Breach of
contract – The greatest damages ever awarded for a breach of contract were
£610,392, awarded on 16 July 1930 to the Bank of Portugal against the printers
Waterlow & Sons Ltd. of London, arising from their unauthorised printing of
580,000 five-hundred escudo notes in 1925. The award was upheld in the House of
Lords on 28 April 1932. One of the perpetrators, Arthur Virgilio Alves Reis,
served 16 years (1930-46) in goal.
The Guinness Book
of Records (1972)
The
rampant ivy which is gradually choking the churchyard of All Saints in Harrow Weald
has obscured the name on the plain cross memorial that marks the burial place
of Sir William Waterlow, the 1st Baronet of Harrow Weald, and onetime Lord Mayor of
London. His funeral service took place at St Paul’s Cathedral, the King and Queen sent a message of condolence to his widow and in the House of Commons Christopher Addison, the Minister of Agriculture, expressed “heartfelt
sympathies for the friends of Sir William Waterlow
who died this morning and who had been acting in a voluntary capacity with such
conspicuous success as chairman of the Central Allotments Committee for the assistance
of unemployed workers.” The
establishment may have rallied around but Sir William died a broken man. His voluntary
work on the allotments committee was a bathetic finale to an illustrious career
which had ended in the ignominy of being ousted from his job as Managing
Director of Waterlow & Sons by his own family. His fall from grace was the
result of his gullibility in falling victim to an outrageous fraud perpetrated
by a Portuguese con man, Artur Virgilio Alves Reis.
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| Sir William and Lady Waterlow, at his inauguration as Lord Mayor of London |
Alves
Reis was born in Lisbon in 1896, the son of an unsuccessful undertaker whose
financial problems prevented his bright and ambitious son from completing his
engineering studies or finding a suitable career in Portugal. At the age of 20,
newly married and penniless, Alves Reis decided to abandon Portugal for the
colonies where he was sure he would find the opportunities for advancement
denied him at home. In 1916 he emigrated to Angola taking with him an
impressive but fraudulent degree certificate from the University of Oxford
Polytechnic of Engineering. His
impressive diploma, duly authenticated by a public notary in Sintra, qualified
him in twenty one subjects including Engineering Science, Geology, Geometry,
Physics, Metallurgy, Pure Mathematics, Palaeography and Electrical Engineering.
These falsified qualifications helped him land a job on the nascent Angolan rail
network but his failure to complete his studies meant that the engineering advice he gave to his employers was deeply flawed and
generally contrary to the counsel offered by genuinely qualified mechanics. A
bridge built under his instruction was considered so shoddily built
and so rickety that it would be likely to collapse the moment a railway
locomotive drove over it. In a risky moment of bravura he defied his critics, putting himself and
his infant son on the first train over the bridge, which despite the dire
predictions, stayed upright. The young engineer acquired a controlling share in
Ambaca, the Royal Trans-African Railway Company of Angola, by the simple
expedient of paying for it with a cheque for $40,000 drawn on a US bank. His
account had less than $10 in it but in the 10 days it took for his cheque to reach his bank
in New York by passenger steamer he was already in control of the company and
its $100,000 cash reserves which he quickly used to cover the dud cheque when the
frantic bank sent him a telegram. When Reis returned to Portugal he found
himself under arrest and charged with embezzling Ambaca’s money. He spent 54
days in gaol as a result of the fraud but it was he was under lock and key that
he came up with the even more grandiose scheme for becoming wealthy that set
him on a collision course with Sir William Waterlow.
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| Alves Reis in Angola, scheming to take over the world |
With
the help of 3 possibly unwitting accomplices, Dutch business man Karel Marang,
German trader Adolph Hennies, and José Bandeira the brother of António
Bandeira, the Portuguese Ambassador to the Netherlands, Alves Reis persuaded Sir
William Waterlow to print 100 million escudos worth of 500 escudo notes, ostensibly for the Bank of Portugal but in reality for himself. Waterlow & Sons were official printers to the Banco de Portugal and held
the original plates to the 500 escudo 'Vasco de Gama' note. Reis convinced Marang, Hennies and
Bandeira that he was working for the Banco de Portugal on a covert operation to
finance the colonial government of Angola by injecting millions of escudos into
the economy – national banks call it ‘quantitative easing’ these days. The
operation was, of course, very hush-hush and as an employee of the bank Alves
Reis couldn’t be seen to be involved which is why he, and the bank, required
the assistance of trusted associates. To back up his story he produced a faked contract
from the bank authorising the printing of the banknotes. The signatures of the
Governor and Director of the Banco de Portugal on the contract were copied from
one of the millions of exemplars floating around on every escudo note of
whatever denomination. The impressive coat of arms on the letterhead belonged
to a Lisbon Sports club and appended to the contract were translations and testimonials,
all duly notarised and authenticated by various public notaries and the
embassies of the United Kingdom and the Netherlands. It was Karel Marang who presented
this elaborate portfolio of documents to
Sir William Waterlow at the offices of Waterlow & Sons in the City and
explained the sensitive nature of the business and how the notes would only be
for use in Angola not in Portugal; once they reached Luanda, he explained, the
word ‘Angola’ would be stamped on each note. Sir William was not entirely
stupid; he was surprised at being approached by an unknown Dutchman acting on
behalf of an old and well known client and so he took the precaution of writing
to the Governor of the Bank of Portugal to make sure that everything he had
been told was legitimate. Unfortunately he told Marang that he intended to do
this and Marang told Alves Reis. By an extraordinary coincidence Sir William’s letter to the
Governor of the Bank of Portugal went astray either in the post or in the
offices of the bank and was never seen or responded to. Alves Reis in the
meantime wrote his own letter in the Governors name, signature once again
copied from a bank note, and assured Sir William that all was well, that Karl
Marang was completely to be trusted and confirming that the bank
authorised Waterlows to print what amounted to over a million pounds worth of
escudo notes. Satisfied that this was a piece of legitimate piece of business
Sir William filed away the fraudulent response and got on with arranging the
printing of the bank notes.
