Pepper Prospectus

Standing with heads bowed before the King's Bench in London's Old Bailey one day last week, three British financiers received British Justice for their part in last year's unsavory "pepper pool" collapse that rocked London commodity markets and brought losses of millions to British investors (TIME, Feb. 18, 1935). The "Pepper King," an Armenian-born British subject named Garabed Bishirgian, had been accused of issuing a securities prospectus which he "knew to be false in a material particular." Aiding & abetting this crime was the charge against John Henry Charles Ernest Howeson, one time Calcutta jute dealer who changed his name from von Ernsthausen before he became the world's undisputed "Tin King." Third defendant was a Howeson hireling.

Having heard the jury's verdict of guilty, Justice Sir Cyril Atkinson turned to the fallen financiers and said: "You were in great positions. Great positions carry great responsibilities. I should be failing in my duty if I did not punish you." Thereupon he sentenced Messrs. Bishirgian & Howeson to one year of imprisonment without hard labor. That was the same sentence passed upon mighty Lord Kylsant in 1931 in the same court house for the same offence in connection with a scandalous Royal Mail Steam Packet prospectus. The third pepper man received nine months. All appealed.

Background of the pepper case was as dizzy as any U. S. dance of corporate dummies. Between Garabed Bishirgian's barren birthplace and his swank mansion in London's Park Lane lay a speculative trail that included caviar, tin and Turk ish rugs. By reputation his "only god was a rising share," though on week ends he was devoted to his 600 pigs on his model farm in Surrey. His lavish stag parties were the talk of the City.

"Tin King" Howeson had even a more spectacular rise from humbleness. With an obscure jute career behind him, he turned up in London about 15 years ago, changed his name for no apparent reason, set out to impose an economy of scarcity upon the world's tin industry. By the end of the 1920's he was master of a $165,000,000 group of British companies, mainspring of the potent International Tin Committee and a power in Empire affairs. The tin restriction plans which were incorporated in an international pact signed at The Hague in 1931 originated with an unsuccessful Howeson tin pool, which was stuck with embarrassing stocks of the metal in a declining market. Result was that the price of tin is now a matter of British Government policy and a stench in the nostrils of U. S. tin users, who have to pay what the Tin Pool charges.

According to one witness at the Old Bailey trial, Howeson's flier in pepper was a complete side-show for him. Garabed Bishirgian was a Howeson crony, and while transactions were for the account of a company headed by Howeson, the pepper trading was done through Bishirgian & Co. Messrs. Bishirgian & Howeson started to play the shellac market late in 1933, switched to white pepper in 1934 with the idea of cornering the world supply. By that summer the Howeson firm was loaded up with some $2,000,000 worth of shellac and about $5,000,000 worth of pepper--to be paid for in the future.

Since the corner was not being turned with the ease expected, Messrs. Bishirgian & Howeson looked around for a way to bail out. They bought an old commodity house called James & Shakspeare, proceeded by a circuitous corporate route to transfer the shellac and pepper commitments to that firm, meantime selling James & Shakspeare stock to the public. In the prospectus they failed entirely to mention these shellac and pepper contracts.

Less than six months after the James & Shakspeare stock was marketed, the white pepper corner was ready for a grand smash. The price had been squeezed up from 18-c- per Ib. to 31-c-. But a bumper crop was in prospect, and vast quantities of hitherto unsuspected pepper were being shaken out of China. Mr. Howeson made one attempt to sell a restriction scheme to pepper producing countries, but this time that method of bailing himself out did not work. "By February ," said the Public Prosecutor, "the game was ended."

James & Shakspeare failed, wiping out stockholders and pulling down other commodity houses: Garabed Bishirgian, his counsel related, "is now without any money at all. Indeed, he is insolvent."

In charging the jury last week, Justice Sir Cyril Atkinson meticulously pointed out that the prospectus, not the corner, was the thing to be weighed. "If you can corner a commodity, corner it by all means," said the bewigged justice who, in a British law suit involving Chrysler Corp., observed from the Bench that Walter P. Chrysler's standard of business morality seemed "lamentably low" (TIME, Nov. 25).

"There is no law against it," Sir Cyril continued on the subject of corners. "You may think it isn't a very nice thing to do, but there is nothing legally wrong about it."

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