British Prime Minister's Staff Is Investigated for Insider Trading
The investigation into insider trading involving members of the British Prime Minister's staff primarily centers around the Marconi scandal, which unfolded during H. H. Asquith's government in the early 20th century. Key officials, including the Chancellor of the Exchequer and the Attorney General, were implicated in purchasing shares of Marconi's Wireless Telegraph Company based on undisclosed information regarding a government contract for constructing wireless telegraph stations. This controversy not only raised ethical questions about the intersection of government and corporate interests but also led to a parliamentary inquiry that revealed significant profits made by these officials prior to the public announcement of the contract.
Despite the investigation's findings that these officials had indeed capitalized on insider information, the panel ultimately ruled that no political corruption occurred, exonerating them from severe repercussions. The scandal contributed to the erosion of public trust and political support for Asquith's government, ultimately culminating in its collapse in 1915. This incident highlights the enduring concerns regarding the influence of corporate entities on government actions, a theme that continues to resonate in contemporary discussions about politics and business ethics. The Marconi affair thus serves as a historical example of the complexities involved when governmental authority intersects with private economic interests.
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British Prime Minister's Staff Is Investigated for Insider Trading
Date January, 1913
High-level staff members of British prime minister H. H. Asquith’s government were investigated for insider trading after buying shares of Guglielmo Marconi’s Wireless Telegraph Company and profiting from the purchases. Those implicated had advance knowledge that the government was to sign a contract with Marconi, and that Marconi shares would increase in value as a result of that contract. The scandal, which led to the fall of Asquith’s government, did not result in criminal convictions.
Also known as Marconi scandal
Locale London, England
Key Figures
Guglielmo Marconi (1874-1937), Italian physicist and inventor, who founded the Marconi companyGodfrey Isaacs (1867-1925), managing director of the Marconi companyH. H. Asquith (1852-1928), British prime minister, 1908-1916David Lloyd George (1863-1945), Chancellor of the Exchequer, and future prime minister, 1916-1922Rufus Isaacs (1860-1935), Liberal Party attorney generalAlexander Murray (1870-1920), Liberal Party treasurerHerbert Samuel (1870-1963), British postmaster generalCecil Chesterton (1879-1918), editor atThe Eye-Witness
Summary of Event
The Marconi scandal was an insider-trading scheme that helped to bring down the government of Liberal Party prime ministerH. H. Asquith in 1915. The alleged crime centered on the purchase of shares in Marconi’s Wireless Telegraph Company by leading officials in Asquith’s government. These high-level officials included his successor, the Chancellor of the Exchequer, David Lloyd George; Attorney General Rufus Isaacs; Postmaster General Herbert Samuel; and the Liberal Party treasurer, Alexander Murray.
The charges against Asquith’s staff were based on the purchase of shares in an American subsidiary of Marconi by cabinet ministers motivated by insider information about a pending contract between the government and Marconi. The contract called for the construction of state-owned wireless telegraphy (radio) stations throughout Great Britain. The government link to Marconi was Asquith’s attorney general, Rufus Isaacs, whose brother, Godfrey Isaacs, was chairman of Marconi. In 1923, Rufus Isaacs established the Israel Electric Corporation (IEC) in the British Mandate of Palestine. IEC remains the primary distributor of electricity in Israel.
The British learned that Guglielmo Marconi, company founder, had filed an application for a United States patent on a transmitting apparatus for wireless telegraphy on July 15, 1910. The patent was issued a year later, on July 11, 1911. Asquith’s cabinet approved the plan to purchase telegraphy services from the Marconi company, and from August, 1911, through April, 1912, Marconi company shares experienced a sharp price increase.
Reporters started to probe the deal, which began with an agreement signed in early March for the construction of six telegraphy stations, after news of the contract was made public. The contract was formalized later that spring. Taking the lead was The Eye-Witness (later called The New Witness), a publication edited by Cecil Chesterton, brother of writer and literary critic G. K. Chesterton. The Chesterton brothers, along with The Eye-Witness’s founder, Hilaire Belloc, were soon accused of anti-Semitism, but such charges hold little historical weight given that a British parliamentary investigation found the government coconspirators did, in fact, buy Marconi shares and profited from the deal. Furthermore, neither of the government officials implicated in the scandal were Jewish, except the Isaacs. It is far more probable that countercharges of anti-Semitism were stoked to undermine the credibility of the criminal allegations and neutralize public perceptions of the criminality and seriousness of the claims, particularly given the lessons learned by European governments in the aftermath of the Dreyfus affair in France at the turn of the century.
