Playing with Fire: Ivar Kreuger - Business Genius or Master Fraudster?

Welcome to Great Business Stories, and today's episode is called Playing With Fire, Ivar Kreuger, Business Genius or Master Fraudster.

It's a fascinating story for a guy called Ivar Kreuger, the most famous Swedish person and probably the most successful business person you've never heard of.

In his prime during the growing 20s, Ivar built up a fortune worth $100 billion in today's money.

He invented many of the financial instruments that are still being used to this day, the stocks and bonds of his companies were the most widely held securities in the world.

He lended billions to cash-strapped governments and became a personal advisor to the US president.

And yet, if you Google him now, he's mentioned in the same breath as Charles Ponzi and Bernie Madoff.

Was Ivar a scam artist or one of the most brilliant business minds of the 20th century, or was he both?

I hope you enjoyed this one and remember, a new episode is released on the 1st of every month.

Hey, morning, Keith, how are you?

Morning, Caemin, how are you?

Not too bad, not too bad.

Today, we're gonna be talking about Ivar Kreuger and The Financial Scandal of the Century is the book that both of us wrote.

Yeah, it's a book Frank Hartnoy, that's the one I read, The Match King.

And I'd never heard of the guy, so obviously I'm really interested in talking about him without trying to sound like I'm in awe of the guy and his achievements and walk that fine line between being amazed by the guy and then obviously, spoiler alert, maybe things didn't end as well as they could have done, but I guess it was your choice, your story.

How did we come to be talking about Ivar?

By chance really, I was looking for a book to read and I came across a Financial Times, they have a list of top 20 business books every year and I think this was for 2010, it was one of the choices.

And I thought, I'll give that a go because the title itself was Ivar Kreuger, The Financial Scandal of the Century, where they're talking about, it was in the 1920s when this happened and I was going, I've never heard of this guy.

I don't know.

I don't even know what financial scandal they're talking about.

So then I read a little bit of the back of the book and it was all this detail about this amazing guy from Sweden who went over to America and raised all these millions and was more than just a mere businessman.

He straddled the world stage financially, lending money to government.

I was gone.

Never heard of this guy.

So obviously it was intriguing.

And because I'd read the book prior to this episode, I read it a good few months ago, I had a bit more time on my hands as well.

So I also did a bit of research.

There was a good YouTube video by Professor David Goldsmith on Ivar and Harvard Business School did a case study on him as well.

And it is just a fascinating story because you read so much about him.

We're not giving much away in terms of spoilers because the clue is in the title, The Financial Scandal of the Century.

You read so much about this guy and how much he achieved.

And then if you Google him and if anybody was to Google him, you'd see him compared to Bernie Madoff or Charles Ponzi.

And yet when you dig into the story, you realize he wasn't a Bernie Madoff.

He wasn't a Charles Ponzi.

There was far much more to him.

He was a man of amazing substance.

But at the same time, his reputation tatters because of what happens during his career.

So just to give our listeners a very quick overview of who this guy was.

His name was Ivar Kreuger.

And he was born in a place called Kalmar in Sweden in 1880.

His grandfather had built this huge businesses in weaving paper and matches.

And his father took over the match business.

And matches were a huge business in those times because everybody needed matches.

And the Swedes were the biggest producers of what was called the safety match.

They invented the safety match whereby there's a particular type of wood as well, I believe, which was indigenous to the area, which was a popular or it was a particular type of wood.

Yes.

Yeah, yeah, yeah.

You're right on that.

And it was a particular type of phosphorus before that, apparently matches.

They were made with yellow phosphorus and they can actually light off anything and they could light off themselves.

They wanted to be safe.

So, yeah, the Swedes came up with this method and when they became the the biggest producers of these safety matches and Ivar was, by all accounts, and do jump in, but from the book that I read and other research was very precocious, but very smart, but also always lived on the edge, even as a boy, always kind of pushed the envelope a little bit.

That's right.

Yeah.

It was a little bit of a bold kid as well, I suppose, as how he was misbehaved and got into quite a bit of trouble.

Yeah.

Similar to a lot of very, very successful entrepreneurs.

Yeah.

And then so he got a combined Master's degree in Mechanical and Civil Engineering by the time he was 20 and he went over to America, which, while it wasn't unusual for a lot of people in Europe to go over to America, most people were going over to seek a better life, whereas Ivar had a better life in Sweden.

You know, he could have taken over the match companies and had a very nice life.

They were very wealthy, but it kind of speaks to, I suppose, his ambition and his independence that he wanted to carve his own path.

And he was very ambitious and very adventurous.

And he spent a year in America, came back with his heel between his legs, apparently, but then went off traveling around the world to Paris, Egypt, South Africa.

He apparently opened up a restaurant in South Africa.

He didn't go well.

Yeah, I didn't I didn't hear that.

But I didn't notice that part.

He did.

He was involved in construction projects as well, maybe even as a laborer or engineer or I think he stumbled into being an architect by accident, I think, in one particular case.

But he would have been involved in the building and construction of the Carlton building in downtown Johannesburg, which is one of the tallest buildings in the world at the time.

And I can say that I've been in it.

Yeah.

And it's a bit like a bunker.

So it's still pretty much the same as it was, I'd imagine.

So it's incredible to have been there and him being involved in it and not obviously having any idea of it.

Yeah.

And construction is definitely where his career took off.

He went back to America and he started working for a company that was run by Jewels Canada.

They had developed a metal, putting steel and concrete that reinforces and allows for much greater loads.

And then with the invention of the elevator, it allowed for the construction of skyscrapers.

And this is when construction was really taken off in America.

