Hudson made quite a splash as Lord Mayor and the local Tories wanted him to continue. This was against the rules because his term as an alderman had run out and only aldermen were eligible to be considered for the role of Lord Mayor. They bent the rules by appointing him as an alderman again, whereupon he was quickly re-elected as Lord Mayor. This caused a furore among his opponents and an enquiry declared that this action was illegal. However, the enquiry was so long-winded that Hudson decided to brazen it out and had actually finished his second term as Lord Mayor before it was published. By that time he could not have cared less anyway. This somewhat shady episode tells us something about the man and his essential pragmatism.
The York & North Midland Railway proved to be a great success but it is interesting to note that at the company’s annual shareholders’ meeting in 1840 some of those present raised concerns about the company’s bookkeeping methods. They were in a minority because most shareholders were highly gratified by the large dividend which Hudson had announced, but they did suggest that professional auditors should be appointed to scrutinise the accounts. Hudson contemptuously swept this proposal aside by telling them that the directors of the company on their behalf had access whenever required to the company’s books and they were perfectly satisfied with the way things were being done. Although the matter was dropped, could it be that a few shareholders knew or at least suspected that Hudson may have been cooking the books?
Hudson’s career as a railway entrepreneur was striding forward as he gained important roles in many new companies that were being set-up. For example, the North Midland Railway Company was having financial problems and Hudson offered to bale it out. The price of this was a place for Hudson on the board of directors with complete autonomy on management and financial matters. He had the Midas touch; no sooner was he at the helm of the North Midland than the shares of the company began to rise impressively. The man had vision, no one can argue with that.
Probably his most inspirational move ever was to mastermind the merger of four companies into the Midland Railway with himself as its chairman. This occurred in 1844 and was the first of many such amalgamations and consolidations over the next decades, although these were carried out by other ‘railway barons’. Historians generally consider these mergers to have had a beneficial economic effect and that they were necessary. Hudson should be given the credit for having the foresight to recognise that big was beautiful in railway terms at the time, although it is unlikely that his primary motivation was the long-term welfare of Britain’s developing railway system.
The creation of the Midland Railway meant that Hudson now had under his control a network based on Derby with lines that stretched as far away as Rugby, Birmingham, Bristol and York. He had considerable influence in many other companies. There were lots of people now who treated him with awe and respect but his visible success only confirmed other people’s undying enmity towards him. One of his biographers terms him ‘The Railway King’ and likened him to Cardinal Wolsey who was similarly of relatively humble origins as well as blustering, bullying, exceptionally able, ambitious, unscrupulous and egotistical. Like Wolsey, Hudson was eventually to fly too near the sun.
Hudson was not a railwayman, an engineer nor an economist – he was first and foremost a businessman, a financial wheeler-dealer with very considerable talent in the role he played. It was his good fortune and ultimately his fate to be around when the railway system was booming and rich pickings were available for such a bold and ruthless entrepreneur. Had some other type of business enterprise come on the scene offering better prospects than the railways, we can be pretty sure that he would have thrown himself into it without turning a hair. Until the ‘Credit Crunch’ of 2008-9 he would probably have been a property developer or hedge fund manager. During the two world wars he would have been a profiteer in munitions or essential commodities in short supply and would have made a mint for himself.
In 1845 Hudson contested a by-election and won the Sunderland seat for the Conservatives. This was not just a personal triumph for Hudson but, pragmatically, he knew that being an MP would make it easier for him to fight those who were advocating closer regulation of the railways in the public interest.
In the mid-1840s the so-called ‘Railway Mania’ was in full swing and Parliament was being presented with a flood of railway schemes all seeking legislative approval. In 1846 Parliament passed no fewer than 219 Acts authorising the building of 4,500 miles of new railways with a capital of over £132 million. Such had been the success of some railways in consistently returning high dividends to shareholders that it was not difficult to raise capital – from businessmen who believed that the proposed line might benefit their enterprises, from professional speculators out to make a quick killing and from genuine small investors looking for a nest egg.
In some cases, however, crooks simply produced a company prospectus and with honeyed words about the golden prospects that could be had invited people to buy shares in lines for which they had no intention of seeking parliamentary approval let alone of actually building. When they had obtained what they considered to be sufficient sums of money by such fraudulent practices, the slippery promoters would simply cut and run only to pop up somewhere else a year or two later doing the same thing.
It was in 1846 to 1847 that Hudson’s prestige and power were probably at their apogee. His town house was a sumptuous mansion in Regent’s Park and there he hobnobbed with the so-called greatest in the land – the leading politicians, scientists and thinkers and influential landowners up to and including the aged and irascible Duke of Wellington. Many of these people privately sneered at Hudson for his lack of breeding, but it had become prudent to keep such feelings private. It was by no means uncommon for the highest born to fawn around him and ask his advice or practical assistance with their business affairs, especially if they concerned railways. This must have gratified his ego enormously, but for the Hudsons of this world a pratfall is never far away.
