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Book titles: The Match King by Frank Partnoy & Kreuger: Genius and Swindler by Robert Shaplen

The names and details change, but the cycles of mania, panic, and crash do not.

The books in three sentences: Riding the boom of financial excess and speculation of the roaring 20s, Ivar Kreuger used his
genius for creating hype and his forward-thinking business savvy to raise money from unquestioning American investors to
create a sizeable global business empire, anchored by matchstick monopolies across Europe. Despite his business empire starting
off consisting of bonafide enterprises and assets, Kruegers greed and pride took him down the path of blurring the lines between
real and fantasy, leading him to falsify financial statements, utilize off-balance sheet leverage and engage in outright forgery on
a mass scale. Unrelenting positive media coverage wove Kreuger into the American fabric and made him idolized to the point
of global worship, yet his securities ended up being worth pennies and the quick collapse of his Ponzi-like empire help set in
motion the creation of the SEC and modern securities laws as we know them today.

Seven big ideas from The Match King/Kreuger--Genius and Swindler:

1. When investing in Kreuger and buying his various securities, investors were always acting on little to no information.
They trusted in and found comfort in the social proof provided by other respected investment banks acting as
bookrunners, and a repeated theme is that no one cared about the details, reported figures simply didnt matter.
2. The power of the media on mass psychology always plays a role: Relentless positive media coverage of Ivar for years
on end spurred the excess and created the bubble (he loved being worshipped.).
3. Kreuger epitomized the bubble era of the late 1920s and was partly a product of the easy credit environment and several
affiliated parties on Wall Street were also to blamethe more money he asked for, the more he kept getting.
4. A tiger rarely changes his stripes. There were always signs in his early life of how he would be later in life. During his
boyhood/early teenage years, he was daring to the point of recklessness, he later showed the same willingness to take
risk (financial) that hardly anyone else would attempt. He had an early pattern of cheating in school and being adept at
cutting corners, never showing any distinction between right and wrong so long as he got what he wanted.
5. Another repeated theme is that childhood friends say he took great pleasure in using his mind to deceive people and he
had a great capacity to bluff (practiced his entire life). He was always experimenting with maneuvers to see what he
could get away with, starting small and then scaling up. His brazen self-confidence and bluffing fooled everyone and
became rather self-fulfilling while the times were good. Everything in life is founded on confidence. Ivar Kreuger
6. Kreuger was actually an innovative financier and came up with or pioneered many of the types of securities that still
exist on Wall Street today, such as convertible preferreds and multi-class share structures, as well as unique and clevel
financing/royalty schemes.
7. Given that Kruegers holding companies had many legitimate valuable assets and businesses (e.g. valuable CBD
European commercial real estate, 50% stake in Ericsson the large Swedish telecom giant, etc.), if he had swallowed his
pride and simply slowed growth, cut his dividend and de-leveraged, he likely could have kept his empire intact and
survived The Great Depression. Strangely, instead he refused to admit defeat and cut the dividend and this is what
forced him to play more shell games and take on more debt in order to keep growing and maintain a high dividend
payout.
Additional excerpts and notes:
From the introduction by John Galbraith: There is a tendency to confuse good manners, good tailoring, and above all,
an impressive bearing and speech with integrity and intelligence. Kreuger was an extraordinarily competent actor who
had discovered that a quiet forceful manner plus the ability to remember and recite the latest banality about the
international economic situation were sufficient to win him the respect of the very best men. It cost them millions.
People believed in his genius to the point of idolatry.

