Jabez Balfour and the Liberator Building Society
The wonderfully and, as it turned out, appropriately named Jabez Balfour (1843 – 1916) is probably one of if not the greatest fraudster in British financial history. His first name – it is Hebrew for one who causes pain and sorrow – was a popular moniker until its lustre was inevitably tarnished by its association with Balfour. Ostensibly a pillar of society – he was a member of parliament for Tamworth (1880 – 1885) and Burnley (1889 – 1893) and the first mayor of Croydon – Jabez made his mark in financial circles by encouraging the working man to save hard and buy their own home.
The Liberator Building Society, of which Balfour became managing director at the age of 37, was positioned to improve the fortunes of the down-trodden. Prominent non-conformist ministers were appointed to the Board to give it respectability and to encourage their flocks to invest. Profits, Jabez claimed, would go towards funding house building and improving living conditions of the poor.
By 1888 the Society had amassed assets of some £750,000 and whilst some of the monies were used to fund good works most of it funded the purchase of properties owned by Balfour at exorbitant prices or to fund wildly speculative projects. One such scheme was to turn mudflats in the Isle of Wight into an upmarket seaside resort.
The final decade of the 19th century heralded a downturn in the economy, hitting speculative ventures and causing investors to look more closely at where they had placed their monies. The press, particularly the Economist and the Financial Times, took a particular interest in the fortunes of the Liberator. Their investigations revealed that the society together with its connected companies mainly traded with each other and overvalued assets were assigned to whichever company was about to announce its trading results, to exaggerate the strength of balance sheets and increase the dividends payable. The companies’ auditors were often impoverished non-Conformist ministers who glad of a few bob signed the accounts off on the nod. Balfour’s own auditor was his tailor!
Balfour might have got away with his fraud had economic conditions not deteriorated. In 1892 rumours swept the City that the Liberator was in trouble and in October it was forced to shut its doors, leaving at least 25,000 depositors ruined. Half were over 60 years of age with limited means. A 70-year old spinster from Hertfordshire went mad and a bookseller in Peckham cut off his own head. Several directors were arrested but Balfour had scarpered – to Argentina.
Thanks to the perseverance of Inspector Frank Froest of Scotland Yard Balfour was kidnapped after 13 months on the run and returned to Blighty to stand trial. Sentencing him to 14 years in November 1895 – he served eleven – the judge said “No prison doors can shut from your ears the cry of the widow and orphan whom you have ruined”. The Economist was more sententious “to the worldly-wise, the mixing up of religion and business and the public appeals for Divine guidance in company matters, are regarded ..as marks of the Pharisee and as danger signals which it would be unwise to ignore. Balfour’s conduct would have been bad enough under any circumstances, but the hypocrisy which permeated it from beginning to end made it infinitely more contemptible than if he had been an ordinary financial scoundrel”.
Balfour wrote a best-seller, My Prison Life, upon release and in August 1915, at the age of 71, went to work in a tin mine in Mandalay. He was sent home, the manager fearing the heat would kill him, and he died of a heart attack on the London to Fishguard train six months later en route to another mining job.