Late in 1847 he found himself in hot water when the Leeds & Bradford Railway Company was taken over by the Midland. This takeover was the handiwork of Hudson who stood to gain because he was chairman of the two companies and had a substantial holding of shares in both. His enemies, and he had them even among the shareholders of the Midland, joyfully rounded on what they saw as a prime example of sharp practice and the issue was raised at the shareholders’ meeting. This meeting was extremely stormy and Hudson was unusually flustered. He lost his temper and told the dissidents – in language that would have done credit to a drunken bargee – that as long as his efforts brought them rich dividends they had no right to complain about the methods he employed in order to obtain those dividends. He had a point but so, of course, did they.
It began to go downhill for Hudson from then on. Almost imperceptibly at first but developing a momentum of their own were signs that the previous seemingly impregnable bastions of Hudson Castle were developing hairline fractures. Progressively these began expanding into cracks and fissures. Hudson had been asked to bail out the absolutely hopeless Eastern Counties Railway, an opportunity which he seized eagerly. This would have been a challenge for anyone, but when as chairman he received an avalanche of complaints about the habitual lateness of the trains being run by this company his response was that since many of the trains ran early then their timings effectively cancelled out those that ran late!
This was extremely feeble stuff from someone whose previous responses to criticism had been supremely bullish and confident, and it was taken by his enemies as evidence that he was beginning to lose his grip. For many years Hudson had been assiduously attacked by hostile satirical cartoonists as a Tory with unacceptably right-wing views or as little more than a loud-mouthed and hectoring bully, albeit a man with very considerable power. Now he was being portrayed as something of a buffoon out of control, careering along being propelled by his own trains!
For the first time, shareholders were no longer necessarily hanging on h
is every word nor supporting his suggestions without question. His persuasiveness was starting to run out of steam. It is significant that in 1848 Hudson made the last two additions to the bulging portfolio of the railway companies he controlled or in which he had a major say.
In 1849 his old friend George Stephenson died. They had worked closely for many years but Stephenson had of late distanced himself somewhat from Hudson over concerns about some of his business methods. About this time Hudson fell ill for almost the first time in his life. His excessive work output was probably a major factor but he ate and drank to excess as well. It became increasingly evident that some of his speeches in the House of Commons were made under the influence of drink. This probably helps to explain why on occasions they were either belligerent, bafflingly incoherent, or both!
In 1849 the hitherto unknown Arthur Smith produced a pamphlet with the less than riveting and seemingly innocuous title The Bubble of the Age or the Fallacies of Railway Investment, Railway Accounts and Railway Dividends. It proved to be a best-seller. In it Smith called into question the accountancy methods and dividend and interest practices of Britain’s railway companies in general. However, he pointed to the York & North Midland and Eastern Counties Railway companies in particular. In making the specific allegation that they paid dividends out of capital rather than revenue, Smith was clearly implying that the chairman of these companies was guilty of improper business practices. Hudson was not amused. Smith’s pamphlet was the harbinger of further horrors to come.
The financial downturn in the late 1840s brought with it a sharp decline in railway profits and dividends, from which Hudson’s companies were not immune. Previously many of those who had investments in his companies had sat back expecting continuing rich returns courtesy of Hudson’s entrepreneurial skills. Truly he had been the goose that laid the golden eggs. Now that the eggs were no longer golden but merely lion-stamped, many of these people rounded on him and joined the chorus that claimed that he was personally to blame for the downward trend in their investments.
It was but a short step from criticising his managerial abilities to questioning the integrity of his business methods as well. For his part Hudson pointed to the general financial downturn and also to his record of success on their behalf in an attempt to assure restive shareholders that the good times would return if they stuck with him.
At the 1849 annual shareholders meeting of the York, Newcastle & Berwick Railway Company, another in Hudson’s portfolio, up jumped a shareholder by the name of Robert Prance. He happened to be a member of the London Stock Exchange and was known to be well versed in matters of high finance. The question he put, which he assured fellow shareholders was based on painstaking research, turned out to be an accusation that Hudson was guilty of what would now be termed ‘insider dealing’ and that he had made substantial profits in the shares of another of his railway companies by drawing on the funds of the York, Newcastle & Berwick Railway, doing so at the expense of the company’s shareholders.
Up to this time, the meeting had been nothing other than routine but Prance’s intervention absolutely galvanised those present. Everyone, Hudson’s friends and foes alike, were on tenterhooks waiting to see how Hudson handled his response. When he got up to speak all his customary bombast had evaporated. He looked crestfallen and sounded confused and unconvincing. He told the meeting that without the books in front of him he could not tell who was responsible, if indeed there had been any wrongdoing, but he would instigate an immediate investigation and if a case was proven, he would not only discipline those involved but personally recompense any shareholders who had suffered losses.
