The Suicide of Ivar Kreuger

There have been many cases of large-scale fraud and swindle, since man first learned how to manipulate the money markets, but none so cataclysmic as the affairs of Ivar Kreuger, Swedish Match King. The investing public is of necessity trusting, and the various issues of Kreuger's shares were snapped up almost as soon as they were offered; those who bought them had every reason to believe that they were putting their money into one of the best industrial concerns of the age. And, in a way, they were right. Had Kreuger, that financial colossus behind the greater part of the world's match industry, kept his house in order, the shares of his many companies would still be standing at a considerable premium to-day. But they are not. When Kreuger, caught up beyond all hope of salvation in the meshes of the net he had woven, put a revolver to his heart, the hopes, ambitions, and life savings of thousands died with the pull of his finger on the trigger. One of the biggest modern castles of finance crumbled to nothing, and the whole world was dumb with the knowledge that so great a project could have existed, and grown, for so long - on nothing more than sheer trickery.

It is ironical to think that some of the most intelligent business people in the world not only fell for Kreuger's schemes but helped to boost them to their own undoing. This one man, self made, through his own persistence, and the confidence he inspired in others, grew to be so powerful that he, alone and unaided in his major transactions, controlled the destinies of thousands in every corner of the globe. Not only men and women, not only big and reliable business organisations, but even the very governments of many countries placed themselves in Kreuger's amazing hands. From nothing he built himself up into one of the most redoubtable figures of commercial history. Unknown to all but himself he was building with nothing. Then, when the end came, as was inevitable, he removed himself, and nothing was left. Nothing, that is to say, but a trail of ruin and disaster. From mere boxes of matches he built up a network of organisations which attracted and absorbed the entire capital of countless trusting families.

Ivar Kreugar was born in 1880, at Kalmar, Sweden; about fifty years after the lucifer match was invented. His grandfather, P. E. Kreuger, had started a small match factory in 1860, and, by the time Ivar Kreugar was twenty, the family owned four factories, small but progressive, and with big possibilities. The first Kreuger factory was before the time of match-making machinery, and had been started on sound and simple lines, with three workmen. Kreuger did not, as might have been expected, step straight into the family business. Kalmar was altogether too sleepy for his adventurous spirit, and while the match business grew and thrived at home, he set out for America with a few pounds in his pocket, and no particular plans in mind.

He was twenty when he left home, and for the next three years he interested himself, first in real estate in Chicago, and then with bridge-building in Mexico, where, amongst other adventures, he nearly died from yellow fever. In about 1903 he was back in Europe, where he made business contacts with a London firm, and shortly afterwards he sailed for South Africa. It was here that he negotiated his first "Big Business," and, almost without doubt, awoke fully to the great possibilities of a financial career. An undertaking in Johannesburg needed additional funds for the completion of some building, and Ivar Kreuger undertook to find the money. He raised it so successfully that he made himself a profit of several thousand pounds. America was his next call, and, when still in his early twenties, he returned to Sweden again in 1907, where he met Paul Toll, an engineer.

By this time Kreuger was worth some £10,000, and seeing a great future for concrete in Sweden, he entered into partnership with Toll. His business experience proved its value for the first time when it came to raising the firm's capital, and in 1911 their enterprise was registered as a Limited Liability Company, with a minimum capital of about £50,000. In spite of many ups and downs the firm prospered, and a year later the first big contract was landed. Kreuger and Toll built the stadium at Stockholm for the Olympic Games. That again was a turning point, for the company then began to secure contracts from abroad; and Kreuger, never satisfied with success, was already looking round for fresh fields to conquer. For the first time he looked seriously to the match industry.

