Preface
Enron. Tyco. WorldCom. The South Sea Bubble. Ivar Kreuger. Equity Funding. While the first three of these infamous financial statement frauds may be burned into your memory, chances are the rest of them are not. Even so, efforts by executives and insiders to cook the books have a long and storied history. Let's take a closer look.
The South Sea Company was formed in England in 1711 by Lord Treasurer Robert Harley and a shady character named John Blunt. Because of Harley's political influence, the company was granted a monopoly for trading rights in Spanish South America. But his main purpose was an attempt to help his government pay for an enormous debt it had incurred during the War of the Spanish Succession, which did not end until 1713.
The essence of the deal was for the South Sea Company to assume nearly all of England's debt in exchange for stock. Since audited financial statements did not exist at the time, the company's insiders simply talked up the value of the stock and individual citizens put their life savings into the scheme. When the bubble eventually burst, it nearly bankrupted a proud nation.
Ivar Kreuger (1880–1932) was so rich that he also loaned money to countries—France, Spain, Romania and Poland—to help them rebuild the wreckage of the First World War. Although born in Sweden, Kreuger immigrated to the United States in the early twentieth century and made his fortune in matches. Before his death by suicide, Kreuger's corporation, the Swedish Match ...
