledge can be offered as an explanation for the conduct of Ivar Kreuger‘s American bankers and associates, and particularly for the failure of Lee, Higginson and the International Match directors to see what was so parently (in the light of afterthought) beneath their noses, is there then no explanation? Is Lee, Higginson’s incredible inobservance to remain a mystery like the Mayan alphabet? Must future generations accept upon faith the allegation that a banker may be duped but blameless? The historians will not say so. The historians will find an explanation for the whole fiasco in the place where we, the living, are least inclined to look—in the times themselves. The times may not be capable of guilt but they are capable of comment. And in the case of the third decade of the 20th century their comment is illuminating. A man’s suspicious will be aroused, at any epoch or under any circumstances, only by that which strikes him as unusual. In a period of scrupulous morality and strict respect for law any deviation from Roman probity will be unusual. In a period of relaxed moral standards and weakened respect for law only the crass and obvious will fall into that category. And the decade of the ’20’s was such a period. The general measure of conduct in the ’20’s was “good business.” If a maneuver “paid” it was sound. If a corporate device yielded profits it was above reproach. And if a banker’s client paid his interest and piled up his dividends there was nothing suspicious to catch the banker’s eye. It was quite understood that taxes would be avoided wherever possible and that the word “avoid” might, by attraction of assonance, slip over into the word “evade.” No one troubled to think that at a time when peccadillos were countenanced crime itself might well go unobserved. The application of the morality of the ’20’s to Ivar Kreuger is too apparent to require proof. In a normal period and under normal conditions any man unloading stock issue after stock issue and debenture issue after debenture issue in a boundless expansion of his business would soon strip himself of all confidence. At a normal time and under normal circumstances mystery and complication and lists of intricate subsidiaries and mountains of lawyer-like financing would scare off the bankers and the brokers and the Stock Exchange officials without more. But the ’20’s were not normal years and New York in the ’20’s was not a normal city. Secretive financiers in New York in the ’20’s were merely financiers with a just sense of their own importance. Complicated and intricate holdingcompany systems in New York in the ’20’s were merely the reasonable and logical idiom of a national wealth which was so vast, so dazzling, and so inexhaustible that nothing but a Ziegfeld ballet of dancing subsidiaries in allegorical designs could possibly interpret it. The truth is that New York and the ’20’s and Ivar Kreuger were made for one another as a patient is made for a disease and as a disease is made for a patient. The money markets of New York turned Ivar Kreuger into a stock promoter and Ivar Kreuger as a stock promoter turned the New York money markets inside out. And the entire fitness of things was observed. Everything in the New York scene was made to Kreuger‘s hand. By and large the New York bankers of the period were law-abiding and honest if romantic men. But their boomyear complacence with regard to the dodging of certain laws, the laws specifically of taxation, gave Kreuger precisely the tool he needed. Tax laws like prohibition laws were laws you dodged if you could. Kreuger was not the only industrialist to have an affiliate in the comic-opera principality of Liechtenstein. Standard Oil of New Jersey also had one.* And it was apparently enough for Kreuger to explain to Lee, Higginson or to the directors of International Match that some secret and mysterious deal or some darkling subsidiary had been put through or set up “to avoid taxes.” They asked no further questions. Mr. Durant understood that the reason for the arbitrary quarterly earnings of International Match (which were just large enough to cover dividend requirements) was that “by not bringing the earnings into the parent corporation each time, but keeping them in the subsidiaries it was not necessary to pay an income tax on earnings which were not brought into the country.” Mr. Pryor “assumed” that there was a reason why International’s Vulcan Match Co. barely kept out of the red year after year and that the reason was “possibly taxation.” And everyone having to do with Kreuger understood that the whole reason for the existence of Dutch Kreuger & Toll was the evasion of Swedish imposts. The result was that Dutch Kreuger & Toll and Continental were able to avoid all further investigation and that Kreugerwas permitted to his bankers and his directors and his public as he pleased. It is old wisdom that if you can get a man to wink with you he will not see. AND there was more in the New York scene in the ’20’s than mere complacence about tax devices. There was also an arbitrary free-and-easiness in the disposition of corporation funds which was equally useful to Kreuger in the disposition of the funds