Although now a largely forgotten figure, Jabez Spencer Balfour was "perhaps the greatest financial fraudster in British history" or, as some would have it "a fat, devious bastard"; the Victorian equivalent of Robert Maxwell.
'A free home makes a free man'
Born at Croydon in 1843 and named after his godfather, the Reverend Jabez Burns a nonconformist minister, his father James was a House of Commons messenger, whilst his mother Clara was a noted temperance campaigner and author of Morning Dewdrops, or, The Juvenile Abstainer. Thus Jabez was raised in an evangelical Nonconformist background, and grew up to be devoted to the twin causes of temperance and the Liberal Party.
In June 1868 Jabez founded the Liberator Building Society, a name deliberately chosen to echo that of the Liberation Society, the principle body campaigning for the rights of nonconformists against the privileges afforded to the established Church of England. Adopting the motto 'Libera sedes, liberum facit', the Liberator sought deposits from ordinary hard-working chapel goers and wrapped its operations in a cloak of pious sanctity. A prayer was said at the beginning of the Society's board meetings, whilst dissenting ministers were recruited to act as agents for the Society, and solicited deposits from their flock as they appealed to their notions of progress and self-help.
The Liberator grew at an astonishing pace; its assets reached £70,000 in 1871, £500,000 in 1875, and by 1879 it had overtaken the Leeds Permanent Building Society to become the largest building society in the country, earning its founder the title of the 'Great Liberator'. On the back of this growth Jabez and his coterie of hangers on known as the 'Croydon Capitalists' built up a diversified and interlocking group of companies involved in such activities as construction, transport and mining which included his own pet bank, the London and General Bank.
Now a successful and well respected businessman, Jabez ventured on a political career, and in 1880 won election as the Liberal MP for Tamworth. Then as always, Jabez campaigned on a temperance ticket against the brewery interest; although as his Conservative opponents were always keen to point out, his prodigious girth and red face rather indicated that he was something of a hypocrite, as indeed he was; although to be fair to Jabez, he rarely touched beer, preferring to drink champagne.
Tamworth was however a little far from Jabez's preferred base of operations in London, and the constituency was about to disappear in a boundary re-organisation in any case. Thus he turned his attentions to his home town of Croydon. In 1883 he endeavoured to make himself the very first Lord Mayor of Croydon, despite the fact that he didn't even have a seat on the council and succeeded in being nominated as the Liberal Party candidate for the borough. Sadly he lost out to his Conservative opponent in the 1885 General Election, and while the local Conservatives celebrated the occasion by marching past his house with a band playing the Dead March from Saul
As a consequence he gave up on the residents of Croydon and sold his impressive house on the Wellesley Road and preferred to live elsewhere in London and even acquired more or less the whole village of Burcot near Abingdon in Oxfordshire as his country retreat. His political ambitions remained however and in 1889 he won re-election to the House of Commons, this time for Burnley where he became very popular, thanks to his generosity in donating thousands of pounds to 'good causes' and his lavish entertainment of local worthies.
The fall of the Great Liberator
Although Jabez posed as a champion of the common man, the funds deposited at the Liberator where not, as might be supposed, used to finance the purchase or building of homes for ordinary people. Rather they were used to finance his predilection for grand projects such as the Hotel Cecil and the Hyde Park Hotel in London. However as was soon to become all to clear his entire business empire was built on deceit; the declared profits were an illusion and nothing more than mere accounting entries. The nature of the fraud perpetrated by Jabez was fairly straightforward; it simply involved moving assets between his various companies at inflated prices, allowing the selling companies to declare paper profits and thus permit the payment of large bonuses to Jabez and his cronies and handsome dividends to the shareholders. (Which of course, is same basic method later famously adopted by Enron, although they were forced to be slightly more devious in disguising what they were up to.)
In 1889 a downturn in the economy put his businesses under increasing pressure; as real profits fell, Jabez's companies increasingly resorted to fraud to maintain the outward appearance of commercial prosperity. By 1892 both the Financial Times and The Economist had begun to question the valuations placed on the assets that appeared on the balance sheets of Jabez's companies. This led to a run on the London and General Bank which was forced to close its doors in September 1892, triggering a chain reaction which led to the rapid collapse of the whole deck of cards and bringing down the Liberator Building Society.
It is estimated that Balfour's various businesses collapsed with combined debts of some £7m, the equivalent of around £500m in today's money, although it was the collapse of the Liberator Building Society that had the greatest impact, as thousands of people lost their life savings, many of whom were prompted to commit suicide. Having once been feted as the Great Liberator, Jabez now found his effigy being burnt at the Bonfire Night celebrations of 1892.
