The Marconi Scandal

David Lloyd George, unlike most Liberal and Conservative MPs, "had no capital resources, whether self-made or derived from the money-making activities of ancestors... As a young M.P. he had to live off a share, perhaps unduly large, of the profits from the solicitors' firm in which he and his brother William were the founder-partners, supplemented by whatever fees he could earn from casual journalism and lecturing." John Grigg has argued that Lloyd George resented this, "not because he cared about money for its own sake, but because he could see that private wealth was a key to political independence". (1)

After becoming Chancellor of the Exchequer he received a salary of £5,000. Although he could live on this income he worried about what would happen if he lost office. He decided to use his contacts with businessmen to provide him with information that would enable to invest wisely in stocks and shares. His good friend and political supporter, George Cadbury, heard about these financial dealings and warned him that if the Conservative press found out about this it could bring an end to his political career. Cadbury was the owner of the Daily News and might have heard about this from journalists he employed.

"Those who hate you and your measures make themselves heard, but the millions who rejoice in your work and in the courage you have shown on behalf of labour, like myself, have no means of expressing their gratitude for what you have done - this must be my apology for writing to a man whose every moment is full of important business, but even now I would not write if I did not feel that I had a definite duty to convey to you my own desire which I believe represents that of millions, that you should hold fast your integrity." (2)

David Lloyd George and the Stock Exchange

One of the reasons for this letter was the rumour that David Lloyd George had made £100,000 by buying and selling Surrey Commercial Dock shares. Surrey Commercial was one of the three London dock companies which had been created when the Port of London was being established, in 1908, under a scheme prepared by Lloyd George but enacted by his successor at the Board of Trade, Winston Churchill. (3)

Lloyd George wrote to his wife about his share dealings. "So you have only £50 to spare. Very well, I will invest it for you. Sorry you have no more available as I think it is quite a good thing I have got." (4) Four days later he told her about the success of his investments: "I got my cheque from my last Argentina Railway deal today. I have made £567. But the thing I have been talking to you about is a new thing." (5)

Wireless Telegraphy Contract

H. H. Asquith had been urged by senior members of the military to set up an British Empire chain of wireless telegraphy. Herbert Samuel, the Postmaster-General, began negotiating with several companies who could provide this service. This included the English Marconi Company, whose managing director was Godfrey Isaacs, the brother of Rufus Isaacs, the Attorney General. (6)

Godfrey Isaacs, was also on the board of the Marconi Wireless Telegraph Company of America, that controlled the company operating in London. Isaacs had been given responsibility for selling 50,000 shares in the company to English investors before they became available to the general public. He advised his brother, Rufus Isaacs, to buy 10,000 of these shares at £2 apiece. He shared this information with Lloyd George and Alexander Murray, the Chief Whip, and they both purchased 1,000 shares at the same price. On 18th April 1912 Murray also bought 2,000 shares for the Liberal Party. (7)

John Bull: "My boys, you leave the court without a stain - except for the whitewash." Leonard Raven-Hill, Blameless Telegraphy (25th June, 1913) — Guglielmo Marconi and Godfrey Isaacs

These shares were not available on the British stock market. On 19th April, the first day that shares in the Marconi Company of America were available in London, the shares opened at £3 and ended the day at £4. The main reason for this was the news that Herbert Samuel was in negotiations with the English Marconi Company to provide a wireless-telegraphy system for the British Empire. Rufus Isaacs now sold all his shares for a profit of £20,000. Whereas his fellow government ministers, Lloyd George and Alexander Murray, sold half their shares and therefore got the other half for free. Lloyd George then used this money to buy another 1,500 shares in the company. (8)

Cecil Chesterton, G. K. Chesterton and Hilaire Belloc were involved with a new journal called The Eye-Witness. It was later pointed out that "the object of the Eye-Witness was to make the English public know and care about the perils of political corruption". The editor wrote to his mother, Lloyd George has been dealing on the Stock Exchange heavily to his advantage with private political information". They immediately began to investigate the case. (9)

