Fraudsters and Charlatans

by Linda Stratmann

  Soon after moving in to Papworth he met the under-sheriff of Cambridgeshire and Huntingdonshire, which gave him the idea of becoming sheriff himself. Enquiries were made, strings were pulled, and no doubt money changed hands. Within three months of his arrival Hooley was high sheriff and deputy lieutenant of the two counties, and a magistrate. He was also able to acquire the position of lieutenant of the City of London, a nominal post that required him on public occasions to wear a uniform consisting of a scarlet tunic, blue trousers, a tricorn hat with a white plume and a sword. Some of his titled acquaintances thought he should have a London residence, so he rented 33 Hill Street, Mayfair, for £2,000 per annum, where he entertained all-comers. ‘I made millions and I spent them as though my wealth was inexhaustible,’ he said later.32

  This reckless extravagance also informed his business life. He often entered into contracts only to back out of them, and was therefore obliged to pay compensation. He was not the only man to pay newspapers to ‘puff’ his promotions, but the sums he offered were foolishly large. Later he claimed that he had been blackmailed. Other people preferred to see it as bribery.

  Whether or not a financial genius, Hooley was now well enough known to feature as such in music hall and pantomime songs:

  He walks into the Stock Exchange, and everybody there

  Cries ‘Look out! Here comes Hooley, the famous millionaire!’

  He can buy a share for twopence, and sell it for a pound,

  When he’s bought St Paul’s Cathedral, he’ll buy the Underground.

  It’s Hooley this, and Hooley that, and Hooley everywhere,

  And it’s ‘here comes Mr Hooley, the famous millionaire!’33

  His reputation for being able to conjure up money had spread abroad. Early in 1897 he was approached by an American visitor representing a syndicate who wanted to raise a loan to purchase Cuba, the amount being between $150,000,000 and $200,000,000 (about £30 to £40 million today): ‘the Americans had read so much about [Hooley] in the papers they must have thought him capable of anything’.34 Even Hooley knew that the Cuba loan was too big for him, but in August 1897 he was tempted by an approach from the Chinese government asking if he could provide a loan of £16,000,000. A possible £1 million was payable in commission. Excited by the vista that opened before him, Hooley sent agents to China to open negotiations. For two months it looked as though the deal was as good as settled, when quite suddenly it fell through: the arch-bluffer had been bluffed. The Chinese had probably always intended to borrow from the Hong Kong and Shanghai Bank and had sought an advantage by playing off one negotiator against another.

  Hooley’s ultimate ambition was to enter parliament and become Minister of Agriculture. In March 1897 he was adopted as Conservative candidate for Ilkeston, and a handsome donation to party funds ensured his admission to the Carlton Club. He was also hoping for a baronetcy in the Queen’s Diamond Jubilee honours list. Since he did not think it would come to him for nothing, he decided to purchase it with good works. He made a donation of a solid gold communion set, profusely decorated with cherubs, to St Paul’s Cathedral (later restoration considerably simplified the design, which had made it impossible to clean) and made a great splash with newspaper interviews about setting up a Jubilee charity fund. He claimed to have set aside £400,000, the annual income of which, amounting to £15,000, would be devoted to the relief of the poor in his district. In fact he did not set aside the money, since ‘fortunately for me nobody felt inclined to come forward and demand the payment of the full amount forthwith’, he admitted. ‘Everybody believed me in those days, which was just as well.’35

  Shortly before the Jubilee he promised to give £10,000 to the Nottingham General Hospital Victoria Fund provided that a corresponding sum was subscribed in Nottingham. Hooley had provided £2,000, and, as the collection approached its target, the committee asked for the remainder. The Jubilee over, and no baronetcy in sight, Hooley did not see why he should part with any more money and tried to claim that he had only promised to match funds subscribed by working men. After prolonged and acrimonious negotiations, in December 1897 Hooley was eventually obliged to provide a further £5,220. It must have been a wrench, for by then his account with Lloyds Bank was overdrawn. Careless extravagance in both his personal and business life had finally taken its toll.

