No matter how much a financial system is fortified against scams, there is always a fraudster, a conman, or a swindler aiming to game that system.
Financial crimes, a la white-collar crimes, are committed, interestingly, by those working closely with the system or those having the innate skill to justify the art through the framework of ‘fraud triangle’, that is in the terms of opportunity, incentive and rationalization.
Scams, mainly the pecuniary ones, involve conduct of dishonest practices leading to perversion, depravity and debasement of the entire morals of the social fabric.
Financial scandals, like any other scandal, have a story of their own and, of course, the denouement. The truth of the scandals appears to be a drama at times, and at times an enthralling thriller.
Vijay Narayan Govind, in his book Fraudster Tales, promises to tell select 10 true stories of financial scams, spread across centuries and continents, and in his own words, “these frauds were significant enough at the time to send major ripples through the systems they challenged, with many of them serving as the catalyst for key legal and regulatory reforms.”
The book introduces 10 swindlers, each with their own story of fraud in a separate chapter with a suitable story-title to it. In Govind’s fraudster tales, Hegestratos’s tale emerges as the ‘First Fraudster’, circa 300 BCE, in Athens. He, along with his crime partner Zenosthemis, working as ship merchants, planned to steal the cargos, sink the vessel, and con the vessel’s insurers of shipload of valuable goods through enforcement of the clauses of bottomry and respondentia contracts.
However, the plans went awry due to the alert captain and crew members and Hegestra tos jumped and drowned himself in the sea. Zenos themis was arrested, tried and imprisoned in Athens for a long time.
The author picks stories, random perhaps, from Athens and other countries, including India. Haridas Mundhra in the tale of ‘The Great Investor’ and Natwarlal in ‘The Master Manipulator’ are the two Indians figuring in the book.
The Mundhra scandal, first of its kind in independent India, not only was embroiled with the stock markets and financial institutions but was an expose of the wicked nexus between political party, bureaucracy, ministers and business class, perhaps a prototype of ‘crony capitalism’.
The conman Mudhra duped Life Insurance Company (LIC) by forging share certificates, using them as collateral for loans, and amassing huge loans to the tune of Rs 15.60 crore by the mid of 1957. It was Feroz Gandhi, the law maker, who brought this scam to public attention that led to nationalisation of LIC, resignation of TT Krishnamachari – then finance minister, indictment of finance secretary and some senior LIC officials, and, of course, sentencing of Haridas Mundhra to 22 years in prison.
In the Mithilesh Kumar alias Natwarlal’s case, the story, though intriguing, is simple. From forging signatures and withdrawing money from banks, he graduated to nefarious crimes such as decamping cash from merchants and siphoning off goods from the cargo areas while using more than 50 aliases. Natwarlal even sold, impersonating himself as government official, the Taj Mahal thrice, the Red Fort twice, and the Rashtrapati Bhawan and Parliament once. He had developed this shrewd art of escaping prison, and one heard him saying quite often that ‘no jail is enough to hold me for too long’.
Then, there is a story of how an expert William Chaloner counterfeited coins, notes, and lottery tickets, in the 1600s, but finally got caught by Sir Issac Newton, and sent to gallows for he was guilty of multiple currency frauds.
Hugh Cameron’s story is about his conspiracy to cheat Royal British Banks and its customers, eventually which led to the Bank’s collapse. However, in due course, it triggered major legislative reforms in the corporate governance systems in Britain.
Oscar Hartzell, a brazen rook, in another story, swindled millions of dollars from investors in a popularly known Sir Francis Drake estate scam.
Another story, rather smutty and historical, called the ‘necklace scandal’, involves one French noble woman Jeanne de valois as the key conspirator. It became one of the scandals that led to French Revolution.
US major Enron bankruptcy, led by Kenneth Lay, and the Ponzi scheme by Charles Ponzi, the two white-collar financial crimes, rocked the financial systems in the US.
The 10 tales are fun, and a riveting read and, in the tales, the readers would find themselves in the murky world of scandals. The criminals of the stories have two things in common, one they dreamt of becoming filthy rich in a trice, and when caught they tried to justify that all is done in good faith, and second, all of them are caught and punished, which the author seems to lay down as the moral of the book.