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| The Quinhentos (500) 'Vasco de Gama' escudo note printed by Waterlows for Alves Reis |
 |
| Alves Reis |
200,000
bank notes is a lot of paper; the new notes were loaded into large trunks and
shipped to Portugal as diplomatic baggage (via the left luggage department of
Liverpool Street Station and The Hague). Laundering such a vast amount of money
was a challenge but if there was ever a man who could rise to even the most
testing of circumstances it was Alves Reis. His solution to the laundering
problem was to open his own bank, Banco de Angola e Metrópole, and issue his
fraudulent currency as business loans. He invested in his own account in
property, jewellery, gold backed foreign currency and businesses throughout
Portugal. The sheer volume of illicit currency in circulation and the business
and consumer activity it generated caused an unexpected boom in the Portuguese
economy. With 500 escudo notes becoming as common as toilet paper it was
inevitable that rumours of counterfeiting would be the result. The Bank of
Portugal took to having its experts examine new notes in general circulation
but of course the experts always declared the notes genuine as it was
impossible to differentiate Alves Reis’s crop of Waterlow notes from the Bank
of Portugal’s own. The newspaper O Século became convinced that there was a
German plot to flood the country with counterfeit notes to destabilise the economy
as a prelude to seizing Portugal’s African colonies. The atmosphere grew more
fevered but still no one could lay their hands on a single example of a clearly
counterfeited note. Then in October 1925 a bank cashier in Oporto found himself
holding two 500 escudo notes with the same serial number; one of them had to be
counterfeit. It took until December for the Bank of Portugal to raid the vaults
of the Banco de Angola e Metrópole but when it did it discovered more notes
with identical serial numbers and the game was finally up for Alves Reis.
When
the news initially broke that Portugal had been the victim of a gigantic
counterfeiting scam the scale of the fraud and the quality of the forged notes
convinced everyone that only a government could be behind it. Some continued to
blame the Germans, some thought it must be the Portuguese themselves and the
Daily Telegraph was convinced it was the Russians. As Marang’s involvement came
to light quite early on and was reported widely Sir William realised that the
notes he had printed were not authorised by the bank of Portugal as he had believed.
After a meeting with the Portuguese ambassador to the United Kingdom Sir
William flew to Portugal to confess his part in the proceeding and offer
£50,000 as compensation for the Bank of Portugal’s losses. Edgar Waterlow was Sir
William’s cousin and a fellow director of the company. He was also an
implacable adversary and when the full scale of Sir William’s culpability in
the scandal came to light he wasted no time rallying the other directors to
oust their chairman and get himself instated in the vacant position. Alves Reis
was sentenced to 20 years in prison for the fraud in 1930 after a protracted
trial. The Bank of Portugal took Waterlows to court in England looking for
damages of more than a million pounds from the company. The legal action went
eventually to the court of appeal and Waterlows were ordered to pay £610,000 to
the Portuguese bank; the company never really recovered and after limping on
until the early sixties it was sold to De La Rue who currently hold the
contract for printing UK banknotes. Although Sir William was left without a job
he had already been lined up for the role of Lord Mayor of London and he duly
took office in 1929. He died in 1931, barely a year out of office, not exactly
disgraced but certainly a humiliated man. Alves Reis served 16 years in prison
and was released in 1945. Of the other accomplices only Marang had served a
prison sentence, 11 months in Holland. Alves Reis lived out the rest of his
life in relative obscurity and poverty. When he died in 1955 he was so poor
that he was buried in a paupers grave wrapped in a bed sheet so that his son
could inherit his only suit, which he needed to attend the funeral of course. 
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