THE HISTORY OF IVAR KREUGER Ivar Kreuger was born in the year of 1880 in the town Kalmar. Ivar was the oldest son in a family consisting of two sons and four daughters. In Kalmar his grand father had built up two match factories. His father, Ernst August, was also a Russian consul in Kalmar. In his early childhood he distinguished himself as a calm, pleasant and obedient child, with an early life-long passion for flowers. In his youth he revealed an extraordinary combination of both shyness and courage, which made him popular among his school-fellows, especially the girls. Self-discipline and a kind of curiosity which sometimes could show itself in a lust for experimenting was also typical for the young Ivar Kreuger, who could be lazy as well when he found something boring repetition. He passed his schooldays without much effort with fairly good remarks. In highschool his best subjects were maths and natural sciences, but he was also good at history - something which later on found expression in his reading numerous biographies and memoirs. Adversaries of Kreuger have not very convincingly tried to find criminal tendencies both in his schooldays and later, when he was studying at the College of Technology in Stockholm. The kinds of "bluffing" which they discovered could also be interpreted as a smart study technique, coherent with the sensible method of achieving the best possible result from the least possible effort. One example from his late studies in Stockholm: the task was to make a sketch for a steam engine. Simply copying someone else's sketch would have been easily discovered by the teacher. Therefore he borrowed the cylinder from one of his fellow-students' sketches and combined it with the butt from another one. Knowing that the teacher would not examine such details, whether they would fit together, he passed through. At the same tame he could sometimes reveal astonishing knowledge in some technical matters in which he was interested and it often happened that he amazed his fellow-students with his unusual ideas - also when it came to his often critical opinions about the professors and there teaching methods. He remained, though, somewhat reserved all through his life, which later on bestowed upon him an aura of mysteriousness; "The Silent One" he was called already during his college days. When IK was nearly 20 years old he acquired his degree as a civil engineer, of which he, indeed, was very proud. (He never adressed himself with something else, like Director or President, which is one more example of his lack of pomposity and superciliousness). After graduation in 1889 he wanted to "see the world" and left for the U.S.A. with less than 100 dollars in his pocket, something that quickly forced him to seek work. He managed to get one as an estate agent (land speculator) in Chicago, where he after three weeks of awesome effort finally earned his first money, which was $50. But he did not stay long in that business and left with the aim of acquiring new skills in his own profession as a building and constructing engineer. However for a short while he worked as a lineman on a railway building, then he signed a contract as a bridge constructor in Vera Cruz, Mexico. From that time we have a legend which tells us that IK in the harbour of New Orleans bravely rescued a little girl from drowning - something which granted him a medal with the inscription "Only a hero will give his life for others". The stay in Mexico did not last long. He had to return to New York due to the yellow fever, the after-effects of which, back in Sweden, liberated him from the military service. Having recovered from the disease IK for a couple of months worked at his father's and uncle's match factory in Mönsterås. It is said that Ivar Kreuger was really in love only once in his life; he had during his study period in Stockholm made acquaintance with a young Norwegian girl, and had even tried to convince her guardian in Drammen that he would be a good husband for the girl. This attempt was not so successful; he had to wait, because a young civil engineer without a fortune was in the eyes of the guardian a doubtful candidate for marriage. Suffering from the aftermath of the yellow fever an eye decease temporarily occurred, which made him think he was going to be blind. He wouldn't like his young lady to pass her days as the wife of a blind man, and wrote a letter to her, stating that he didn't love her any more. But when he eventually recovered he couldn't forget her and made an attempt to re-establish their relationship. His sister went to Drammen and talked to the girl, who turned out to have been so distressed by his breaking off of the engagement that she told his sister that in that very moment her feelings for him died forever. When IK some years later got the news of the too early death of his young lady he is supposed to have been crying in his bed - the only time he is seen to have expressed some deeper emotions. He remained a bachelor, content with temporary relations. He said he wouldn't have time enough to raise a family. In 1901 he went back to New York, where he again had some occasional jobs, until the moment when he found something challenging enough to have him stay for three years. That was in a building and construction