Poor Ivar Kreuger

My interest in Ivar perked up after I finished reading Ayn Rand’s famous play Night of January 16th. Like most other Rand books, it was inspiring and this one was based on Ivar Kreuger. I guess those who read some of my earlier blogs would have found me a big-time admirer of Ayn Rand and her powerful writing style & ideology. For me she presents a perfect example of what one can achieve if one wanted to. As a Russian émigré who spoke not a word of English, she became a master of English writing, words, plots & sub plots, movie scripts & what not…But then, this is not about her, this is about Ivar Kreuger, the Swedish Match King.

Sweden has always been a fascination for me. A small country that virtually made its fortune, trading in the rest of the world, be it Japan, China, India, Germany or USA…they made their name & fame with Ingrid Bergman, Alfred Nobel, ABBA, Bjorn Borg (and the other tennis stars that followed like Wilander, Edberg, Bjorkman….) and companies like SKF, IKEA, ASEA (now ABB) and Ericsson.

Ivan Kreuger got the name ‘match king’, selling matches (our old theepatti) and holding the world monopoly for matches for a long time. His organization Swedish match owned & owns WIMCO today…I used to have a friend Theepatti (that was what he was called, since he worked for WIMCO) Nair who worked in WIMCO, that BTW is another story, how Nair joined WIMCO, will hold it for some other day, maybe..
Now why did Kreuger & Swedish match strike it big? And what happened to him?

Ivar Kreuger killed himself on March 12th, firing a bullet through his heart, as media puts it, to escape creditors following the NYSE crash. The story of his death was reported by Time with some background material to boot and titled aptly ‘Poor Kreuger’. His rise to richness is simply mind boggling; even Kreuger did not know how much he made. Schooled in Sweden (double engineering degrees by age 20), he left Sweden when his girlfriend’s guardian refused to let him marry her as he was not financially sound (like a Bollywood movie eh?)!! Moving across the Atlantic and working as an engineer in the US, he picks up an award for saving a drowning girl in New Orleans!! He goes on to Mexico and South Africa, hears that his old flame is dead and returns back to Europe, after visiting India.

Kreuger then moved to Sweden and virtually took over the match industry (hesitantly at first), starting out actually to help his father’s ailing match factory. The Swedish match used the revolutionary non toxic red phosphorous safety match (required to be struck on a special surface compared to the more dangerous Lucifer match) and was thus the most popular. He was one of the first to effectively use the concept of mergers to grow, creating the merged Swedish Match company, and grow he did to control a capitalization of over a billion dollars (30Billion SEK in the 1930’s is roughly equivalent to ~150 BUSD today!!). Diversifying into all kinds of areas, he even owned LM Ericsson, the great communications company at one time. He made his fortune at a time when there were no big accounting rules, forming large pyramid & holding companies (~ 400 subsidiaries!).

Ivar grew to become larger than the state and then started to decide destinies of many a European state with his magnanimous personal loans (75-350M$ at that time!!), effectively undermining governments and politics. And then, he died. The larger problem (as an individual larger than powerful states) was solved eventually, though millions lost money due to it!! Today much of US financial reporting system owes itself to laws passed after the analysis of Kreuger’s clever methods of manipulation.

Kreuger was an interesting guy. A very clever chap from childhood days, he purportedly even made money selling exam question papers to students. During his heydays, presidents, politicians and movie stars like Garbo hobnobbed with him. He lived a high life, penthouses wherever he went, and the best luxury money could buy. He could be quite cunning when he decided to acquire something, indulging in industrial espionage, secret agents, cross purchases of competitors stock and the such. Most amazing was the fact that he committed little to paper, relying on his superb memory. Kreuger himself maintained all the while: "I've built my enterprise on the firmest ground”...Time does not concur though!

'Throughout his bizarre career,' wrote Robert Shaplen, author of the 1960 biography Kreuger, 'Kreuger alone supplied the figures for the books of his various companies, and he mostly kept them in his head. A former secretary of Kreuger's claimed that Kreuger once dictated the text of the annual reports for his four companies in a single afternoon. To Kreuger's credit, he was a highly intelligent businessman and financier. Many of his defenders contend that, although his dealings may appear shady in retrospect, at that time many of his activities represented the norm.

Well let us now get back to the death – Kreuger fires a 9mm bullet into his heart, as subsequent reports state. Many thousands who lost their life savings wanted to hear no more of the high profile villain, and the case was quickly closed. There are a few others who point out that - No bullet is ever found, no shot was ever heard and the gun disappeared during investigations. The body was found with a gun in the right hand, even though Kreuger was left handed. Somebody had purchased the gun in Krueger’s name, while Kreuger was apparently in a meeting elsewhere! No autopsy was held & his body was quickly cremated!

The bankruptcy that followed Kreuger's suicide in 1932 led to numerous changes in financial reporting. The media coverage made it politically expedient to pass laws to prevent such schemes. The result was mandatory audits, by CPAs, of all companies with listed securities. The US security market became a regulated market after Kreuger’s death…

Rumors were a plenty even after Ivar died – One was that he had actually faked his death and fled to Indonesia. Supposedly Kreuger's tobacconist later received a large order from Sumatra for custom-made Havana cigars. The tobacconist said that Kreuger was the only person who would have known how to place that order.

Whatever happened to Swedish match, the owner of WIMCO matches? The Wallenberg family of Sweden came to the rescue of Swedish Match. In an agreement that involved a transfer of $15 million from Stockholm to New York, Jacob Wallenberg was able to gain control of the injured enterprise. Swedish Match was sold to Volvo in 1990. Volvo eventually spun Swedish Match off to its shareholders in 1996, in a deal worth SKr 10.1 billion
Kreuger’s - Three of a match story
Three on a Match (also known as Third on a match) was a superstition among soldiers during the First World War. The superstition is that if three soldiers lit their cigarettes from the same match, one of the three would be killed or that the man who was third using the lit match would be shot. Since then it has been considered bad luck for three people to share a light from the same match. The reasoning was that when the first soldier lit his cigarette the enemy would see the light, when the second soldier lit his cigarette the enemy would take aim, and when the third soldier lit his cigarette the enemy would fire. The superstition was alleged to have been invented about a decade later by the Swedish match tycoon Ivar Kreuger in an attempt to get people to use more matches but it appears he merely made very shrewd use of the already existing belief which may date to the Boer War.

References
Two contradicting accounts terming it a murder
Time articles & Kreuger - A complete study

Authors Note: I wrote this more than a year ago, but looking at the situation with the markets today thought it a good idea to post it!!