Charitable Corporation facts for kids
The Charitable Corporation was a British company that aimed to help people by giving them loans. It was like a big pawnbroking business, offering money at low interest rates to those who needed it. The company started in 1707. Its full name was "Charitable Corporation for the relief of the industrious poor by assisting them with small sums upon pledges at legal interest."
However, the company became dishonest. Some of its leaders made risky investments and lost most of the money that belonged to the shareholders (the people who owned parts of the company).
Contents
How It Started
The main idea behind the Charitable Corporation was to help small business owners. They could get loans by leaving valuable items in the company's warehouse. This way, they wouldn't have to sell their goods for very low prices when they needed cash quickly.
The company began with £30,000. This amount grew over time: to £100,000 in 1722, then £300,000 in 1728, and finally £600,000 in 1730. Basically, the company acted as a large pawn shop.
In 1719, the company explained its process in a pamphlet.
- A person needing a loan would bring goods to one of the company's warehouses.
- They would sign a bill of sale (a document showing they were selling the item).
- A warehouse worker would decide how much the item was worth.
- This information went to the bookkeeper and then to the cashier, who paid the loan.
Workers like the warehouse keeper and cashier had to provide security, and there were people checking on them. Records were signed every night. If a loan wasn't paid back, the item could be sold after a year. Borrowers had to pay 5% interest, plus other fees. This meant the company actually earned much more than the "lawful interest." These rules should have stopped cheating. But by the late 1720s, the rules were not followed strictly, which allowed a lot of fraud to happen.
The first warehouse was in Duke Street, Westminster. Later, it moved to Spring Garden near Charing Cross, London. By the mid-1720s, the main warehouse was in Fenchurch Street, London, but the Spring Garden one was still used.
Growing Bigger
A report from the House of Commons (part of the British Parliament) later said that the company didn't do much business until 1725. That year, a new group of directors was chosen. They hired new officers, including John Thomson as the warehouse keeper.
Thomson quickly got rid of the person who was supposed to check his work. He also managed to get control of all the important keys, which meant he had full access to the warehouse. This removed the important checks that were supposed to prevent cheating. When some directors realized this, they resigned.
The company also started allowing much larger loans, sometimes over £1,000, and even up to £2,000 with the directors' approval. This made it easier for people to borrow huge amounts of money using fake items as pledges.
Secret Deals and Bad Investments
Soon after Thomson became warehouse keeper, some people involved in the company's management started making very large, risky investments in shares. This group, known as the "partnership of five," included Sir Alexander Grant, William Burroughs, William Squire, George Robinson, and John Thomson.
In 1727, they began buying shares in the Charitable Corporation itself. They also invested in lead mines in Scotland and Norway. All these investments were paid for by borrowing money from the Charitable Corporation using fake pledges. This meant they were taking money from the company without putting up real valuable items as security.
George Robinson, one of the partners, was a stockbroker. He handled many of these deals. He even tricked his own partners, making them believe their shares were lost and taking control of them himself, stealing about £100,000 from them.
Company Brokers
Richard Woolley and Thomas Warren worked as brokers for the company. They found people who wanted loans and earned a commission. However, they often submitted paperwork for loans long after the money had already been given out. This made it hard to track what was happening.
The rule allowing loans over £1,000 was specifically put in place so that Robinson could get money from the company using fake pledges to buy more of the company's shares.
Public Complaints
Eventually, in March 1731, the City of London complained to the Parliament of Great Britain. They said the company charged "unreasonable and exorbitant rates" (too high fees) and sold unredeemed goods for very low prices. Merchants and silk weavers supported this complaint. They claimed that items were often sold for 20% less than they cost to make, which hurt businesses and encouraged dishonest bankruptcies.
The company tried to fight back, saying they followed their rules and helped prevent usury (lending money at unfairly high interest). But pamphlets at the time showed that pawn shops were charging 30% interest.
Parliament looked into the matter. They heard from witnesses, some of whom were in prison for debt. The Parliament committee reported:
The Charitable Corporation have lent money in large sums which under colour and pretence of reasonable costs and charges they have exacted after the rate of [5 percent] over and above lawful interest, and therefore ought to be regulated.
This meant the company was charging too much. A new law was proposed to fix this, but Parliament was stopped by the king before it could be passed.
The Collapse
Soon after, the company's financial problems became clear. In October 1731, John Thomson and George Robinson, two key figures in the fraud, suddenly ran away to France. Robinson returned briefly but then went into hiding again. Their bankruptcies (meaning they couldn't pay their debts) were announced.
The company's directors formed a committee to investigate. In January, they reported how huge the fraud was. The records showed nearly £400,000 was owed by borrowers, but there were only about £40,000 worth of actual goods in the warehouses as pledges. A lot of the money was gone!
Parliament Steps In
In February 1733, the shareholders (the people who lost money) asked Parliament for help. The House of Commons investigated the situation thoroughly.