So Ivar got the rights for this building method and took it back to Sweden and started a company called Kreuger & Toll.

And they were a real progressive, efficient construction company.

Apparently like none other back then, they were the first company, I believe, in Europe to set prices.

In other words, they guaranteed that they would be finished a job by a certain day and gave them a price for that day.

And on their first big builds, they did a deal saying if we're for every day that we release, we pay you, the customer, 5,000 krona, but for every day that we're early, you would pay us a bonus of 5,000 krona.

And they actually finished the job two months early.

So they got a nice bonus and it sealed their reputation.

And they continued to grow that company.

They floated that company within a few years.

They're making 200,000 euro profits a year.

That's about 20 or 30 million, which for back then was a lot of money.

And they're also paying dividends.

And this is a key story.

They were paying dividends of 25% a year, which were the kind of dividends that weren't heard of in most of Europe and definitely in America.

And this is key to Ivar's, I think, MO.

He knew that if I pay out big dividends, I am going to get a lot of investors on board.

So effectively over four years, you got the price of your investment back essentially.

Yes, that's huge.

It's huge.

It's huge.

And of course, it's probably unsustainable.

It is unsustainable as we shall see later on.

But anyway, he wasn't going to be happy just running Kreuger and Toll.

He had much, much bigger ambitions.

And around a few years into this with Kreuger and Toll, his father's match business was in a bit of trouble.

Competition was getting very fierce.

Ivar took over the company and he could see that because the margins and matches were so, so thin that the only way you could make a goblets if you had a monopoly.

And back then, while monopolies were illegal in America as a result of the Sherman Act, in Europe and in most countries around the world, monopolies were still perfectly legal.

So Ivar started growing the match business by taking out huge loans from this Swedish banking syndicates.

And he consolidated the Swedish match business and bought all his competitors and also then went into the whole vertical integration model where he bought the companies that made the machines for the match companies, bought the forestries, bought the chemical companies.

So he owned it all and he called this company then Swedish Match.

And actually, I was looking it up.

Swedish Match was still going and was only sold in 2022 to Philip Morris for 16 billion.

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Thank you.

Yeah, they diversified into the world of tobacco, I think, and much later, but they were in the match business and they had various different products, I think, over the course of their life.

But I think, I think Philip Morris bought them because of Snus, the tobacco product that's very popular in the Nordics, so they didn't stray that far away from their original Swedish roots, obviously.

Yeah, I saw that.

I was looking up their products and I saw the Swedish match.

No, they sell cigars.

They sell that Snus.

Snuf, is this?

No, no, it's a little pouch of tobacco that you put in your upper lip.

Or you can get loose tobacco.

It's very popular in Sweden.

I've used it myself.

Yeah, I know.

And I was still looking at those products and I was still thinking, God, 16 billion.

They must be selling a lot of that stuff to be bought out for that amount.

But anyway, so he had, by this stage, so then Ivar had Swedish match and he Kreuger and Kohl and they were both very, very successful.

And he also then started expanding into your other match companies.

But what he found was that whenever he tried to consolidate say the Belgian markets or whatever markets, that as soon as he bought up all the big match manufacturers, that within a few months, smaller competitors would start cropping up, undercutting him.

So he realized that he needed a monopoly in any country that he was in, that the only way for this match business to work properly was to have monopoly.

And of course, the reason why monopolies work for matches as well is that they're what was called an inelastic product.

And that means that if you have monopoly, you can raise the prices and it's not really going to impact your sales because it was a necessary product to people have to buy matches.

And the cost per unit is so tiny, I suppose that even a significant increase doesn't feel like a huge increase to consumer.

Yeah.

And around this time, he was like, in some respect, you're reading through this, you're looking at these must be hugely labor intensive negotiations and a bit of strong army to consolidate these very different markets.

And then he was also dabbling in the entertainment business.

Was that around this time as well?

So it was the movie business?

Yeah.

And in fairness, the author does point out that of all the businesses that Iver was dabbling in, and he was in dabbling in loads and continued to expand into loads.

The movie business, I think it was a passion project for him because he never made any money from the movie business as very few people do.

But he did.

He got very much involved.

He actually founded the Swedish film industry.

He's the founder of the Swedish film industry.

And as a result of that, it was he who discovered a young actress who became known as Greta Garbo.

She was a waitress in a restaurant, I think.

That sounds like a human league song.

Him and her became lifelong friends and very, very good friends.

They used to meet each other regularly and confided in each other throughout their lives.

And they were very, very close.

I suppose back then, they were over the course of their careers, the two most famous Swedish people in the United States.

Yeah.

And there's a bit of a scene there as well, I suppose, in so far as both of them like their their alone time, you know, wasn't that?

Yeah.

Carlos' favorite quote, I want to be able to.

And he was pretty, pretty fond of kind of taking time away from everybody and retreating into himself and palmering his existence.

Yeah.

So that was Ivar anyway, up to now, up to 1919, 1920.

So he had a huge business expanding.

Swedish Match was also paying out big dividends, not quite 25%, but still significant dividends.

But all this was built on borrowed money from a syndicates of Swedish banks.

And they were, or Ivar by this stage was by far their biggest borrower.

And there was a concern that maybe they were overexposed to him, you know, them tens of millions.

So they did send in a forensic accountant to take a look at his business.

But by this stage as well, Ivar had created dozens of subsidiaries and interconnected companies.

He was using the money from these companies, basically, you know, they were public companies, using them really as his own money as he saw fit.

He was gambling an awful lot on foreign currencies and apparently he was quite good at this, at least he said he was and making a lot of money from it.

And he was also using an awful lot of off balance sheet and mark to market accounting practices.

And all this made it really difficult for forensic accountants to get a grip on his business.