Marconi Scandal

On 19th July, 1912, Herbert Samuel announced that a contract had been agreed with the English Marconi Company. A couple of days later, W. R. Lawson, wrote in the weekly Outlook Magazine: "The Marconi Company has from its birth been a child of darkness... Its relations with certain Ministers have not always been purely official or political." (10)

Whereas the rest of the mainstream media ignored the story, over the next few weeks The Eye-Witness produced a series of articles on the subject. It suggested that Rufus Isaacs had made £160,000 out of the deal. It was also claimed that David Lloyd George, Godfrey Isaacs, Alexander Murray and Herbert Samuel had profited by buying shares based on knowledge of the government contract. (11)

The defenders of Lloyd George, Isaacs, Murray and Samuel, accused the magazine of anti-semitism, pointing out that three of the men named were Jewish. "They were all victims of the disease of the heart known as anti-semitism. It was a gift to them that the Attorney-General and his brother had the name of Isaacs, and the added bonus that the Postmaster General, who had negotiated the contract, was called Samuel." (12)

H. H. Asquith called a meeting with the accused men and discussed the possibility of legal action against the magazine. It was Asquith who eventually advised against this: "I suspect that Eyewitness has a very meagre circulation. I notice only one page of advertisements and then by Belloc's publishers. Prosecution would secure it notoriety which might yield subscribers." (13)

Alexander Murray resigned from the House of Commons on 7th August, 1912. Later that week he was raised to the peerage as Baron Murray of Elibank. Officially he left Parliament because he needed to rehabilitate the Elibank estates which his father had made over to him. Soon afterwards the Liberal industrialist Weetman Pearson sent him on business to Bogotá in Columbia. (14)

A debate on the Marconi contract took place on 11th October, 1912. Herbert Samuel explained that Marconi was the company best qualified to do the job and several Conservative MPs made speeches where they agreed with the government over this issue. The only dissenting voice was George Lansbury, the Labour MP, who argued that there had been "scandalous gambling in Marconi shares." (15)

David Lloyd George responded by attacking those who had spread untrue stories about his share dealings: "The Honourable Member (George Lansbury) said something about the Government and he has talked about rumours. If the Honourable Member has any charge to make against the Government as a whole or against individual Members of it, I think it ought to be stated openly. The reason why the government wanted a frank discussion before going to Committee was because we wanted to bring here these rumours, these sinister rumours that have been passed from one foul lip to another behind the backs of the House." (16)

Later that day, Rufus Isaacs issued a statement about his share-dealings. "Never from the beginning... have I had one single transaction with the shares of that company. I am not only speaking for myself but also speaking on behalf, I know, of both my Right Honourable Friends the Postmaster General and the Chancellor of the Exchequer who, in some way or another, in some of the articles, have been brought into this matter". (17)

Leopold Maxse, the editor of The National Review, pointed out that Isaacs had been careful in his use of words. He speculated why he said that he had not purchased shares in "that company" rather than the "Marconi company". Maxse pointed out: "One might have conceived that (the Ministers) might have appeared at the first sitting clamouring to state in the most categorical and emphatic manner that neither directly nor indirectly, in their names or other people's names, have they had any transactions whatsoever... In any Marconi company throughout thc negotiations with the Government". (18)

Asquith announced that he would set-up a committee to look into the possibility of insider dealings. The committee had six Liberals (including the chairman, Albert Spicer), two Irish Nationalists and one Labour MP, which provided a majority over six Conservatives. The committee took evidence from witnesses for the next six months and caused the Government a great deal of embarrassment. (19)

On 14th February, 1913, the French newspaper, Le Matin, reported that Herbert Samuel, David Lloyd George and Rufus Isaacs, had purchased Marconi shares at £2 and sold them when they reached the value of £8. When it was pointed out that this was not true, the newspaper published a retraction and an apology. However, on the advice of Winston Churchill, they decided to take legal action against the newspaper.