Initially Jabez resigned as an MP, ostensibly to devote himself full-time to rescuing his failed companies, in reality to lay the ground work for his escape. By the time the authorities had realised the nature and extent of the fraud and issued a warrant for his arrest, Jabez Spencer Balfour was nowhere to be found.
Jabez's Argentine adventure
Over the Christmas and New Year of 1892-93 there were a flurry of sightings of Jabez from around the world, but the man himself eluded the authorities. Jabez had in fact taken passage on a steamship bound for Argentina in December 1892, and in March 1893 he was discovered living in a suburb of Buenos Aires with Ethel Sophie and Lucia Maria, the two daughters of his former business associate Henry Freemen. Although nominally his wards, and very much younger than the fifty-year old Jabez, they appeared to be happily living together in a menage-a-trois.
Jabez had selected Argentina as his bolt hole in the belief that it had no extradition treaty with the United Kingdom. He was wrong as it happens, there was an extradition treaty, it simply hadn't been ratified as yet. When Jabez discovered his error he left Buenos Aires for the town of Salta close to the Chilean border, where he ingratiated himself with the locals. He subsequently managed to frustrate the British government's attempts to have him extradited by relying on the Argentinian law that prevented anyone from leaving the country if there was litigation outstanding against them; thus Jabez simply arranged to be sued at appropriate intervals by his cronies. Whenever the courts in Buenos Aires made an order for his extradition, it would be struck down by the local authorities in Salta, anxious to retain the services of the great British financier.
This was obviously a disappointment to the British Government, and so they despatched Detective Chief Inspector Frank Froest of Scotland Yard with orders to bring back Jabez, no matter how long it took. Froest, who appears to have been very much a practical policeman, armed himself with the latest extradition warrant from the Buenos Aires courts and simply kidnapped Jabez and hauled him aboard his own specially chartered train bound non-stop for Buenos Aires. When the local officials at Salta realised what had happened they send a party of riders to intercept the train. When one rider stood on the tracks waving a warrant for Jabez's release, Froest stepped in to prevent the engineers from applying the brakes, running over and killing both horse and rider. (The British government later felt obliged to offer the sum of $50 in compensation.)
Froest subsequently frustrated a number of further attempts to release his captive and once in Buenos Aires hauled him aboard the steamship Tartar Prince and shipped him back to Britain to face trial.
Back home Balfour was remanded in custody in April 1895 and was placed on trial for fraud in December, when the jury took a mere thirty-five minutes to find him guilty. "You will never be able to shut from your ears the cries of the widows and orphans you have ruined" thundered the judge as he sentenced him to fourteen years with hard labour. (Which was regarded as a pretty stiff sentence for the time, since three years was more the going rate.) Serving his time at Wormwood Scrubs, Parkhurst, Portland and Pentonville prisons he gained maximum remission for good behaviour and was released on 13th April 1906 after serving eleven years. He was immediately whisked away in a motor car sent by the press magnate Lord Northcliffe who had acquired the exclusive contract for Jabez's prison memoirs. These were serialised in the Weekly Dispatch over a period of twenty-six weeks, and later published as a book entitled My Prison Years in 1907.
Jabez was able to live off the money generated by his writing for a few years but the cash eventually ran out and, at the age of seventy-one, he was forced to seek employment as a mining consultant. In August 1915 Jabez was working at a tin mine in Burma, some two hundred miles north of Mandalay. His boss sent him home for fear that the heat would kill him, and so he returned to Britain where he found another position at the Morriston Colliery in South Wales. On the 16th February 1916 he was sitting on board the London to Fishguard express enroute to Swansea, when he suffered a fatal heart attack. He was later buried in his parent's grave in Paddington Old Cemetery, although there is no marker there today to indicate his presence.
Jabez himself was unrepentant to the end claiming that "No one suffered more from the crash than I did". But despite the chaos he left behind, he was rapidly forgotten except as a footnote to the history of the Building Society movement as the crash of the Liberator Building Society, which also brought down a number of other building societies in its wake, prompted the authorities to shut a few stable doors and pass the Building Society Act 1894.
The National Portrait Gallery has a cartoon of Jabez although it rather disingenuously describes him as a 'Radical politician'. (See
- Matthew Paris and Kevin Maguire Great Parliamentary Scandals(Revised edition, Chrysalis, 2004)
- Andrew Roberts The tale of the half-billion-pound sting 09/03/2004
- Jonathan Aitken, Imperfect swindle, 26/07/2004
- The crook was in his counting house, March 28, 2004
- Kathryn Hughes, Balfour's bubble, March 20, 2004
- A Brief History of the Boards of Visitors 1898 - 1998, compiled by Ruth Draycott www.nationalarchives.gov.uk/ERO/records/ho415/1/bov/bovh.pdf
David McKie Jabez: the Rise and Fall of a Victorian Rogue (Atlantic, 2004)