Book Review: The Match King: Ivan Kreuger, the Financial Genius Behind a Century of Wall Street Scandals

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Before there was National Student Marketing, Enron, or Bernie Madoff, there was Ivan Kreuger: the "Swedish Match King" of the 1920s and early 30s, who raised millions of dollars from investors through a byzantine maze of preferred stock, options, futures, inflated assets and hidden debt. The whole thing came crashing down in the wake of Kreuger's death, and it was the largest single-entity Wall Street scandal in history -- until the Enron/Worldcom era of the new millennium.

In The Match King: Ivan Kreuger, the Financial Genius Behind a Century of Wall Street Scandals, Infectious Greed author Frank Partnoy takes an in-depth look at the man and his empire, the result of six years of extensive digging through primary sources, since there is little in the way of reliable research on Kreuger's life and work.

As something of an amateur fraud history scholar, I was really looking forward to The Match King and while I did enjoy it, I think it's doubtful that most business readers will. The problem is that there is simply too much narrative describing arcane and uninteresting communications between Kreuger and his accountant. This isn't really Partnoy's fault: With a securities fraud case so old, there simply isn't the capacity to construct a narrative as enticing and rich as Conspiracy of Fools, Kurt Eichenwald's classic account of the collapse of Enron.

There are a few interesting things that make The Match King worth reading: Kreuger's paranoia about a campaign of malicious short-sellers undermining his companies, the ease with which he was able to distract and possibly corrupt the checks and balances and the system, and the convoluted pyramiding of subsidiaries he used to hide debt: These are all red flags that contemporary investors should be on the lookout for in their own holdings.

In addition, the supposedly independent directors who were in place to provide oversight at his companies served on so many companies' boards that they could not possibly have devoted much time to their duties -- a common problem in corporate governance today as well.

Discussions of The Match King will doubtless focus on the parallels with Bernie Madoff -- and perhaps the collapse of companies like AIG as well. But in a way, this isn't so surprising -- although Partnoy suggests that Kreuger was not the complete crook that he is widely believed to have been. As Barry Minkow, the boy wonder mastermind of the Zzzz Best securities fraud of the 1980s has told me, there are really only two things that white collar criminals do: "They lie about what they make and they lie about what they owe."

The specific machinations -- mark-to-market accounting, alchemy, channel stuffing and outright lying -- are just details and those change, as do the characters and currencies. In the end though, the latest verse of financial charlatanism is always the same as the first.

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