Great Swindles of the 19th Century

A Scottish adventurer, Gregor MacGregor, perpetrated an almost unbelievable swindle in the early 1800s.

The veteran of the British Navy, who could boast some legitimate battle exploits, turned up in London in 1817 claiming that he had been appointed the leader of a new Central American nation, Poyais.

MacGregor even published an entire book detailing Poyais. People clamored to invest and some even exchanged their money for Poyais dollars and planned to settle in the new nation.

There was just one problem: the country of Poyais did not exist.

Two ships of settlers left Britain for Poyais in the early 1820s and found nothing but jungle. Some eventually returned to London. MacGregor was never prosecuted and died in 1845.

The Sadleir scandal was a British banking fraud of the 1850s that destroyed several companies and the savings of thousands of people. The perpetrator, John Sadleir, killed himself by drinking poison in London on February 16, 1856.

Sadleir was a Member of Parliament, an investor in railroads, and the director of the Tipperary Bank, a bank with offices in Dublin and London. Sadleir managed to embezzle many thousands of pounds out of the bank and covered up his crime by creating fake balance sheets showing transactions which had never actually occurred.

Sadleir's fraud has been compared to the scheme of Bernard Madoff, which unraveled in late 2008. Charles Dickens based Mr. Merdle on Sadleir in his 1857 novel Little Dorrit.

One of the great scandals in American political history involved financial fraud during the construction of the transcontinental railroad.

The directors of the Union Pacific came up with a scheme in the late 1860s to divert funds allocated by Congress into their own hands.

Union Pacific executives and directors formed a dummy construction company, to which they gave the exotic name Crédit Mobilier.

This essentially fake company would grossly overcharge Union Pacific for construction costs, which were in turn paid by the federal government. Railroad work that should have cost $44 million cost twice that. And when it was revealed in 1872, a number of congressmen and President Grant's vice president, Schuyler Colfax, were implicated.

The New York City political machine known as Tammany Hall controlled much of the spending by the city government in the late 1800s. And many city expenditures were diverted into various financial swindles.

One of the most notorious schemes involved the building of a new courthouse. The construction and decorating costs were wildly inflated, and the final cost for just one building was approximately $13 million, an outrageous sum in 1870.

The leader of Tammany at the time, William Marcy "Boss" Tweed, was eventually prosecuted and died in prison in 1878.

The courthouse which became a symbol of the era of "Boss" Tweed stands today in lower Manhattan. More »