Oscar Hartzell, Part II
Brian Trumbore
President/Editor, StocksandNews.com

As we pick up our story of swindler Oscar Hartzell, by 1915 Oscar and his compatriots were telling suckers that $50 invested in the Drake Estate would bring $100,000 plus the entire city of Plymouth, England as part of the settlement, just as soon as the issue was finally adjudicated.

In the early 1920s Hartzell then moved to London, to do further research, ahem, and help the process along, while his agents in the Midwest collected the funds. Hartzell would send wires back to America proclaiming things such as King George and the House of Lords had stated they were going to pay him billions.

Oscar became a fixture in London, taking up an apartment in one of the better neighborhoods, buying suits on Savile Row, and dining nightly at the Savoy Hotel, table number 101. But on August 9, 1922, the British Home Office wrote the American embassy in London confirming there was "no unclaimed Sir Francis Drake Estate."

Hartzell seized on this, wiring his donors cheerfully, yes there was no such item as "an unclaimed Sir Francis Drake Estate." As Richard Rayner writes in "Drake's Fortune," Hartzell's point was quite different, "namely that the estate was legally in the hands of the wrong people and should be handed over to Colonel Drexel Drake and thus himself." Of course there never was a Drexel Drake. But since Hartzell hadn't committed any offense in England, there was nothing Scotland Yard could do, no matter how much the U.S. State Department complained as the years went on.

By the late 1920s, stock swindles of all sorts were common in America so the Drake Estate, by comparison, didn't seem so outlandish. Then in 1928 Iowa's secretary of state, Ed Smith, tried to stop Hartzell, but when the state legislature tried to act, the public bombarded the representatives with letters protesting what Smith was doing. Americans can "donate" to whomever they please, was the attitude of Iowa's farmers, so the legislation was defeated, another vindication for Hartzell.

Then on October 11, 1930, Oscar Hartzell struck gold, only this time it was in the form of an essay by none other than economist John Maynard Keynes in The Saturday Evening Post titled "Economic Possibilities for Our Grandchildren." Keynes argued that even in difficult times like the nation was now going through the virtues of capital investment were all too clear. In the piece he made reference to Sir Francis Drake and the treasure he stole from Spain.

Keynes linked the emergence of England as a world power directly to Queen Elizabeth and her use of the money. Rayner writes, "She invested it and arranged for England to take half the interest each year while the rest compounded at an annual rate." Noted Keynes, "The power of compound interest over 300 years is such as to stagger the imagination. Every pound which Queen Elizabeth invested in foreign trade has now become 100,000 pounds."

Keynes was arguing for deficit spending as a way of dealing with the Depression, but it was far more than that for Oscar Hartzell. From Rayner, "Here was John Maynard Keynes, the world's top money man, echoing what he'd been saying all along: Sir Francis Drake! Compound interest! Staggering returns!"

Well, it should be no surprise that Hartzell mimeographed thousands of copies of the article and distributed them at Drake Estate meetings and throughout the Midwest. Farmers began spouting Keynes and it was as if Keynes himself had endorsed the scheme.

Hartzell wired from London, "You can see that the matter is so far reaching that the rambling minds of great financiers of the past have been made to tow my mark regardless of consequence."

Farmers in South Dakota and Iowa, for example, would write Hartzell asking whether the abandonment of the gold standard affected the estate at all? Hartzell would reply in his normal, cryptic way. Send money?matter moving fast. And so they did, $millions of it.

Hartzell was still living in London, though, managing to elude the law and the best efforts of the State Department, the FBI, Scotland Yard and the U.S. Post Office. Each agency had files inches thick on Oscar and the Drake Estate. But he wasn't committing any crimes as all of the "donations" were being collected in America, after which his agents would wire vast sums of it to him overseas.

Finally, a U.S. Postal Service inspector, John Sparks, along with help from Scotland Yard was able to nail Hartzell on mail fraud charges after getting some of the agents in America, as well as Oscar's friends in London to talk. Enough of them admitted the Drake Estate was a swindle to press charges and Hartzell was extradited to face trial in Sioux City, Iowa in 1933. He was convicted and sent to prison for ten years, though his attorneys did attempt one appeal, which failed. But even after his arrest the swindle continued, with one new agent collecting $500,000 over 1934-35. These were desperate times and those Midwesterners who were being solicited wanted to believe in some miracle to get them out of their misery.

Alas, Hartzell was diagnosed as being mentally ill and he died in an institution, alone and crazy. But with a simple scheme he had placed himself in the Wall Street Hall of Shame.

[Source: "Drake's Fortune" Richard Rayner]

Wall Street History will return on February 21.

Brian Trumbore