The Great Stock Exchange Fraud of 1814 was a
hoax
A hoax (plural: hoaxes) is a widely publicised falsehood created to deceive its audience with false and often astonishing information, with the either malicious or humorous intent of causing shock and interest in as many people as possible.
S ...
or
fraud
In law, fraud is intent (law), intentional deception to deprive a victim of a legal right or to gain from a victim unlawfully or unfairly. Fraud can violate Civil law (common law), civil law (e.g., a fraud victim may sue the fraud perpetrato ...
centered on false information about the
Napoleonic Wars
{{Infobox military conflict
, conflict = Napoleonic Wars
, partof = the French Revolutionary and Napoleonic Wars
, image = Napoleonic Wars (revision).jpg
, caption = Left to right, top to bottom:Battl ...
, affecting the
London Stock Exchange
The London Stock Exchange (LSE) is a stock exchange based in London, England. the total market value of all companies trading on the LSE stood at US$3.42 trillion. Its current premises are situated in Paternoster Square close to St Paul's Cath ...
in 1814.
The du Bourg hoax
On the morning of Monday, 21 February 1814, a uniformed man calling himself Colonel du Bourg and claiming to be aide-de-camp to
Lord Cathcart, arrived at the Ship Inn at
Dover
Dover ( ) is a town and major ferry port in Kent, southeast England. It faces France across the Strait of Dover, the narrowest part of the English Channel at from Cap Gris Nez in France. It lies southeast of Canterbury and east of Maidstone. ...
,
England
England is a Countries of the United Kingdom, country that is part of the United Kingdom. It is located on the island of Great Britain, of which it covers about 62%, and List of islands of England, more than 100 smaller adjacent islands. It ...
, bearing news that
Napoleon I of France
Napoleon Bonaparte (born Napoleone di Buonaparte; 15 August 1769 – 5 May 1821), later known by his regnal name Napoleon I, was a French general and statesman who rose to prominence during the French Revolution and led Military career ...
had been killed and
Bourbon rule restored. Requesting this information to be relayed to
the Admiralty
The Admiralty was a department of the Government of the United Kingdom that was responsible for the command of the Royal Navy.
Historically, its titular head was the Lord High Admiral – one of the Great Officers of State. For much of its h ...
in London via
semaphore telegraph
Semaphore (; ) is the use of an apparatus to create a visual signal transmitted over distance. A semaphore can be performed with devices including: fire, lights, flags, sunlight, and moving arms. Semaphores can be used for telegraphy when arra ...
, "Colonel du Bourg" then travelled to London, stopping at inns on the way to spread the news. Three men posing as French officers dressed in Bourbon uniforms were also seen celebrating in London, proclaiming the restoration of the Bourbon monarchy.
Effects on the stock market
Rumours of Napoleon's defeat had been circulating throughout the month. When the news from Dover began to circulate among traders at the
London Stock Exchange
The London Stock Exchange (LSE) is a stock exchange based in London, England. the total market value of all companies trading on the LSE stood at US$3.42 trillion. Its current premises are situated in Paternoster Square close to St Paul's Cath ...
, the value of government
securities
A security is a tradable financial asset. The term commonly refers to any form of financial instrument, but its legal definition varies by jurisdiction. In some countries and languages people commonly use the term "security" to refer to any for ...
increased rapidly. With no official confirmation of the news, prices began to drop back, only to increase again on reports of the supposed celebrations of the French officers.
The entire affair proved to be a hoax. In the afternoon, the government confirmed that reports of Napoleon's death and the Bourbon restoration were false. The relevant stock prices immediately fell back to their previous levels.
Investigation
The Committee of the Stock Exchange, suspecting
stock manipulation
In economics and finance, market manipulation occurs when someone intentionally alters the supply or demand of a security to influence its price. This can involve spreading misleading information, executing misleading trades, or manipulating ...
, launched an investigation. It was soon discovered that there had been a sale that Monday of more than £1.1 million of two government-based stocks, most of it purchased the previous week. Eight people were eventually convicted of conspiracy to defraud, including
Lord Cochrane, a
Radical
Radical (from Latin: ', root) may refer to:
Politics and ideology Politics
*Classical radicalism, the Radical Movement that began in late 18th century Britain and spread to continental Europe and Latin America in the 19th century
*Radical politics ...
member of Parliament and well-known naval hero, his uncle the Hon.
Andrew Cochrane-Johnstone, Richard Butt, Lord Cochrane's financial advisor, and Captain Random de Berenger, who had posed both as du Bourg and as one of the French officers. Six, including those involved in the purchases, were tried, and sentenced to twelve months in prison, with the most prominent also sentenced to the public
pillory
The pillory is a device made of a wooden or metal framework erected on a post, with holes for securing the head and hands, used during the medieval and renaissance periods for punishment by public humiliation and often further physical abuse. ...
; fines were also imposed. Lord Cochrane was stripped of his naval rank and expelled from the
Order of the Bath
The Most Honourable Order of the Bath is a British order of chivalry founded by King George I of Great Britain, George I on 18 May 1725. Recipients of the Order are usually senior British Armed Forces, military officers or senior Civil Service ...
and from the House of Commons.
Andrew Cochrane-Johnstone fled the country after hearing the verdict.