Churchill argued that this would provide an opportunity to shape the consciousness of the general public. He suggested that the men should employ two barristers, Frederick Smith and Edward Carson, who were members of the Conservative Party: "The public was bound to notice that the integrity of two Liberal ministers was being defended by normally partisan members of the Conservative Party, and their appearance on behalf of Isaacs and Samuel would make it impossible for them to attack either man in the House of Commons debate which would surely follow." (20)

Churchill also had a meeting with Alfred Harmsworth, Lord Northcliffe, the owner of The Times and The Daily Mail and persuaded him to treat the accused men "gently" in his newspapers. (21) However, other newspapers were less kind and gave a great deal of coverage to the critics of the government. For example, The Spectator, reported a speech made by Robert Cecil, where he argued: "It was his duty to express his honest and impartial opinion on the conduct of Mr. Lloyd George in the Marconi transaction. He had never said or suggested that the transaction was corrupt; but he did say that, if it was to be approved and recognized as the common practice among Government officials, then one of our greatest safeguards against corruption was absolutely destroyed. The transaction was bad and grossly improper, and it was made far worse by the fact that Mr. Lloyd George went about posing as an injured innocent. For a man in his position to defend that transaction was even worse than entering into it." (22)

During the House of Commons investigation the three accused Liberal MPs admitted they had purchased shares in the Marconi Company of America. However, as David Lloyd George pointed out, he had held no shares in any company which did business with the government and that he had never made improper use of official information. He ridiculed the charges which were made against him - some of which he invented, for example, the claim that he had made a profit of £60,000 on a speculative investment or that owned a villa in France. (23)

Alexander Murray was unable to appear before the Marconi Enquiry because he was still in Bogotá. However, during the investigation, Murray's stockbroker was declared bankrupt and, in consequence, his account books and business papers were open to public examination. They revealed that Murray had not only purchased 2,500 shares in the American Marconi Company, but had invested £9,000 in the company on behalf of the Liberal Party. (24)

H. H. Asquith and Percy Illingworth, the new Chief Whip, denied knowledge of these shares. According to George Riddell, a close friend of both men, Asquith and Illingworth had known about this "for some time". (25) John Grigg, the author of Lloyd George, From Peace To War 1912-1916 (1985), has argued that Asquith was also aware of these shares and this explains why he was so keen to cover-up the story. "If he had shown any sign of abandoning them, they might have contemplating abandoning him, and vice versa... there was probably a mutual recognition of the need for solidarity in a situation where the abandonment of one might well have led to the ruin of all." (26)

On 30th June, 1913, the Select Committee provided three reports on the Marconi case. The majority (government) report claimed that no Minister had been influenced in the discharge of his public duties by any interest he might have had in any of the Marconi or other undertakings, or had utilized information coming to him from official sources for private investment or speculation.

The Minority (opposition) report criticised the whole handling of the share issue and found "grave impropriety" in the conduct of David Lloyd George, Rufus Isaacs and Alexander Murray, both in acquiring the shares at the advantageous price and in subsequent dealings in them. It also censored them for their lack of candour, especially Murray, who had refused to return to England to testify.

Although the chairman on the enquiry, Albert Spicer, signed the majority report, he also published his own report where he heavily criticised Rufus Isaacs for not disclosing at the beginning that he had bought shares in the Marconi Company. Spicer claimed that it was this lack of candour that resulted in the large number of rumours about the corrupt actions of the government ministers. (27)

In October, 1913, Rufus Isaacs, was appointed Lord Chief Justice of England. Newspapers complained that it appeared that he had been promoted as a reward for not disclosing the full truth about his share-dealings. However, it was reported by Lord Northcliffe that only five people had sent letters to his newspapers on the subject and "the whole Marconi business looms much larger in Downing Street than among the mass of the people". (28)

C. K. Chesterton, one of the men who exposed the scandal, agreed: "The object of the Eye-Witness was to make the English public know and care about the perils of political corruption. It is now certain that the public does know. It is not so certain that the public does care." However, he did go on to argue that it did have a long-term impact on the British public: "It is the fashion to divide recent history into Pre-War and Post-War conditions. I believe it is almost as essential to divide them into Pre-Marconi and Post-Marconi days. It was during the agitations upon that affair that the ordinary English citizen lost his invincible ignorance; or, in ordinary language, his innocence". (29)