of his own companies. There was, for instance, the now well-known example of the National City Bank which, while closing out the accounts of its old customers during the crash and foreing its employees to pay in depression dollars for stock bought at boom prices, lent $2,400,000 (of which only 5 per cent has been paid back) to its own officers to support their market commitments. And there was also the bonus of $3,400,000 over and above salary paid by the same bank and the National City Co. to Charles Mitchell in 1927 and 1928 and 1929. While the use of Transamerica money by Mr. Amadeo P. Giannini in 1929 to support the company’s stock is equally notorious. And there was also complacence about the sale of securities. The National City Co. may serve as an example. That house underwrote in September. 1929, in conjunction with J. Henry Schroeder & Co. of London, an issue of $8,000,000 of bonds of the Brazilian state of Minas Geraes. The underwriters knew that the state of Minas Geraes had defaulted on $42,000,000 of its bonds marketed in London and Paris from 1907 to 1916. They presumably knew that George F. Train of National City’s foreign department had written in April, 1927, a letter, stating that “the laxness of its [Minas Geraes’] finances is almost fantastic” and that “it would be hard to find anywhere greater ineptitude, negligence and carelessness in the handling of its external loans.” They knew that the real purpose of the $8,000,000 issue was “partly with a view to” repaying the National City Co. for earlier short-term advances to the state amounting to $4,000,000. And yet National City issued a prospectus certified to by Mr. Train declaring that the purpose of the issue was to increase “the economic productivity of the State of Minas Geraes” and stating that “prudent and safe finances had been axiomatic of successive administrations in the State of Minas Geraes.” In much the same way Messrs. J. & W. Seligman sold a Peruvian loan to the public in spite of the fact that their agent in Peru, Lawrence Dennis, had satisfied himself that the country was already over-borrowed and running at a deficit and that the national debt had risen 283 per cent in ten years. And the U. S. Department of Commerce seems to have approved, if not the specific judgment, at least the happy optimism of these houses of issue. In a letter to the commercial attaché at Lima an official of that department wrote: “I should like to emphasize that the spirit of the bureau follows the spirit of American business, which is to make sales in spite of difficulties, or to find ways of doing seemingly impossible things. As officials we should be encouraging whenever possible and discouraging only in the last extremity. We are builders, promoters—even propagandists, although never to such an extent that we fail to recognize and point out difficulties.” OBVIOUSLY in a cit and country where sales by misleading circulars of bonds of unsound South American republics were practiced or condoned by the largest investment houses, and officers of a department of government thought of themselves as “promoters, even propagandists,” Kreuger‘s prospectuses for, and sales of, bonds of Swedish match companies would pass unnoticed. Many ofKreuger‘s prospectuses were misleading. But compared to National City’s prospectus referred to above they were not extravagant. And if the disparity between Kreuger‘s promise and Kreuger‘s performance is all too clear and if the question of the responsibility of Lee, Higginson is thereby all too sharply presented, nevertheless it must be borne in mind in fairness to that house that if Lee, Higginson had not handled the Kreuger issues some other house almost certainly would have. Mr. Pecora, examining a member of National City Co.’s foreign department before the Senate Committee, asked why National City participated in the $4,000,000 of short-term credits to the state of Minas Geraes. To keep Kuhn, Loeb and Lee, Higginson from “chiseling in” on the field of Brazilian credit, answered Mr. Train. “Chiseling in? That is not a banking term, is it?” said Mr. Pecora… And J. & W. Seligman’s reasoning with reference to Lawrence Dennis’ unfavorable Peruvian reports was, as stated by Mr. Dennis, that if they did not make the loan someone else would. But it was not only in the disposition of corporate funds for the advantage of officers nor in stock-selling technique that Wall Street set the stage for Ivar Kreuger. It was above all in accounting practice and in managerial secrecy. One of the great and justifiable complaints against Kreuger was his failure to divulge necessary information and his secrecy as regards the physical properties of his corporations. But Allied Chemical & Dye in this country has long offered a parallel. Mr. Orlando Weber not only denies his stockholders the right to enter the company’s Hopewell nitrogen plant but has so consistently refused, both to stockholders and to the Committee on Stock List of the Net York Stock Exchange, basic and essential financial information that the Governors of the Exchange have voted to exclude the stock of Allied Chemical from the list unless, prior to August 23, the corporation mends