Culpability of Lord Cochrane
Though convicted of the fraud, Lord Cochrane continued to assert his innocence. In 1816, he brought an (unsuccessful) charge of "partiality, misrepresentation, injustice and oppression" against
Lord Ellenborough, the presiding judge in his case. Popular opinion certainly backed Cochrane; his sentencing was followed by his re-election unopposed to the House of Commons for
Westminster
Westminster is the main settlement of the City of Westminster in Central London, Central London, England. It extends from the River Thames to Oxford Street and has many famous landmarks, including the Palace of Westminster, Buckingham Palace, ...
. The pillory portion of his sentence was dropped, for fear of public reaction. Due to public outcry over his treatment, the punishment of the
pillory
The pillory is a device made of a wooden or metal framework erected on a post, with holes for securing the head and hands, used during the medieval and renaissance periods for punishment by public humiliation and often further physical abuse. ...
was limited to those found guilty of perjury in England and Wales in 1816. Its use was completely discontinued in 1837 in England and Wales (though the
stocks
Stocks are feet and hand restraining devices that were used as a form of corporal punishment and public humiliation. The use of stocks is seen as early as Ancient Greece, where they are described as being in use in Solon's law code. The law de ...
, a similar device, lasted the rest of the nineteenth century).
Lord Cochrane continued to petition the government for redress; in 1832, he was granted a free pardon, including reinstatement to his rank of
Rear Admiral
Rear admiral is a flag officer rank used by English-speaking navies. In most European navies, the equivalent rank is called counter admiral.
Rear admiral is usually immediately senior to commodore and immediately below vice admiral. It is ...
. Restoration of the
Order of the Bath
The Most Honourable Order of the Bath is a British order of chivalry founded by King George I of Great Britain, George I on 18 May 1725. Recipients of the Order are usually senior British Armed Forces, military officers or senior Civil Service ...
and other honours followed in the subsequent decades, and, in 1877, a
Select committee found that his treatment since 1832 constituted "nothing less than a public recognition by those Governments of his innocence."
Lord Cochrane's culpability has been a subject of continued debate. In 1965, the judge
Henry Cecil
Sir Henry Richard Amherst Cecil (11 January 1943 – 11 June 2013) was a British flat racing horse trainer. Cecil was very successful, becoming Champion Trainer ten times and training 25 domestic Classic winners. These comprised four winners o ...
set out an argument that supported Lord Cochrane's guilt in ''A Matter of Speculation: The Case of Lord Cochrane''; Brian Vale's 2004 book ''The Audacious Admiral Cochrane'' also argues for his guilt.
In his 1981 PhD thesis, John Sugden argued that "the question of his guilt cannot satisfactorily be resolved." Two other historians, Christopher Lloyd in 1947, and David Cordingly in 2007,
concluded that Cochrane was innocent.
Literary references
Security speculation based on allegedly accurate news delivered by semaphore telegraph forms a plot event in the novel ''
The Count of Monte Cristo
''The Count of Monte Cristo'' () is an adventure novel by the French writer Alexandre Dumas. It was serialised from 1844 to 1846, and published in book form in 1846. It is one of his most popular works, along with ''The Three Musketeers'' (184 ...
'' (published 1844).
The Great Stock Exchange Fraud forms the basis for the 11th novel in
Patrick O'Brian
Patrick O'Brian (12 December 1914 – 2 January 2000), born Richard Patrick Russ, was an English novelist and translator, best known for his Aubrey–Maturin series. These sea novels are set in the Royal Navy during the Napoleonic Wars and ...
's
Aubrey–Maturin series
The Aubrey–Maturin series is a sequence of nautical historical novels—20 completed and one unfinished—by English author Patrick O'Brian, set during the Napoleonic Wars and centring on the friendship between Captain Jack Aubrey of the R ...
, ''
The Reverse of the Medal
''The Reverse of the Medal'' is the eleventh historical novel in the Aubrey-Maturin series by Patrick O'Brian, first published in 1986. The story is set during the Napoleonic Wars and the War of 1812.
Returning from the far side of the world ...
'' (published 1986).
The Great Stock Exchange Fraud is a key plot element in
Katherine Cowley's ''The True Confessions of a London Spy'' (published 2022).
Note
In the terminology of 1814, ''stocks'' refer to interest-bearing securities of the type that are today called
bonds. The fraud particularly involved government
bearer bond
A bearer bond or bearer note is a bond or debt security issued by a government or a business entity such as a corporation. As a bearer instrument, it differs from the more common types of investment securities in that it is unregistered—no ...
instruments called 'Omniums', which were partly-paid government bonds, where the purchaser initially only had to pay 10% or 15% of the face value and later made further installment payments. This feature gave the securities a great deal of price volatility, as a small change in the value of the fully-paid bonds would represent a much greater change in the value of the partly-paid Omniums.
References
{{Reflist
* Yapp, Nick. ''Great Hoaxes of the World (and the hoaxers behind them)''. Robson Books. 1995.
Civilising Mammon: Fraud and Profit in Nineteenth-Century London
External links
The Trial of Charles Random de Berenger, Sir Thomas Cochrane et al.taken in shorthand by
William Brodie Gurney, from
Project Gutenberg
Project Gutenberg (PG) is a volunteer effort to digitize and archive cultural works, as well as to "encourage the creation and distribution of eBooks."
It was founded in 1971 by American writer Michael S. Hart and is the oldest digital li ...
1814 in the United Kingdom
19th-century hoaxes
Hoaxes in the United Kingdom
1814 in economic history
London Stock Exchange
February 1814
1814 in London
1810s crimes in London
1814 crimes in the United Kingdom