In a speech at the National Liberal Club, David Lloyd George, attempted to defend the politicians involved in the Marconi case: "I should like to say one word about politicians generally. I think that they are a much-maligned race. Those who think that politicians are moved by sordid, pecuniary considerations know nothing ofeither politics or politicians. These are not the things that move us...The men who go into politics to make money are not politicians... We all have ambitions. I am not ashamed to say so. I speak as one who boasts: I have an ambition. I should like to be remembered amongst those who, in their day and generation, had at least done something to lift the poor out of the mire."

Lloyd George went on to argue that it was politicians like him who were protecting the public from other powerful forces: "The real peril in politics is not that individual politicians ofhigh rank will attempt to make a packet for themselves. Read the history of England for the past fifty years. The real peril is that powerful interests will dominate the Legislature, will dominate the Executive, in order to carry through proposals which will prey upon the community. That is where tariffs - the landlord endowment - will come in." (30)

The armed services had used radio extensively during the First World War. Marconi's Wireless Telegraph Company supplied much of the equipment and was responsible for important technical developments. There were widespread fears of a Marconi monopoly and in 1919 the United States government forced the transfer of Marconi's US stock to the Radio Corporation of America (RCA), controlled by American shareholders. Marconi was also excluded from British government discussions of a revived imperial chain scheme in 1921. (31)

Primary Sources

(1) George Cadbury, letter to David Lloyd George (21st March, 1912)

Those who hate you and your measures make themselves heard, but the millions who rejoice in your work and in the courage you have shown on behalf of labour, like myself, have no means of expressing their gratitude for what you have done - this must be my apology for writing to a man whose every moment is full of important business, but even now I would not write if I did not feel that I had a definite duty to convey to you my own desire which I believe represents that of millions, that you should hold fast your integrity.

Many of us have seen that a great crisis was coming in the world's history, that the teaching of Jesus Christ should be more fully carried out as to the brotherhood of men, that in His sight the humble labourer is equally as precious as the wealthy millionaire. Those who are in the advance guard of an army must expect to bear the brunt of the battle. I trust you will not be discouraged by apparent defeat such as the by-election at South Manchester, and by the ingratitude of those whose cause you are pleading. Your fate is only that of every great leader whose names go down to history as the great benefactors of mankind. What you have to suffer is but little compared to the sufferings of our great Leader, Jesus Christ, Whom I believe you are desiring to follow. "Ye build the sepulchres of the prophets, and your fathers slew them." It is extremely difficult when falsely accused to remain absolutely calm and collected under a sense of duty done. May this be your experience, and "may the peace of God which passes all understanding keep your heart and mind" and then `at eventide there will be light' and your life will be a magnificent object lesson to others.

(2) David Lloyd George, speech in the House of Commons (11th October, 1912)

The Honourable Member (George Lansbury) said something about the Government and he has talked about rumours. If the Honourable Member has any charge to make against the Government as a whole or against individual Members of it, I think it ought to be stated openly. The reason why the government wanted a frank discussion before going to Committee was because we wanted to bring here these rumours, these sinister rumours that have been passed from one foul lip to another behind the backs of the House.

(3) Rufus Isaacs, personal statement (11th October, 1912)

Never from the beginning... have I had one single transaction with the shares of that company. I am not only speaking for myself but also speaking on behalf, I know, of both my Right Honourable Friends the Postmaster General and the Chancellor of the Exchequer who, in some way or another, in some of the articles, have been brought into this matter.

(4) Leopold Maxse, evidence before the House of Commons committee (12th February, 1913)

One might have conceived that (the Ministers) might have appeared at the first sitting clamouring to state in the most categorical and emphatic manner that neither directly nor indirectly, in their names or other people's names, have they had any transactions whatsoever... In any Marconi company throughout the negotiations with the Government.

