The amazing story of the man who ‘stole Portugal
When you think of huge financial scams, who comes to mind?
Bernie Madoff? Charles Ponzi?
Pfft. They are amateurs. If you want a Masterclass in financial scams, then look no further than Alves dos Reis from Portugal. In terms of brazen financial fraud, he claims the Gold Medal.
LinkedIn wasn’t around in the time of dos Resis but for a bit of fun, let’s create a LinkedIn profile of sorts for him.
Born:
Lisbon, Portugal 1896
Education:
Diploma of Engineering — Oxford University (forged)
Polytechnic School of Engineering (school doesn’t exist)
Career:
A major shareholder of the Transafrican Railways of Angola (purchased with a fake cheque)
Prison
Career Highlights:
Caused an economic crisis that led to a nationalist military coup d’etat.
Ok, let’s pause here because despite this unique profile so far, it is now that things get even more interesting.
In prison, there is a lot of time to think. And dos Reis put his time in jail to good work, coming up with a get-rich-quick plan. Super rich. Super quick. He formulated a plan to print Portuguese currency.
Plenty of people have attempted to counterfeit money — nothing overly clever about that. The genius behind dos Reis’ plan was that he would get approval to print legitimate currency.
He approached a British company, Waterlow & Sons, that had the contract to print currency for Portugal, saying he was a representative of the Portuguese government and needed more banknotes to send to Angola — a Portuguese colony at the time. Dos Reis told them it was a secret project, and they couldn’t tell anyone.
Now, of course, the fine people at Waterlow were not so foolish as to just accept dos Reis’ word; they asked for evidence of this. You may recall from my LinkedIn profile of him that dos Reis had already faked documents before, so he happily provided paperwork from the ‘Portuguese government.’
Satisfied with this, Waterlow handed over $100 million escudos — in 500 escudos notes to do Reis. All perfectly legitimate and using the same plates to produce ‘genuine’ currency for Portugal. To put this into perspective, that was equivalent to 1% of Portugal’s Gross Domestic Product (GDP) at the time (around $2 billion USD in today’s terms).
I would say it was like taking candy from a baby, but a baby would make more of an attempt to keep its loot than Waterlow did.
Dos Reis was clearly a smart man. He had a more diversified portfolio than Warren Buffett. And like any savvy entrepreneur, he wanted to invest his wealth wisely.
- He used approximately $25 million escudos and bought a fleet of taxis, a portfolio of farms, and, like all master thieves, a lot of jewels. He spent so much that he actually created an increase in the Portuguese economy.
- He created his own bank so he could launder his funds by offering loans at ridiculously low rates.
- No doubt his biggest, boldest move was to start buying shares in the Bank of Portugal so he could mount a takeover. This move was not only to make money but to take control of the one institution that could uncover what he had done.
The national paper O Seculo was owned by a tycoon Alfredo de Silva, who saw dos Reis as a rival and was jealous of his success.
He had his journalists investigate and report on all the activities of dos Reis. They questioned how his bank could offer such low-interest rates when they never took in any deposits. Eventually, the authorities took notice.
The problem they had was that all the banknotes were legitimate. The only thing the government could do was to recall every 500 escudo banknote in circulation: the real ones and the dos Reis ones.
No prizes for guessing what happened next. Mass panic.
Police did manage to arrest dos Reis while he was on board a ship heading to Angola.
The conspiracy theories came thick and fast when dos Reis was arrested. Although authorities believed he couldn’t have acted alone, there were no other arrests. Some people believed the German government had backed him in an attempt to gain control of Angola.
The Bank of Portugal sued Waterlow & Sons for a breach of contract arising from their unauthorized printing of the notes. They were awarded £610,392 — a world record at the time.
The head of Waterlow, Sir William Waterlow, lost his job but was subsequently elected mayor of London.
Portugal’s economy tanked, and people lost faith in the banks and financial institutions. There was a military coup that ended the First Republic and led to the fascist regime of António de Oliveira Salazar.
Dos Reis received a 20-year prison sentence but only served 15 of those and was released in 1945. Ironically he was offered a job at a bank — some people are just too trusting — but he had moved on from the world of finance. And I guess fraud.
He died in 1955 in poverty.
The fake notes that dos Reis had printed are now quite valuable.
Ironically dos Reis’s scheme would now be very profitable. At a recent auction, one of the 500 dos Reis Escudo notes sold for $7500. The 200,000 notes he had printed would be worth $1.5 billion based on that auction price.
Time to hunt down some of those notes!
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