achieve his ‘steel scheme’ he needed a large amount of money — probably nearly £8 million — but he had a shortfall, and one that he was finding increasingly difficult to bridge, not least because Montagu Norman, the Governor of the Bank of England, was implacably opposed to both Hatry’s scheme and its promoter. ‘I say he shd stand aside as long as Hatry controls,’ Norman advised a director of the merchant bank Morgan Grenfell, which had been approached for a loan.
To raise the £900,000 (more than £40 million in today’s currency) necessary to float Steel Industries of Great Britain Inc., Hatry, at the suggestion of one of his directors, an Italian called John Gialdini, tipped from dextrous dealings and sailing close to the wind into illegality. A few years earlier he had audaciously managed to break into the lucrative corporations loans business, and by the end of 1928 he had cornered 90 per cent of the market. Now, in a manoeuvre ‘intended to rob Peter to pay for Paul and to reimburse Peter from the profits of selling Paul’ he agreed to forge corporation scrip certificates (receipts and contracts) for three of the municipalities with which he had dealings, Gloucester, Swindon and Wakefield, thereby providing security for further loans from the banks until the steel combine was floated, whereupon the forged certificates could be redeemed.
It didn’t work. The City’s confidence in Hatry, already ebbing, went into free fall, partly as a result of the excessive number of scrip certificates that seemed to be in circulation, and the Stock Exchange suspended dealings in Austin Friars Trust. Gialdini had already done a runner back to Italy when on 19 September 1929 Hatry, who was by now being investigated by Sir Gilbert Garnsey of Price Waterhouse on behalf of worried creditors, and his three other directors confessed to the Chairman of his companies, the 16th Marquess of Winchester, in the Charing Cross Hotel, that there were ‘irregularities’. The four then piled into a taxi to tell Garnsey, ‘We want to make a complete statement before the investigation is begun.’ They subsequently made a formal confession to the Director of Public Prosecutions, Sir Archibald Bodkin, in which the forty-year-old Hatry took full responsibility himself for the misdemeanours. Garnsey revealed that the total liability of Hatry’s companies was in the region of £21 million, with Austin Friars Trust responsible for £15 million. The City took the news badly. ‘This Hatry affair has besmirched us all, especially in the eyes of foreigners, which we can ill afford,’ wrote the Governor of the Bank of England. In his diary he laconically gave his verdict: ‘I do not favour bail for Hatry.’
Hatry did not get bail, nor did his young associates. When the case came to trial on 20 January 1930 it took the prosecution a full four days to present the charges, so complicated were the details, so breathtaking the sums of money involved. Hatry was defended by Norman Birkett, KC, but since he and his fellow defendants changed their pleas to guilty of all charges, all Birkett could plead was mitigation. All the lawyer’s legendary powers of persuasion (which brought tears to the eyes of the accused) were to no avail. The judge failed to see the difference between Hatry’s intention to redeem his fraudulent issue out of the large profits he anticipated making when his ambitious steel combine was floated and ‘the threadbare plea of every clerk or servant who robs his master and says that he hoped to repay the money before his crime was discovered by backing a winner. Except that your crime was on a large scale.’ Mr Justice Avory sentenced Hatry to a draconian fourteen years of penal servitude, since ‘You stand convicted on your own confession of the most appalling frauds that have ever disfigured the commercial reputation of this country.’ The ‘bird-like’ Hatry ‘visibly reeled’. His son bitterly concluded that the case had been prejudged in the name of a nation that was itself reeling from the effects of the world slump, but on appeal two months later Hatry’s sentence was effectively increased by the two months that had elapsed between trial and appeal.
The verdict of some in the City was similar to that of the judge. Hatry’s Chairman, the Marquess of Winchester, who had lost money and reputation in the ‘Hatry crash’, had once thought that Hatry was ‘an example of the alert business brain having an unusually quick perception of any proposition, a marvellous gift for shifting the intricacies, a power of putting his case with a clarity of expression rarely found apart from legal training, coupled with an apparent frankness which amounted to a charm of manner’. He now revised his opinion, and decided that in fact what Hatry possessed was ‘dangerous optimism coupled with inordinate conceit … his brain was honeycombed with crevasses into which unpleasant facts were allowed to slip and there he permitted them to remain in the hope that the glacier would never reveal its secrets’. The Times spoke of ‘a rogue … a signalman who deliberately tampers with the signal’.
But others were less anxious to clamber onto the moral high ground. The left-wing New Statesman, which might have been expected to be very harsh about the unacceptable face of capitalism, was kinder. ‘Hatry was not a swindler … he was rather an unbalanced optimist with a defective moral sense. He set out not to defraud the investors in his companies, but to make money, if he could, for them as well as himself … “If only I had been reasonably lucky,” a man in a similar position might say, “I would have retrieved everyone’s fortunes, and no one would have been a penny the worse for my illegality. How right I should have been!”’ For the New Statesman it was the City itself that was particularly to blame: ‘How in the name of fortune did the banks come to give the Hatry group so much money?’ At a time, it probably wanted to add, when it was so unwilling to lend to industry in the depressed areas. Indeed, ‘The Hatry case will have done some good if it rivets public attention on the joint-stock banks and reveals what part they are really playing in City speculation and in financing productive industry.’
A model prisoner with influential and eloquent supporters such as Harold Nicolson, eighteen MPs and his lawyer Birkett prepared to petition for him, Hatry was released from prison after serving nine rather than fourteen years. He subsequently borrowed sufficient money to purchase the ‘carriage trade’ bookshop Hatchard’s in Piccadilly. Again he expanded and acquired and amalgamated and diversified, and again his rickety empire crashed. In the late 1950s Hatry was to be found cashing in on the coffee-bar craze, buying up premises in the West End to serve ‘froffy coffee’ to a newly affluent post-war generation of teenagers. He died of heart failure on 10 June 1965.
It would be a coup de maître. British prestige confirmed with a stylish gesture. The country’s position as an imperial power elegantly underlined. Brigadier-General the Right Honourable Lord Thomson of Cardington, Secretary of State for Air in the Labour government, would stroll coolly into the meeting of the Imperial Conference in London on 20 October 1930 as the delegates were getting down to a discussion of air power. Thomson would have just arrived back from a round trip to India which had taken little more than a fortnight, while the representatives from Australia and New Zealand had taken six or seven weeks to get to the mother country. It would demonstrate that Britain had taken the lead from Germany in the development of ‘lighter than air’ machines. Furthermore, Thomson was being canvassed as the next Viceroy of India, and the subcontinent had been showing disturbing signs of nationalist unrest for over a decade now. The previous year Jawaharlal Nehru, the President of the Indian National Congress, had pre-empted the Simon Commission’s recommendations on India’s constitutional future by declaring for purna swaraj (complete independence). Perhaps the choice of this destination for the R101, the airship in which Thomson would make his flight, would be read as evidence of how close and how benign the ties of Empire were — at least as far as Britain was concerned.
During the First World War, rigid German airships named after Count Ferdinand von Zeppelin, a German cavalry officer who had been interested in constructing a ‘dirigible balloon’ ever since he had seen the French using them during the Franco-Prussian war of 1870–71, had become an ominous sight over England. By the outbreak of the war there were a total of twenty-one Zeppelins in service for commercial passenger transport. Recognising their military potential (which Zeppelin had always intended),