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Walter Watts’ $7m Cheque Scam Was The First “White Collar” Crime

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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.

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What was the scam?

The company and its auditors accepted Watts' version of the records without question.

What they should've done was to compare the entries in the passbook with the canceled cheques in the archive.

In August 1844, Watts 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 which included 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, he didn't get off lightly.

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 jail.

Watts was stunned by the sentence and took his own life on his first night in prison.

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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.

One writer called 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".

In the days long before computers, 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.

This led to Victorian journalists dubbing Watts as the inventor of what we now call "white collar" crime.

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