The Match King

In 1932, a man who has been coined both "The Sneak" and "a superman of finance," came to a most mysterious death. Dan Ferris gives us a peek into the intriguing life (and death) of…

As a child growing up in Sweden, Ivar Kreuger was known as "The Sneak." Kreuger’s classmates recall the ingenious methods he devised to cheat on tests. Once he climbed in the headmaster’s office and stole exam questions. He then sold the questions to other students.

It should have been no surprise to anyone who knew his childhood nickname, when "The Sneak" was found dead on March 12, 1932.

Kreuger was found in his apartment on Rue 5 Victor Emanuel III in Paris. He lay in bed with a hole in his heart and a 9-millimeter Browning pistol in his left hand.

No shot was heard. No bullet was found.

The official police report said he shot himself in the heart. Someone claiming to be Kreuger bought the gun at the same time that Kreuger was known to have been in a business meeting with two other men. The gun disappeared during the investigation.

Kreuger’s family was denied an autopsy and the body was cremated immediately after arriving in Sweden. His personal diaries were burned. "The Sneak" was dead, and no one would ever know how it happened.

Ivar Kreuger: The Match King

Most people knew Kreuger as "The Match King." A popular movie of that title appeared the year Kreuger was killed. After cornering the market for matches in Sweden, Kreuger had gone around the world, offering huge low-interest loans to bail out ailing countries, in exchange for a monopoly on their match business. Several countries, including France, Germany, Greece and Poland, had been bailed out by Kreuger loans. That’s how he gained control of 65% of global match production.

The tendrils of his empire went around the world. He bought LM Ericsson, trying to gain a foothold in the telecom market. He controlled 30% of global cellulose production. He owned the richest gold mine in the world, and six of the most productive iron mines.

Kreuger’s companies continued to pay dividends even during 1929-32, three years of devastating market losses. His stocks paid dividends of between 16% and 24%, while all of Wall Street was struggling to stay alive. Some called him, "the miracle of the investment world," and "a superman of finance."

Paris police kept the news of Kreuger’s death quiet for five hours, until the New York Stock Exchange closed. The Match King’s empire involved 400 companies, many of which traded on the New York Stock Exchange. It was feared that his death would send the already beleaguered market into a death spiral.

Then "The Sneak" was found out.

Italian bank notes worth $150 million were found in Kreuger’s private vault. The Swedish finance minister took the notes to a private meeting with Benito Mussolini immediately after Kreuger’s death and asked if Kreuger had made a cash-for-monopoly deal with Italy. He had not.

Kreuger tried, but failed, to use the notes to get a loan from a Swedish bank. The bank notes contained the signatures of Italian Finance Minister Antonio Mosconi and another official, Giovanni Boselli. Mussolini took one look at the notes and shouted, "These signatures are forged!" He summoned Mosconi and Boselli to verify the treachery. It wasn’t necessary. The superman of finance had spelled their names wrong.

Investigators were called in to examine hundreds of Kreuger’s accounting ledgers and 150 bags of wastepaper, including 1,900 personal telegrams. The headlines soon revealed, "Kreuger Books are ‘Grossly Wrong,’ Some Assets False." Stock in Kreuger’s companies became worthless, including the $125,000 worth he gave his mistress.

Ivar Kreuger: The irving Trust Company

The Irving Trust Company of New York was named as trustee in the Kreuger bankruptcy. Irving Trust liquidated almost all of Kreuger’s assets. But there were four little companies they didn’t want to liquidate in the United States. Their assets were debentures with a face value of $95 million, now trading for only five cents on the dollar. But the liquidators at Irving Trust were smart. They thought the debentures would go up over time. If that happened, a large capital gains tax would be applied upon sale. The Irving Trust determined to find a way to eliminate the tax burden on what was left of the infamous Ivar Kreuger’s assets.

The prestigious Wall Street firm of Cadwallader, Wickersham and Taft offered a solution. They instructed the firm of Conyers, Dill & Pearman to set up a company called International Match Realization Company, Ltd., and to incorporate it in their home country – Bermuda.

International Match Realization then went into the New York market and bought the debentures for five cents on the dollar. The assets were liquidated a few years later, having risen nine-fold to 45 cents on the dollar, a profit of $38 million, with no capital gains tax on the transaction.

It became one of the most important financial transactions in history, the founding act of the "Switzerland of the Atlantic," as Bermuda would come to be known. Word of the Kreuger transactions – word of Bermuda – got around. American businessman, Cornelius Vander Starr, had built a sizeable global insurance empire. In 1947, Starr wanted to move his non-U.S. headquarters from Cuba, which he viewed as an unstable environment.

He ruled out Panama due to its language barrier, distance from his New York operations, and an unfamiliar legal system. It didn’t take Starr long to find the ultimate resting place of Ivar Kreuger’s legacy, Bermuda. It was English-speaking and close to the United States. Bermuda imposed no corporate, income, dividend or capital gains taxes, and Starr understood the British legal system from time spent in Shanghai.

Starr’s appointed successor is in the news today. Perhaps you’ve heard of him. His name is Maurice "Hank" Greenberg. Greenberg is the chairman and CEO of the company Starr created. Today, Starr’s company has a market value of $159 billion. It is one of the 30 Dow Industrials. The company is American International Group, Inc., better known as AIG.


Dan Ferris
for The Daily Reckoning
December 2, 2004

We’re on the story, dear reader.

A tired looking British Home Secretary (equivalent of our U.S. Attorney General and Secretary of the Interior) was on the cover of the tabloids on Monday. Tuesday brought out the smiling mug of his mistress, an American woman who seems to have slept her way to notoriety in the United Kingdom. Then, on Wednesday, we saw the cuckold – her husband. Today it’s the Filipina nanny’s moment of fame. There she is on the front cover of the Daily Mail. Also on the cover, is the disclosure that the Home Secretary got her a visa in record time.