And he actually had to go back to the bankers and say, I can't actually value everything in this business because there's so much complexity in here.

And he also said to the bankers, there's a big risk here in that Ivar has total control.

And it wasn't that he had any suspicions of Ivar.

It was just a case that if there's a risk, yeah, the risk, if anything were to happen to Ivar, we need more oversight here.

We need more regulation here.

But the lead banker of the syndicate was a guy called Oscar Rideway.

And he was one of Ivar's original backers.

He sat on the boards of his company, very close to Ivar.

And he convinced the bankers that regulation wouldn't be such a good idea.

And maybe they'd be better off letting Ivar be Ivar because he was pretty much a very impressive and a genius.

He was really seen as this amazingly clever businessman.

And the bankers, because they were making money from the interest repayments that Ivar was making, and also because most of our shareholders in his company and they're making huge dividends, they kind of went, yeah, let's just leave Ivar off on his own.

Yeah.

And I suppose we have to be careful when you're looking at a story like this, enough to judge what's acceptable by the standards of today and what is common by the standards today, because you're reading the book and you're thinking, you know, the statement, financial statements and the information he provided seemed so brief and so blunt that it's outrageous that he was able to get away with this.

But in a lot of respects, that was, you know, par for the course.

Yeah.

And in fairness to the author, Frank Park, he does make that clear that all these companies that were on the New York Stock Exchange, most of them didn't publish accounts.

And when they did, it was as brief as Ivers.

And Ivers published accounts.

Sometimes we just have two lines with sales.

And then with the income from the revenue or other income or income from other sources.

And that would be it.

When he was asked about what are these other sources, it was like, well, some of it is from the foreign currency exchanges that I do.

Some of it throws some assets that I would have said sold, but it wasn't in the accounts.

And you got away with it back then.

There was very much, when you say light regulation, there was no regulation.

So what Iver was doing, your rice, what Iver was doing was very much in line with what was par for the course back then.

So of course, because he was so indebted to these Swedish banks, they couldn't give him any more money anyway.

And his ambitions were too big for just what he was doing.

He wanted to raise lots of more money.

He wanted to expand far, far bigger and quicker.

So of course, he set his sight on the US and this was the early 1920s.

The US was booming.

It was called the roaring 20s for a reason.

I had some figures here.

They were selling over 4 million cars a year.

Those 15 million cars on the road by the early 20s.

And of course, with all these cars came huge investment in roads and infrastructure technologies like traffic light, those roadside restaurants, motels, gas stations, huge amount of progress and investment going on.

A lot of what we probably realize as are recognized today as being family foundations were put in there.

Yeah, I guess when you look at what changed and again, credit to Frank Parton.

He credits a lot of this to the interest in or interest by the common consumer in the stock market and how common it became for the ordinary consumer on the street to buy shares and to speculate and to trade.

I don't understand share trading and working with brokers, even people who wouldn't necessarily be considered particularly wealthy at the time.

Yeah, because of all this investment and growth, there was a real increase in wealth and consumerism.

And so with this extra money, you're right, members of the public started getting involved in shares.

And there was more day traders back then than ever before in the history of America, apparently.

So it was huge.

America was booming and Ivar had studied history and he knew that this wouldn't last, but he knew that there was money to be made and money to be raised while it did last.

So he went over to America with a really, I thought reading it, it was a really good plan.

He met up with a company called Lee Higginson, which were a conservative investment banker who were keen to get in on this boom tonight in America.

And the author goes into great detail describing how Ivar prepared for this meeting, the poise he had during this meeting.

Ivar preparedly employed pauses very, very effectively when he met people.

He'd look them in the eye.

He'd take his time before he answered a question.

He was very, very careful.

But he also prepared really, really well in that he'd never have any notes.

When he did this presentation to the investment bank, no notes, but every fact and figure that he gave when it was double-checked by whatever junior assistants to see if he was right.

Everything was correct.

He knew it.

Yes.

So the plan, of course, this wasn't just to be just for one thing.

This wasn't his first trip to America.

And trying to start a business and establish it because you're right.

This is a part that I found fascinating that he'd actually tried this before and failed.

Yeah, you're right.

He had a different plan back in 1990.

He went over to America with a view to merge his match business with the largest match business in America.

And two things happened there.

First of all, the match business in America treated him as a junior partner, which was only right because Ivar had no real footprint in the American market.

And Ivar got very miffed about this, that, you know, how dare this guy treat me as a junior partner.

But another thing then is when they were in negotiations, Whitewater House Cooper did an audit on Ivar's business and they found irregularities in the finances of his business and they weren't able to certify his accounts.

So Ivar very much retreated from America with his tail between his legs back then and never mentioned that episode to anybody.

Oh yeah, I forgot.

When he came back in, Rachel, he nailed it.

Oh, he nailed it.

And he nailed it with a different plan.

This plan that he presented to the Lee Higginson Investments Board wasn't a plan to create a business in America.

This was a far, far better plan.

His plan now was to raise money in America using the boom that was going on at the moment.

And as you said, all the interest from normal people who were buying shares, to raise money, to use this money then to lend to governments in Europe, because it was still a huge hangover from World War I.

And an awful lot of countries were still in financial dire straits.

His idea was we lend money to these governments in exchange for these loans.

These governments will give us monopolies of the match markets.

Not only will the governments get their loans, but also we will give them a percentage of the profits from the monopolies.

So really, really nice plan.

And the way he presented this and the way he held himself and his knowledge and expertise.

And one thing that's important to say about Ivar as well, even though he was this charismatic, enigmatic type of figure, everybody mentioned how humble he was and how he seemed to have no ego.