firm, specialising in building skyscrapers - a job which really got his full attention. Once he noticed that something obviously was wrong with the calculations on the strength of material of the entrance and he proved it to the Director, who then had the sketch rewritten. IK soon gained reputation as a specialist in steel and concrete constructions and took an active part in building a lot of buildings both in the U.S.A. and in Europe. In 1904 he was asked by a London company to participate in a skyscraper project in Johannesburg - the Carlton Hotel. He accepted, but when the project for some reason was stopped for a while IK had to find something else in South Africa. At that time he and a friend of his made an investment, buying a small restaurant, which IK managed to run with good result, but his impatience sent him to India, then via Egypt to Paris and in June 1905 he was back in the U.S.A. where he, however, failed to repeat the previous success in the restaurant business and returned to building and construction. For the time being the building technique using reinforced concrete was beginning to gain ground and IK soon realized the advantages of this new method and started to implement it. But before that he had made acquaintance with the inventor of that method, Julius Kahn, and presented to him his concept of how to introduce this "Kahn-iron" in Europe. Kahn was impressed by the intellectual capacity of this young man and liked his brave and fresh ideas. In the London office of Kahn's company IK found out that another young Swedish engineer had asked about the permission to become its agent in Sweden. Ivar Kreuger, now a 28-year old cosmopolitan, got in touch with this man, who turned out to be Paul Toll, two years younger than him. Their meeting in Stockholm almost immediately led to the decision to co-operate. That was the birth of "Kreuger & Toll", which was started with a modest start capital - money from Kahn's Detroit company and a loan from Ilk's father. In spite of Paul Toll not contributing any money to the firm, they decided to share the profits equally. The first period for K&T was a difficult one: they had to overcome both the usual resistance when it comes to introducing something new and a lack of working capital. The real break-through occurred in the following year, 1909: the first building in the centre of Stockholm with the signature of Kreuger&Toll - a new chapter in Swedish building history opened. In connection with this project an illustrative story can be told, bearing witness to ilk's successful approach to business: a paragraph in the contract stipulated that fees of 5000 kronor be paid for each day of delay. Kreuger suggested that, similarly, a premium of the same size be given for each day they would catch up to the day of delivery. The future owners of the house gladly accepted this bid, hoping that this was something impossible to achieve. Kreuger, consequently , set up tarpaulins around the building, the builders were working in two shifts and IK even invented a special heating system to keep the workers warm during the cold winter. In spite of some neighbours' complaints to the Police authorities about unbearable noise - especially at nights - from the working site, the building was finished as much as two months before the contracted date. Kreuger & Toll participated in the construction of many major projects in Sweden: the famous Stadion and the Town Hall in Stockholm are two good examples of the competence of the firm of the two young engineers, which quickly grew and even expanded over its nation's borders; daughter companies were established in a number of European cities, including St. Petersburg in pre-Revolutionary Russia. In 1911 K&T was transformed into a joint stock company with an impressive capital of 1 Million Swedish kronor. In 1915 Kreuger founded the real estate company "Hufvudstaden", which quickly developed into one of the biggest real estate companies in Scandinavia and also an important contractor of Kreuger & Toll. At that time the building business had in fact gone over to the supervision of Paul Toll, who after the so called "Kreuger crash" continued business under a new name, having omitted the then slandered name of its dethroned cofounder. Before that happened AB Kreuger & Toll underwent a period of unprecedented growth and became something similar to a World Bank. When Ivar Kreuger was asked by a group of banks, whether he could organise a merger of the match factories in his hometown Kalmar and nearby, he was already a wealthy man, well established as a building engineer and was probably going to be offered a carrier as Director of the Mortgage bank. His four years younger brother, Torsten, who like his brother was an engineer with financial capabilities, had already refused to do the job and dissuaded his brother to accept this offering. However he finally did accept, and 1913 AB Förenade Svenska Tändsticksfabriker (United Swedish Match Factories) was formed. Ivar Kreuger rationalised the companies, squeezing costs, raising the quality etc. But he also discovered that something had to be done in the field of marketing and, secretly, started to buy one after another of the most important selling companies in the branch, which soon enabled the Kalmar-trust to outmanoeuvre