Parliament quickly passed a law to force Robinson and Thomson to appear and reveal what happened, or they would be guilty of a serious crime called a felony. A reward of £500 was offered for finding Burroughs and Squire, who were also involved.
Quick facts for kids Charitable Corporation Frauds Act 1731 |
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| Act of Parliament | |
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| Long title | An act to encourage and compel George Robinson, esquire, and John Thomson to appear, and produce the books, and discover the effects of the Charitable Corporation for relief of industrious poor by adjusting them with small sums upon pledges at legal interest; and to be examined thereupon at the times are places therein mentioned. |
| Citation | 5 Geo. 2. c. 3 |
| Charitable Corporation (Claims and Disputes) Act 1731 | |
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| Act of Parliament | |
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| Long title | An act for appointing commissioners for taking, stating and determining all the claims and demands of the creditors of The charitable corporation for relief of industrious poor, by assisting them with small sums upon pledges at legal interest; and of all persons claiming any share or interest in the stock or fund of the said corporation, and for enabling the said corporation to name one person to be an assignee under the respective commissions of bankruptcy awarded against George Robinson and John Thomson; and for enabling the commissioners acting under the said commissions of bankruptcy to proceed and inquire of the estates, goods and effects of the said bankrupts, and to apply the same; and to oblige John Thomson, father of the said John Thomson the bankrupt, to appear before the said commissioners of bankruptcy in England. |
| Citation | 5 Geo. 2. c. 31 |
| Sir Robert Sutton, etc., Restrained from Going Abroad Act 1731 | |
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| Act of Parliament | |
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| Long title | An act to restrain Sir Robert Sutton, knight of the bath, Sir Archibald Grant, baronet, Denis Bond, William Burroughs, esquires, Richard Woolley and Thomas Warren, from going out of this kingdom for the space of one year and until the end of the then next session of parliament; and for discovering their estates and effects, and to prevent the transporting or alienating the same, and to oblige William Squire to surrender himself at a time and place mentioned in the act, and to give security for his not going out of this kingdom for the space of one year and until the end of the then next session of parliament, and for discovering his estate and effects, and to prevent the transporting or alienating the same; and for committing the aforesaid William Burroughs to the prison of the Fleet, until be shall have complied with the directions of this act. |
| Citation | 5 Geo. 2. c. 32 |
Neither Robinson nor Thomson followed the law at first. However, Thomson later offered to return under certain conditions. Another law was passed, giving him more time to appear before Parliament and his bankruptcy officials. If he cooperated, he would get a reward: a fifth of the company's assets he helped find overseas, and a tenth of those in Great Britain. Thomson agreed and appeared before a Parliament committee.
Two more laws were passed. One confirmed an agreement between the Charitable Corporation and most of its creditors (people it owed money to). The other allowed a lottery to help those who lost money because of the fraud. This lottery specifically excluded Robinson, Thomson, Woolley, and Warren from benefiting.
| Charitable Corporation Act 1732 | |
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| Act of Parliament | |
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| Long title | An Act to allow a further Time to John Thomson to appear, and produce the Books, and discover the Effects, of the Charitable Corporation for Relief of industrious Poor, by assisting them with small Sums upon Pledges, at legal Interest; and to be examined thereupon at the Times and Places fixed in the Bill; and for allowing the said John Thomson a Proportion out of the Effects of the said Corporation which he shall discover; and for preventing fraudulent releasing or assigning any Debt due from George Robinson or the said John Thomson, or either of them. |
| Citation | 6 Geo. 2. c. 2 |
| Dates | |
| Royal assent | 22 February 1733 |
| Lotteries Act 1732 | |
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| Act of Parliament | |
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| Citation | 6 Geo. 2. c. 35 |
| Charitable Corporation (Arrangements with Creditors) Act 1732 | |
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| Act of Parliament | |
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| Citation | 6 Geo. 2. c. 36 |
| Charitable Corporation Lottery Act 1734 | |
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| Act of Parliament | |
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| Citation | 8 Geo. 2. c. 14 |
| Other legislation | |
| Repealed by | Statute Law Revision Act 1867 |
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Status: Repealed
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What Happened Next
The frauds left the Charitable Corporation with almost no money. The legal cases against George Robinson and John Thomson went on for a long time. Finally, some money was paid out from Robinson's property in 1748 and from Thomson's in 1747.
Legal action was also taken against Sir Robert Sutton, one of the directors. In 1742, a court ruled that he was responsible for some of the company's losses, even though the five main partners were primarily to blame (see The Charitable Corporation v Sutton). Sutton and the company later reached an agreement.
The exact end of the Charitable Corporation is not fully clear.
See also
- The Charitable Corporation v Sutton (1742) 26 ER 642, the court case where directors were held responsible for the company's money.
- History of pawnbroking (1500 to 1800)