(5) The Spectator (11th October, 1913)

Lord Robert Cecil, addressing a Unionist meeting in North-West Manchester in support of the candidature of Mr. Hubert M. Wilson, dealt with the controversy between Mr. Lloyd George and members of his family on the Marconi question. The various charges which Mr. Lloyd. George bad brought against the Cecil family were irrelevant, and, he believed, entirely mistaken ; but whether mistaken or not, if the gentlemen attacked had broken every one of the ten Commandments, that did not alter his right or his duty to express his honest and impartial opinion on the conduct of Mr. Lloyd George in the Marconi transaction. He had never said or suggested that the transaction was corrupt ; but he did say that, if it was to be approved and recognized as the common practice among Government officials, then one of our greatest safeguards against corruption was absolutely destroyed. The transaction was bad and grossly improper, and it was made far worse by the fact that Mr. Lloyd George went about posing as an injured innocent. For a man in his position to defend that transaction was even worse than entering into it. Lord Robert Cecil added that the recklessness of the transaction, which was even more remarkable than its im- propriety, was characteristic of a good deal of the Govern- ment's proceedings, public as well as private. Recklessness was the chief characteristic of the Insurance Act and their policy in Ireland, and it also marked their attack on the Welsh Church.

(6) C. K. Chesterton, Autobiography (1936)

The object of the Eye-Witness was to make the English public know and care about the perils of political corruption. It is now certain that the public does know. It is not so certain that the public does care...

It is the fashion to divide recent history into Pre-War and Post-War conditions. I believe it is almost as essential to divide them into Pre-Marconi and Post-Marconi days. It was during the agitations upon that affair that the ordinary English citizen lost his invincible ignorance; or, in ordinary language, his innocence.

(7) David Lloyd George, speech in the National Liberal Club (1st July, 1913)

There is one martyrdom which I always thought was the least endurable of all. That was where the victim had his hands tied and arrows were shot into his body; and he could neither protect himself and tear them out nor sling them back. I can understand something of that now. For months every dastardly and cowardly journalist in the Tory Press shot his poisoned darts, knowing that the hands were tied behind the back by the principles of honour... My hands are free now - free to shield, free to smite, not for myself, but for the cause I believe in, which I have devoted my life to, and which I am going on with.

Before I do so, with your permission, I should like to sling a javelin or two at my persecutors ... when I was looking at the list of those who voted to turn us out of public life, I wondered how many of them would have gone into that lobby ifit had been a condition of being allowed to vote that they must show their pass-books for three years....

I should like to say one word about politicians generally. I think that they are a much-maligned race. Those who think that politicians are moved by sordid, pecuniary considerations know nothing ofeither politics or politicians. These are not the things that move us... In politics there is no cash, and if this campaign of calumny goes on there will be very little credit, either. There is no politician I know of who has attained a high position on either side... by capacity and strength of character - who would not in a business or profession make ten times as much as he makes in politics or is ever likely to make in politics... The men who go into politics to make money are not politicians. Men go in, if you like, for fame. Men go in, if you like, for ambition. Men go in from a sense of duty. But for mere cupidity, never!
We all have ambitions. I am not ashamed to say so. I speak as one who boasts: I have an ambition. I should like to be remembered amongst those who, in their day and generation, had at least done something to lift the poor out of the mire...

The real peril in politics is not that individual politicians ofhigh rank will attempt to make a packet for themselves. Read the history of England for the past fifty years. The real peril is that powerful interests will dominate the Legislature, will dominate the Executive, in order to carry through proposals which will prey upon the community. That is where tariffs - the landlord endowment - will come in.

(8) Hilaire Belloc, unpublished memoirs, written in 1937.

David Lloyd George excelled even the ruck of politicians in his desire for what he thought was fame, as well as his extravagant greed for money. The two things do not usually go together but in his case it was difficult to say which was the stronger. He fully achieved both. Lloyd George began as a small Nonconformist Radical member of Parliament. He was a fluent speaker and appealed strongly to the audiences which in an earlier generation had also been appealed to by Spurgeon, Moody and Sankey and people of that kind. He may possibly like other men of the sort who enter public life had some sort of convictions when he begun, but he had certainly lost them by the year 1900 and was purely on the make.