The Match King

by Frank Partnoy

  Ivar had seemed tired that morning, so a nap was not out of the question. Still, Jeannette’s story seemed odd. Littorin suggested to the men that he and Karin Bökman take a taxi to Victor Emmanuel III, to check on Ivar. No one at the meeting questioned them, or suggested that someone else go. It seemed perfectly natural that two of Ivar’s closest friends would be the ones to do it. Besides, the men were too concerned about the financial implications of Ivar’s absence to notice any suspicious behavior by Littorin or Bökman. They agreed to wait at the du Rhin.

  The taxi ride along the Seine was painfully slow. The early afternoon sky had turned a darker gray, and the wind was howling for the Briand cortège. All of Paris was sad, and death was in the air.

  When they arrived at Victor Emmanuel III, Littorin ran up the stairs and into the apartment. He opened the bedroom door and stood at the same spot where he had greeted Ivar a few hours earlier. As his eyes adjusted to the dark bedroom, he could just make out a silhouette on the left side of the double bed, a tall body covered by white sheets, lying still. A neat dispatch case was next to the baseboard, along with a cane. The apartment typically smelled of wild flowers or roses, but not now.

  Littorin used a low voice, in case the man was asleep. He whispered the name of his long-time friend and boss.

  “Ivar, Ivar.”

  The body did not move.

  It was after one o’clock, but the curtains were drawn and the bedroom was damp and dark, like a wine cellar. Even with the door ajar Littorin could hardly see.

  He glanced back at the two women waiting for him to enter. Jeannette Barrault, who had been at the vestibule when they arrived, now stood aside, indicating that he should go in alone. Karin Bökman waited for Littorin to make the first move, as she typically did. Littorin whispered, “He must be sleeping.” The women turned their heads away as he approached the body.

  The details and evidence of their next steps, and the hurried investigation that followed, would be scrutinized and debated for decades. In several crucial respects, testimonies about the events would be in conflict.9

  Littorin entered the bedroom and saw the man lying flat on his back, with his coat and waistcoat unbuttoned and pulled to the left. According to Littorin’s testimony, he immediately recognized the man as Ivar. Littorin said the man held a pistol, a Browning 9 mm, in his left hand in what he later called a “cramped grip.” There was blood on his left wrist. Littorin saw a red stain on the man’s shirt and what appeared to be a hole in his chest, directly in line with the heart. Littorin shouted, “Il ne dort pas, il est mort!” (“He’s not sleeping, he’s dead!”)

  At this point, the two women rushed into the room. Both later testified that they did not remember the placement of the gun clearly, but believed it was on the bed next to the man’s open left hand. They also said they recognized him as Ivar. All three of them insisted they did not touch the body.

  On the bedside table were three sealed personal notes, addressed in what Littorin said was Ivar’s handwriting.10 The notes lay next to a copy of the novel The Single Front, by the Russian Jewish writer Ilya Ehrenburg, about an industrialist named Olsson who eerily resembled Ivar. Like Ivar, Olsson owned match factories throughout the world, and was known as “The Match King.” At the end of the novel, Olsson died of a heart attack in a Paris apartment.

  Littorin grabbed the notes. One was addressed to Ivar’s sister Britta, who later insisted that its contents remain private. Another included instructions to Sune Schéle, the New York broker who had helped Ivar try to buy shares through Karl Lange, the Santa Claus lookalike. Ivar wrote that Schéle should close some accounts, and included 10,000 dollars of cash.

  The third note was the only one bearing that day’s date.11 It was addressed, in English, to Littorin, who opened it and read it aloud, in a shaking voice:12 March 1932

  Dear Krister,

  I have made such a mess of things that I believe this to be the most satisfactory solution for everybody concerned. Please take care of these two letters also see that two letters which were sent a couple of days ago by Jordahl to me at 5 Avenue Victor Emmanuel are returned to Jordahl. The letters were sent by Majestic. Goodbye now and thanks. I.K.

