Incompetence, fraud, greed
Introduction
Victorian Bournemouth (238) follows the court proceedings which followed the bankruptcy of Stephen Ely, a prominent draper in the resort. During the 1890s, Ely created a business using several adjacent buildings on Old Christchurch Road. Its apparent success belied its ‘melting away’ into bankruptcy, which may have surprised some observers. The court hearings revealed a network of fraud and greed involving an established, Scottish wholesaler and a corrupt manipulation of company law. The simple, yet deceitful, process of hiding the books resulted in adjourning the case sine die, enabling Ely and his partners to escape.
Victorian Bournemouth (238): Stephen Ely
Early history
Stephen Ely (1851-1932), born in Romsey, Hampshire, grew up within the world of retail commerce, his father an ironmonger’s assistant. By 15, he had started work as a draper’s assistant. A decade later, he belonged to the staff living-in at a Southampton drapery, where he acted as a buyer. Still single, he soon married his wife, a daughter of a cheesemonger. He began trading as a draper, buying an existing business in Salisbury. He had paid £4,000 for this business, providing £3,500 of the capital. Within a few years, however, he sold the company for £3,400, its goodwill by now worth nothing. Ill-health drew him to Bournemouth’s benign climate. A directory for 1895 lists him as having established a drapery business at 211-215, Old Christchurch Road, Bournemouth’s main fabric shopping milieu. Subsequent expansion and innovation suggested success, but trouble had occurred by 1897. He went bankrupt in 1899.
Later history
After bankruptcy, Ely’s life appeared to change. In 1901, still married, he boarded alone in Sheffield, his occupation ‘insurance superintendent’. Amelia, his wife, visited a widow of independent means then living in Portsmouth. A widower in 1906, Ely appeared at the next census working as a draper’s valuer, boarding with or visiting a married daughter in Coulsdon, Surrey. His nomadic life continued, later moving around watering-places on the south-east coast. He died in Edmonton, Essex, in 1932, appearing to have left no estate. Under contemporary conventions, Stephen Ely seems not to have lived a successful life; his well-publicised bankruptcy perhaps continued to dog him on his travels. At least one child, however, seems to have improved his social position. His son became a solicitor who later married the daughter of an army captain (1906). On the marriage certificate, he listed his father as a ‘gentleman’.
Victorian Bournemouth (238): bankruptcy
Crash
Despite expanding along Old Christchurch Road, opening a Westbourne branch, and introducing a house-furnishing option, Ely’s financial condition appears to have deteriorated during 1897. He secured a loan from Arthur and Co, a substantial Glaswegian fabrics wholesaler. The lender’s terms included mortgages on his freehold sites (worth £10,000 to £20,000) and an agreement to purchase its goods. In the aftermath, some suggested that Arthur had demanded higher prices for fabrics than Ely’s business could sustain. He signed several notes, which he dishonoured, and defaulted on an interest payment in 1899. Advised by Mr Sternberg, a shadowy financier, Ely took virtual flight by transforming his business into a company. This strategy aimed to protect his assets from Arthur and Co. An opaque process resulted in Ely receiving £3,000 cash and £12,000 in the new company’s shares. He did not, however, become a director, but received an appointment as manager for £500 per year.
Cover-up
Arthur and Co won judgment in their suit against their customer, but his assets had gone, transferred to Stephen Ely Co Ltd. The trustee appointed for the bankruptcy denounced the transfer as fraud. During the post-mortem conducted by the court, sharp practice, if not fraud, emerged on both sides. Arthur’s arrangement consisted of supplying 60% of Ely’s product at prices 10%-20% higher than current levels. Arthur’s managing director claimed ignorance about street prices. Meanwhile, Sternberg sheltered behind the “Bishopsgate Financial Corporation”, engaged in questionable manoeuvres to put Ely’s assets further beyond Arthur’s reach. Seven figurehead directors signed the company memoranda, obtaining a share each, but neither Ely nor Sternberg did so. Nor did the company issue a prospectus. Subsequent hearings consisted of attempts to obtain the company’s books. Sternberg and his coterie dismissed them, claiming to have seen but no longer possessed the books. An adjournment sine die resulted.
Victorian Bournemouth (238): assessment
In the shadows
The Bournemouth Guardian, outraged at Ely’s escape, played its part by listing the names, occupations, and addresses of the seven men who had signed the memoranda and received one share. A century and a quarter later, the contemporary opacity surrounding the case has eased little. Most of the names remain untraced, but some suggest the published list had some accuracy. Traces of one director, M.A. Hubbard, auctioneer, Bush Hill Park, Enfield, still exist. A surveyor at this address, he provided expert evidence in other fraud and bankruptcy cases. He also became a director in a second case, that of the failed Kent Outcrop Coal company, in 1911. The press report listed other occupations as ‘chartered accountant’, ‘retired major’, and even ‘gentleman’. A clerk on Darnley Road, Hackney, perhaps matches a solicitor’s clerk at the same address in 1901. Of H.M. Sternberg, the organising financier, no subsequent trace has emerged.
A new world
Other cases of bankruptcy during Bournemouth’s Victorian period suggest that some might undergo this process and survive with their reputation intact. One or two builders managed this. In their case, however, financial problems occurred perhaps through inefficient bookkeeping. In Kipps, by H.G. Wells, Mr Shalford, the owner of the (fictional) Folkestone Drapery Bazaar ‘had added to exceptional business ‘push’, bankruptcy under the old dispensation, and judicious matrimony’. Stephen Ely’s case, however, appeared to operate at quite a different level. Ely would have featured at the heart of novels by Dickens or Trollope, their targets London’s questionable financial practices. Stephen Ely’s case indicated how, behind apparent success, lurked levers of corruption manipulated by shadowy London financiers and bullying within the supply chain. He brought into the seeming innocence of a successful convalescent resort men practised at facing down judges in court by shrugging shoulders and sheltering behind assumed ignorance.
Takeaway
Victorian Bournemouth (238) has investigated events surrounding the bankruptcy of draper Stephen Ely. It has uncovered a web of dubious supply and financial management. The case leaves unanswered whether Ely’s involvement concerned just commercial failure or extended into the dubious practice of evading insolvency. He claimed never to have met the man to whom he transferred his assets, with the entire process carried out through the unilateral signing of documents. However, soon after, the business went up for sale at £5,000, a price well below the value of his buildings.
References
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