its biggest competitor in Sweden, the match industry of Jönköping. In 1917 the Swedish Match Company (STAB) was eventually founded as a merger of the two match trusts of Kalmar and Jönköping and Ivar Kreuger was chosen Managing Director. He used the First World War experience to create what is called vertical integration and STAB soon controlled the whole chain of production and marketing of this little product - the safety match. The process of achieving a world-wide monopoly had started. That was not an easy thing, but in accordance with this vision of its Managing Director STAB began its enormous expansion. One important episode in this process was the founding of "International Match Corporation" (IMC) in the U.S.A., to which IK moved a great part of STAB's foreign assets, with a share capital of 28 Million Dollars. This historic event took place in 1923. Kreuger & Toll was still the principle company, functioning as the tool with which Kreuger financed not only the expansion of the match industry, but also a lot of other industrial and real estate investments. In 1925-26 the concern developed to become one of the biggest investment companies of the World. It was Torsten Kreuger who in Poland in 1925 managed to create a match monopoly with the participation of the Polish state. This agreement set a model to all of the monopoly arrangements which were to come: long term hard currency loans on reasonable conditions for the nation in question in return for monopoly rights on the production and marketing of safety matches. Thus, in this way K&T got interest bearing state bonds and was, at the same time, thanks to the monopoly agreement on matches, insured against inflation, because the prices of the products in question could easily be adjusted. In order to finance these substantial transactions the Kreuger companies issued large quantities of mainly B-stocks (a financial instrument, introduced by IK, with less voting rights than the A-stock) and so called participating debentures, which became very popular in the world's stock markets of the twenties and even remained so after the occurrences of Wall Street in 1929. The capital was mainly from the U.S.A. and was placed in good securities like state bonds and sound industrial objects. In the beginning the match industry was, of course, the most important one, but Ivar Kreuger had also discovered the potentials of other Swedish key industries like telephones, forests, mining and so on. IK had towards the end of his life started to turn his attention more and more to achieve telephone concessions all over the world, using the control over the well-known Swedish telephone company LM Ericsson. The accusations of Kreuger's creating fictitious assets are false. It was quite the reverse: many assets were undervalued and so-called `Goodwill´ was not used at all in the accountancy. But, no doubt, it was not an easy thing to achieve these monopolies; everything in connection with the negotiation, which in some countries meant giving bribes, had to be kept very secret in order to raise these huge amounts of money. The recession after 1929 made things much more difficult. Among all the state loans that were given by K&T, the French loan of 1927 is the most renowned one, due to its complete success for both parties involved. In order to stabilize its economy and thus save it from hyper-inflation France turned to the financial markets of the World, but the only sources which in spite of the prevailing distrust to French politics of that time could offer a loan of that size - $75 000 000 - was the Morgan group, based in the U.S.A. and Kreuger & Toll. The loan was finally granted by Kreuger at an annual interest rate of the state bonds of merely 5%, which was more reasonable than the 8% demanded by the Americans. In traditional Kreuger manner the whole deal was tied up to an agreement in the match industry, though in France IK was not able to create a monopoly. It is also interesting to note that K&T in its turn could achieve better credit agreements on the world's financial markets. The French economy quickly stabilized after this and the loan could be returned completely already in 1930, with a profit of $ 30 000 000 - money badly needed to finance K&T's biggest obligation ever, which was the loan to Germany of $125 000 000. It might have been a mere coincidence, but the day after K&T's announcement of its issuing this German loan "Black Friday" occurred on Wall Street, 28 October 1929. However, that did not break the confidence of Kreuger's company which was going to be very active until the forced crash in 1932. When Kreuger's match empire had reached its greatest size it enclosed as many as 250 plants in 43 countries and controlled 80-85% of the market. One of the biggest obstacles on the way to a world monopoly was the Soviet Union. Although Ivar Kreuger had pursued a number of negotiations with the Soviets the result was not the desired one. I K was simply not willing to co-operate on the terms offered by the Soviet negotiators, which would have meant unjust methods like dumping. Kreuger in his turn is said to have demanded the Soviets to pay back all of the debts of the previous regime, but they strongly refused to do this. An issue which, like many other things about this period, has