Railroad fraud, 1870, Honduras

In case anyone reads the story of Briggs in Pearl Lagoon and thinks it preposterous, here is a story of stock fraud from Honduras and Europe – complete with kickback diamonds and money-laundered racehorses!

From “An early global crisis: the financial and commercial collapse of 1873 and its impact on Latin America,” by Carlos Marichal (El Colegio de Mexico, 2011):

“For Honduras, the loan deals of 1867, 1869 and 1870 were so outrageous that by contrast the Costa Rican transactions appeared positively judicious. Like their neighbors, the Honduras authorities were intent upon stimulating economic progress through the construction of railways.”  . . .

“By 1870 the large volume of unsold bonds from the 1867 and 1869 transactions led the European bankers to propose a new loan for £ 2,700,000. Once again Bischoffsheim [Bischoffsheim, Goldsmith Bankers] assumed responsibility for the issue. This house worked with a singularly mischievous speculator named Charles Lefevre who, it was later found, had a criminal record in France for fraudulent business dealings. Lefevre hired between fifty and one hundred agents to create an artificial market at London for the Honduras bonds and soon managed to sell off a large proportion of both the old and new loan paper at relatively high prices. According to an embittered former clerk in his financial house, Lefevre bought the cooperation of the Honduras minister in England with a gift of £ 4,000 in diamonds for his wife; simultaneously, the financier remitted a gratuity of £ 10,000 to Medina, the president of the Central American republic.”

“The net proceeds on the bond issues of 1867, 1869 and 1870 totalled L 2,695,000. About one quarter of this sum went for constructing 57 miles of the projected railway, another 20% to the bondholders to pay interest charges in advance, and some 15% to the Honduras treasury for sundry expenses. Yet almost 1,000,000 pounds sterling still remained unaccounted for. According to the [British] parliamentary enquiry of 1875, three quarters of this huge sum constituted the booty of Lefevre (who apparently spent a great deal of it on racehorses), while the remainder went into the pockets of Dreyfus [the firm of Dreyfus Fréres of Paris] and Bischoffsheim.”

http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=19&ved=0CFUQFjAIOAo&url=http%3A%2F%2Fwww.unige.ch%2Fses%2Fihise%2Fresearch%2Fsar%2FMarichal_2011.doc&ei=VJVJT6zaNMXj0QHW16j8DQ&usg=AFQjCNFTWZWtGam_NrRACfA9HRHSLvw1-Q

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