The story of Ivar Kreuger, Swedish tycoon in the 1920s and 30s, is the topic of this book by Frank Partnoy. The author is Professor of Law and Finance and director of the Center on Corporate and Securities Law at the University of San Diego, and it shows. This book is telling a fascinating story about Kreuger, who paid a 25% dividend on the debt of one of his companies to lure American investors into his investments. He created off-balance-sheet vehicles along the way, hiding his income streams from the noses of his accountants. The scheme was not a Ponzi, since Kreuger actually owned match factories all over the world. He made money by establishing match monopolies outside the US, where anti-trust laws had been established. Kreuger then moved into financing government debt in Europe, competing with J.P. Morgan.
When the Great Crash of 1929 hit, Kreuger came into financial difficulties and after a series of near-collapses finally went bankrupt, leaving his lenders in tears and regulators in shame. While Ivar Kreuger was no Madoff or Ponzi, his business was still based on a lot of illusion and only worked because investors were cheated into believing what he said. But then, was it Kreuger’s fault or the investors’, who did not have a lot of information and should have asked more questions about the origins of the money? A timely book and a very good read for those who want an inside view on how the financial sector worked back in the 1920s.