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 Financial Scams and Scandals

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PostSubject: Financial Scams and Scandals   Wed 28 May 2014, 12:49

Throughout history, there have been a whole variety of frauds and scandals perpetrated by people from the naïve to the downright dishonest that have bankrupted institutions and individuals and destroyed reputations and careers.

This first one is The Marconi Scandal of 1912, in which senior Government figures were alleged to have used insider information on the awarding of a major Government contract, to buy shares;

http://en.wikipedia.org/wiki/Marconi_scandal

Punch's view of the matter;

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PostSubject: Re: Financial Scams and Scandals   Wed 28 May 2014, 12:54

William "Boss" Tweed;

Corruption

After the election of 1869, Tweed took control of the New York City government. His protégé, John T. Hoffman, the former mayor of the city, won election as governor, and Tweed garnered the support of good government reformers like Peter Cooper and the Union League Club, by proposing a new city charter which returned power to City Hall at the expense of the Republican-inspired state commissions. The new charter passed, thanks in part to $600,000 in bribes Tweed paid to Republicans, and was signed into law by Hoffman in 1870. Mandated new elections allowed Tammany to take over the city's Common Council when they won all fifteen aldermanic contests.

The new charter put control of the city's finances in the hands of a Board of Audit, which consisted of Tweed, who was Commissioner of Public Works, Mayor A. Oakey Hall and Comptroller Richard "Slippery Dick" Connolly, both Tammany men. Hall also appointed other Tweed associates to high offices — such as Peter B. Sweeny, who took over the Department of Public Parks — providing the Tweed Ring with even firmer control of the New York City government and enabling them to defraud the taxpayers of many more millions of dollars. In the words of Albert Bigelow Paine, "their methods were curiously simple and primitive. There were no skilful manipulations of figures, making detection difficult ... Connolly, as Controller, had charge of the books, and declined to show them. With his fellows, he also 'controlled' the courts and most of the bar." Contractors working for the city – "Ring favorites, most of them – were told to multiply the amount of each bill by five, or ten, or a hundred, after which, with Mayor Hall's 'O. K.' and Connolly's indorsement, it was paid ... through a go-between, who cashed the check, settled the original bill and divided the remainder ... between Tweed, Sweeny, Connolly and Hall".

For example, the construction cost of the New York County Courthouse, begun in 1861, grew to nearly $13 million – about $178 million in today's dollars, and nearly twice the cost of the Alaska Purchase in 1867. "A carpenter was paid $360,751 (roughly $4.9 million today) for one month's labor in a building with very little woodwork ... a plasterer got $133,187 ($1.82 million) for two days' work".
Tweed and his friends also garnered huge profits from the development of the Upper East Side, especially Yorkville and Harlem. They would buy up undeveloped property, then use the resources of the city to improve the area – for instance by installing pipes to bring in water from the Croton Aqueduct – thus increasing the value of the land, after which they sold and took their profits. The focus on the east side also slowed down the development of the west side, the topography of which made it more expensive to improve. The ring also took their usual percentage of padded contracts, as well as raking off money from property taxes. Despite the corruption of Tweed and Tammany Hall, they did accomplish the development of upper Manhattan, though at the cost of tripling the city's bond debt to almost $90 million.

During the Tweed era, the proposal to build a suspension bridge between New York and Brooklyn, then an independent city, was floated by Brooklyn-boosters, who saw the ferry connections as a bottleneck to Brooklyn's further development. In order to ensure that the Brooklyn Bridge project would go forward, State Senator Henry Cruse Murphy approached Tweed to find out whether New York's aldermen would approve the proposal. Tweed's response was that $60,000 for the aldermen would close the deal, and contractor William C. Kingsley put up the cash, which was delivered in a carpet bag. Tweed and two others from Tammany also received over half the private stock of the Bridge Company, the charter of which specified that only private stockholders had voting rights, so that even though the cities of Brooklyn and Manhattan put up most of the money, they essentially had no control over the project.

Tweed bought a mansion on Fifth Avenue and 43rd Street, and stabled his horses, carriages and sleighs on 40th Street. By 1871, he was a member of the board of directors of not only the Erie Railroad and the Brooklyn Bridge Company, but also the Third Avenue Railway Company and the Harlem Gas Light Company. He was president of the Guardian Savings Banks and he and his confederates set up the Tenth National Bank to better control their fortunes.
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PostSubject: Re: Financial Scams and Scandals   Wed 28 May 2014, 12:59

Reports of the Emperor's demise proved to be exaggerated;

http://en.wikipedia.org/wiki/Great_Stock_Exchange_Fraud_of_1814
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PostSubject: Re: Financial Scams and Scandals   Thu 29 May 2014, 10:14

A scandal which involved the French Court in the run up to the Revolution;

http://en.wikipedia.org/wiki/Affair_of_the_Diamond_Necklace
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