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5 massive British frauds you've probably never heard of

Fraud. Sometimes it feels that not a week goes by without a fraud or scam hitting the headlines. But this is not a symptom of our economic times.

No, you may be interested to learn of a few of Britain’s lesser-known, large-scale frauds. While all of these swindles have been surpassed in pure money terms by recent corporate scandals, these earlier cases had just as big an impact at the time, even leading to major changes in the law.

[Related feature: A classic scam makes a comeback]

Republic of Poyais
The Poyais fraud was a major scandal in the 1800s. This fraud was certainly the most audacious and imaginative of all, as the perpetrator, Gregor MacGregor, created a fictional country in Central America.

MacGregor served in the British army and was involved in various operations in the Americas. During his travels, he visited the coastal areas of present-day Honduras and Belize. MacGregor claimed to have received a land grant from a local native leader, and upon his return to London, announced the new nation of the Republic of Poyais.

MacGregor created a flag, a coat of arms, currency and other trappings of a sovereign nation and then proceeded to sell off land to investors and settlers in the London markets. He also issued sovereign debt backed by the promise of this new nation, and induced settlers with glowing accounts of the capital city and the fertility of the soil.

The first group of settlers arrived in Poyais in 1823, and found nothing except dense jungle and abandoned wood shacks. Three other shiploads of settlers arrived over the next few years and found a similar situation. Disease and hunger soon worked through the settlers and almost 200 colonists died.

The news eventually reached London and the authorities arrested MacGregor. While awaiting trial, he fled to France and attempted the same Poyais scam on French investors.

MacGregor ended up in Venezuela, where he helped the nation in its fight for independence and for his efforts was awarded a pension and the title of general by the newly established government.

Video: How your friends are turned into scammers

Thomas Brerewood
The story of Thomas Brerewood, a London merchant living in the 18th Century, acts to remind us that the fraud scandals with which we are confronted with nowadays are certainly not new.

In 1705 Thomas Brerewood attempted to pull off a massive bankruptcy fraud. Despite being relatively wealthy, when he was in his 30s he became involved in a fraud known as the Pitkin Affair. In February of 1705, Thomas Brerewood met with his business partner Thomas Pitkin in the Swan Tavern in the heart of the mercantile district of London. The men met to plot a bankruptcy fraud that, when discovered, would rock England.

The details of the fraud itself are fairly simple. Pitkin, using money provided by Brerewood, paid off his existing creditors early to give the impression that he was awash with cash in the wake of a profitable marriage.

Having acquired the reputation for wealth, Pitkin proceeded (on Brerewood’s instructions) to purchase a huge quantity of merchandise on credit. History suggests that his debts were anything up to £100,000, which considering a wealthy merchant’s salary – around £600 a year – is a sizeable sum indeed. Figures from the Bank of England show that, in today’s money, his debts would be worth well over £18 million.

The plan required Pitkin to sign over his estate to Brerewood, which would ensure that when the creditors tried to reclaim the debt – there would be nothing left. But the plan did not go as they had hoped. When Pitkin’s creditors heard he was missing they became suspicious and petitioned the House of Commons for a public act condemning Pitkin.

Unravelling the details of their scam required three large insolvencies and four acts of Parliament over the course of more than 40 years. However, Brerewood's ability to negotiate successfully with his creditors resulted in him being pardoned for his part in the fraud, and he was fully discharged by 1709.

[Related story: Fraud warning: new card scam nets £1m in four months]

Jabez Balfour
Jabez Balfour began as an upstanding member of his local community. A member of Parliament and a charter mayor he was heavily involved in politics and public life.

Balfour then turned his hand to business ventures, beginning with a building society, 'the Liberator', aimed at local people – offering them house ownership on exceptional terms and winning praise for his work.

However, as it transpired in 1892, Balfour had not been passing this money to home buyers. Instead, he had passed the home buyers money to property companies, and purchased a range of properties for a high sum.

When his crimes were discovered, Balfour fled the country. Tragically, many of those he swindled were left with nothing and some killed themselves. He became as hated as he had once been revered and was sentenced to 14 years for his fraud.

John Thomson
John Thomson was warehouse-keeper to the Charitable Corporation in 1727, but participated in a fraudulent scheme borrowing against its assets.

The Charitable Corporation was a pawn broking company which made loans against goods. Thomson began speculating and investing in other firms – investment that was financed with the Charitable Corporation’s money which had been fraudulently borrowed against fictitious pledges.

The speculation was successful for a time, but when in 1730 the Corporation of London petitioned for the regulation of the Charitable Corporation, the fraud was uncovered and Thomson fled to France.

William Chaloner
Born in Warwickshire in the mid-17th century, William Chaloner made a career as a forger and for a time used his profits to live a luxurious life – even being able to buy a large home in Knightsbridge.

He started off his criminal career in Birmingham as a young boy, where he discovered he had a natural gift for coin forgery and learnt to make the small silver 'groat', worth about four pennies, quickly. However, this small time counterfeiting was not enough for Chaloner and he moved to London where successfully forging lucrative English guineas saw his profits soar.

But at this time, another famous character from history was holding the post of Master of the Royal Mint. Sir Isaac Newton had a shrewd eye for fakes, and brought this notorious forger to justice. As a result, Chaloner was hanged for his crimes on March 16, 1699.

[Related link: How to spot a fake £1 coin]

The bottom line
As you can see, fraud has a long and extensive history, and despite the best regulatory efforts of the law, swindlers continue to attempt to get one over on companies and individuals alike.

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