  Hooley’s reputation was safe as long as the businesses he promoted did well and people were willing to pay inflated prices, but by May 1897 the cycle boom was ending. Foreign imports and overproduction meant that supply began to exceed demand. Even if Hooley took no interest in a company after he had floated it, city analysts were beginning to take a critical look at his record. In July The Economist was reporting that the market in cycle shares had been at a low ebb for some time and many of the companies that had been floated at the height of the boom were unsaleable. Not only had Dunlop shares declined in value, but other industries had suffered – the £1 Bovril shares stood at 17s and Schweppes also saw its premiums shrinking. ‘In the past, no doubt, the mere fact that Mr Hooley was known to be interesting himself in any joint-stock undertaking acted as a powerful lever in the movements of prices… . But this personal influence is distinctly on the wane.’36 The Economist was less surprised at the shrinkages as ‘that there should ever have been any premiums upon capital which were obviously greatly inflated at the outset’.37 By August it was reporting that ‘people here have learned to look askance upon Mr Hooley’s peculiar method of regenerating home industrial undertakings by loading them with heavy additions to their capital accounts that represent nothing but the intermediary profits of himself and his financial associates’.38

  The Beeston Tyre Company did not survive the downturn and went into liquidation in the following year. Grappler survived a little longer and was eventually reconstructed as New Grappler, with Mr Tumulty still in the chair.

  As 1898 opened, Hooley was still riding high in public opinion. A supplement called ‘Men of Millions’ published by the Financial Times in February described him as ‘a young man who has come upon the City during the last two or three years like a whirlwind, and literally carried all before him’.39 His close associates had by now realised that his day was almost done, and the early months of 1898 were unhappy ones in which he did very little business and saw court cases erode his reputation. Many of the visitors to the Midland Grand were creditors, and so Hooley stayed away, preferring to hold business meetings at the Hotel Victoria.

  On 12 February, despite knowing that he was on the brink of bankruptcy, Hooley was at Wolferton stud farm near Sandringham with the Prince and Princess of Wales, the Duke of York and an array of earls, lords and ladies, where he bought a brood mare for 360 guineas and was narrowly outbid on his offer of 1,100 guineas for the popular filly Sea Breeze. His outward good humour was a mask for anxiety about a pressing load of litigation, but for a time his reputation was enough to ensure that, when charged with fraud, he would be given the benefit of any reasonable doubt.

  On 27 March Thomas Bayley MP brought an action against Hooley for false representation. He had bought some shares in a Hooley promotion, Fairbanks Wood Rim, on the strength of a draft prospectus which had portrayed a substantial factory premises. The final prospectus as issued to the public showed that the company occupied only a small part of that impressive building. The shares had been purchased from a Mr Thomas Lambert, who denied that he was acting as an agent for Hooley, and as a result the case was dismissed.

  In Dublin on 8 May a Mr J.H. Naylor, licensed vintner, brought an action for conspiracy to defraud against a group of alleged co-conspirators – Hooley, Harvey du Cros, the managing director of Dunlop, Hooley’s stockbroker, Bulger, and Frederick McCabe of the Field. The action was to recover damages for fraudulent misrepresentation on the formation and floating of the Component Tube Company. This was a small concern that Hooley had bought and then dismissed from his memory; subsequently, in November 1896, Bulger and McCabe had taken over the promotion from Hooley. It wa
s alleged that three of the contracts mentioned in the prospectus were fictitious, and the claim that the company was prosperous was false. Hooley, although served with a subpoena, failed to attend court and later protested that he had nothing to do with the wording of the prospectus. The court found for the defendants.

  Adolph Drucker MP, whose lack of business acumen and fondness for alcohol had led Hooley to regard him as a fool who could be milked of his money, finally saw the light and on 10 May sued Hooley for fraudulent misrepresentation. Hooley had offered to relieve Drucker of some ‘practically worthless’40 shares in return for others he claimed were worth £8,000. Drucker later found that Hooley had been selling the supposedly worthless shares at a profit, while those he had received in exchange were unsaleable. Drucker had gone to see Hooley to demand his shares back. Hooley refused, but suggested that if Drucker would call upon him the next day he would ‘fix things up’.41 Drucker later received a telegram from Hooley saying that he could do nothing for him. The court took the view that, while Drucker had made a bad business deal, there was no evidence of fraud.

