Walter Watts was born in London in 1817.
He got a job at the Globe Insurance Company through his father, dealing with the firm’s cheques.
He was responsible for ensuring that the amount paid out for fire, insurance claims, and dividends was adequately reflected in the company passbook.
In 1833, he testified as a witness on behalf of the bank in the trial of a man accused and later convicted of forging a £150 cheque. A decade later, he embarked on his own life of crime.
What was the scam?
The company and its auditors accepted Watts’ version of the records without question, rather than comparing the entries in the passbook with the canceled cheques in the archive.
In August 1844, he began to take advantage of this by embezzling money from the bank, altering the records to cover his thefts.
He used this money to fund an extravagant lifestyle as a playboy buying two London mansions.
What happened next?
Watts also became a theatrical impresario, funding several productions of his plays, including one about a servant who impersonates his master.
Doing so brought him too much public attention and resulted in questions about how he could afford his lifestyle on a salary of just £200 a year.
In 1850 he was arrested for forging a cheque for £1,400.
Watts owned shares in the company, so under the law at the time, he was only successfully prosecuted for the theft of the paper on which the cheque was written.
However the Judge decided sentencing should be in accordance with the crimes that it was probable that Watts had committed not just what the jury actually found him guilty of and sentenced him to ten years in.
Watts was stunned by the sentence and committed suicide on his first night in prison.
What was the result of the scam?
Watts’ frauds cost Globe Insurance Company at least £70,000 (£7.6m today).
The actual amount may be higher since the company refused to publish a detailed report on his crimes commissioned by an accountant.
The company’s staff and auditors attracted sweeping public criticism and ridicule, with one writer calling them “lotus-eaters” and “men of straw” who were too dim to notice the “well-appointed carriage… that used to bring their humble check-clerk to his duties every morning”.
The fact that the passbook was filled with crossings-out should have raised their suspicion.
Watts’ scam was one of the first of many in banking over the years, which led to Victorian journalists dubbing Watts as the inventor of what we now call “white collar” crime.
Kris Paterson is a writer for WhatJobs.com.