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 Until the bubble of his false hypothecations burst, he was widely respected and worshipped as a forward-looking
international banker. His securities were voted as most stable in the world and he was voted most respected business
man.
Many men helped create him. They saw reflected in his tremendous success their own images of wealth and glory.
When he first came to America, he was down and out, and claims to have picked food scraps out of garbage cans.
Based on numerous anecdotes, he thought quickly on his feet (referred to as opportunistic improvisations) and
fabricated lies for a quick buckcharacteristics that dominated his career.
Kreuger partly went to America early on to prove himself to a Norwegian girl he had met at the University of Stockholm.
Upon returning and getting summarily rejected by her for marriage early in his life (they had dated temporarily) shaped
his personal response to women throughout his life and he is said to have never fallen romantically in love again.
Throughout his life he would make no distinctions between right and wrong so long as something worked. And was
remarkably adept at cutting corners to save time with no signs of guilt. Of course, later on he cut accounting corners
on a colossal scale.
Whether dealing with women, employees, or entire nations, he characterized all objects, animate or inanimate, purely as
they served or failed to serve his purposes and he used and discarded them accordingly.
There are many anecdotes showing his early and consistent history of forgery, faking letters for his friends school
recommendations, doctors notes, etc.
Of all historical figures, he most admired Cecil Rhodes, Napolean, and Charles XII of Sweden.
He stayed in South Africa and enjoyed the get rich quick flavor of the place, the amorality, and had several irons in
the fire with various business ventures. He was speculating on precious metals, started a restaurant in Johannesburg due
to this early success, even considered settling down there, but he ultimately wanted to be closer to the major financial
center and excitement of NYC.
In the winter of 1904-1905, Kreuger traveled the world extensively (described as a multi-year bender through Paris,
India)
He headed back to America for a third time, stopping to work for a few months in Toronto for a general contracting
firm.
He started another restaurant in Philadelphia that quickly failed.
He was hired at a NYC based construction firm and oversaw the construction of many buildings on Syracuse University
campus. The construction used reinforced concrete, a new type of building. After just a few years he grew tired of
making money for second rate people and was anxious to get back to Sweden to apply many of his ideas and the new
construction techniques and skills he had learned.
He moved backed and launched Kreuger & Toll with engineer Paul Toll (May 1908). They introduced the Kahn
method of construction (reinforced concrete) to Sweden and within four years they had the reputation of being the
best building company in the country.
o First construction firm to commit to finishing a project by a certain date and based payment on finish date.
They floated stock in 1911 and raised about a quarter of a million dollars.
Krueger next launched Capitol City, Inc., a real estate subsidiary, that at the outset owned five commercial buildings.
Kreugers family had long been involved in the match industry, with his father, uncle and brother owning and running
two match factories. In the early 1900s, Swedens match industry was in the midst of competitive havoc, dominated by
a six company roll-up called Vulcan Match Factories, Inc., but there were a dozen smaller players including the Krueger
enterprise.
Regulatory change as catalyst: A new national banking law in 1911 gave banks the ability to invest in industrial
enterprises. A banker pleaded Kreuger to move to increase the number of authorized shares for his various business
entities, so that the shares could be used as collateral for loans to facilitate acquisitions of the smaller match factories
and consolidate the industry. After a while, Kreuger agreed to enter the fray and became head of United Match Factories,
Inc., also known as the Kalmar Trust, which consisted of nine other Swedish concerns in addition to the two owned by
his father and uncle.
From this time on, Kreuger turned his back on engineering/construction.
He revealed his plans to consolidate the match business of the world to friends with much enthusiasm.
He had absolute confidence in his ability, but knew he would need to borrow large sums of money to achieve
consolidation. With the support of three banks, the Kalmar Trust floated stock worth about one million USD.
Krueger moved quickly to vertically integrate the operations, including buying the companies that made the match
making machines that went into his factories, producing his own potash and phosphorous, and building up an internal

