fraud in history

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More Fool Me

Blackmail is a form of extortion, and becomes fraud when either the incriminating circumstances have been set up for the express purpose of getting money out of the victim, or the victim has done nothing, but can’t prove it.

Both are variants of the badger game, possibly so called because of the nasty sport of badger baiting, where the poor innocent badger is attacked by a ruthless pack of dogs for the entertainment of the crowd and the enrichment of the animal’s owners and canny gamblers on the outcome.

The classic badger game

The essence of the trick is to lure the victim into behaviour of which they are ashamed, or that will get them into hot water with family or employers.

The classic ploy involves two fraudsters. One sets the trap, and the other springs it.

A Good Samaritan meets a badger

I was reading a case in point in the Old Bailey records. In the mid-nineteenth century, an immigrant from Germany sought financial help from a well known member of the German expatriate community in London. Poor woman. Her husband needed money in order to travel to join her.

Once she received the first handout, she needed another. She couldn’t live on air until her husband arrived, after all. Then she discovered that she was with child. Then she was ill. Then the child was ill. And all the time, her husband was delayed and the philanthropist continued to provide funds. Until the day that she threw herself into his arms to express her undying gratitude. Just as her husband burst into the room and declared himself wronged.

The philanthropist then faced a demand for even more money. Far more money. A thousand pounds would soothe the wounded feelings of the devastated husband.

Unfortunately for the fraudsters, the philanthropist was made of stouter stuff than they expected. He laid an information with the police, and the couple were arrested, tried, and convicted.

Of course, he must have been confident about his reputation, and the record does not show whether he had a loyal and trusting wife, was a single gentleman, or slept on the couch for the next year.

A single trick with countless variations

You can imagine the many variations on the ploy, especially in the straight-laced moral environment that was the public face of the Victorian era. Embarrassment, marital disharmony, and social ostracism were all weapons in the hands of the fraudster.

Nothing was off-the table apparently as a potential con:  inappropriate sexual advances, child pornography, bizarre fetishes, sexual or otherwise, sexual harassment in the workplace, or professional misconduct (those are but a few).  One that gained national attention via the August 25, 1930 edition of Time magazine involved a “sick” woman visiting a doctor, who after describing symptoms that would require her to disrobe, would claim misconduct.  Sometimes an “outraged husband” would burst into the room and threaten the doctor with criminal charges or a lawsuit. (Sharon Hall on Felonious Females)

And there was worse. When acting on same-sex attraction was punishable by death, playing the badger game could be a very lucrative activity for the fraudulent lover and that lover’s partner. Acquire a set of incriminating letters, and the victim had no choices beyond paying up, killing the fraudsters, or fleeing the country.

And the badger game still worked if the victim was poor but had wealthy relatives who cared about their family reputation. “Your grandson has compromised my daughter and the problem will go away for ten thousand pounds.”

Or perhaps the victim was innocent but couldn’t prove it. To save his reputation, he might well pay up anyway. “This is your baby and I am going to tell your wife.”

Today, badger games have moved to social media. Which you might want to keep in mind next time you’re tempted to share a revealing photograph with an intimate friend.

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Fool Me Once: Fraud in history

The South Sea Company was founded to raise money to fund the national debt, and granted a monopoly to trade with South America, at that time in the hands of Spain. Trade was never likely to take place, but that didn’t prevent stock from rising greatly in value. A few people made fortunes from insider trading, using their knowledge to purchase debt in advance. A considerable number were ruined.

Fraud was not invented with the Internet. Right through history, people have come up with scams and schemes to extract money from unsuspecting people in return for pipe dreams that evaporated when the confidence trickster slipped away into the night. Or overreached and was caught, since throughout history the first to be meshed in a con artists rhetoric is often the fraudster himself.

We chance to have evidence of fraud from ancient Mesopotamia: a doctored cruciform monument from four thousand years ago, that attempted to convince the king that the temple revenues were higher than they were. Undoubtedly, the scribe was not the first of human kind to apply what has been kindly called ‘creative accounting’. Fraud is as old as civilization.

I’ve been reading about historic cases of fraud as background to a couple of stories.

The secret Buried Treasure scam

Don’t tell anyone, but I can let you in on a pirate treasure.

Some of the biggest schemes in history have whole books written about them. The Spanish Prisoner letters of the late eighteenth century preceded Nigerian scams by two hundred years, but used the same basic psychology.

In essence, the story told was some version of the following. A wealthy person of high estate (possibly related to the ‘mark’, the person being targeted as victim) is falsely imprisoned in Spain, under another identity. He knows the whereabouts of buried treasure, which he can use to ransom himself free, but trusts no one but the mark to retrieve the treasure. If the mark comes to Spain with sufficient money for travel, the prisoner will hand over the information needed to find the treasure, and will share the proceeds fifty/fifty.

If it looks too good, it almost certainly is

The buried treasure idea is a flexible variant of the get-rich-quick scheme category of fraud, but the past is also littered with countless investment propositions that looked too good to be true, and were. Some fraudsters offered incredible profits from non-existent or failing development schemes, diamond mines, or ship cargoes. Others, more cautious, promised profits just above the market rate, funding returns to early investors with money from later investors.

Some schemes, such as the eighteenth century’s South Sea Bubble, reaped millions, and changed governments and economies. Others affected only a few people, but ruined lives, all the same.

And if you like my canal, I have a bridge I can sell you

In one case in Old Bailey online, the scheme may have begun honestly enough. The solicitor at the heart of it was investigating whether to reopen a canal. As came out at the trial, he very quickly had a report from an engineer to say that the cost would outweigh the return. That didn’t prevent him from convincing his client, a local widowed bootmaker, into investing her life savings: two thousand pounds (around two hundred thousand in today’s dollars) for a promised return of up to ten thousand. The woman didn’t have all the money, so gave a quarter up front and the rest in small amounts, given to the fraudster.

The fraud came to light when the widow was presented with a claim for five thousand pounds from someone who held a paper purportedly signed by her.

Fool’s gold

One hundred and fifty years on, the site of the Great Diamond Hoax of Wyoming doesn’t look like much.

Another variant is ‘salting the mine’. Want to get rid of an old defunct tin mine in Cornwall? Place some rich tin ore in an appropriate place and let your mark discover it. It been working since at least Roman times.

These were all versions of the get-rich-quick scam. Read on over the next few weeks for Persuasion tricks,  Extortion, and Gold-brick scams.