He wasn't one of these brash types.

He came across very humble, no ego.

So the bankers in Leek has loved his plan.

But the Paris that Ivar was holding in front of them was that he was giving them the opportunity to become these financiers on the world stage.

And up until now, the big beast on the world financial market was JP Morgan.

JP Morgan was the company who was lending to governments all over the world.

And now Ivar was presenting I.

Lee Higginson with this opportunity to take on JP Morgan and to come this preeminent financial.

And for our listeners, it's important to say there's a good reason why you haven't heard of Lee Higginson.

You've heard of JP Morgan.

But we'll get to that in a little while, I'm guessing.

There's actually a very funny section in the book about Morgan and an exchange with Jack Morgan, who's JP Morgan's son, who was running the bank at the time, and his son.

And while there was various different, huge developments happening in Europe in terms of loans, the only exchange that they published was about the purchase and commissioning of EOFs.

So you can imagine, you know, Ivar's singular focus on, you know, financial matters.

And the two guys just beating me on the boat.

It's just hilarious.

It is.

But that's the thing.

Your man mentioned in the book, Frank Parna, he mentioned the book.

He said, Pierpont Morgan was by this stage.

His name must have been John Pierpont Morgan.

He was dead by this stage.

And you're right.

Jack, his son was really considered a pale shadow of his father.

Having said that though, JP Morgan still had the top people working for them.

But Jack Morgan doesn't come on.

That's quite funny actually.

In the middle of all the seriousness.

Yeah.

So obviously Lee Higginson jumped on board with Ivar.

They were so keen to go ahead with his plan and straight off, they raised $15 million in their first round.

They created a company called International Match.

The PNRP was the hottest IPO of the year.

The book goes into great detail about this.

Another aspect of Ivar that he created financial instruments that are still used today.

The B-share I think is one of the big long-standing ones.

The B-share whereby people could buy shares, but they had minimum vote, tiny voting rights or little or no voting rights, which seems to Ivar because he wanted to hold on to control.

He also invented convertible gold deb insurers.

These were shares inverted at a future date if you wanted.

They also paid dividends.

He invented American depository receipts, which was a way in which foreign investors could invest into American companies back then.

So he had all these financial instruments as well.

So he was very, very progressive in his dealing.

So they raised the first 15 million and then the pressure was on Ivar to use this money to lend to a government.

And he did.

He was negotiating with several governments at that time.

And eventually within a year by 1924, he landed the Polish government.

He gave them a loan of 6 million at 7% for a monopoly on the production.

Now he later then got another loan to them for 25 million to give them a monopoly on the sales and distribution.

But the success of landing the Polish government got huge publicity for Ivar because he was delivering on his promises.

And he was paying off these big dividends to his shareholders.

And everything was good, except for one key thing that came out of this deal with the Polish government.

After he did the deal with the Polish government, he got these people to make a rubber stamp of the signatories on the deal.

And apparently it didn't say this in the book, but apparently he did this then for every other deal he did with the governments there after he got the signatories that were on the treasury bills that he signed.

He got them copied onto these rubber stamps.

Now, he apparently these were never used, but you've got to start wondering why are you doing this, Ivar?

Yeah, I don't think it's to put up the equivalent of a, you know, a golden disc in your hallway to show visitors or something.

No, no.

So, so that he got the Polish deal.

And then over the next few years, they raised the equivalent of about 300 million in loans, which is 15 billion in today's money.

But again, remember back then, there wasn't as much money in circulation.

15 billion is a huge amount of money.

And just give an idea of some of the countries.

You got Ecuador for 3 million or gave them treatment in Yugoslavia, 22 million, Hungary, 36 million, Latvia, 6 million, Romania, 30 million, Lithuania, 6 million, additional 25 million to Poland.

And then France and Germany, which we'll get on to because they were.

Yeah, the French one was was incredible.

The French one was incredible.

The French one was really the one that put his name up there.

Yeah, you know, this was the big, big break.

But while he was doing all that, and I'll get to the French one in a minute.

While he was doing all that, he was also creating all these other subsidiaries and companies.

By the end of it all, he had 225 subsidiaries.

He was moving money around between Switzerland and Liechtenstein.

He had tax breaks.

He was also gambling heavily on foreign currencies.

But again, as you said, nothing was doing, nothing illegal here.

And his investors knew about these foreign currency gambles.

They knew about the Liechtenstein company for tax breaks.

And they aborted it because they thought, yeah, well, that's what Iver does.

And he's making us loads of money.

And there wasn't anything really wrong in a lot.

Yeah.

I guess it's not that the dividends are coming.

That was it.

We don't ask any questions.

That's it.

And again, when they asked Iver for information on some of the deals that he was doing, he said, no, he said, these are confidential.

And then offer lost them in fairness war because you're not dealing business to business here.

You're dealing business to government.

And there was a lot more secrecy involved when you're dealing with politicians.

So they took that as, okay, no problem.

And in fairness, when they did, they weren't suspicious, but they wanted to do their own due diligence.

And they did send, I think it was a Percy Rockefeller, a Scion of the Rockefeller family who had experience in the match.

They sent him over to Sweden, just to have a look at Ivar's operations.

And he came back with glowing accounts.

Ivar's businesses were legitimate.

They were making huge amounts of money.

Yeah.

He was a substantial, kind of genuine forces business.

He was.

And his loans to the government were legitimate.

And he was getting monopolies in all these countries.

So everything was going well for Ivar.

And then as you mentioned there, the France deal, the France deal was in 1927, where he lent 70 million to the French government.

And JP Morgan had been the lender to the French government.

So this was a big, big deal to go.

And it was a big coup.

