There?s an old saying that those who don?t learn from history are doomed to repeat it, and financial scandals are no exception.

More than 100 years before Enron, there was Overend & Gurney, a stalwart of the British banking industry that came to a crushing end in the 1860s.

Local author Geoffrey Elliott has explored this billion pound bank collapse in ?The Mystery of Overend & Gurney ? A Financial Scandal in Victorian London? published this year by Methuen. The Overend & Gurney scandal took down with it hundreds of smaller businesses and caused a financial panic later known as ?Black Friday?.

The large Quaker family that was ultimately responsible for the financial crisis experienced a humiliating, highly public trial, but never went to prison. They were left poorer, but by no means poverty-stricken.

The Mystery of Overend & Gurney is by no means a dry tome, and requires no financial savvy from the reader. Mr. Elliott uses evocative language to paint a picture of a company and a family against the backdrop of Victorian England.

?When you are talking about a long gone period that is interesting then you can let yourself go a bit,? Mr. Elliott told . ?I spent three years researching this.?

The research took him all the way from Galway, Ireland to various places in England including Manchester and London.

?The interesting thing about these projects, is that however much you do there is always something that comes out afterwards,? Mr. Elliott said. ?The first book I wrote, ?I Spy: The Secret Life of a British Agent? was about my father.

?He was in Hungary. Five years after I released the book the Hungarians released some more information. It didn?t necessarily alter the book, but it could have given me another few pages.

?Recently, I came across something about the London docks and shipbuilding that could have been a few more pages. Someone said once that books are never finished they are just abandoned. There has to be a cut off point, even though you may wish that you could go on digging up more stuff.?

Mr. Elliott was perhaps an ideal person to write about Overend & Gurney as he was for many years a senior banker in London and on Wall Street. The Mystery of Overend & Gurney was originally supposed to be part of a series of historical financial scandals.

?The Overend & Gurney collapse has been mentioned a little bit in city histories for two or three pages,? Mr. Elliott said. ?It interested me. First of all I was going to do a study of five or six of these things over a certain period. This one seemed so interesting because of the Quaker aspect.?

The Overend & Gurney fortune was compiled using Quaker values of honest business practices and integrity. According to Mr. Elliott?s book, the company began to destabilise when its Quaker foundation began to erode.

?The Quakers were quiet, god fearing folk who made a great deal of money,? said Mr. Elliott. ?They were very good at business, partly because they weren?t in mainstream American or English life. They had to find other things to do. People trusted them, ?my word is my bond.??

Unfortunately, as the generations went on, many Gurneys became Quaker in name only.

?The earlier generation had stuck to their faith and made money, but the next generation saw in the Victorian speculation era that a lot of people were making a lot more money.

?They saw that it was quite nice to have a big house and estate and horses in London. They drifted. I don?t think they consciously said that Quakerism is all wrong. I think they would still have said they were Quakers.?

Mr. Elliott said that if the generation that ran the firm in the 1860s had been tempted by riches, but hadn?t been so arrogant they might have avoided self-destruction.

?It was this combination of cultural change, and the fact that the senior people in the firm were just not that sharp that caused the problem,? he said.

The problem was a series of large loans gone bad. Overend & Gurney could have simply written the loans off as bad debts, but instead acted like the man with a leaky boat who tried to solve the problem by drilling more holes to let the water out. Everything the firm tried made the situation worse until finally they had to close.

?The situation just went from bad to worse and it just snowballed,? said Mr. Elliott. ?Today they would have gone to prison, but then they didn?t because the fraud laws weren?t quite as tight.

The Gurneys were put on trial, but they weren?t convicted. It was a very sad chapter of mistakes, because unlike other cases, these were honest people. They didn?t start out by saying, ?how are we going to rob the public today; what whizbang scheme can we come up with???

Today, the only remnant of the Overend & Gurney empire is Barclays Bank.

?Barclay?s Bank is a collateral descendant,? said Mr. Elliott. ?It was the silver lining to the cloud. There was a firm in Norwich and a firm in London.

When the firm in London saw it was heading into deep trouble, they shifted the shareholdings so that none of the people in London were involved with the Norwich bank. So when London went down, the Norwich bank stayed whole. It was a very fine bank; it was the bank of East Anglia.?

Later it was decided to merge a series of private banks into Barclays Bank. The Norwich bank became nearly a quarter of Barclays.

Mr. Elliott is also the author of ?From Siberia With Love: A Memoir of Exile, Death, Love and Tobacco? and ?Secret Classrooms: An Untold Story of the Cold War?. The Bookworm Beat will talk to Laura Resau, author of ?What The Moon Saw? about a young Mexican-American girl who goes to Mexico for the first time to visit her grandparents.

@EDITRULE:

Contact the Bookworm Beat at bookwormbeat1hotmail.com .