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 sales organization. The outbreak of WWI cut down the available imports of Russian aspen wood, so he made deals with
suppliers in northern Sweden and secret deals with Germans to sell them matches in exchange for raw materials. He
Next he got a bit lucky in terms of timing of war. His main competitor, the Vulcan Co., was cut-off from their largest
end markets in the Far East. The Japanese began exporting matches to Vulcans end markets and falsely labeling their
matches as being made in Sweden. A year earlier, a Japanese business man had accidentally let his hat drop into a vat
of chemicals used at a Vulcan plant, and after fishing it out and returning home, allowing his firm to analyze the chemical
formula and produce the same matches.
Kreuger emphasized the importance of creating lifelong loyalties and surrounding himself with weaklings and
sycophants who would do what he ordered without question.
One of his right-hand men, Littorin, was pliable andhe always worshipped Kreuger.
Conversely to demanding lifelong loyalty, Kreuger was always quick to betray any friends if it served his business
ambitions.
Kreuger dealt with such a mixture of real and unreal that it was difficult to distinguish truth and fiction. His fantastic
schemes became self-perpetuating and carried him forward at such a dizzying rate that even he was surprised despite
his early bold predictions.
From the get go he had real earnings and real growth. In its first year, Kalmar Trust lost $7,000, but after that it made
$60,000 and then $500,000 while declaring a 12% dividend.
With such an overvalued stock, Kreuger pulled off an amazing coup and negotiated a merger with the large rival firm,
forming the Swedish Match Company. Despite being the smaller firm, Kruegers Kalmar swallowed the larger firm.
Krueger & Toll meanwhile was steadily growing with six international subsidiaries and it was paying a 15% dividend.
In January 1917, Krueger split the company into two distinct parts, one was the construction firm run by Paul Toll, and
the other became an amorphous financial holding company that became a free-wheeling fiduciary vehicle that Kreuger
did whatever he wanted with. He continued to issue more shares.
Post-World War I, the state of the worlds match markets were in total disruption that Kreuger took quick advantage
of and purchased match factories all over Europe when foreign currencies were depressed.
o He would destroy anyone who refused to sell to him with ruthless tactics: he took over supply contracts,
interfered with customers, temporarily lowered prices below costs.
Also after the war he made successful real estate investments in Germany, flipping for quick profits.
He gave large kickbacks and bribes to Russian officials in order to get help arranging a sale of Russian factories.
When negotiating on deals, he would send out agents posing as independent buyers or appraisers and they would make
ridiculously low ball offers that would be rejected. Krueger would follow up with his official offers which would
invariably be accepted as sellers would anchor to the previously lower price offered.
Just as in his childhood, he was taking large risks and was frequently over extending his firms financially, but there was
ready credit available and he could always do more stock sales.
He thought nothing of the risks involved in gambling with large sums that were mostly borrowed from banks. For
example, in 1918, he borrowed money personally to speculate that the USD would rise relative to the Kroner and in
two years made $5 million of profit, making him one of the richest men in Scandinavia. He bought shares of a small
German chemical company that was eventually bought out, making him 15x his initial investment in just two years.
Had been raising funds primarily in Europe prior to 1922, then saw Americas buying mania as an opportunity to raise
more capital.
Ivar thought that When investors were manic, they would purchase just about anything. He knew the timing of his
capital raises was crucial.
He would constantly commit to financing new businesses or government loans before he had the capital lined up.
He targeting a high dividend payoutit was enough to make even the most conservative investors lose their minds.
The number of conservative investors, people who might question how his companies could pay such large dividends,
was dwindling.
Kreuger also had a movie production company and was devoting an inordinate amount of time to the entertainment
industry (both film & theater). His production company was losing money. His American film business was both a
money pit and a distraction.
Pursued deal with Diamond Match, market share leader in the US. Diamond hired Price Waterhouse to audit Kreuger
& Tollthey would not certify Kreugers balance sheet and merger talks ended abruptly.
Loan-for-Monopoly idea: Ivar was getting no traction with American businesses and failing to get any investments
banks to back him. He then came up with the idea to replicate the South Sea Company with a twist. He studied the