It was a big coup.

And France actually honored him with the, the grand cross of the Legion of Honor.

And normally these kind of ceremonies, whoever gets that honor, will turn up at the ceremony in all their medal.

And Ivar turned up with just one simple medal on him.

And when he was asked by the media, what is this medal?

He just simply said, well, it's just a medal to commemorate the Swedish Olympic Games in 1912.

And that's all he said.

Which he was instrumental in establishing.

Well, he financed the whole Olympic Games, but he didn't pay that to the media.

And then the media found that out and that only enhanced his reputation for being this really humble, humble guy who doesn't like to brag about what he has.

So it really elevated him by this stage after the French deal.

His reputation was through the roof.

Yeah.

And the interesting thing as well is you're thinking, you know, he's running his business and he's spending a huge amount of time across the different businesses from the match business right across the finance business.

But he's also buying suede of other businesses, right?

So he's buying property, he's buying art.

It just seems frenetic.

I've got it here.

I've got a list actually.

Interesting you should mention that because I made a list just to sort of give the listeners an idea of what he had by this stage.

So by this stage, he was estimated to be worth about $100 billion.

So he's thought to be about third richest man in the world.

Swedish match had 26,000 eyes in operations in 90 countries.

They had matched monopolies in 24 countries and near monopolies in many more.

And they controlled 75% of the match business worldwide.

He owned banks.

He owns Ericsson, the telecommunication company.

He owned mines all over the world.

He controlled half of the international market in iron ore.

Between 1923 and 1929, the value of international match had soared by 1100%.

And because of all this, his reputation was such that he was now mixing it with world leaders.

And he became an trusted advisor to Herbert Hoover.

So like, I don't know if Time magazine did Man of the Person of the Year back then, but if they had, I'm pretty sure Ivar would have made the cover.

They did it.

He was featured in a few magazines.

He was seen as a colossus of business.

And yeah, I think the fact that he was international and it made himself available to the president of the United States who advised them on geopolitics as well as an interesting one.

Yeah.

Yeah.

So yeah, like he was a colossal.

He was the preeminent businessman and he was everywhere.

As you said, he was buying businesses everywhere.

There was even stories of his auditor.

And I mentioned his banks sent somebody over just to do due diligence.

He did actually have an American auditor.

It was Ernest and Ernest were the company and it was a young guy, Eddie Burning, who was the auditor.

And this poor guy, like he was junior when he first came on board as the auditor.

And rightly so because by this stage, Ivar had only landed in America and most of his businesses were going to be in Europe anyway.

So Ernest and Ernest didn't think that they'd need anybody senior.

But of course, Ivar's, the more money they raised, the busier this poor auditor became.

And he was just stressed out asking Ivar questions all the time.

And Ivar just either ignoring him or giving him vague answers.

And the auditor anyway became very compromised because Ivar did still need this guy to certify his account.

So Ivar sent him and his wife off on Luxury Europe.

The book goes into good detail about this young auditor, waiting for Ivar to get back to him with his details of this trip to Europe so he could tell his wife.

Gave him then I think shares worth a year's salary.

Ivar then kept on putting more business towards Ernest and Ernest.

They were doing consultancy work for him, taxation work for him.

Of course, they became compromised as well and it ended up with this auditor really was more on Ivar's side and was helping Ivar kind of cover over the cracks that were.

He would write the memos and send them on to Ivar and say, does this look okay?

And then he got a telegram back.

Of course, that was a common way of communications then.

But Ivar seems to have been, I wouldn't say cruel.

This poor auditor obviously was starstruck by Ivar.

There was a huge imbalance of power raping there.

Yeah.

And Ivar go out of his way to try and avoid this guy.

Come to York and meet me in Paris.

Oh no, sorry.

I've gone back to Sweden.

They hop over to Sweden.

Oh, and come back to Paris again.

And God only knows where he actually was.

But as you say, this guy went and examined a substance of the assets as well, actually.

He did.

He did go over to Sweden as well and met with the Swedish auditors and the Swedish auditors he found were very professional, but there was just so much detail and so much complexity in the business that it was impossible for him to get to the bottom of it.

And Ivar was the only one who knew where all the bodies were buried, I suppose, and he just, he wasn't going to give all those details away.

And so the auditor did start papering over the cracks because the cracks were beginning to appear.

Apparently in some of the monopolies that Ivar had secured, I read this in another source now, not in Frank Parnell's book.

He had secured them at too high a price in that some of the deals he made with the governments promised them maybe a bit too much back that didn't make the monopolies profitable.

And in other countries where he didn't have monopoly apparently, he was selling his matches at a loss to keep the Russians out because the Russians were undercutting the market.

So in short, this is the crux really of what was happening with Ivar at that time and maybe throughout the years was that his companies weren't making enough money to pay the high dividends.

So in other words, he was subsidizing the dividends out of capsule, not out of earnings.

And that's why he was in this cycle now where he needed to keep raising money so that he could keep paying out these big dividends.

So he keep up this facade that his businesses were far more successful than they probably were.

Probably where the comparison to Ponzi comes from then.

So really, I need to craft a narrative beyond reality really.

So I'm using borrowings to pay out dividends that demonstrate the success of my business as opposed to the companies actually generating enough to pay the dividends in the first place.

And it's a fair comparison in a way that there was a Ponzi like thing going on here.

It's just that mostly with Ponzi schemes, there's no substance behind them at all.

Whereas Ivar had a ton of substance.

Like he was half businessman, but he was doing shady shit.

And this is what happens.

And what do you think his biggest mistake was?

Ivar, I think was just being Ivar.

And his biggest mistake was always having to portray this image that he was being successful all the time and that he could afford to pay out all these dividends.