not been researched properly, is the contents of the negotiations between I K and the Soviets, taking place in the Italian town Nice in April 1928: Ivar Kreuger is supposed to have offered in the name of a financial syndicate a state loan to the Soviet Union of an unprecedented kind - 1 Billion Dollars! The financial syndicate in question, led by I K, would in turn be given monopoly rights not only on matches, but on other products like tobacco as well, combined with the right to exploit mines. The Soviet ambassador in London, Krasin, who represented the Soviet Union in these negotiations, then suddenly died under mysterious circumstances and the whole thing came to nothing, but if this transaction had been executed history would surely have looked different, enabling a smooth transition of the Soviet economy, which was in a state of vacuum after the experiment of NEP had failed. The change of system that did occur at this time was, though, another one: Stalin was going create a state controlled planned economy in accordance with his theory of "socialism in one country". Stalin said of Ivar Kreuger that was not in the interests of the Soviet Union to encourage this man, whom he found "dangerous". Therefore every new monopoly agreement with Kreuger was seen by the Soviet politicians as a thorn in the flesh - both politically and economically, and they, consequently, sought to thwart Kreuger's plans by means of dumping their own low quality matches and even spreading false rumours and foul slander, often in collusion with some of their fellow-travellers in Western Europe. The German monopoly is the best example of this; for the Soviets this achievement of Kreuger meant that its most important export market disappeared at the same time as the Kreuger money led to a certain degree of economic stabilisation, which in its turn made things more difficult for a red revolution in the country. In this connection it is interesting to note that there was a secret co-operation between the Kremlin and Kreuger's financial competitors and antagonists in the West. Some people talk about a conspiracy, which is something that needs to be investigated more thoroughly. In the world's stock markets there was indeed a great deal of "bear" operations against Kreuger's companies. These actions were sometimes co-ordinated with the aim of pressing down the prices of shares in the Kreuger companies, thus obstructing I K's attempts to raise money for the many commitments of K&T. This was achieved with very risky methods and in some cases even by criminal means. In the light of Kreuger's own secret operations on the stock markets, making supporting purchases of K&T's papers, "blanking" operations were particularly dangerous, because when the delivery of the shares or debentures in question were going to take place, the speculators would have been forced to buy from for example Kreuger himself, who would have set the actual prices. This is called "a bear squeeze", and in the year of 1932 it would have been a really successful one if Ivar Kreuger had not been killed. In the end of March 1932, that is a couple of weeks after the death of Ivar Kreuger, a Swedish banker, A.W.Högman, paid a visit to Torsten Kreuger and informed him that he had some evidence proving that a big banking firm, Banque Daniel Dreyfus & Co, in Paris, had created a substantial decline of Kreuger papers by criminal means. Mr Högman had in the name of his firm in the Paris bank deposed as a security for a loan a big parcel of participating debentures in K&T, which in their turn illegally had been placed on the stock exchanges of Paris and New York, thus having made it more difficult for I K to raise money for K&T in the U.S.A. Mr Högman started a process against Banque Daniel Dreyfus & Co, but after having seen his own debts by the bank disappear just like that he suddenly took back his accusations. The prosecutor, though, continued with the case and sued some of those responsible, but it was never disclosed on whose orders these decoys had acted. It has been stated by suspicious minds that this Paris bank had an intimate kind of co-operation with Stockholms Enskilda Bank, the bank of Kreuger's mighty competitors, the Wallenbergs. Towards the end of his life I K also discovered that even some of his trusted fellow-workers had been engaged in criminal activities of this kind. In the autumn of 1931 the situation of K&T became difficult: some states had proclaimed a moratorium on all their foreign debts, the stock markets, especially the one in New York were, literally, flooded by Kreuger papers, which led to decreasing prices of shares and debentures and other unforeseen expenses. At the same time I K was bound to fulfil the commitments of the concern. He was very eager to maintain the good reputation of both himself and his companies. In December he went to New York in order to pursue discussions with his partners in the American banking firm, Lee, Higginson & Co, in the first place about the take-over of the Swedish mine of Boliden. In January he was interviewed by the American press and had a meeting with the American President, Herbert Hoover, to whom he expressed his views about the international economic situation and the relations between the U.S.A. and Europe. He was a proponent