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 scheme created by Robert Harley, Earl of Oxford, in the 17th century. Harley formed the South Sea Company to assume
Englands national debt. In exchange for the South Sea Company assuming its debt, the British government had given
the company a monopoly on trade to the South Seas. This kept Britain solvent and lead to a bubble in South Sea
company stock. Ivars grand idea that would change the course of his empire was to do with match monopolies what
Harley had done with South Seas trade. He would get Americans to lend money to foreign governments, through him,
in exchange for monopoly concessions for the production and sale of matches, and everyone would make unimaginable
profits from these match monopolies.
o Would also offer to include a sales royalty to the government on the match sales, usually an amount high enough
that it alone could service the new debt.
By 1924 he was in negotiations with a dozen governments, with little or no success. In most countries legislators were
raising tariffs on imported matches to spur local industry.
First big breakthrough was deal with Poland. Befriended the Finance Minister when the country was in chaos, offered
loan for humanitarian aid plus royalty. A deal was struck. International Match agreed to lend $6 million to the Polish
government at 7% interest rate. All Polish match factories were nationalized and leased back to International Match for
20 years, with ownership reverting back to Poland after year 20.
After receiving the contract, he secretly had the finance ministers signature (Dr. Glowacki) made into a stamp for future
forgeries, if need be.
After the deal with Poland, he quickly completed three more capital raises in America, each one bigger than the last
(gold debenture, then convertible preferred stock deals).
Ivar wanted to keep raising capital without giving up control (shareholder votes), so he came up with B-class of shares
that carried only 1/1000th of a vote. With a single B-class share sale, Kreuger doubled his capital base in late 1924 after
Polish deal was inked but not yet in effect.
o Even if the financial statements had holes, investors wanted to get in early. They didnt care what was off or
on the balance sheet.
Ivars reputation was unassailable. One only had to open a newspaper or ask any businessman to understand that.
Berning [Kreugers auditor] was reluctant to accuse such a reputable man of anything.
All the way up until 1927, no auditor or investment banker had even bothered to visit any of International Matchs
factories to even see if they were real.
Ivar told his auditor that financials provided dramatically understated his profits due to the sensitive nature of secretive
government deals he didnt want to reveal. It was hard to either confirm or deny statements like this.
o He had to avoid accurate disclosures, to preserve the secrecy of his match monopoly negotiations. The
inaccuracy of his financial statements was a boon, not a worry. It reflected the fact that Ivar had secured many
secret deals, and therefore additional secret cash flows.
Ivar would accidently send his bankers or American subsidiaries too much money, and would respond with statements
such as, Oh, we simply made a mistake. We have so much money here, we just cant keep track of it.
Investors were developing a taste for novelty and adventure and Ivar arranged a $50 million issue on the back of an
arrangement with the French government, one of the highest profile deals in history at the time (Everyone was
involved.). The offering was a complicated convertible debenture deal, it had a floating rate interest payment that rose
with Kreuger & Tolls dividends (but had a floor of 5%), and could also be periodically paid down (sinking fund
provisions).
Around this time mass media around the globe began to worship Kreuger and he loved being worshipped. He was
voted as the most respected business man in broad public opinion polls.
In 1927 around this time John Maynard Keynes pronounced that, We will not have any more crashes in our time.
Kreuger commenced construction of his immense Match Palace to house the enterprise.
o The Match Palace had a silent room with a writing desk and sofa, Ivar would shut himself in the Silence room
for days at a time.
o His office had a red/green light outside, indicating if he could be disturbed. He would keep it red when visitors
arrived, then switch it after his secretary called him. His desk had three telephones on it, he could make the
middle one ring by stepping on a button under the desk. He would pretend to receive calls from important
government officials when he had guest visiting.
He began using inflated shares to acquire a wide variety of businesses including a controlling half of the international
market share in iron ore and cellulose, and a controlling stake in the Swedish telephone industry.