Kreuger's father had two factories, but neither was doing well. Ivar Kreuger stepped in, reorganised them, together with eight others, with a capital of half a million pounds sterling. In less than two years he saw the richest results of his work. Starting with a turnover less than a third of his biggest competitor, he had the satisfaction of seeing the two organisations running neck and neck twenty-four months later, and the Kalmar, or Kreuger, amalgamation then swept ahead, month by month, until in 1915 it reached a turnover of close on a million and a quarter pounds. And all the while Kreuger was planning his greatest coup of all; he was awaiting the moment for his first big amalgamation. In 1917 he was successful. His competitors accepted his terms, eighteen match factories came under his control, and Kreuger, thirty-seven years of age, on the threshold of a brilliant career, became managing director of the Swedish Match Company, with a capital of about £5,000,000. Within a very few years this capital had increased to £40,000,000.

It was at this stage that the investing public first heard of Kreuger on any scale. Twenty years previously, as an ambitious boy, he had sailed for the States, almost without a penny. Here he was, back in his native Sweden, with a personal fortune of many thousands of pounds, and regarded by almost every one as a "gilt-edged" investment. What Kreuger touched seemed to turn to gold; and, as the gilt-edged shares of the Swedish Match Company paid anything from twelve to fifteen per cent dividends, thousands flocked to invest. It was then a really sound concern, and Kreuger, at its head, had still to embark on the voyage of chicanery and fraud which was to plunge his companies, his shareholders, and himself on to the rocks of destruction.

Why did he ever go adrift? No one will ever know. At first it may have been no more than following the foolish principle of the office boy who borrows five shillings from the till - "certain of being able to replace it when the horse wins." Though, in Kreuger's case, needless to say, it was the lure for bigger and more ambitious achievements which prompted the borrowing, if such it was. Nothing was too good for the headquarters of the Swedish Match Company at Stockhom. A veritable palace was built, with a magnificent courtyard, fountain, and wrought-iron gates. Silent rooms and corridors, with rich carpets and luxurious furniture, a museum showing the birth and growth of the humble match, bathrooms and rest rooms for the staff, all these things and many more comprised what was then one of the finest commercial buildings in Europe, if not the world. Kreuger's own room was furnished with magnificent inlaid chairs and tables; his private telephone was so constructed that he could walk about the room touching nothing, speaking with and listening to any other person in any country then linked to Stockholm by wire.

Kreuger had entered the realms of financial potentates, and he led rather than followed. He denied himself nothing. Cars, beautiful homes, lavish entertainment, enchanting women; all could be bought with money, and Kreuger had the money. He was a bachelor, and, officially he cared nothing for the company of women. But, as the world was to know in years to come, that was but another of Kreuger's deceits. Even as he managed to keep secret the vital details of most of his greatest deals, so did he live his astounding double life without any of his friends being one whit the wiser. Early in his life Kreuger might have married. He enjoyed a brief romance, but it was broken, and thereafter he sought the company of women rather than woman. Quiet, inclined to be shy, generous almost to the extent of foolishness, Kreuger earned the respect and admiration of all who came into contact with him. An opportunist, he was always ready to make capital out of any turn of events.

At the end of the world war many of the European states were on the verge of bankruptcy. Only one thing could save them, and that was money. Kreuger wanted one thing, and that was an ever-increasing sale of matches. The answer to both sides of the problems was monopolies. Kreuger said to the war-weary states, in effect, "You must have money, and I can raise that money for you. I will arrange whatever loans you need, and in return you will grant me a monoply." From Germany, in return for a loan of £25,000,000 which he negotiated, he received a thirty-two years' monopoly; and so on, at varying rates, he dealt with one state after another, more than a dozen in all, until he had arranged loans totalling more than £50,000,000.

Once Kreuger had ventured upon this hazardous road, it seemed that nothing could stop him. He bribed, and he bribed handsomely, and none knew the nature or extent of his bribes but himself. No one will ever know. Forgery followed bribery, for an important looking document often had more effect than a few bank notes. In order to negotiate the stupendous loans, which he promised in exchange for monopolies, Kreuger had, naturally, to show investors that they were getting their money's worth. Therefore, if the bargain he had struck did not look sufficiently handsome, he resorted to alterations. Possibly a few noughts here, and a different clause there. No one thought to doubt Kreuger. Why did he do it? For no other reason, surely, than the fact that he had determined to corner the world's match industry, and would brook no interference. He may even have thought that falsifications were justified. Perhaps they were in his own mind. If he had said to his investors, or his directors, "I know this looks a bad bargain now, but you wait, and trust me," there is no doubt that the deals would have fallen through. In which case, Kreuger, realising this, may have said to himself, "If I tell them the whole story they won't touch it. If I tell them the best of it, knowing that I can come out on top eventually, and to their advantage, they'll have nothing to worry about."