of free trade, free movement of capital and stable currencies. The "Kreuger plan" consisted of his dream of developing his world company, which would, he believed, to a large extent help statesmen and politicians prevent wars and spread well-fare all over the World. During his stay in New York this time I K was struck by two set-backs: firstly in Sweden and then abroad disinformation was being spread about the Boliden mine, claiming it was worthless and, secondly, the co-operation in the telephone industry between LM Ericsson and the American company "ITT", partly owned by the Morgan group, reached a dead end and Morgans wanted I K to pay back their investment in LM Ericsson, $11 000 000. Immediately! Kreuger was at this time helped by the Swedish Prime Minister, C.G.Ekman, who got the Central Bank of Sweden (Riksbanken) to take part in a bank consortium in order to save K&T from a liquidity crises. I K, in his turn, managed to get a half year prolongation from ITT. When Ivar Kreuger after this tough fight in America returned to Europe, on the ship "Ile de France" the worst problems were overcome and on the voyage I K acted as usual, showing no signs of mental distress. He was in good spirits and positive about the future, which he also some days later in Paris expressed to his brother in a phone call. On March 11 I K was met in the harbour by his friend and right-hand man, Krister Littorin. From 2 o'clock there was a meeting with some of their co-workers, who were anxious to find out as much as possible about the financial position of the concern. It was during this meeting I K was accused of lying about the Italian bonds, stating that the papers lying in his private safe were real. In this case I K must have meant that they indeed represented real expenses to the Italian government, but the whole thing was connected to the Italian match monopoly, which was going to be ready and announced within 20 days. So I K could remain calm, knowing that substantial assets soon would be liberated, both through the Italian match monopoly and the Boliden mine. At 4 o'clock there was another meeting at Hotel Meurice with Littorin and the Swedish Banker Oscar Rydbeck. They decided to meet again the following day at 11 o'clock. Rydbeck later on claimed that Kreuger and Littorin left him not before 6 o'clock. That is important, because sometime between 4 and 5 this very afternoon a man entered a weapon shop in Paris and bought a hand-gun in the name of Ivar Kreuger, which he carefully wrote on a form in the shop. He even asked about simple things like how the gun, a Browning, was to be loaded, obviously not knowing that Ivar Kreuger in fact was very good at weapons. After this purchase this man returns to Avenue Victor Emanuel III No 5, probably to the empty apartment below Ivar Kreuger's. The wife of the janitor confused him with Mr Kreuger -"the engineer" - which also was going to happen a second time, on the next day, after the murder of Ivar Kreuger. Before Miss Bökman, Kreuger's private secretary, went out that Saturday, March 12, she reminded him of the meeting which was supposed to take place at 11 o'clock. When she and Krister Littorin eventually came to the flat at 1 o'clock, they saw Ivar Kreuger, lying in his bed with a gun in his left hand. Littorin was immediately convinced that his friend had been murdered, but Miss Bökman said at the Police station that Ivar Kreuger had committed suicide. The Police in Paris were busy this day, during the funeral of the French statesman Briand, and accepted this version and did not bother to perform a proper investigation at the scene of crime. An array of facts clearly indicates that Ivar Kreuger was murdered and that it was arranged as if he had shot himself. The financial markets of the World were in a state of shock at the news of Ivar Kreuger's death. The stock exchange in Stockholm was closed for a week and the government announced a moratorium for K&T. But already on the day after the shot in Paris, on a Sunday, a young lawyer, Hugo Stenbeck, visited the Director of K&T, Erik Sjöström, and offered skilful experts on law to help to clear up the situation. Stenbeck had been working for the SEB and the Wallenberg family and it was obviously they who held the reins even this time. On March 16 Hugo Stenbeck went up to the Minister of Finance, Felix Hamrin, alleging falsely that the board of K&T had set up a commission to investigate the affairs of the concern and that the members of the commission were already chosen, as if it was an accepted fact. Somewhat later on the same day Stenbeck paid a visit to two of board members of K&T, this time stating that it was the government which had appointed this commission. The board members negatively reacted on the choice of the commission's members: apart from Martin Fear from Riksbanken there were only representatives of other banks, apart from the one of Kreuger's companies, Skandinaviska Banken. The commission was in the beginning financed by one of these, i.e. the Stockholms Enskilda Bank, which was heavily represented in the commission by Jakob Wallenberg. This self-elected commission soon took the name "The Royal Commission" and, in spite of the protests of K&T's board members, who were efficiently outmanoeuvred, the commission soon cunningly was