For the understanding of the Marconi Case, the vital period is the four months of 1912 between March 7, when the tender was accepted, and July 19 when the contract was tabled. Let us concentrate upon that four-month period. The Postmaster-General issued no statement whatever on the matter but on March 8 the Company sent out a circular to its shareholders telling them the good news—but making the news look even better than it was by omitting all reference to Clause 10, which entitled the Government to substitute some rival system at any time it pleased. The Postmaster-General issued no correction because, as he said later, he had not been aware of the omission.
Immediately after, Godfrey Isaacs left for America to consider the affairs of the American Marconi Company, capitalised at $1,600,000, of which he was a Director. More than half its shares were owned by the English Company. On behalf of the English Company he bought up the rights of the American Company's principal rival, and then sold these rights (at a profit not stated but apparently very considerable) to the American Company for $1,400,000. To handle all this and allow for vast developments hoped for from this purchase and from a very favourable agreement Godfrey Isaacs had negotiated with Western Union, the American Company was to be re-organized as a $10,000,000 Company—two million shares at $5 each. The American Company—whose own repute in America was too low for any hope of raising money on that scale from the American public—seems to have agreed to the Godfrey Isaacs plan only on condition that the English Company should guarantee the subscription; and Godfrey Isaacs made himself personally responsible for placing 500,000 shares. (It should be remembered that the pound was then worth just under five dollars: a $5 share was worth £1.1.3, or £1 1/16 in English money.)
Godfrey Isaacs returned to England. On April 9 he lunched with his brothers Harry and Rufus—Rufus being Attorney-General in the British Government. He told them of the arrangements he had made—arrangements which were not yet made known to the public—and of the new stock about to be issued, and offered them 100,000 shares, out of the 500,000 for which he had made himself responsible, at the face value of £1.1.3. Rufus refused—one reason for his refusal being that the shares were not a good "buy," as the prospects of the Company did not warrant so large a new issue of capital. Harry took 50,000.
We now come to the transactions which the public was later to lump together rather crudely as "Ministers Gambling in Marconis."
A. On April 17—roughly a week after the luncheon—Rufus Isaacs bought 10,000 of Harry's shares at £2. He made the point later that buying from Godfrey would have been improper as Godfrey was director of a company with which the Government was negotiating, but that it was all right to buy from Harry who had bought from Godfrey. (Harry having paid only £1.1.3 was willing to let Rufus have them for the same price. But Rufus thought it only fair to pay the higher price. This is all the more remarkable because only a week earlier he had thought these same shares bad value at roughly half the price he was now prepared to pay.) Of his 10,000 shares, Rufus immediately sold 1000 to the Chancellor of the Exchequer, David Lloyd George, and 1000 to the Master of Elibank, who was chief Whip of the Liberal Party then in office. It is to be noted that no money passed at this time in any of those transactions: Rufus did not pay Harry, Lloyd George and Elibank did not pay Rufus.
Nor did the shares pass. Indeed the shares did not as yet exist, as it was not till the next day, April 18, that the American Marconi Company authorised the issue of the new capital. On the day after that, April 19, the shares were put on the market at £3.5.0. That same day they rose to £4. In the course of the day Rufus Isaacs sold 700 shares at an average price of £3.6.6, which on the face of it looks like clearing £3000 more than he had paid for all his shares and still having 3000 shares left. But he explained later that there had been pooling arrangements between himself and his brother, and himself and his two friends: so that the upshot of his day's transactions was that he had sold 2856 of his own shares, and 357 each for Lloyd George and Elibank.* The triumvirate therefore still had 6430 shares of which 1286 belonged to Lloyd George and Elibank.
[* Rufus' explanation boils down to this: he and Harry had arranged that whatever either sold in the course of the day should be totalled and divided in the proportion of their holdings. Rufus sold 7000 shares, Harry 10,850: a total of 17,850. Rufus had taken 1/5 of Harry's 50,000 shares, so one-fifth of the shares sold were allotted as his—i.e. 3570. Lloyd George and Elibank had each taken 1/10 of Rufus', therefore each was considered to have sold 357.]
On April 20 these two sold a further 1000 of their 1286 shares at £3.5/32.
B. On May 22 Lloyd George and Elibank bought 3000 more shares at £2.5/32. As they were not due to deliver the shares previously sold by them at £3.6.6 and £3.5/32 till June 20, this new purchase had something of the look of a "bear" transaction.
C. In April and May the Master of Elibank bought 3000 shares for the account of the Liberal Party, of whose funds he had charge.