At any rate, he told only the brighter side of things, and he even brightened that up to make it look better. Having started it was not easy to go back; even if he wanted to go back. His credit was excellent, and when he wanted money he had merely to ask the banks for it, lodging the necessary securities. After a while, as his commitments grew bigger, so did his demands for money, and the banks wanted more securities than he had got. But this did not stop Kreuger. He merely juggled with his securities. If Mr. Smith wants to borrow £100 from the bank, he offers as security an insurance policy, or some sound share certificates. Kreuger had for security his factories, his tracts of forest, his personal estate, and numerous other companies which he had founded at one time or another, for one purpose or another. And, if those were not enough, Kreuger merely produced proofs of yet more forest land which never existed at all outside his own imagination. Who was to say that the securities he offered were worthless? His very audacity was sufficient to guarantee good faith. And so he juggled with non-existent assets, supporting one with something borrowed (on paper) from another. And if, and when, the assets of one concern had to be shown advantageously, he would arrange the figures in a miraculous manner so that it appeared as the finest proposition in the world.

There is but one way of explaining simply the almost impossibly complicated schemes he employed to bolster up his credit, and that is by likening his methods to those of a small-time organisation of crooked intent. "A" wants to borrow a thousand pounds, over and above what he can raise on his proper securities. He thinks, perhaps, that a house would be admirable security, so he decides to create the impression that he owns another house. But banks are carefully run, and no mere forged document will do the trick; so a "reputable" firm is necessary to back up the proposition. "A" then forms "B," a company dealing in real estate, and "B" produces the necessary evidence of the property's existence. Later, "B" has to show evidence of that, and other transactions, to satisfy some other creditor, and so-documents from yet another firm, "C," are shown as assets. And so on. Kreuger robbed Peter to pay Paul, and then robbed Tom Dick, and Harry (all on paper), to pay Peter. But he owed them all, from Tom to Paul. By arranging the books of a dozen firms to tally with entries in the books of the one in question, he kept up his terrific bluff, and more miraculous still, increased his bluff day after dav. But his machinations did not stop at mere book entries. He maintained dummy companies, whose staffs were but tools in his hands. Even while those people thought they were carrying out normal business transactions, they were helping with the big bluff.

And, all the while, the shares of Kreuger's companies increased in value, changing hands at a profit, paying good dividends to the hundreds of thousands of investors dotted about the globe. Some say that Kreuger was already practising deceit in 1915, others say that his first really serious stroke of fraud occurred some ten years later, when one of his many companies, the Garanta Company of Holland, was made to show an enormous asset which never existed at all. But Kreuger was so clever with his juggling that even the men who dealt with the books were unaware of what was amiss. In 1930, as it was discovered later, the books were out on the wrong side to the tune of nearly twenty million pounds when the balance sheet had to be prepared. To this Kreuger merely said that he had more than that amount available in Italian Bonds and other forms of security, and the books were "put straight." The Garanta Company was, according to Kreuger, an office established solely for the purpose of dealing with the taxation side of his business. Actually it was but another of his numerous "houses" which played a major part in the transferring of "assets" from one section of the ever-growing network to another, as the occasions arose. He did not even stop at these convenient exchange offices, but even founded banks to deal with his amazing transactions. Kreuger had a wonderful brain, and a highly retentive memory, but it is certain that towards the end he cannot have carried anything like a true position of his affairs in his head. After his death it was estimated that his various companies, big and small, amounted to close on 500.