  If Hooley had forgotten all about the unfortunate shareholders in Grappler, they had certainly not forgotten about him. On 17 May Mr Robert C. Reid, a Belfast merchant, brought an action again Hooley and Rucker, claiming damages for ‘fraudulent conspiracy’ and ‘fraudulent misrepresentations’ aimed at inducing him to buy shares in Grappler.42 In 1896 Reid had read in the newspapers about Hooley’s offer for Grappler and had bought 100 shares at prices ranging between 37 and 50s. In May 1898 Grappler shares were being quoted at 6s.

  Counsel for the plaintiff was Sir Edward Clarke QC. When he revealed Hooley’s and Rucker’s offer to buy Grappler shares at £4, a burst of laughter was heard in court. There could be only two explanations, said Clarke. ‘Either they wanted, having got hold of a lot of shares, to create a market, so that they could get rid of them at a profit, or secondly, that they had got hold of some secret information regarding the prospects of the company and were anxious to secure a good thing.’ Sir Edward suggested that the former was the true explanation.43

  Crucial to the defence was whether Tumulty had misled Hooley and Rucker into believing that Grappler’s licence was transferable had Hooley bought the company. Cross-examined by Hooley’s counsel, Mr Stanger, Tumulty admitted that at the time of the meeting in early May 1896 he had known about Hooley’s Dunlop venture and was well aware of the importance of establishing a monopoly over licences to produce Dunlop tyres. Asked if he had told Hooley and Rucker that the Grappler licence was unconditional, he replied evasively: ‘I cannot say that I put it that way.’44

  Clarke was also careful to question Hooley about the Beeston Tyre offer. Either of the cases examined in isolation might have been looked at leniently, but together there was evidence of a systematic campaign to rig the market, and the court cannot have been unaware of the other cases against Hooley, both those in which he had been given the benefit of the doubt and those still pending.

  In his summing-up the Lord Chief Justice made the point that the case was of far greater importance to the defendants than to the plaintiff, in that, if the verdict went against Hooley and Rucker, ‘they would not be entitled hereafter to the reputation and character of honourable men’.45 The most important question the jury had to consider was whether the agreement to purchase was bona fide. The one thing that ‘passed his comprehension’ was how the agreement ‘could have been come to with the assent of any legal mind… . there had, in fact been no real investigation as to whether there was a licence at all or not.’46

  On the third day of the trial, the jury, who must have felt their responsibilities weighing upon them heavily, retired shortly before 5 p.m. At 5.10 p.m. they sent out a note: they were unable to agree. The Lord Chief Justice asked if counsel would take a majority verdict, but Stanger said he did not think so and the foreman thought there was no possibility of an agreement after further discussion. The jury was discharged. It was a victory for Hooley, but a brief and bitter one. More than any other case, the Grappler dispute, which was reported in detail, exposed the unpalatable foundations of his dealings: ‘the case has thrown such a strong light upon the financial methods of Mr Hooley and his associates that it has naturally attracted a large amount of public attention,’ commented The Economist.47

  Although Hooley was victorious over Naylor, the Component Tubes case gathered momentum as increasing numbers of shareholders sought compensation. In mid-May it was reported that nine new actions had commenced and another seventy were pending. By 2 June there were 150, and the numbers were still growing.

  On 27 May the Pall Mall Gazette published a devastating analysis of the performance of Hooley promotions. ‘Do the public realise what they have lost by reposing confidence in Mr Hooley?’ it asked,48 providing a tabulated list of seventeen companies floated by Hooley that showed a loss in value of £4,300,000 on a total capital of £8,500,000, while shares in other Hooley-promoted companies were unsaleable. The fault was not entirely a result of the downturn in the cycle trade. ‘Over-capitalisation has been the bane of nearly every concern touched by this particular promoter.’49 The public had already come to the same conclusion. None of Hooley’s 1898 promotions was successful. In two cases, the take-up of shares was so poor that the subscriptions had to be repaid.

