TEXT OF INTERVIEW
Steve Chiotakis: So, what is it about tough economic times that brings out the greed in some people? Schemers who take advantage of a system by offering an investment so tantalizing that it’s hard to pass up. Chris McKenna’s writing a book about all that, called “Partners in Crime.” Chris, Bernie Madoff and Charles Ponzi aren’t the only examples out there. Who else taught us a lesson about scamming?
Dr. Chris McKenna: The figure who actually we should all be talking about is somebody named Ivar Krueger, who was for a time the richest man in the world — or so he was thought to be. And this was during the 1920’s and early 1930’s. In fact, when the great crash happened in 1929, he was put on the cover of Time Magazine, because he was the only person who managed to survive the crash without any problems. Or so people thought.
Chiotakis: Well talk a little bit about it.
McKenna: So, Krueger was known as the Match King, and what he did was he went to governments all over the world, and he said to them, “If I could get a monopoly in matches in your country, I’ll give you quite a lot of cash, I’ll give you tens of millions of dollars.” And during the 1920’s, after World War I, people needed this money.
Chiotakis: So we’re talking about like matches to light cigarettes right, or fires?
McKenna: Absolutely. So these were just simply matches that people used, common people used all the time. And the great thing about them was if you monopolized them, everybody was using them constantly.
Chiotakis: So this had to have been a disaster.
McKenna: No. Because his securities were the biggest securities in the world. More people owned his securities than anything else, and all of the economies were intertwined via the Match King.
Chiotakis: And so the world economy was literally affected by all of this.
McKenna: Yeah, absolutely. So he was Swedish, and when this happened, his debts were greater than the entire national debt of Sweden. And what happened was that he was discovered in 1932, and he committed suicide. And when they figured out what had gone wrong, everybody was up at arms. And in fact, the Senate held hearings on this, and the result was the creation of the Securities and Exchange Commission, the very organization that’s supposed to regulate these things nowadays.
Chiotakis: So how we do we stop something like this from happening again? What do we look for?
McKenna: Well, one of the things that happened with him, and that happened with Madoff and has happened with several other people, is there’s a consistency to the returns that seems problematic. So one of the problems is that these people seem to do well in bad times and in good. And that’s something that seems very appealing to all of us, but should raise alarm bells. In other words, if the market’s down and they’re still doing really well all the time, they’re somehow managing their earnings. The other thing is that in both cases, they had very small set of people around them who were controlling things. In the case of Madoff, we now know that it’s a very small accounting firm that looked after him. In the case of Ivar Krueger, again, it was a tiny little accounting firm that was looking after him. And so we should be concerned, basically, if only a few people are the control for something that’s going on like this.
Chiotakis: Dr. Chris McKenna, director of the MBA program at Oxford University, and writing a book on white-collar crime, “Partners in Crime.” Thanks for joining us.
McKenna: Thank you very much.
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