Great frauds in history… the MP who faked his death

John Stonehouse was born in 1925. After graduating from the London School of Economics and then serving in the RAF for two years he worked as an economist. He contested various parliamentary seats before getting elected as a Labour MP for Wednesbury in 1957 (and then Wallsall North in 19741976). In 1967 he became technology minister then postmaster general, making him briefly a member of the cabinet before the post was abolished in 1969. All this time he was secretly working with the Czech intelligence services.

What was the scam?

After Labour lost the 1970 election Stonehouse failed to get appointed to the shadow cabinet, prompting him to go into business. He became involved with the British Bangladeshi Trust (later London Capital Securities), but thanks to a combination of poor management, allegations of fraud and the 1973-1975 secondary banking crisis, the bank quickly became insolvent. In a last-ditch attempt to prop up the bank’s share price, Stonehouse arranged for it to make loans to friends and relatives in order for them to buy shares. Facing disgrace, Stonehouse disappeared.

What happened next?

In the month leading up to his disappearance, Stonehouse borrowed large sums of money from his own companies, which was diverted (along with money from London Capital Securities) into a private bank account in the name of Joseph Markham, a dead constituent whose identity he had stolen. He also took out several life insurance policies to benefit his family in the event of his (faked) death. In November 1974, he disappeared from a beach in Miami, flying to Australia with Markham’s passport. His ruse quickly unravelled and he was arrested in Australia (ironically mistaken for the fugitive Lord Lucan). He was convicted of fraud and sentenced to seven years.

What was his legacy?

When he fled, Stonehouse’s debts amounted to £800,000 (£8.5m today). His behaviour was embarrassing for his relatives (who were unaware of the true situation and had agreed to buy shares on his behalf), and especially for his nephew, who was director of several of Stonehouse’s companies. He was, as Max Hastings says in The Times, “a successful love rat but seconddivision politician, fourth-class traitor [and] bungling fraudster [who] is best forgotten”.