Kreuger had the fantastic idea of turning his family’s match-making industry, based in provincial Sweden, into the leading provider of loans to the shattered post-war I economies of nations during the1920s.
He raised cash through a number of share and bond issues in the U.S., and then loaned the money to national governments in exchange for match-making monopolies in those countries.
He promised fantastic rates of returns (as high as 25%) to investors, but the loans he provided to countries such as Germany were returning only 6% to him.
Money was shuffled between dozens of subsidiaries to provide the illusion of profits, while Kreuger speculated with other people’s cash in an attempt to fill the interest rate gap.
THE LEADING LENDER
He was the leading private lender to Europe in his day, raising money in the U.S. to lend to Europe countries in exchange for match-making monopolies.
Over a period of seven years from 1922 to 1929, as share-buying and investment mania hit the US, things went well, but then disaster struck. In October, 1929, he made a then massive $125 million loan to Germany, just days before the stock market crash of Black Monday and Black Tuesday. At the height of the great stock market crash, confidence in his firms grew even greater, as they continued to return large dividend payments, even though Kreuger’s ability to generate speculative returns was going downhill.
Kreuger’s financial methods became increasingly devious. He was keeping liabilities “off balance sheet,” establishing a network of more than 200 firms that fooled his auditors and bankers, and invented non-voting shares. He also conjured up “options”, “derivatives” and stashed cash away in secret subsidiaries in Liechtenstein and Switzerland.
Kreuger then began Enron-style financial shenanigans, reporting profits when there were none, and paying his generous dividends by attracting new investment or plundering existing ones. Kreuger was seen as a business titan of the times, with his firms seemingly triumphing during the crash.
President Herbert Hoover regularly sought out his advice about the problems affecting the global economy, and he consorted with Hollywood stars and financial kingpins. He was hailed on the cover of Time magazine, and was seen as a hero in countries such as France, which he had bailed out with a huge loan.
At his financial height, Kreuger had many businesses besides match-making. His industries included film-making (he discovered Greta Garbo working in a department store), construction, mining, and communications. He owned the phone giant Ericsson. His Swedish Match firm exists to this day.
In March 1932 Kreuger allegedly shot himself in a hotel room in Paris, just before a meeting with bankers, at which he would have faced some hard questions. A number of bonds with forged signatures had been found in his safe. The bonds had been used as security against his loans.
At the time of his death, Swedish bankers estimated he was the third-richest man in the world. Once the extent of his deception became known, investors were hit by what was known as the “Kreuger Crash.” Regulators were lambasted by Congress for their light-touch approach, and in the fallout a raft of new laws and regulatory bodies were created, including the Securities and Exchange Commission.
While the cause of his death was ruled a suicide, the Var Kreuger home page (www.qikrux.com/kreuger) begs to differ:
He was (probably stabbed in his heart (and probably drugged) in his apartment on rue 5 Victor Emanuel lll, in Paris. A 9mm Browning was found in his left hand and the official version of what (happened) claims that Kreuger shot himself in the heart. The gun itself disappeared in the subsequent investigations.
No bullet was ever found. No shot was ever heard.
The alleged suicidal gun was bought the day before the murder, at Renette-Gastinnes small arms shop, by someone signing in as Ivar Kreuger, while the real Kreuger attended a meeting, at hotel Maurice, with banker Rydbeck and manager Littorin. Despite the request of the relatives, no autopsy was allowed and the remains were cremated in a hurry after their arrival in Stockholm. The Kreuger diaries were officially burned.
The last night in Paris, in an orgy of flowers, he was accompanied by his Finnish fiancé. She witnessed: “he was happy that night.”
Phil Robertson, Editor