  Karin Bökman sobbed as Littorin dropped the note. He had worked with Ivar for thirty years, and now his friend was gone. Instead of ending with “Kreuger,” as Ivar typically signed his messages to Littorin, this note was signed “I.K.” - with two fat dots.

  Instead of calling the police right away, Littorin and Bökman rushed back to the Hotel du Rhin to tell the bankers their story: that Ivar Kreuger had committed suicide. Ivar’s death confirmed everyone’s worst fears about the man and his finances. The investment bankers from Lee Higginson, which had sponsored Ivar for a decade, were dismayed. Soon, Lee Higg, one of the most prestigious investment banks of the era, would file for bankruptcy and the partners would be ruined, all because they had bet the venerable firm on a self-made man. George Murnane, the senior partner, later told investigators what he thought when he heard the news: “I suddenly knew we had all been idiots.”12

  In New York, the markets were still open, so everyone promised to keep quiet until the close, to avoid another crash. They knew Ivar’s suicide would trigger a panic, and no one wanted to repeat the black days of October 1929.

  But Durant, and perhaps others, couldn’t resist. Right away, a cable arrived at Lee Higginson’s Wall Street office warning: “For partners only Oak died very suddenly today not public yet please say nothing until announced here.”13 Shortly thereafter, on the New York Stock Exchange, there was a surge of orders to sell securities of Ivar’s companies. Most of these orders were anonymous, but they originated in Paris. Someone was betting that Ivar’s shares soon would collapse.

  In recent sessions, Kreuger & Toll had been the most active security traded on the New York Stock Exchange. On Saturday, trading was even heavier; Kreuger & Toll accounted for 25 percent of the Exchange’s volume, and that was before word of Ivar’s death had leaked .14 Eager investors in the United States, ignorant of the news and still believing in the Match King, had gobbled up shares from the short sellers. By the close of trading that day, the price of Kreuger & Toll securities had actually risen, by 37 cents.

  After an hour, Karin Bökman finally went, alone, to the Faubourg St Honoré police station. Teary-eyed, she told her version of the day’s events, and concluded that Ivar had shot himself. An examiner rushed to the scene, found the body semi-warm, and hurriedly noted that “death appears to have occurred by suicide with a firearm.”15

  One of the officers was surprised by the precision of the single wound, in the exact center of the man’s heart, and estimated that a person attempting suicide would have had only a one in 10,000 chance of such a precise hit. Still, the investigation was brief: no one examined the gun for fingerprints or noticed whether the body had a stunted left index finger. The police never even asked which hand Ivar had favored. They placed Ivar’s note to Krister Littorin under seal, where it would remain for twenty-three years.16

  As the shocking news spread the next day, the world mourned Ivar Kreuger’s death. The London Daily Express reported that the sky seemed to darken and “the same thoughts came to men as when Caesar died.” Families gathered around their radios to hear John Maynard Keynes, the famous economist, eulogize Kreuger as “perhaps the greatest constructive business intelligence of his age.” The London Times wrote that Ivar “was the victim of a world-condition affecting and afflicting every industrialist and every financier in greater or less degree.” The New Statesman called him “a very Puritan of finance.”17

  When the New York Stock Exchange finally opened on Monday, shareholders panicked, just as Ivar’s colleagues had feared. Ivar had visited the gallery of the Exchange more than thirty years before, as an immigrant just off the boat with only a hundred dollars and no job. He had dreamed that one day his shares would be traded there. Now, the famed Exchange ticker could not keep pace with the number of trades in s
hares of Ivar’s companies, even on a delay. When the ticker finally caught up, it recorded the largest single trade in the history of the markets: a sale of 673,800 American Certificates of Kreuger & Toll. 18 By the end of the day, those securities - still among the most widely held in the world - were worth just pennies.

  13

  GREATNESS?

  During the next two weeks, public sentiment about Ivar flipped. Journalists drew hasty conclusions about him based on preliminary assessments of available evidence. The abruptly revised view, that the Match King had perpetrated the greatest financial fraud in history, quickly became cemented in the public mind. The world now saw an epic betrayal: a villain, not a hero; a schemer, not a planner; a destroyer, not a builder. Ivar became the Judas of the financial markets.

