With investigations into potential fraud at Enron heating up, and with all manner of corporations now subject to increased scrutiny over accounting practices, this week we take another look at the 1920s, and one of the real scumbags of that era, Albert Wiggin.

Albert Henry Wiggin was born in 1868 in Medfield, Massachusetts. The son of a Unitarian minister, Albert was a bank clerk at the age of 17. By 1904 he had become a vice president (the youngest ever) at Chase National Bank in New York, after which he rocketed up the ladder, becoming chairman of Chase in 1917. Wiggin then embarked on an acquisition spree, which saw Chase swallow up 6 New York institutions by 1929, thus making the bank the 2nd largest in the world next to National City.

Wiggin expanded Chase's traditional businesses, opening up branches all over New York City, as well as overseas. He also took advantage of his connections, serving on 59 corporate boards, which helped him gain support far and wide for his own ventures. Of course, it was "I'll scratch your back, you scratch mine."

But unbeknownst to but a precious few executives at Chase, by the time the fall of 1929 rolled around, Wiggin had established 6 private corporations, 3 in America and 3 in Canada. Through this setup, which wasn't discovered until a 1933 Senate investigation looking into the causes of the Crash, Wiggin organized investment pools that bet on shares of Chase Securities and Chase National Bank, profiting handsomely during the bull run during the first half of 1929. Wiggin cut some of his fellow executives in on the action (sound familiar?) and all parties borrowed from the bank to pay for their holdings. Wiggin and his family even took out loans of $8 million from Chase, even though their own net worth clearly didn't require it.

Back then, the quiet, reserved Wiggin was known as "the most popular man on Wall Street." [Charles Kindleberger] Little did folks know though that as the market topped on September 3, 1929, with the Dow Jones peaking at 381, Albert Wiggin was preparing his next big move. Beginning on September 23, with the Dow still at 359, he began to short stock in his own bank, both the shares of Chase Securities and Chase National. Here was a man, being paid a handsome salary of $275,000 a year to not only enhance the prospects of his companies, but also to protect the common shareholders, and he was betting that the very same stock would go down.

Of course it proved to be a smart bet, as the market reached a temporary bottom of 230 on October 29. By the time he wrapped up his most aggressive short-selling, on December 11, he had profits in excess of $4 million.

As if that wasn't bad enough, Wiggin had been part of a banking group that had gotten together on Black Thursday, October 24, in an attempt to save a market that appeared to be in freefall. All the players agreed to fund a pool with the intent of stabilizing the market (it worked for a few days), but here was Wiggin selling short his own company.

And just like some of the names in the news today, Wiggin used his 'offshore' (Canada) shell companies to hide his profits, and thus avoid paying taxes. [Again, this wasn't discovered until he was required to testify in 1933.]

Market historian Charles Geisst says of Wiggin's activities, "(They) gave banking and the stock market a bad name for at least 2 generations after the Crash." Author Charles Morris adds, in commenting on the Wiggins of the world, "(Even if) they had done nothing actually criminal, (they) had treated their own stockholders and the investing public as so many sheep to be fleeced by whatever means the ingenuity of accountants and lawyers could devise." [History is repeating itself today, that's for sure.]

When the Pecora Commission (named after Senate counsel Ferdinand Pecora) finally got to the truth, Wiggin still didn't admit any wrongdoing. "I think it is highly desirable that the officers of the bank should be interested in the stock of the bank." [Maury Klein]

Wiggin retired from Chase in 1932, at which point he was awarded with a $100,000 pension by the board, only to have to renounce it when the new chairman questioned the validity. Wiggin was also sued by a group of Chase shareholders, a suit he ended up settling for $2 million. He died in relative obscurity in 1951. Today, we can call him just another dirtball.

[As for Chase National Bank, it merged in the early 1950s with Bank of Manhattan to create Chase Manhattan Bank.]

Sources:

"Money, Greed, and Risk," Charles R. Morris
"Wall Street: A History," Charles Geisst
"Rainbow's End," Maury Klein
"The Great Bull Market," Robert Sobel
"The Great Game," John Steele Gordon
"Manias, Panics, and Crashes," Charles P. Kindleberger
"Eyewitness to Wall Street," David Colbert

Brian Trumbore



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