The Role Of Hatry’s Fraud In Wall Street Crash Of 1929
The Wall Street Crash of 1929 is known to have been the cause of one of the world’s greatest financial crises’. In ninth grade, one of the topics that was discussed in my history class was World War 2. The one thing that stood out to me most was the Great Depression and how some people believed that it was triggered by the crash. The crash was explained to have simply been the New York Stock Exchange share prices collapsing and causing turmoil in the global economy. Not much was known further than that. The topic ended very abruptly and that insinuated that it was not a very important subject to be put to light. The crash is a well-known event but the minor and major events, and people that triggered it aren’t. One minor event that is not really known is that of Clarence Hatry. Hatry committed one of the greatest frauds in the UK just before the iconic crash.
Hatry was a financier but started off as an insurance clerk. His career first began when he took over his father’s successful silk business. He then worked for a reinsurance firm, the City Equitable Fire Insurance Company where he made a huge success. During his time working there, he managed to reorganize the company and resell it with a huge amount of interest in return. After he was established, buying and selling buildings and businesses, his career began to have ups and downs. In some cases, he found himself bankrupt and other times, he accumulated incredible fortunes. Hatry was a profiteer of the First World War, he ultimately became the director of 15 corporations such as Leyland Motors, Photomaton by 1921.
Throughout Hatry’s career, he was involved in illegal activities. In 1924 his Commercial Corporation of London failed for $3.37 million; miraculously his bankruptcy made him successively richer. He was able to build an empire with investments in loan offices, cameras, vending machines, and photographic supplies. Hatry also ran a stockbroking corporation which got on into trouble with the governor of the Bank of England, Montagu Norman. This was one of the incidents that caused rage and decline in the financial sector of the UK and ultimately the world. It contributed to the Wall Street Crash of ‘29.
Hatry was a proud character when it came to displaying his fortunes. Between 1922 and 1926 he lived at 56 Upper Brooke Street, where he owned a rooftop swimming pool where he would host luxurious, high-class bathing suite parties. He owned a yacht, racehorses and a massive house in Sussex near the mansion of King George the fifth’s daughter. He spent a total of £70,000 on the improvements of the house alone!
In early 1929, investors all ran to the Hatry group (his empire) that consisted of his multiple corporations. He was at the peak of his career at the time as well as the peak of corporate finance. His empire then reached it’s lowest when Hatry landed on the wrong side of the governor the Bank of England, Montagu Norman. As Hatry was at a peak in his career, he decided to embark on another business venture: buying the United Steel Companies. He bought the entity for $40 million; at the time he still had investors but later on, they ended up bailing out on him. Therefore, during late August, Hatry made a secret visit to Montagu Norman to appeal to complete a merger with the United Steel Companies. His bridge loan (short-term loan used until a person/company secures permanent financing) was denied. His desperate need for the money resulted in him issuing fake securities (investments) in his existing companies using them as a guarantee of raising money. Although his plan failed, he was caught by the Stock Exchange committee for borrowing $1 million on counterfeit investments. By the 17th of September, when his stocks on the London Stock Exchange began to fall, in desperation, 2 days later he visited Lloyds Bank to bid for financing. There he asked for Sir Gilbert Garnsey, a chartered accountant to intervene in his financial crisis. On behalf of Hatry, Garnsey made another visit to Norman to ask for financing. Again, the attempt was unsuccessful. Norman alerted the London Stock Exchange that the Hatry group was bankrupt. This resulted in the trading of the Hatry group shares (which were worth £24 million) become suspended on the 20th of September.
On the day of the suspension, Hatry and his associates confessed to forgery. Hatry confessed to his accountant as well as the Director of Public Prosecutions and other officials. In late December Hatry and his fellow associates: Albert Edward Tabor, Edmund Daniels, and Charles Graham Dixon were charged with fraud and forgery at the Old Bailey. Hatry was sentenced to 14 years and was sent to Brixton Prison; there he was required to work as a librarian, sleep on a board and crush rocks. Although, Hatry only served 9 years in prison due to the help of his lawyer, Norman Birkett. Hatry’s defense was paid by his friends, which added up to £95,000.
The effects of Hatry’s fraud and collapse were evident in people’s lives and businesses. His fraud caused many people to pull out money out of the US market to settle their losses elsewhere. This caused the stocks on the US market to decrease at a considerable amount. Obviously, Hatry’s fraud was not the sole or main contributor to the Wall Street Crash, as his fraud was small compared to the size and power of the NYSE.
