Birrell, Lowell - Master Stock Manipulator

Lowell Birrell

THE CON: Lowell Birrell’s game was to merge two companies – one strong and the other weak or failing – and issue new stock on the phony combined assets. His fraud cost investors millions and caused eight companies to declare bankruptcy.

THE DAMAGE: Eight companies went bankrupt and investors lost $14 million, or about $103 million today.

THE OUTCOME: Investors lost $14 million, while eight companies went bankrupt. After hiding in Brazil for seven years, Birrell returned to the U.S. and spent two years in prison. Not long after his release, he was convicted of wire fraud and sent back behind bars.

Master manipulator

Lowell Birrell stole from a dozen companies and drove as many into the ground before his shady maneuvers caught the attention of the Securities and Exchange Commission. But just as the SEC launched an investigation in 1957, Birrell disappeared. Two years later, he turned up in Brazil with a fake passport. Accused of running a $14 million stock fraud, Birrell insisted it was just a big misunderstanding, a “complicated business problem.” Indeed, he was an expert at complicated business – and layers of complexity that masked the true nature of his business.

In the late 1950s, Birrell controlled a half a dozen major corporations. But unlike most businessmen, he wasn’t terribly interested in his products, which ranged from chemicals to insurance to oil. His primary concern was his stock, which seemed to hold infinite possibilities for profit. He orchestrated the mergers of two companies – one strong and the other failing or bankrupt – and issued new stock against the combined (and often fictitious) assets. Along with mergers, he secretly issued hundreds of thousands of shares to himself and put them on the market unregistered.

As president of the Swan-Finch Oil Corporation, Birrell increased the number of shares from 43,000 to 3 million. To create a veneer of legitimacy, he chose a well-regarded executive to serve as chairman. People in his inner circle, and the investors attracted to his stock by full-page ads in The New York Times, had no idea that Birrell was - as the SEC later put it - “the most brilliant manipulator of corporations in modern times.”

It was a quintessential Birrell move, in which he turned a property acquired for $250,000 into $2 million worth of stock, that caused the SEC to issue a subpoena in 1957. With the spotlight suddenly turned on him, Birrell fled to Cuba, leaving eight bankrupt companies in his wake. Two years later, he snuck into Rio de Janeiro, where he could hide without fear of extradition. But Brazilian authorities knew he entered the country with a fake Canadian passport and, seven years after he arrived, shipped him back to New York in 1964.

Meanwhile, a Federal grand jury issued in indictment against 14 men, including Birrell, for fraud, conspiracy and the illegal stock sale of American Leduc Petroleums, Ltd. During his trial in 1964, Birrell denied conspiring with more than a dozen brokerage firm officers to offload 3.5 million unregistered shares of stock at an average price of $1.05. The Government charged that the fraud cost the public as much as $20 million and sued Birrell for $18.6 million in unpaid taxes.

Convicted in 1967, Birrell spent nearly two years in jail awaiting his trial and sentencing. He was released on $30,000 bail in late 1968. Two years later he was convicted of wire fraud after he attempted to secure a $5,000 loan from a bank in Cincinnati using fake stock certificates as security. In 1970, he returned to jail for two years.