And that was the thing that was going on for years.

But I suppose the biggest mistake he made then was he went ahead.

And if we go back to this time, it was 1929 now, it was September.

Shares were starting to fall.

There was a bit of a, the market was getting a bit shaky and Ivar's shares were still holding well.

But then on the week, starting October, 2014, negotiations with the German government to lend them $125 million.

And the market was tanking.

Now this was just near the end of October.

And this was a time really where Ivar should have just stood back and said, okay, the markets here are a bit shaky.

Now is not the right time to be lending $125 million to the German government.

Now, October 21st was a really bad week.

And it actually, it was so bad that the market closed that Friday and Saturday for trading.

And yes, on October 26th, Ivar signed the deal with Germany to lend them $125 million.

And the following Monday and Tuesday became known as Black Monday and Black Tuesday.

So Ivar, that was a time where Ivar really should have just stood back and said, okay, this is too much.

I got it.

Yeah.

But I guess in fairness to him, hadn't the French redeemed their loan or paid their loan back early?

Yes, but not by this stage.

Really?

No, no, no.

By the stage that he made the commitment to Germany, France still more, France had taken the loan out in 1927.

This is only 1929.

So this is where things get a bit suspicious.

And Frank Parton does raise suspicions here.

So Iver did the deal with Germany, which was reckless.

But also he wanted to continue to create this aura of conflict.

Like he's above all this.

His businesses are above all the stuff that's going on in the stock market.

He did the deal with Germany.

Now he had to come up with the first tranche of 50 million.

He didn't have it.

And then just a month or two before he had to pay the first tranche to Germany, France came up to him and said, we're paying back all the 70 million you gave us just two years ago.

And not only that, part of that deal he did with France, because Iver did strike amazing deals was that as well as paying interest on the 70 million, France also had agreed that when they paid back the 70 million, they would actually end up paying back 75 million.

So all of a sudden, just when he needed the money, the more, France paid him back 75 million.

Now, as the author said, he was either very lucky or something else happened there.

And Time magazine actually ran an article after France gave him the money back, throwing huge shade and an awful lot of skepticism on the timing of that payback.

Yeah.

But what was the inference that there was so often any inference that that was the thing.

But the author, Frank Partley, all he said was that it was very coincidental.

And then he mentioned the Time magazine article being very skeptical, but I couldn't find the article and I couldn't get the gist of what they were skeptical about.

But obviously the suggestion is that somebody got a lot of money to ensure that Iver got his 75 million back so that he could.

Just when he needed it, just when he needed it.

But of course, you know, things are catching up on him now.

Things were going south.

But having said that, Iver's shares compared to the share price on shares of other companies on stock exchange were still doing pretty okay at that time.

They weren't tanking as badly as other companies, but he was still coming under huge pressure.

But that's probably on the promise of the dividend though, right?

It's the safe haven.

And not only did Iver go ahead with the German deal, while the markets were tanking, he came out and increased his dividend payment to his shareholders.

Again, to give the air of confidence that he was doing okay.

Stick with me.

Everything is okay.

But of course, if he wasn't able to pay the dividends before the crash, no way that he was going to be able to pay the dividends while the market was tanking and everybody was suffering.

And then of course, there was the Italian deal.

And this was the one, this is the 1930.

It'd be courting the Italians for a long time.

I'd be interested to get your take on this because the nob of it is that it was very top secret.

He didn't even tell his fellow directors where he was going.

He just said, I'm dealing with country X.

He didn't tell his fellow directors who he was meeting, where he was traveling to.

But we do know that he met with the Minister of Finance a few times with another senior official and that he had one or two meetings with Mussolini.

We do know that nothing public ever came out of that.

And we do know that Iver came back from those meetings with Isley.

And he had a copy of an Italian treasury bills that he took to the printers that printed his treasury bill.

And he asked them to make 42 forged copies of those treasury bills with the dates on them that were compatible with the dates that he met the Minister for Finance and this other top official.

And then Iver crudely signed all these bills with those two government officials' names, very crudely apparently misspelt them in some occasions and then locked them away in the state.

Which is really puzzling behaviour.

It's very strange.

It's very strange.

Again, but at the same time, he made those rubber stamps of signatures and nothing was ever done with them either.

And it's very strange behaviour and there's not enough meat on the bones really from the book or from any source to sort of give an idea as to what was going on here.

Why was he doing this?

But just part that for a second.

We will get back to the Italian one because it does come up.

So he made these signatures, these forged treasury bills, and he put them in a safe, locked them away, didn't show them to anyone.

But then in 1931, he was under huge financial pressure and he was selling Ericsson to the American conglomerate IT&T.

That's right.

Just a side note on that.

I worked for Ericsson for two years and part of the induction is to learn about the history of Ericsson.

I was thinking about this as I was reading the book.

His ownership and involvement in the company, to the best of my knowledge, was not mentioned at all.

I think that's interesting because he effectively owned or controlled the company and was trying to sell it at this time.

He did.

He bought into it in 1927 and effectively took control of it by 1929.

Yeah.

And that was also, I suppose, to a certain extent following that monopolistic thread across Europe as well.

Maybe he thought he could jump on because he was a fan of technology.

He was a big user of the telegram.

And as you'll see from the book, he was monopolizing the telegraph facilities on the boat.

And he seemed like an incredible guy who was traveling all over the state.

So he was into technology, I guess, or the technology as it was at the time.

I just thought it was fascinating that they never mentioned him.

Never mentioned him to the best of my knowledge.

I thought it was probably only a blip in that he seemed to only own them for like two or three years anyway.

But still it would make an interesting little chapter in the Ericsson biography.

