Loans – Nice frauds in historical past: John MacGregor’s dodgy loans
John MacGregor was born in Drynie within the Western Isles of Scotland in 1797 and emigrated to Canada together with his household in 1803. After a short involvement in native politics, he moved again to Liverpool in 1827, then briefly labored as a businessman earlier than spending the subsequent 20 years in more and more senior civil-service roles on the Board of Commerce. He was elected to Parliament as a Liberal for Glasgow in 1847. He additionally helped discovered the Royal British Bank, with businessmen John Menzies and Edward Mullins, and would grow to be its chairman after it was granted a royal constitution in 1849.
What was the rip-off?
From the second it was arrange, the bank was introduced low by a mix of unhealthy enterprise loans, together with to a Welsh ironworks, and enormous private loans to the administrators and their mates. These included a £70,000 (£6.59m in the present day) loan to Humphrey Brown, the MP for Tewkesbury, £30,000 (£2.82m) to the bank’s supervisor, £14,000 (£1.32m) to John Gwynne, £7,000 (£659,000) every to John MacGregor and Edward Mullins, and £2,000 (£188,300) to auditor Thomas Chandler. To cover the bank’s distressed state from its shareholders and depositors, the accounts had been falsified and dividends had been paid out of capital.
What occurred subsequent?
By 1856 rumours had been flying across the Metropolis of London. The Joint Stock Firms Journal printed a collection of articles in regards to the bank’s issues, though with out mentioning it by identify, resulting in awkward questions on the half-yearly assembly in August. By early September the bank was pressured to droop enterprise and the fraud was revealed a couple of weeks later. MacGregor died in France after fleeing the nation. The eight surviving administrators had been convicted of fraud, although they served solely nominal sentences.
Classes for traders
By the point it collapsed, the bank’s liabilities had been £539,131 (£50.75m) with solely £288,644 (£27.1m) in belongings. Within the authorized battle between shareholders and depositors, the courts dominated that the fraud didn’t diminish shareholders’ legal responsibility, even supposing round 40% of them had been widows, spinsters, tradesmen or servants. The depositors needed to accept round three-quarters of the cash they had been owed. Limitless legal responsibility has all however disappeared in the present day, but it surely’s nonetheless worth checking if these making ensures are able to face by them.