The British parliament began its investigation of the Marconi deal in January, 1913. The parliamentary inquest, in its “Reports from the Select Committee on Marconi’s Wireless Telegraph Company, Limited, Agreement,” found that Asquith’s staff had sold Marconi shares long before the April, 1912, public announcement of the contract. After the announcement, the company’s shares rose even more to a solid 33 percent. Government staff earned a significant amount of money from sales of the shares: Godfrey Isaacs earned £10,000; Rufus Isaacs earned £20,000 and then sold £2,000 in shares to Lloyd George; and Samuel earned £2.532. Murray purchased three thousand Marconi shares for himself and an additional three thousand shares for the Liberal Party.
Although the parliamentary investigation found that Lloyd George, Samuel, Murray, and Rufus and Godfrey Isaacs had directly profited from inside information, the panel ruled that no political corruption occurred, and the five were virtually exonerated. Subsequently, Godfrey Isaacs sued Cecil Chesterton for criminal libel and won. Chesterton was fined one hundred pounds plus court costs.
Support for Prime Minister Asquith’s Liberal Party government already had eroded significantly in parliamentary elections by 1911. He was able to hold on to power in 1911 only by enlisting the support of Irish Nationalists in the House of Commons. His Liberal government collapsed in 1915, and Lloyd George succeeded Asquith as prime minister in a coalition government in 1916.
Impact
The accusations of insider trading among members of Asquith’s government certainly accelerated the collapse of his government in 1915. However, historians have largely ignored the role of the Marconi scandal in the demise of Asquith’s prime ministry. The respected Chambers Biographical Dictionary, for example, makes no reference to the scandal in its entry on Asquith. Such omissions, however, do not obscure the relationship between the development of corporate entities, nation-states, and technology in Western history.
Since at least the Scientific Revolution, science and technology have been envisioned as enhancing the interests of the state in architecture, communications, engineering, industry, and the military. In the modern era, the relationship between corporate structures such as Marconi and nation-states such as the United Kingdom has only expanded, as industrialization shifted the economic dynamics away from agrarian markets to the concentration of capital and industry in urban centers.
The deleterious mix of government and corporate interests continues to make headlines and policy as the revolving door between the halls of government and corporate lobbying firms continues unabated. Corporate special interests continue to subvert and overwhelm the public interest.
Bibliography
Baker, W. J. A History of the Marconi Company. New York: St. Martin’s Press, 1971. An excellent book about Marconi and the company he created. A good place to start for understanding the significance of his inventions in the first years of the twentieth century.
Cheyette, Bryan. “Racism and Revision: Hilaire Belloc and the ’Marconi Scandal,’ 1900-1914.” In The Politics of Marginality: Race, the Radical Right, and Minorities in Twentieth Century Britain, edited by Tony Kushner and Kenneth Lunn. Savage, Md.: F. Cass, 1990. In this article, subtitled “a reassessment of the interactionist model of racial hatred,” the author examines the charge of anti-Semitism made against investigators, including government officials and journalists, of the Marconi scandal.
Donaldson, Frances Lonsdale. The Marconi Scandal. New York: Harcourt, Brace & World, 1962. Provides details about the fall of Godfrey Isaacs, managing director of the Marconi company, after the Marconi scandal. Donaldson’s report of this convoluted proceeding is filled with all the intrigue of a mystery novel.
Packer, Ian. Liberal Government and Politics, 1905-1915. New York: Palgrave Macmillan, 2006. An analysis of British Liberalism during the early years of the twentieth century, describing the major concerns of Liberals and how the party fashioned its domestic and foreign policies, including its contracts with foreign companies such as Marconi. Concludes with a section on Asquith’s government.