But yeah, he tried to sell it to IT&T.

And again, the book really details his poise at these meetings.

They'd ask him questions and it was only Ivar.

It would be Ivar in a room with maybe a dozen Ericsson executives.

He had all his facts and figures again, no notes, off by heart.

When they got to check them, everything was correct.

They'd ask him questions and the author talked about how Ivar would take a cigarette out, roll it in his fingers, lice it, smoke it.

It could be five to six minutes before he even thought about answering a question, which invariably led one of the Ericsson people to jump in before Ivar answered, go in some sort of answer that would then mould the way Ivar answers his own question.

But they were amazed by his poise.

They came up with a deal whereby they advanced Ivar 11 million, but they also said that we had to do an audit on Ericsson.

When PricewaterhouseCoopers did their audit on Ericsson, it wasn't quite as Ivar had said.

Now, apparently from the book, Ivar wasn't caught out in a lie.

There was an issue with a mistranslation as to when Ivar, what cash in the bank means in Sweden and what cash in the bank means in America, something like that.

Whatever happened was the deal felt true.

So IT&T said, we're not going to head with this.

We want that 11 million back.

Ivar had no problem.

He was very calm.

Yeah, you'll get it back.

But secretly he was under huge pressure.

And there was good insight from his secretary who told of Ivar smoking more, drinking more, spending hours and hours in his office, pacing it and talking to himself.

So he was.

Yeah.

He would say a bit of signs of stress, I suppose.

Yeah.

Yeah.

Which is understandable.

Which is understandable.

He was under huge pressure.

He was held up as the savior of Europe.

He was helping out governments left, right and center.

He was the preeminent businessman.

And yes, it was all built on very, very shaky foundations that were all about crumbling down on him now.

And he did have a nervous breakdown.

And while he had this nervous breakdown, his fellow directors were desperately scrambling to try and get some money together, keep the companies going.

And they went into his office and they went into his safe and lo and behold, they found these Italian treasury bills that were worth $140 million, though they rang up the Swedish Prime Minister who owed Ivar a few favors and said, look, we have these bills.

They're worth $140 million.

Can you get on to the banks and just tell them to order some money?

So on the back of that, he did get on to the banks.

The Prime Minister, they did lend them a bit of money that kept them going for another few months.

But of course, the Italian treasury bills just raised more questions.

And that was sort of the beginning of the end, really.

It was.

It was.

That was really it for Ivar because his bankers in both America and Sweden wanted answers.

They want an answer to what was going on here because there was rumors going around as well that there was significant shortfalls in the company accounts.

Ivar, of course, was blaming short sellers and media.

Whenever you hear something going out, you always know that they're in trouble.

So they wanted to meet up with Ivar and they arranged to meet up with him on March 12th, 1932 in Paris.

They all met in a hotel.

Ivar didn't show up.

He ended up shooting himself through the heart in his cruise compartment and he left behind three letters, one to a very good friend of his who was also a fellow director and he was the man who found the body.

In his letter, Ivar basically said, I messed up and this is the best way out.

It's a very short letter.

The details of it are published in the book.

The second letter was to his broker just with instructions on how to do it and selling various shares.

And the third letter was to one of his sisters and the contents of that letter were never revealed.

Never published.

Yeah.

And then of course, I guess in any event like this, there's going to be some speculation around, you know, and there was speculation at the time, was this suicide, was this murder?

Did Ivar fake his own death in the school?

And had he been cited?

And I thought that was quite an interesting sort of thread.

It's inevitable, I suppose.

I did follow some of those treads outside of the book as well, because I know Ivar's brother maintained up until the very end that Ivar was murdered.

And he wrote a book about it as well.

Based on everything that I read on it, there was a lot of speculation, a lot of conjecture, but like with an awful lot of these conspiracies, there wasn't a whole load of actual.

And I think, I guess the guys who found the body were a little bit, as you would expect, they're in shock.

So the recollection of the circumstances were muddled, were questionable as well.

So the rifle that he used or gun he used went from one hand to the other, his left hand and went to his right hand or he had a shortened index finger, I think.

So he couldn't have pulled the trigger on that.

He didn't open, which was common at the time, bizarre.

And a glass coffin, a glass lid on the coffin to allow you to pay your final respects, course the body didn't look at anything like him.

And so I guess this steep sort of emerges around the death of somebody this famous and this well known.

It does.

It does.

And it adds to the story a little bit, but my conclusion is that Ivar did kill itself and that really was Ivar.

Tragic.

Really.

It was tragic.

And the initial reaction to his worldwide was one of deep grief.

The media had loved Ivar, the public had loved Ivar, and not just the public in America, his shareholders, he had lent money to governments that were in need and this money was put to build roads to help these countries out.

And so the initial shock at his death and the grief was genuine.

And people were very obsessed about his death and there was great obituaries written.

But then within two weeks, Price Waterhouse Cooper had come out and said that all his companies were insolvent and he had debts of over 2 billion Krona, which was more than the Swedish national debt.

Now apparently they had jumped the gun a little bit because there was no way they could have figured out everything that Ivar had within two weeks because there was such a spider web of companies and interconnected companies and assets and money everywhere.

They were wrong on that.

There was a lot more value in Ivar's businesses than they had initially thought.

And it comes out in The Watch later, he had a lot of really, really good assets.

He had 5 million acres of forestry.

He had all that iron ore.

The loans to the government were very real.

The interest repayments that Germany were making were 3.75 million every six months.

And they continued throughout the Third Reich, throughout World War II.

And they actually went up to 1983.

They finished off paying off that loan.

So there was a lot of value in his company, but it did take 13 years.

