Great Stock Exchange Fraud of 1814
The du Bourg hoax
On the morning of Monday, 21 February 1814, a uniformed man posing as Colonel du Bourg, aide-de-camp to Lord Cathcart, arrived at the Ship Inn at Dover, England, bearing news that Napoleon I of France had been killed and the Bourbons were victorious. Requesting this information to be relayed on to the Admiralty in London via semaphore telegraph, "Colonel du Bourg" proceeded on toward London, stopping at each inn on the way to spread the good news. Three "French officers" dressed in Bourbon uniforms were also seen celebrating in London, and proclaiming the restoration of the Bourbon monarchy.
Effects on the stock market
Rumours of Napoleon's defeat had been circulating throughout the month, and the combined events had a significant impact on the London Stock Exchange. The value of government securities soared in the morning, after the news from Dover began to circulate among traders at the Exchange. Lacking official confirmation of the news, prices began to slide after the initial rush, only to be further propped up at noon by the French officers and their handbills.
However, the entire affair was a deliberate hoax. In the afternoon, the government confirmed that the news of peace was a fabrication. The affected stocks' prices immediately sank to their previous levels.
The Committee of the Stock Exchange, suspecting deliberate stock manipulation, launched an investigation into the hoax. 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. Three people connected with that purchase were charged with the fraud: Lord Cochrane, a Radical member of Parliament and well-known naval hero, his uncle the Hon. Andrew Cochrane-Johnstone, and Richard Butt, Lord Cochrane's financial advisor. Captain Random de Berenger, who had posed both as du Bourg and as one of the French officers, was soon arrested, and a guilty verdict was returned against all three charged in the case. The chief conspirators were sentenced to twelve months of prison time, a fine of £1,000 each, and an hour in the public pillory. Lord Cochrane was also stripped of his naval rank and expelled from the Order of the Bath.
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 to the House of Commons for Westminster. 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 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, a similar device, were used over 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. Restoration of the Order of the Bath 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."
Security speculation based on allegedly accurate news delivered by semaphore telegraph forms a plot event in the novel The Count of Monte Cristo (published 1844).
- Justin Pollard (2011). Secret Britain: The Hidden Bits of Our History. Hodder & Stoughton. ISBN 1848541988.
- William Brodie Gurney (June 1814). "The Trial of Charles Random de Berenger, Sir Thomas Cochrane et al" (2007 ed.). Project Gutenberg. p. 600. Retrieved 2 November 2014.
- Piero Sraffa, Piero. Ricardo in Business - David Ricardo, The Works and Correspondence of David Ricardo,. Vol. 10 Biographical Miscellany . p. 77.
- Climateer Investing (16 January 2011). "How The Richest Economist In History Got That Way". Retrieved 19 September 2013.
- These are described in, also discussed in
- Yapp, Nick. Great Hoaxes of the World (and the hoaxers behind them). Robson Books. 1995.
- Civilising Mammon: Fraud and Profit in Nineteenth-Century London
- The Trial of Charles Random de Berenger, Sir Thomas Cochrane et al. taken in shorthand by William Brodie Gurney, from Project Gutenberg