Financiers ‘keep on repeating errors of past’

Fortune’s Spear, by Martin Vander Weyer, tells the story of Gerard Lee Bevan, a blue-blooded rogue and high-living womaniser whose fraudulent actions left shareholders and creditors with losses equivalent to £200m.

The Helmsley-based writer describes his tale as “a costume drama parable of what goes wrong in the financial world and how people are tempted into dishonesty by circumstances beyond their control”.

Mr Vander Weyer, formerly an investment banker, told the Yorkshire Post about the story of Bevan and how the psychology of high finance can bring its practitioners crashing down to earth.

In person, Bevan was smooth, cultured and wealthy. He had impeccable establishment credentials; his father was the founder chairman of Barclays Bank and his wife was a cousin of future prime minister Neville Chamberlain.

But instead of a career in banking, Bevan chose to become a stockbroker and was very successful, rising to become senior partner at Ellis & Co in 1912.

He also took a controlling stake in the City Equitable, a reinsurance company poised for expansion as German and Austrian rivals exited the London market at the outset of the Great War.

After hostilities ended, the post-Armistice boom saw Ellis & Co as act as broker on a series of corporate mergers and flotations, with Bevan often taking seats on the boards of floated companies and recommending shares to his stockbroking clients. The City Equitable underwrote many of the deals and often invested too.

“He was enormously rich and successful and admired in the City and although people probably thought he was a bit sharp they certainly didn’t think he was a villain,” said Mr Vander Weyer.

In the bust that followed, Bevan was left with stocks that were unmarketable. To keep up appearances, he would buy the shares that his stockbroking clients wanted rid of and sell these to the City Equitable or use the reinsurer to make loans to Ellis & Co.

Bevan tried to cover up his actions by cooking the books and asset-stripping to keep the cash coming in.

He started gambling in casinos and lived openly with a combination of mistresses until he decided he could carry on no more and fled the country, disguised as a Frenchman and wearing a fake beard.

Bevan was eventually caught in Vienna, brought to justice and jailed for five and a half years.

He moved abroad on his release and spent the last few years of his life as the manager of a mafia-controlled distillery in Cuba, where he died in 1936.

“Bevan was rather a fascinating figure,” said the author. “He was a great connoisseur and collector of all sorts of beautiful things.

“He wrote poetry in the high Victorian style and had quite a romantic streak in him. He was a renaissance man. But when things went wrong he didn’t have the moral courage to face up to it. He just fiddled the books and ran away.”

According to Mr Vander Weyer, Bevan was not an outright swindler in the mould of Bernard Madoff, the $65bn Ponzi scheme fraudster. Instead, he was more of a rogue trader like Nick Leeson, although their social circumstances were quite different.

“Leeson was a settlements clerk from Watford let loose in Singapore, while my man was at the heart of the financial establishment. Both had exactly the same problem – their positions had gone horribly wrong and they didn’t want to admit it.”

Fraud is ever-present, said the author. “In boom times, there are always unscrupulous people exploiting the over-optimistic among the wider public.

“In bust times, there are people who thought they were running decent businesses who thought they were smart and over-estimated themselves and took too many risks.

“In the famous Warren Buffett phrase, it’s only when the tide goes out that you can see who’s been swimming naked.”

Mr Vander Weyer spent the first 15 years of his working life as a banker, following in the footsteps of his father Deryk who rose to become senior general manager at Barclays.

The 56-year-old worked in the City of London, Brussels, the Far East and eastern Europe before deciding to quit to become a writer and journalist.

Caught in an artificial world

Most forms of business revolve around physical goods and services, but finance is ultimately about the concept of money, said Martin Vander Weyer.

“In high finance, it becomes enormous numbers on screens, enormous trades of complicated securities, which have been invented for the purpose of trading them in enormous volumes,” he said.

Consequently, he added that financiers believe they have superhuman trading skills, when in reality they are only following market trends and when the markets turn they find out they are wrong.

“The big number, artificial nature of high finance catches people out time after time,” he said. “People are unaware of their own fallibility until it catches up with them.”