its ways. (It was only after years of effort that the Exchange was able to extract from Mr. Weber the fact that Allied Chemical’s item of “marketable securities” includes the securities of six companies, the largest holdings being its own preferred and common stock.) Another great complaint about Kreuger‘s companies has been that Ernst & Ernst, the American auditors of International Match, were not authorized to make a complete audit of the company and all its foreign subsidiaries. And the complaint is justified. Much of the fraud was made possible by that practice. But the practice existed long before Kreuger. On the basis of most recent annual reports, 9 per cent of the companies listing stocks on the New York Stock Exchange, exclusive of railroads and some inactive companies but including American Tobacco, American Can, Standard Oil of New Jersey, National Biscuit, Standard Oil of California, and Western Union, showed no independent accountant’s certification on their annual reports (though some of them may have had such audits). And in 1929 the percentage was very much larger. Many companics, as for example A. T. & T. and American Metal Co., have had the books of their subsidiaries audited by their own auditors. And very frequently where independent auditors are used for the books of holding companies, etc., it has been the common practice of such corporations as Continental Can (1931), American Sugar Refining (1931), American Smelting & Refining (1931), General Electric (1932), I. T. & T. (1931), Socony-Vacuum Corp. (1931), etc., to ask the independent auditors to accept unaudited statements of some or all their subsidiaries, and reputable auditors have done so—precisely the practice followed by Ernst & Ernst with International Match subsidiaries. Almost a year after Kreuger‘s death, in January, 1933, it was decided by the New York Stock Exchange that from and after July 1, 1933, all new offerings of stock listed must be backed by an independent audit—i.e., an audit by some firm of chartered accountants not on the payroll of the corporation. And the new rule must be taken as a commentary on the old practice, and an intimation that the old vice will be reformed. But it is significant that the new rule makes no change in the form of independent accounting and that that form still leaves the door wide open to misrepresentation, intentional or accidental. It has been the general practice of such companies as Radio, audited by Arthur Young & Co., and National Cash Register, audited by Price, Waterhouse, to show profits by charging surplus, and many corporations have not hesitated to combine such a maneuvet with eloquent and comforting words. HERE then was a scene set for the swindler. Here was a city and a time in which inadequate audits opened the basic corporate structure itself, the unit cell of modern industry, to corruption and rendered the domestic holding company with subsidiaries abroad practically investigation-proof. Here was a city and a time in which unconscionable stock selling muddied the source and spring of all financing. Here was a city and a time in which acquiescence in the avoidance and even the evasion of tax laws provided a justification for secrecy and, as an inevitable consequence, a cloak for fraud. Here was a city and a time in which enormous bonuses and huge loans to corporate officers broke down the inviolability of corporate funds. And here, therefore, by all the laws of probability and chance, was a city and a time ripe for the appearance of an Ivar Kreuger. To say that New York and the ’20’s explain the third great Kreuger mystery, the mystery of the dupes, is to put it mildly, Just as a hinterland which demanded to be swindled would have been obliged to create Wall Street had Wall Street not existed, so a Wall Street which demanded to be fooled would have been obliged to invent an Ivar Kreuger had Ivar Kreuger not been born. In the last analysis Wall Street and the decade of the Boom do more than solve a mystery. They give meaning to a man. Ivar Kreuger, successful swindler, dead at Numéro Cinq Avenue Victor-Emmanuel III in the March morning, signifies nothing. But Ivar Kreuger, Byronesque figure created and uncreated by the world he fed on, signifies a great deal. In a sense he signifies the Age—an Age, it may be hoped, now past. *Small sovereign states like Liechtenstein and Luxemburg and even larger states like Holland offer attractions to foreign corporations desirous of avoiding the tax laws of their own countries. In Liechtenstein for example there is no income tax but a capital tax paid either at the rate of one-tenth to one per thousand or in small global annual sums running as low as $40 a year Foreign corporations establishing subsidiaries in the principality may thus avoid ordinary taxation on such capital and income as they care to attribute to the subsidiary corporation. And since books need not be shown nor statements published privacy is assured. About 80 per cent of Liechtenstein’s clients are German. But directories are not made public. The Standard Oil affiliate is a patent pool for that corporation, I. G. Farbenindustrie, Imperial Chemical Industries, and Royal Dutch.