  Ivar’s sisters flew from Stockholm to bring the body home, where it was cremated after a brief public viewing of a casket with a glass cutout for the face.1 King Gustaf cut short a holiday on the French Riviera to be in Stockholm for the funeral. Gustav Vasa chapel was filled with lilies of the valley, one of Ivar’s favorite flowers.2 Authorities read Ivar’s final will and testament from 1930, which contained just one provision: a bequest of 1 million kronor to Ingeborg Eberth, his neighbor at Villagatan in Stockholm. Ivar also had given her 65,000 dollars of debentures before he died, but those were now worthless. 3 Eberth told reporters she “never had an inkling of what was coming” and insisted that Ivar’s “memory is sacred to me and I am not going to give it away.”4 Still, she added, she knew quite a lot about Ivar and was planning to write a book about him.5

  She wasn’t the only one.

  Ivar’s companies suffered a similar fate to the body, as panicked selling reduced them to dust. The remaining directors of International Match met hurriedly, and decided not to pay the dividend that was coming due.6 On March 25, less than two weeks after the public learned of Ivar’s death, investigators from Price Waterhouse declared that his companies were insolvent. The Swedish committee investigating Kreuger & Toll concluded that its 1930 balance sheet “grossly misrepresented the true financial position of the company.”7 When formal charges were read in the Second Chamber of the Riksdag, just before midnight on April 5, they seemed indisputable. Investigators estimated the loss at 2 billion kronor, more than Sweden’s national debt.8

  The accountants were comfortable reaching such sweeping preliminary conclusions because they found abundant evidence that Ivar had treated his companies and subsidiaries as personal assets. He had wired millions of dollars among secret subsidiaries and arranged for dubious intercompany transactions. The details were too complex to unravel, but that didn’t give the accountants pause. Although they hadn’t yet figured out where all of the money had gone, they nevertheless concluded that Ivar’s businesses were a massive fraud.

  But these early reports of financial manipulations were not the death knell of Ivar’s companies and reputation. Nor was it the reported suicide, although that certainly led many people to suspect the worst. Instead, the nails in Ivar’s coffin were the Italian treasury bills. Those forged bills crystallized the public’s view of Ivar in a way that explanations of intermingled accounts, offshore subsidiaries, and off balance sheet liabilities never would.

  At first, it was difficult for some people to accept Ivar as a fraud. He had helped central Europe avert financial crisis. He had restored the financial morale of France and Germany. He was a friend and advisor to government leaders, including President Hoover. Even Isaac Marcosson couldn’t accept the public’s about-face on Ivar - until he read about those Italian treasury bills.

  The forged Italian treasury bills galvanized opinion against Ivar. The media replayed the investigation over and over. The public accounts repeated the same facts. First, investigators found the bills soon after they impounded the Match Palace. Then, Sweden’s foreign minister, Johannes Hellner, flew to Rome to show the bills to Mussolini. Hellner asked Mussolini the question everyone had been asking since the news broke: “Did Ivar Kreuger lend your government money in exchange for a monopoly on the manufacture and sale of matches within Italy?”9

  Mussolini said he and Ivar had discussed a loan twice, in 1927 and again in 1930, but they could not agree on terms. He examined the Italian bills and said they were clearly forged. Mussolini ordered his assistants to bring out other state documents with the signatures of Mosconi and Boselli. The shapes and sizes of the letters didn’t match. Moreover, although Mosconi usually placed a comma after his name and didn’t sign with his first initial, the bills were signed “A. Mosconi” with no comma. Boselli’s name was misspelled on several bills. Mosconi, Boselli, and Mussolini all signed statements that the bills were forgeries. They said they had never seen them before.

  When Hellner reported these answers to the public, Ivar’s good name was destroyed. Copies of both the bills and the statements attesting they were forged appeared in every major newspaper and magazine. Reports also spread that Ivar had ordered 150 sacks of waste paper to be recycled before he shot himself. The police found nearly 2,000 of Ivar’s personal letters and cables inside those sacks.10 People could only imagine what secrets were buried there.

