Clarence Hatry, a colossal embezzler

Posted in Famous crimes, Historical articles, History on Tuesday, 17 May 2011

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This edited article about Clarence Hatry originally appeared in Look and Learn issue number 940 published on 26 January 1980.

Old Bailey, picture, image, illustration

A Trial at the Old Bailey before the Lord Chief Justice c.1900

It has been known for an employee, finding himself short of money, to “borrow” a pound or two from his employer’s cash box – intending, of course, to pay the money back before it has been missed. But what if the borrower finds he cannot pay it back in time?

The annals of petty crime are full of such cases. No matter what the original intention, in the eyes of the courts anyone who takes a chance like this, and is unlucky enough to be caught, is a thief.

Half a century ago, Clarence Hatry took such a chance. In this case, however, it was a matter, not of a mere pound or two, but of hundreds of thousands. For he was one of the leading financiers in Britain at the time.

Hatry successfully promoted a large number of companies, many of them formed by amalgamating smaller firms to create larger and more efficient units. In 1929 he embarked on an extremely ambitious undertaking of this kind in the heavy steel industry.

Hatry’s chief company was the Austin Friar’s Trust, through which he launched and controlled many of his other firms. Taking over other companies, as was necessary in the projected steel combine, involved buying shares from existing shareholders. Various banks were happy to lend money to Austin Friars for this purpose, for Hatry’s credit stood high, and no one doubted that his new enterprise would prove very profitable. Hatry and his associates, too, were confident that, once the steel combine was under way, they would quickly be in a position to clear their debts. But they had not taken sufficient account of the economic depression that was then threatening the world, and was rapidly deepening.

One symptom of this was an alarming drop in the value of shares in a number of Hatry’s companies. To remedy this, he took his first fatal step on the road to ruin.

Of the money borrowed from the banks, Hatry used no less than £1,500,000 to boost his own failing companies. But the time soon came when the money so used had to be replaced.

If funds were not quickly found, the steel project would have to be abandoned; and by now Hatry’s fortune, and that of his many companies, depended on its successful launching.

In June, 1929, he invited his four chief associates to his London home to discuss ways of raising the necessary money. These were Edmund Daniels, John Dixon, Albert Tabor – and John Gialdini. The last named was to prove their evil genius.

It was Gialdini who reminded them that one of their more successful companies, Corporation and General Securities, had done profitable business by raising loans on behalf of local authorities. These included the corporations of Wakefield, Gloucester and Swindon, for which the firm had raised over £1,500,000 by selling loan certificates to the public.

Gialdini suggested that the company should now issue further certificates, nominally on behalf of these authorities, but in reality to obtain money for their own use. Of course it meant taking a risk. But, once the steel project was established, they could buy back the certificates, and the trick would never be discovered.

That, at any rate, was what Gialdini argued. The others were reluctant to take such a step. But Gialdini, it is said, dramatically threatened to shoot himself on the spot if they did not agree to take this way out of their difficulties. Tragically, they allowed themselves to be persuaded.

To begin with, all seemed to go smoothly. Fraudulent loan certificates were issued for more than a million and a half pounds. Many of these certificates were lodged with banks as security for loans.

Beneath the surface, however, trouble was brewing. Financial experts in the City of London have a sensitive ear for reports of weakness or possible failure in the affairs of companies. And rumours had begun to spread that all was not well with the Hatry group.

Next came reports that a flood of certificates had been marketed in respect of certain local authority loans. The reports and rumours aroused such suspicion that the Stock Exchange suspended dealings in the shares of Hatry’s companies.

A number of banks, to which his firms owed money, now appointed a well-known accountant, Sir Gilbert Garnsey, to inspect the accounts of the group. By this time Gialdini, scenting trouble ahead, had removed himself to Italy.

Hatry and the others decided that the time for deception was past. They approached Sir Gilbert Garnsey on 19th September, 1929 and admitted that there had been “irregularities” in the way they had done business.

Despite their frankness, the law had to take its course. Hatry, Daniels, Dixon and Tabor were arrested. Hatry’s financial empire collapsed, causing grievous losses to many shareholders.

On 20th January, 1930, the four men were brought to trial at the Old Bailey. They pleaded “Not Guilty” to charges of fraud. After the evidence for the prosecution had been given, however, they changed their plea to “guilty”. The judge, Mr Justice Avory, showed no mercy, awarding Hatry the maximum sentence of 14 years penal servitude, and stiff, though shorter, sentences to the others.

Many thought the punishment too severe. But, like a shop assistant who borrows from the till, they had gambled – and they had lost.

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