Ivar Kreuger


Ivar Kreuger was a Swedish civil engineer, financier, entrepreneur and industrialist. In 1908, he co-founded the construction company Kreuger & Toll Byggnads AB, which specialized in new building techniques. By aggressive investments and innovative financial instruments, he built a global match and financial empire. Between the two world wars, he negotiated match monopolies with European, Central American and South American governments, and finally controlled between two thirds and three quarters of worldwide match production, becoming known as the "Match King".
Kreuger's financial empire has been described by one biographer as a Ponzi scheme, based on the supposedly fantastic profitability of his match monopolies. In a Ponzi scheme, early investors are paid dividends from their own money or that of subsequent investors. Although Kreuger did this to some extent, he also controlled many legitimate and often very profitable businesses. He owned banks, real estate, a gold mine, and pulp industrial companies. He also owned many match companies. Many of them have survived to this day. Kreuger & Toll, for example, was composed of bona fide businesses, and there were others like it. Another biographer called Kreuger a "genius and swindler", and John Kenneth Galbraith wrote that he was the "Leonardo of larcenists". Kreuger's financial empire collapsed during the Great Depression. The Price Waterhouse autopsy of his financial empire stated: "The manipulations were so childish that anyone with but a rudimentary knowledge of bookkeeping could see the books were falsified." In March 1932, he was found dead in the bedroom of his flat in Paris. The police concluded that he had committed suicide, but decades later, his brother Torsten claimed that he had been murdered, which spawned some controversial literature on the subject.

Early life

Kreuger was born in Kalmar, the eldest son of Ernst August Kreuger, an industrialist in the match industry in that city, and his wife Jenny Emelie Kreuger. He had five siblings.
At school, Ivar skipped ahead two classes by taking private lessons. At age 16, he began studies at the Royal Institute of Technology in Stockholm, from which he graduated with combined master's degrees covering both the faculties of mechanical and civil engineering, at the age of 20.

Personal life

Ivar Kreuger never married, but lived for many years in different periods with Ingeborg Eberth, a physical therapist from Stockholm, who first met him there in 1913. According to the book she wrote after Kreuger's death in 1932, he was not interested in marriage or children and was very much focused on his business. She broke off their relationship in 1917 and moved to Denmark, where she married a Danish engineer named Eberth. They had a daughter in 1919, Grete Eberth. After some years she divorced Eberth and moved back to Stockholm with her daughter, reuniting with Kreuger. Mr. Eberth once kidnapped the daughter in Stockholm and brought her back to Denmark. Shortly thereafter Ingeborg, without notifying the authorities or police, went down to Denmark and brought the daughter back to Sweden by hiring a private fishing boat in Denmark that took them over Öresund to Sweden. The new period with Kreuger lasted until around 1928; after that they just met occasionally. The last time they met was in November 1931, just before Kreuger started on his final trip to America. Eberth received the news about his death in Paris on 12 March 1932, from newspaper headlines the day after.
Kreuger had private apartments in Stockholm, New York, Paris, and Warsaw, and a country place used during the summer season on the private island Ängsholmen in the archipelago of Stockholm. On business tours in Europe, he preferred to meet his business associates in Paris and then stayed in his flat at 5, Av. Victor Emanuel III. He owned several specially designed motor yachts, among them Elsa built in 1906, Loris, Tärnan, and the most famous, Svalan, built at Lidingö in 1928, a 37 ft, 4.9 ton motor yacht, equipped with a V12, 31.9 liter Hispano-Suiza engine from the US company Wright, with 650 HP output, capable of more than 50 knots. A replica of the boat has been built.
He had a large private library in both his apartments in Stockholm and New York and quite a large art collection. The paintings were sold at different auctions held in September 1932, as all of Kreuger's private assets were incorporated into the bankruptcy. The collection in Stockholm comprised 88 original paintings, among them 19 by Anders Zorn and a great number of Dutch masters. The New York collection included paintings by Rembrandt and Anthony van Dyck.
Kreuger became the major shareholder when the Swedish film company AB Svensk Filmindustri was founded in 1919 and because of that, sometimes met celebrities from the film industry. In June 1924, Mary Pickford and Douglas Fairbanks were invited by SF to Stockholm and were guided around the Stockholm archipelago in Kreuger's motor yacht Loris. A five-minute film sequence of this occasion is stored in SF's film archive. Pickford, Fairbanks, Kreuger, Charles Magnusson, Greta Garbo and various SF employees appear in the film.