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 American audit firm, Ernst & Ernst, continued to rely heavily on International Matchs Swedish audit and used logic
such as he owned the company, if his financial statements were false, and the preferred didnt receive any money,
neither would he. Why would Ivar cheat himself? Berning, the American auditor, continued to accept Ivars statements
as a matter of faith.
International Match had no cash and was close to missing a dividend payment in July 1928. None of the numbers were
adding up.
Ivar never showed concern that the mania for his securities would end.
At the end of 1928, Met Life bought a large stake in International Match, one of the largest and most sophisticated
investors in the world that carried much cachet providing further confidence for retail investors to pile in.
Accountants moved $1 million into a reserve account to save and show some extra profit for 1929.
Ivar spread the story that using one match to light two cigarettes was fine, but a third was bad luck. This idea caught on
and further boosted match sales.
Kreuger began to battle bouts of mania and depression showing increasingly volatile behavior.
The 1929 stock market boom was dominated by consumer products companies and retailers. The Industrial average
rose 25% just between May 1st and August 31st of 1929. Academics praised the wisdom of crowds. Then in September,
stocks began to fall slowly at first, and hardly anyone noticed the early declines. Kreugers securities continued to rise
while positive breadth in the market collapsed. They were seen as a safe haven right up until the bitter end despite being
built on a Ponzi like foundation.
On October 22nd, 1929 the Saturday Evening Post ran an extensive cover feature praising Kreuger as a successful
Renaissance man. It was stated that these three things most accounted for his success were: One is silence; the second
is more silence; while the third is still more silence.
Time magazine put him on the cover running a feature story about how his securities continued to defy the deepening
market slump, and concluded with this quote from Kreuger: There is not a single competitor with sufficient influence
upon the different markets to cause us any really serious harm. No market is sufficiently significant to be of importance
to us. The reason is that the whole world is our field.
The Thursday before Black Monday in the crash of October 1929, he signed a personal guarantee for one of the largest
loans in history. To instill confidence in the face of the market collapsing, Kreuger offered to personally guarantee half
of all banks exposure to his American Certificates (a complex new hybrid issue). This put back right for the banks
could cost Ivar his entire fortune.
In the week over the great crash, International Match defied the markets black hole and fell only 12% compared to
50% for many leading issues.
At this time, Kreuger came to a binary decision where he takes the largest gamble of his career(here he could have
easily stepped back and declined)--- to commit to lend $125 million (that he didnt have) to Germany for 6% or not?
Interest rates were rising and he continued to pay a 25% dividend on his common shares.
o He thought an audacious deal could be the miracle that would create optimism in markets and he could sell
more shares and shift his personal guarantee to American investors.
o As market crashed, he raised his dividend. At the very least, he should have long ago just cut the dividend,
however, such a decision would have forced him to swallow his pride and lowered share prices making new
issuance more difficult. Instead he raised dividends in the face of financial distress.
What finally brought Kreuger down was auditors finally asking so many questions about debts of secret subsidiaries in
Luxembourgoff balance sheet obligations that werent showing up anywhere in his companies financial statements.
Congressional investigations of his firms led to many modern day securities laws.
Many [corporate executives]come to believe they can overcome any skepticism and dig out of any financial hole, no
matter how deep. Given the complexity of accounting, they, and their employees, manage reported earnings in a way
that diverges from reality. Securities analysts and journalists entice them to repeat optimism so frequently that they come
to believe it, just as [Kreuger] did. Some corporate officers become mentally unstable as the pressure mounts, especially
at times of calamity.
Kruegers genius and imagination [were] unconstrained by integrity.
.
Kruegers securities were the most widely held in the world. Even as markets collapsed globally, investments in his
companies were holding up.
The honest man becomes committed to the crook before he know there is anything wrong. Then he must protect
himself or, in the more usual case, refuse to believe there is anything wrong.