The only one to conduct himself with any grace and dignity has been the husband – who has kept quiet. We can only the hope the poor man finds his reward in Heaven, for he gets no comfort from his wife or the tabloids – who regard him as something of a fool.

Of course, none of this matters – except that it is a public spectacle more entertaining than finance and more important than politics. The story has all the elements of great tragedy…love, betrayal, intrigue, fatal character flaws, even technological curiosities (the husband had had a vasectomy…making his wife’s pregnancy something of a pleasant surprise. It was almost a ‘miracle’ they told friends).

Thank God for the rambunctious British press. On page 3 of the Daily Mail, we find nearly a full page devoted to Liz Hurley’s lips. She seems to have had them amplified, says the paper. Of course, the photo makes her look ridiculous…but it won’t be the first time an attractive young woman has been made a fool by fashion.

But we are all fools in one way or another – at least that is the conclusion we reach after surveying today’s news.

While the Daily Mail seems to think the most important things going on in the world are Mr. Blunkett’s sorry love life or Ms. Hurley’s lips, the International Herald Tribune flatters itself with pretended seriousness. Its front page is full of dull news about events in Ukraine and Israel. Its editorial page is a smorgasbord for earnest world-improvers. In just two pages of cheap newsprint, we find out what to do about Iran, Haiti, Iraq, Sudan and China. If the IHT hadn’t been so tight with its page space, it could have saved the entire world.

But over in the financial pages, another sort of public spectacle draws crowds. Here is the plot:

The U.S. economy is the proud, but aging, Agamemnon – the Alpha Male of the entire world – coming home from the Trojan wars. But he’s grown a bit fat and bit lazy, and now expects the rest of the world to do the work and saving, while he does the spending and thinking. Meanwhile, his stock – the U.S. dollar – is falling, though he seems not to notice.

We have a feeling that this story will not end well. But we’re not sure. There are bound to be a lot of twists and turns before we come to the end of it. And in the meantime, everyone seems very content to play a role. They seem to think it is going to be Mary Poppins. Or maybe The Sound of Music. They watch the dollar falling day after day…and can’t wait for the happy ending.

"Everyone still feels confident that the U.S. is happy with the dollar weakening," said an analyst to the IHT. American consumers are spending more than ever; the 3rd quarter brought out shoppers, with spending rising at a 5.1% rate. Polls show CEOs are optimistic.

Well, yes, "hallelujah" shouts the Chorus. Now the dollar will be less expensive. U.S.-made goods will be more competitive on world markets. The trade deficit will soon disappear. All will be well!

But the dollar keeps falling. Everyone says it will continue its gentle descent until the end of Act III, when the whole cast comes out to take their bows.

How can it be, dear reader? Would the Great Playwright really put together such a pathetically obvious show? Wouldn’t he want to put in a twist or two…a betrayal…a surprise…tragic turn?

More of the world’s wealth is calibrated in dollars than any other measure. Trillions are lost as the dollar falls. According to the press, all the world’s traders are short the dollar. Is there no one on the other side? Why do the world’s dollar holders stand still while their pockets are picked?

We don’t know. But we suspect Agamemnon is likely to be disappointed when he finally gets home. [Ed. Note: Enjoy this fascinating drama from the most expensive seats in the house. Relax and enjoy the free booze and gourmet sandwiches. But please note, advance ticket purchases only…once this show gets going, there’ll be lines around the corner. Tickets can be purchased from EverBank. They offer over a dozen different choices of foreign currency deposits and CDs, and a fee structure that beats anything your normal brick and mortar bank can offer.

More news, from our friends at The Rude Awakening:


Eric Fry, reporting from the center of the financial universe…

"This breakneck rate of coal consumption is unlikely to slow dramatically over the next few years. Here’s why: China uses coal to power more than three quarters of its electricity production. Hence, as Chinese electricity demand goes, so goes demand for coal."

Coal: Not just a stocking stuffer for naughty little boys and girls…


Bill Bonner, back in London:

*** We have begun to think of the tropics. We lead such a charmed life; we hardly needed Thanksgiving to remind us. We work in two of the world’s best cities – London and Paris. And when, in winter, the going gets tough in the North of the Northern Hemisphere, we head to the tropics. Unfortunately, we can only go when the children all have vacation from school – which is only two weeks in February.

Still, we can daydream. Of beaches. Palm trees. Sunny days…and starlit nights. And of doing good.

You probably think of us here at the Daily Reckoning as hard-hearted cynics. But the steel crust around our hearts is only there to protect the soft mush on the inside. Yes, we laugh and sneer at the Public Spectacles all around us. But in our private lives…in our own little way…we dream…and like to think we do a little good. We sweep our own doorway and imagine the whole world tidied up.

Recently, we got out our brooms in Nicaragua. We discovered that the people of the neighboring village, practically at the doorway to our holiday place down there, had no access to rudimentary health care. Working with a group from Pittsburgh, we helped build a clinic. The cost was peanuts to us…but it meant a lot to people who had never before had a nearby doctor. Now comes word that our clinic – named after Pittsburgh baseball star Roberto Clemente – it is up and running:
"I’m so excited about our new clinic in Nicaragua!!,"writes colleague Julia Guth. "I don’t know if I’ve told you are not, but our little clinic outside the gates of Rancho Santana has become a dream come true for the Limon residents. Healthy babies are being born, diabetes is being treated, and people are learning about how to help themselves get healthy."

Julia goes on to point out that it takes more peanuts…not much, but some…to keep this thing running. She thought Daily Reckoning readers might want to help.

The Daily Reckoning