This stunned his audience as being such a contrast to his customary ebulliently confident manner. Worse was to follow. Hudson then stood speechless and motionless for probably no more than a few seconds but in a time-lapse which must have seemed like an eternity to his audience and, most of all, to him. He then falteringly blurted out that he had indeed exploited his position to buy shares cheaply and sell them on very profitably. He apologised and stated that he was prepared to take the shares back and make a full refund to anyone in the meeting. After this the meeting was in uproar and Prance’s motion that a committee should investigate the issue gained the backing of the meeting.
A few days later Hudson was due to preside at the annual shareholders’ meeting of the Eastern Counties Railway, but foreseeing a rough ride he gave his apologies. This was seen by those at the meeting as tantamount to an admission of fraudulent practice and the meeting decided that a committee should be established to look into the growing concerns about Hudson’s financial probity. Even in the apparently solid redoubt of Hudson’s financial and managerial activities – the Midland Railway – questions began to be asked, and when a majority of shareholders requested a meeting with him, if only to assure them that there were no unanswered questions, Hudson resigned his chairmanship.
It was now coming thick and fast. The commission that resulted from Prance’s efforts had published its report and confirmed that Hudson had been involved in share dealing contrary to company law. He had fixed the price of shares in the Great North of England Railway which he then sold to the York, Newcastle & Berwick. He had also breached company law by having financial involvement with two companies which had been engaged in business negotiations with each other. Now many who had previously clung to Hudson’s coat-tails hastily abandoned him while simultaneously trying to drop him in it. When one such turncoat revealed that Hudson had told him to alter some accounts to make them more acceptable to the shareholders of one of his companies, the ‘Railway King’ was sunk.
When the shareholders of the Eastern Counties Railway issued their report, Hudson had little option but to appear before them. By now he was a broken man, humbly, even cringingly explaining that he had indeed paid dividends out of capital in an attempt to attract further investment and by way of excuse saying that the amounts concerned were not great, although he would not or could not specify exactly how much was involved. He asked for various other financial irregularities to be taken into account.
George Hudson in his prime.
In May 1849 Hudson was heartbroken when the body of his beloved brother-in-law was hauled out of the river Ouse at York. He had committed suicide as the result of the investigations into Hudson’s financial dealings which in turn had implicated him. Soon afterwards Hudson appeared in the House of Commons to answer a number of questions about his financial affairs. Gone was all his previous self-confidence, and the physically and mentally shrunken man’s statement was received with a stony silence.
A few days later the shareholders’ meeting of the York & North Midland Railway learned how the company funds had been tapped for electoral expenses and also how Hudson had used company funds to build a private station close to his country home at Londesborough Park. He resigned with immediate effect as a flood of other damaging accusations and allegations came at him from every angle.
Either voluntarily or under duress he had to make a series of payments to various companies and individuals. It was only the fact that he was an MP that meant that he was not arrested for debt. Wisely he spent much of his later years living abroad, but by then he was in greatly straitened circumstances. He was in London on 11 December 1870 when he had a heart attack and he died shortly afterwards. When his will was read he had assets of just £200 – not much for the ‘Railway King’.
George Hudson depicted coming off the rails. Caricaturists often showed him as a symbolic locomotive with a crown for a chimney.
Hudson broke the law and he breached business ethics, but there were many people who had been aware of this and had heard or seen no evil as long as the dividends kept rolling in. They then hypocritically and sanctimoniously rounded on the man when he was no longer coming up with the goods. A scapegoat was needed and Hudson fitted the bill. He was by no means unique in the history of capitalism as a businessman who accumulated and wielded wealth and power while not being too fussy
about the methods he employed to do so. Those who benefited were not too fussy either.
The ‘Railway Mania’ period was a financial bubble, and like other bubbles it was rooted in the ‘get-rich-quick’ ethos. Hudson did get rich quickly, but in doing so he enriched many others along the way. The bubble, however, was bound to burst and inevitably Hudson was undone when that happened.
The earlier railway companies with which Hudson was associated were nearly all set-up as the result of their own specific private Acts of Parliament, which laid out in considerable detail the powers and responsibilities of their directors and of the chairman. In 1845 the alliterative Companies Clauses Consolidation Act codified practice on such matters as the role of directors and the act was applied to all new statutory companies. Hudson could therefore never have said that he was unaware of his legal obligations and responsibilities.
Research has identified five definite cases where Hudson embezzled money from one or other of the railway companies of which he was the chairman, and has highlighted up to eight occasions when Hudson most certainly acted in breach of his responsibilities as a director. He was involved in the falsification of the accounts of several of his companies, in particular the Eastern Counties. Although one of his biographers says that Hudson ‘raised creative accounting to an art form’1 he always argued that everything he did was intended to benefit the railway companies which he controlled. His ego and his compulsive desire for wealth and power meant that, like many other entrepreneurs, he found it hard to differentiate between what was simply in his own interests and that which might have – or actually did – benefit other people. Significantly Hudson was never prosecuted in a criminal court.
Blood on the Tracks: A History of Railway Crime in Britain Page 10