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 There is a dangerous clich that in the financial world everything depends on confidence. One could better argue the
importance of unremitting suspicion.
Kreuger made his career by exploiting the men who had confidence. It is the nature of an asset boom that the men
who have confidence and do not ask questions look with uneasiness on the suspicious men who do. Anytime there is
an excess of confidence, there will be confidence men to take advantage of it.
Kreuger was both at once so real and so unreal.
Wall Street sold $250 million worth of stock in his last ten years (inflation adjusted in the billions), 1922-1932.
Kreuger had deliberately listed assets that were greatly in excess of the items they purported to represent, entirely
fictitious, or duplicative of assets belonging and appearing on the books of associated companies. He was cross-
collateralizing assets in various countries and subsidiaries to borrow against them multiple times from different
counterparties.
Additionally, he had counterfeited Italian government bonds worth $142mm and faked the signatures of many officials.
There were many careless mistakes such as misspelled names and titles.
As his securities were finally declining, he blamed the deceitful media and short term short sellers. Never mind the
media building him for the previous decade. He was increasingly paranoid about short sellers and was personally
leveraging himself to buy more of his own stock to try and prop it up and scare off shorts.
Ultimately Kreuger complex web of holding companies and subsidiaries had 400 entities around the world (corporate
family tree from hell).
Between 1917-1932 Kreuger had inflated earnings by more than $250 million. He had raised a total of $650 million via
stock sales and bank loans, and total assets came out to only $200 million. The shrinkage was due in part to low securities
prices during 1932. At the tail end, much of the money he squandered went towards speculating on his own, in a futile
attempt to bail himself out.
He claimed money meant nothing to him.
Some of the money disappeared because it was paid as bribes and paid to blackmailers.
As the securities prices declined and more and more loans were maturing and dividends payments due, it became one
non-stop frantic shell game for Ivar to shuffle cash back and forth between subsidiaries to use as collateral for more
loans.
By February 1932 he was seriously contemplating suicide.
The Swedish government began investigating him, especially growing suspicious of the forged Italian bonds he had used
as collateral.
Krueger had apparently shot himself in the chest in a Parisian hotel right before a meeting with bankers.
Next to three individually sealed notes was a copy of the novel The Single Front, which was about an industrialist named
Olsson who eerily resembled Ivar. Olsson owned match factories throughout the world and was known as The Match
King. At the end of the novel, Olsson dies of a heart attack in a Paris apartment.
Panic selling of The International Match securities crushed them to pennies within a single trading day.
An abruptly revised view was cemented in the mind of the public that Krueger had perpetrated the greatest financial
fraud in history. He had lasted ten times longer than Charles Ponzi and raised 50x as much capital.
The securities laws of 1933 and 1934 were encapsulating a political reaction to a single bullet and to one man, who was
labeled during congressional debates as the greatest swindler in history. The Committee report for the Securities Act
of 1933 included 250 pages on Ivar.
It was clean he had not been lying consistently from the beginning. Ivars greatest monopoly was legitimate and
continued in force for more than years after his reported suicide.
Ivars real estate subsidiaries held 87 commercial buildings in Stockholm alone.
After 13 years of digging, the bankruptcy trustees recovered 32 cents on the dollar, which was mostly depressed due to
fire selling of assets and securities during the Great Recession. All told, the total value of International Match was half
of the amount investors had originally put into his companies (unclear if this counts dividends paid), which was in line
or better than the average stock return over the same time period.
The simple conclusion that he was purely a crook is not accuratethe story is much more nuanced and complex.
No one wanted to scrutinize his companies or financials on the way up. Investors, bankers, auditors, directors all
remained silent (International Match directors served on an average 20 corporate boards!).
Reality is stranger than fiction: There are many mysterious details and circumstances surrounding Ivars death that
would be scrutinized and debated for decades. The body was cremated before an autopsy and French police never
found a spent cartridge or exit wound and no one in the building claims to have heard a gun shot. The gun was in the

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left hand and the bullet hole was perfectly placed. Krueger was right handed with a stunted left index finger, so some
think he was possibly stabbed in the heart by a hit man hired by Jack Morgan! Another speculative version of the
situation is that Ivar obtained a body double and faked his death in an elaborate escape, exiting with his wealth in tact
from selling his stock, and leaving behind a trail of fabricated evidence of nervous breakdown and then suicide. I
encourage you to read the books to find out more of the details and decide for yourself!

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