Early years in the United States

After the start of the 20th century, Kreuger spent seven years traveling and working abroad as an engineer in the US, Mexico, South Africa and other countries, but spent most of the time in the US. In South Africa, he ran a restaurant for a short time together with his friend Anders Jordahl, but they soon sold the restaurant. At an early stage, he came in contact with the patented
Kahn System for concrete-steel constructions that was exploited by Julius Kahn's Trussed Concrete Steel Company, when working for different engineering companies, among them The Consolidated Engineering & Construction Co. and Purdy & Henderson in New York. This new technique had not been introduced in Sweden at that time. In 1907, he managed to get the representative rights for the system for both the Swedish and the German markets, and at the end of 1907, he returned to Sweden with the goal of introducing the new methods in both countries at the same time. At that time, one of the experts in Sweden in concrete-steel constructions was his cousin Henrik Kreüger working at KTH in Stockholm.

The building contractor and his innovations

In May 1908, Kreuger formed the construction firm Kreuger & Toll in Sweden with the engineer Paul Toll, at that time working for the construction company Kasper Höglund AB, and his cousin Henrik Kreüger, working at the faculty of civil engineering at KTH, as a consulting engineer for the company. In Germany, he formed the company Deutsche Kahneisengesellschaft together with a colleague from his time in America, Anders Jordahl.
The concrete-steel construction method of constructing buildings was not fully accepted in Sweden at that time and in order to market the new technique, Kreuger held several lectures and wrote an illustrated article on the subject in a leading engineering magazine, Teknisk Tidskrift. The new technology was a success and the firm won several prestigious contracts, such as the construction of the Stockholm Olympic Stadium ; the foundation work for the new Stockholm City Hall and the department store NK in Stockholm. The chief engineer behind these advanced projects was Henrik Kreüger.
Innovation in the construction business also included a definite commitment to finish the building on time. Hitherto the financial risk of delays were assumed by the clients. Kreuger & Toll was the first firm in Europe to commit to finish projects by a fixed date, thus shifting the risk to the builder, who after all was in the best position to reduce delays. When Kreuger won the contract to build a six-story "skyscraper", he promised that if construction wasn't finished by a particular date Kreuger & Toll would give the client a partial refund of $1,200 for each late day. It is noteworthy that Kreuger & Toll's entire capital would have covered just two days of being late. The client, in turn, agreed to pay a bonus for every day the building was finished before the due date. Kreuger & Toll finished early and subsequently earned completion bonuses for every project. Within a few years, Kreuger & Toll was seen as the best building company in Sweden and one of the top firms in all of Europe.
Within six years after its incorporation, Kreuger & Toll earned annual profits of around $200,000 and was paying a substantial dividend of 15%. In 1917, the company was split into two separate companies: Kreuger & Toll Construction AB, with the majority of shares owned by Paul Toll, and Kreuger & Toll Holding. Ivar Kreuger was not among the board members in the construction company. How much of Paul Toll's company Ivar Kreuger owned has not been revealed—just that Paul Toll owned 60% in 1917 and, around 1930, 66% of the construction company. Kreuger & Toll Construction Co. has never shown up in any Kreuger & Toll Holding organisation charts.
Kreuger & Toll Holding became his financial holding company, with Ivar Kreuger as the general manager and major share holder. He controlled it with a tight grip. The board of directors consisted of Ivar, his father, Paul Toll and two very close colleagues.
After Ivar got involved in his father's match factories in Kalmar, he became more focused on "constructing" new companies or taking control of other corporations – usually paying with his own securities instead of cash – rather than buildings and bridges. Thus, by 1927, Ivar had bought banks, mining companies, railways, timber and paper firms, film distributors, real estate in several European cities as well as a controlling stake in L.M. Ericsson & Co., Sweden's leading phone company. He controlled about 50% of the world market in iron ore and cellulose. He owned mines all over the world including the Boliden mine in Sweden, which had one of the richest gold deposits outside South Africa in addition to other minerals.
Kreuger formed Swedish Match by merging his father's business with other match factories he had quietly bought during World War I. Its initial capital was around $10 million and Ivar owned about half of it, held all senior positions and controlled the board of directors.
The Swedish banker Oscar Rydbeck
sv became a close associate and an important teacher for Ivar in the financing business. He worked for Kreuger & Toll as a consultant from around 1912 until the Kreuger Crash in 1932 and was a member of its board of directors. For not having carried out his duties as a director he went to jail for 10 months after Ivar's death.