  By the end of May Hooley had been warned not to draw from his account at Lloyds Bank, but he took no notice and a number of small cheques were returned. He was asked for an immediate settlement of £3,000 for work done to one of his estates. The man who had once dealt in millions was unable to pay. The Component Tubes writs were piling up – there were eventually to be over 300 – and there was only one way to cock a snook at his creditors: on 8 June Ernest Terah Hooley filed for bankruptcy. To those in the know, the only surprise was that it had happened earlier than expected.

  The Economist commented:

  Mr Hooley, on his own showing, was very far from being a financial genius. He had a certain boldness of conception, but he was entirely lacking in organising and directing power, and although he obtained millions of profits out of his flotations, at the expense of the public, he became a mere channel through which those profits found their way into the pockets of much cleverer people than himself. Whatever the investigation does, it has undoubtedly shattered the idea that Mr Hooley was a serious financier.50

  There was initially some public sympathy for Hooley. At the Palace Theatre Miss Julie Macey sang:

  Terah–rah Hool–ey–ay!

  Terah–rah Hool–ey–ay!

  Tear not your wool–I–ay!

  Don’t fret and mope–I–ay!

  But live and hope–I–ay!

  You may yet rule–I–ay!

  Terah–rah Hool–ey–ay! 51

  There were suggestions that the St Paul’s communion set should be handed back to help pay off Hooley’s creditors, but Canon Scott-Holland wrote:

  Hooley represented a more genial and rowdy type of daylight gambling; popular, loud, open-handed, showing his hand, sharing his spoils, working hard for his money, with a strange perverted British–Philistine belief in the rightness of his cause. There is nothing sinister or crafty about the man… . He simply uses, with blunt force, all the advantages which a loose money-market allows him … 52

  Hooley’s explanation for his plight was that he had been too generous to others, had paid away huge sums in blackmail, and had been ‘surrounded by incompetent men’.53 He remained confident that he would win over the public again, although when a Telegraph reporter asked about the man who bought shares on the strength of his name, ‘Well, he was a fool,’ said Mr Hooley, curtly. ‘That’s the truth.’54 Unsurprisingly, his legal representatives warned him to give no more interviews.

  Mr Brougham, the Official Receiver, soon found he had some difficulties. Hooley’s books of account were ‘imperfect and incomplete’.55 There was no proper cash book, no ledger showing the dealings with his creditors, no account of his personal expens
es and drawings, neither had he ‘prepared a profit and loss account or balance sheet at any time’.56 ‘I suppose I might as well admit’, Hooley confessed in his 1924 memoirs, ‘that I never made the slightest attempt to keep any proper books.’57 The claims against him, most of which he repudiated, exceeded the value of his estate by about £1 million.

  When Hooley appeared at his public examination before Mr Registrar Hood, it was with a cheerful determination that, if he had been ruined, then he was going to take everyone else with him. Declaring that the chief cause of his failure was the withdrawal of capital by Rucker, he claimed to have paid substantial amounts to his associates in inducements, inflated commissions and bribes, and he was happy to stand in court and name names. On the Dunlop promotion alone, he said he had paid away £50,000 to Earl de la Warr, of which half was for distribution to other directors. His solicitors had received £20,000 each, and he had spent £63,000 on supplying newspaper representatives with options to buy shares at par. Some of these claims were probably true – the counterfoil of a cheque for £1,250 bore the legend ‘quieting papers generally on the pneumatic’.58 He also claimed to have paid the Financial Post £1,000 for the privilege of writing his own article, which the editor immediately denied, and indeed the correspondence pages of The Times were, for a period, filled with letters from solicitors, nobility, the press and many others who had had dealings or acquaintance with Hooley, angrily denying either that they had been paid anything at all, or stating that money received had been for demonstrable bona fide business purposes. J. Lawson Johnson announced that, so far from receiving money from Hooley as alleged, he and his co-director had advanced Hooley funds of £130,000. Earl de la Warr was especially aggrieved. He had taken his duties as a director seriously and had had to chair meetings of angry shareholders in cycle companies Hooley had promoted. He said that he had not received anything like the sums Hooley said he had paid, and those he had received he considered he had earned.