  Millions of investors saw for themselves that Ivar was a crook, just like Charles Ponzi. The only difference between the two men was scale: Ivar had raised fifty times more money and lasted ten times as long.

  The investigation of Ivar’s companies spread to the United States, where congressional hearings led many legislators to advocate federal requirements that companies obtain audits and disclose material facts.11 Ivar’s friend Herbert Hoover had been swept from office, and Franklin D. Roosevelt, the new president, favored dramatic legislative intervention. With a boost from Ivar, securities reform quickly became part of the agenda.

  Ivar and his companies became a centerpiece in the government’s inquiry. Members of Congress were especially skeptical of Ivar’s bankers, and demanded to know what they knew and when they knew it. The forged Italian treasury bills hung over the debates, and legislators cited Ivar’s collapse as a prime example of what must never happen again.

  The Senators were particularly tough on Donald Durant, and wanted to know why he had not done more as a director of Ivar’s companies. Investigators expressed dismay at Durant’s testimony that he had never attended a board meeting as a director of Kreuger & Toll.12 They also questioned why Durant had notified his firm so quickly about Ivar’s death, even while he insisted that others keep the news quiet until the trading session in New York had ended. Had Lee Higginson sold securities based on Durant’s advance word? This questioning became intense, and culminated in a “Who’s Who” colloquy of prominent American lawyers, with Judge Joseph M. Proskauer, Durant’s counsel, trying to amplify one of Durant’s responses to a question from Senator Thomas Gore, only to be rebuked by Senator Peter Norbeck that, “We are not going to let a visitor who has come into the room, and who has not been called upon, take part in the hearing.”13 Durant must have been grateful that Proskauer deflected some of the heat.

  A.D. Berning also testified, and once again people got his name wrong, as Ivar often had. (Even The New York Times called him “Birning.”14) Berning previously had worried that investors would point fingers at him, given his lack of attention to the details of Ivar’s companies. But Ivar was not there to contradict him, so Berning aggressively defended his role. He skillfully navigated the questions, and, this time, his role switched from lackey to champion. Berning could forgive the Times’s spelling when the newspaper labeled him the “Man Who Trapped Kreuger.”15 The investigators saw Berning as one of their kind, the cat in an international cat-and-mouse chase, the one man who finally uncovered Ivar’s massive fraud, an epic con that left Ivar with no escape.16 They didn’t hear anything about Ernst & Ernst’s consulting fees or the Bernings’ extravagant trips to Europe. They never questioned Mrs Berning.

  Members of Congress ignored the inconvenient facts about Berning’s conflicts of interest and duplicity. Instead, they
called Berning an exemplar. America needed to give men like Berning a more prominent role. Congress needed to require that every company have a proper audit from an American audit firm. Berning blamed his failure to catch Ivar earlier on the auditors in Sweden, and everyone saw the wisdom in pointing fingers abroad.

  With the public clamoring for Congress to act, legislators first took aim at the New York Stock Exchange, particularly its willingness to list unaudited companies. Representative La Guardia of New York claimed that American investors “could not have been swindled out of their money had it not been either for the carelessness, indifference or connivance of the New York Stock Exchange.”17 The Exchange tried to fend off legislation by voluntarily requiring newly listed companies to agree to future audits; when that wasn’t enough, it agreed to require audits before granting listings.18 But neither move satisfied the public, or Congress. The era of laissez-faire self-regulation was over.

  Both President Roosevelt and Felix Frankfurter, the House of Representatives legal counsel (and later a Supreme Court justice), cited Ivar and Samuel Insull in pressing for new laws. Although legislators referred to Insull’s companies, his schemes were smaller and generated less publicity than Ivar’s; they were geographically limited to the Midwest, and involved neither Wall Street nor New York bankers. Moreover, Insull ultimately was acquitted of alleged financial crimes whereas Ivar would never be acquitted of anything. Insull was an important part of the debate, but Ivar was the man members of Congress had in mind as they thought about who the new securities laws must stop.