able to control the course of events in the light of the prevailing panic in Sweden at that time. On March 18 the two young lawyers Stenbeck and his colleague Ohlsén met Miss Bökman and in the name of the "Royal Commission" broke the seals of Kreuger's belongings from Paris and got hold of important documents and even Ivar Kreuger's diaries, some of which later on were burnt. The same day the "Royal Commission" declared that the board of K&T not longer had the right to make any decisions and that its employees be dismissed, which clearly indicates that the purpose was not the reconstruction of the concern, but its bankruptcy and the following partition of the enormous assets in Aktiebolaget Kreuger & Toll. On March 23 the commission summoned the firm of auditors Price, Waterhouse & Cie in Paris and its representative Mr E.Seatree. (That was indeed a fine name, but the Paris firm, engaged and financed by SEB, had nothing but the name in common with the renowned firm in London.) Only two days later the commission stated that that the financial position of the company would necessitate its bankruptcy, which was strongly supported by Mr Seatree in his report of April 4. This piece of news of course added a lot to the panic of the stock exchanges of the World. On April 10 Mr Seatree delivered the next shock: the Italian bonds, the drafts of which had been found in Ivar Kreuger's private safe. Now his dethronement was complete. Not being able to defend himself Ivar Kreuger's reputation was blackened through the statement that he was about to have counterfeited Italian bonds of £21 000 000. Mr Seatree, though was not sure about the currency in question, Liras or Pounds, but the whole thing was evident: Ivar Kreuger was a gigantic swindler! This was trumpeted forth by the newspapers and shares of both the Swedish Match Company and LM Ericsson were sold for nearly nothing. Public opinion wanted those responsible punished and a number of trials were later on held against Kreuger's "accomplices", who were convicted, imprisoned and forced to pay compensation. The "Royal Commission" wanted the moratorium of K&T revoked in order to declare it bankrupt, but the Prime Minister Ekman resisted this. A general meeting with shareholders in K&T was held, which also strongly opposed bankruptcy and adjourned its meeting. The commission then turned to one of the Directors of K&T, the major Nils Ahlström, who, if I K had been alive, would have lost all his powers in the company and who had been provided with a kind of certificate that he did not understand anything of the company's affairs. This weak man was persuaded to sign the bankruptcy petition of Kreuger & Toll, which was not judged by the Court whether it was reasonable or not, because it arose from the company itself. Even Ivar Kreuger's estate and the American subsidiary IMC was quickly declared bankrupt, in the last case also at its own request; a debt of 5 Billion kronor to its mother company had been constructed - a debt of which only 0,2% later on became valid. Jacob Wallenberg even wanted STAB bankrupt. But the Wallenbergs could buy it cheaply anyway after the match monopoly had been broken into splinters. The bankruptcy of these two holding companies were in fact not necessary at all. Serious investigations show that in May 1932 even the liquidity crisis was a thing of the past. All of the subsidiaries were able to exist and flourish without any capital added at all from the new shareholders, who were able to buy them very cheap, partly due to heavy undervaluation by the official liquidators. One typical example will show this: the forest company SCA, founded by Kreuger in 1929 and to which K & T over a couple of years paid as much as 100 Million kronor was valued to merely 4 Million kronor and sold for 360000 kronor including the take-over of the company's debts, which SCA itself was responsible for. When it comes to the protection of the interests of the owners of shares and debentures of Kreuger & Toll the procedure of the official liquidators was scandalous. Many people committed suicide after the "Kreuger crash". But, of course, there were winners, among which the Wallenberg dynasty, not surprisingly, gained most. The Prime Minister Ekman, who was critical of the activities of "The Royal Commission" and had to resign from his post, after having lied about the reception of some money from Ivar Kreuger to support Ekman's liberal party during the election campaign. The person who without doubt lost most from the "Kreuger crash" was Torsten Kreuger. He was selected as a scapegoat and was imprisoned for fraud on very dubious grounds. He had to pay big damages and was deprived of a great deal of his properties - even with illegal methods. He was later on in his life engaged in a stubborn struggle, supported by many renowned men, many of whom were experts on law, to get a review of his case from the Supreme Court. But in vain: a review of this absurd sentence would have implied a great loss of prestige for Sweden as a law-abiding society. It is about time to get rid of a couple of other delusions about how things have been arranged in this country since the Kreuger époque, during which Sweden was an economically great power thanks to the deeds of a great man with the name of Ivar Kreuger.