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Business: Kreuger’s Books

4 minute read

Editor George Horace Lorimer of Saturday Evening Post was able to lead off his April 2 issue with an up-to-the-moment article—a “last talk” with the late Ivar Kreuger, recorded by his good friend & admirer, Isaac Frederick Marcosson, able tycoon interviewer. Although the “last talk” was an innocuous compendium of Herr Kreuger’s views on international finance, its publication indirectly certified the aura of greatness surrounding the matchmaker and moneylender who had shot himself (TIME, March 21).

Last week Publisher Lorimer and Reporter Marcosson may have regretted their coup. For in one of the most smashing statements ever made by a firm of auditors, Ivar Kreuger was last week pronounced a crook, a swindler, a falsifier of books.

When in 1928 the famed Boston-born firm of Lee, Higginson prepared to issue millions of Kreuger securities to U. S. investors, it naturally demanded an audit of the Kreuger business. It was persuaded by Ivar Kreuger—one of the most charmingly persuasive men who ever lived —that it was not necessary for a U. S. firm to audit his vast affairs. He had not only one but three great Swedish firms of auditors which over a period of years and throughout the civilized world had learned how to keep track of the globe-girdling assets and liabilities of his huge money-lending match company. So great was Sweden’s reputation for honesty that Lee, Higginson decided, as a practical matter, to accept a Swedish audit of the greatest Swede.

When Lee, Higginson discovered last week that it had been gulled, it suffered the most stinging blow to its moral sensibilities in all its 84 years, first devoted to the China Tea Trade, then under Boston’s Symphony-founding Major Henry Lee Higginson to railroads and later to industrials. Its Kreuger affairs were handled mainly in New York. The partner chiefly associated with the Kreuger business is a physically big and distinguished figure, Frederick Winthrop Allen, long head of Yale’s rowing committee.

The truth about Kreuger came from Price, Waterhouse, famed auditors of a large part of all Big Business in Britain and America. Its British partners, called to investigate by the Swedish Government, minced no words in their preliminary report. Their points:

1) “We are able to state that in our opinion without doubt the balance sheet of Aktiebolaget Kreuger & Toll as at Dec. 31, 1930, as well as the consolidated balance sheet accompanying it… grossly misrepresented their true financial position.”

2) “Under the personal direction of the late Mr. Kreuger entries were made on the books which on the one hand eliminated substantial balances shown to be owing the parent company by him and on the other hand entirely eliminated liabilities to other subsidiary companies. . . .”

3) “There are indications that the profits reported for the year 1930 were grossly overstated by means of fictitious entries.”

4) “The above statement must be accepted as evidence that gross frauds have been perpetrated by Mr. Kreuger.”

The New York Sun, smugly smart in its financial page, conveyed the impression that this was no news to wise folk. Said the verbose Sun: “It is now apparent to everyone what some people here who aren’t given to mistaking engaging personalities for other qualities have suspected for a long time.” As a matter of fact, biggest New York bankers were frank to admit that (at least until the Kreuger suicide) no one but a mind-reader would have suspected Kreuger’s honesty.

The truth, disturbing to man’s faith in man, shook financial markets throughout the Occident. A dozen “protective committees” were set up, awaiting further details of fraud. Estimated losses, largely due to Kreuger fraud, are $300,000,000 throughout the world, of which perhaps $200,000,000 are in the U. S. And the loss to Sweden is incalculable honor.

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