As a child, I had an innocent dream, one common no doubt to many children: I wanted to work in a bank when I grew up. I spent the golden summer days of my Tipperary childhood imagining how I would join as a computer programmer and work my way up for several years until I was indispensable and trusted. Then I would embezzle the bank out of the largest sum my childish mind could conceive of: a million pounds! I would stay working for a couple of years, carefully erasing all traces of my fraud, and retire at 30, a rich man, having hollowed out the bank from the inside.
Imagine my shock when, a few years later, I discovered the existence of derivatives traders. Sitting at a computer, destroying a bank from the inside, and retiring at 30 having siphoned off all the bank's wealth for yourself, was perfectly legal! All the romance went out of the prospect. And so I gave up my dream, and settled for being an underground popstar and sex god.
The news that Bernie Madoff has leaped into the Greatest Swindler of All Time chart at number one (imagine his glee: $50bn!), brings back my innocent youth in a Proustian rush. One reason embezzling appealed to me as a career was the fine example set a century and a half ago by my relative, John Sadleir. The greatest bank fraudster of his day, he pioneered many of the methods of fraud now known as "financial services."
The name of John Sadleir was always whispered in our house. My mother refused to discuss him, despite my pleas that details would help further my career. And so it is with particular pleasure that I've been reading Prince of Swindlers: John Sadleir MP 1813-1856, by James O'Shea (Geography Publications). A scholarly and densely researched history, published by a small Irish press in 1999, there lurk, deep in its thickets of footnotes, the makings of a biography with the pace of a thriller.
Sadleir's career was a stick of dynamite; short, and explosive.He inherited a small Tipperary bank, set off to London to make his fortune, was elected to Westminster in 1847, while still in his early thirties, and was £1.5m in debt by January 1856. Not bad going for a Tipperary lad. Some of this debt came from buying 30,000 acres of land from Ireland's Encumbered Estates Court (so often a mistake), some from loaning money to the Duke of Buckingham (always a mistake), but most came from speculation on the London stock exchange using money borrowed from his own bank.
As the Morning Chronicle later wrote, "there were few men outside the house of Rothschild who speculated to such an extent in foreign, continental railways and mining undertakings." He lost £120,000 in a single day, speculating in sugar. As things went wrong, he began to lie, forge and steal. O'Shea tells us that, on the brink of disaster, Sadleir resorted to desperate measures. "One novel course was proposals of marriage to several wealthy Catholic heiresses, who wisely resisted his advances."
If he sometimes comes across as a villain in a Victorian melodrama, that's because many of those fictional villains were based, very firmly, on him. The best known of these is Mr Merdle, in Charles Dickens's Little Dorrit (completed in 1857, the year after Sadleir's fall). Merdle is "a dooced extraordinary phenomenon in buying and banking and that"—a paragon of honesty who, on the brink of a peerage, turns out to be "the greatest forger and the greatest thief that has ever cheated the gallows."
For it was Sadleir's misfortune to live in an age before bank bailouts, when actions had consequences and reckless speculation with borrowed money was considered a crime.
And so he took a small silver cream jug to Hampstead Heath, behind the pub Jack Straw's Castle. In the jug, he mixed prussic acid with opium pellets and a little sugar, and drank it. He was buried in an unmarked grave in Highgate cemetery.
When the extent of his frauds became known, the Tipperary Bank collapsed, and with it most of the companies that Sadleir had defrauded. They imploded, all over the world: the Royal Swedish railway company, Carson's Creek Gold Mining Company, Newcastle Bank, and on and on, for months afterwards.
Looked at from this sour point in the history of banking, John Sadleir's crime was being a century and a half ahead of his time. Overborrowing against worthless assets in order to overtrade in products you don't understand, not caring if it brings the bank down as long as you can make off with the profits, became an honoured and envied way of life. There are tens of thousands of John Sadleirs walking the streets of London and New York, free and rich, their money legally embezzled from insolvent institutions.
What was Madoff thinking, committing an old-fashioned Sadleir-era fraud, in the brave new world of deregulated banking?
Well, perhaps Madoff, too, had a romantic childhood dream.