And we will go back now to the Securities Act and all that, but his investors eventually at the end of a 13 year process got some like 32 cents on the dollar.

And the author reckons they would have got about 50 cents on the dollar if there hadn't been such a fire sale of all this.

Yeah.

Yeah.

Which is understandable, I suppose.

Yeah.

Fire sale happened after crashes, you know, but even if they had got 50 cents on the dollar, which the author reckons they would have put out the fire sales, Keith, that that's very much in line with what any company would have been working after the crash.

You know, that meant the time even after the crash.

So there was a lot of value there.

But I suppose the key thing that really downed Ivar and that that scarred his reputation and that when you look him up on Google, now you'll just see Ponzi scheme was the Italian, the Ford, the Italian treasury bill.

And just out of curiosity, I don't know if you managed to get to the bottom of that.

The 30 cent on the dollar that investors got back, that was based purely on the sale of the assets price.

But if you think about it, if you'd been an investor for more than four years, arguably would have got your principal back should the dividend pay.

Yeah.

Yeah.

I didn't dig into that, but you're right.

If they were getting that amount of dividends every year, no, 25% was on the high end and that was for Kreuger, the international match people, the author just said that they didn't get 25%, but they, he just said it was close to that.

I don't know why he wasn't able to get the exact figure.

So they were probably maybe getting, you know, 20, 21%.

But you're right.

After a few years, they would have got close to getting all their money back anyway.

You know, so, so, so some people probably, you know, made those broke, even made a fine.

Probably like any Ponzi scheme, but then if he contrasted against the return for everybody else who lived through the 20s and invested in other companies, yeah, you know, that's the extraordinary thing about it.

That is it.

That is it.

Like that's, that's the thing about Ivar.

Yes, there was a Ponzi like element to what he did, but overall there was enough substance behind what he was doing.

There was enough brilliance in him that he had built these huge businesses that really, as you said, if you, if you looked at it, they probably didn't do as badly as anybody else that had invested in other companies that didn't have any Ponzi like element attached to them.

Yeah.

Yeah.

And, and who knows what his motivation wasn't in doing that.

And I guess he wasn't, as you said, the person who, who, who found them.

Obviously he didn't have to find them if he knew where they were, but he didn't produce them, I suppose, at the time of greatest need and we will never know he would have still.

That's it.

It was his fellow directors who found them and used them as collateral.

He didn't in the same way that he didn't use those rubber stamps that he made of all those other people's signature, but it does put the big question mark over why did you do it then?

Yes.

And the crash of his company can't be known as the Kruger crash.

And it led to Congress holding hearings and out of those hearings came the 1933 and 1934 Securities Act.

I always assumed that those Securities Act came as a result of the 1929 crash, but they were actually as a result of Ivar Kreuger and they're the foundation of what are the regulations stuff such as General Acceptable Accounting Practice or GAP came out last stuff like public companies have to submit detailed audited accounts quarterly.

Stuff like companies could be sued for fraud.

So if the end of a fair regulation and the proof is in the pudding in that 250 pages of those Securities Act are dedicated to Ivar.

So it was him that called the Securities Act to be in it.

Is that his lasting legacy then?

Probably.

Probably.

Probably.

It was just a bad legacy, but I'm sure Ivar would have much preferred to have a different take on it because I don't want you to watch your take on it because as I said, when you Google him, he put in a casket with Bernie Madoff and Charles Ponzi and I don't think that's true.

Yeah.

And I think it's fundamentally unfair because he's a creator, right?

He's an instructor.

He's invented financial instruments and classes of shares.

He's a tragic figure, obviously, not just because of the way the circumstances ended.

But I think, you know, one of the other themes in the book is he had all of these properties throughout the world, but he'd have these silence rooms or rooms of silence in which he'd retreat.

So he was obviously a tortured man.

Yeah, who had a labyrinthine sort of spider web of information to process in an era when you didn't have a computer to do it.

He obviously was working at arms and shall we say from his auditors on these banks.

So the burden, the mental burden of what he was trying to carry around must have been immense on him and he had a very small circle of friends, yes, but I just think it, it's a tale of an incredibly talented, ambitious man who just ended in tragedy.

Yeah.

That's the impression I get.

And it's interesting.

You should say the quiet rooms he had and the life he led, he didn't seem to have anybody really, he had no partner, no real, real friends.

Like he kept everybody at a distance and he came across very much like Gretchen Garbo, his very good friend as a very lonely figure.

And it is a tragedy because I hadn't heard of him before.

And when I did do any bit of research and said he now is compared to these great swindlers.

If he had just stayed on the straight and narrow, he could be somebody that we had heard of before as being one of the great financiers and one of the great businessmen of the 20th century.

But now he's just a footnote thrown in with the likes of Charles Ponzi and Bernie Madoff.

And when you dig into the detail, you find out that there was so much more to him than that.

So it is very tragic.

Yeah.

And I think if we think about what he left behind, you know, SCA, I was reading about those guys, so that they're still in existence, toilet tissue and wood pulp, Aretan is still around.

The Mayans are still around, as I mentioned, the Carthaginians, so there's a legacy of real subsets there.

But his legacy is tainted.

Tragic ending.

So look, good story, well worth looking into, they're the kind of ones that I really like in that I've never heard of it before.

Yeah, I think it was a great discovery, actually.

So kudos on that one.

Yeah.

All right.

It'd be a hard one to follow.

All right.

But you got something for us.

I do.

Yeah, I do.

I'm keeping my powder dry.

I've started reading already, just trying to get ahead of you.

It should be an interesting one.

I think it's got to be an interesting one this time.

Lovely.

All right.

Thanks.

Take care.