Business on Trial: the Tobacco Securities Trust and the 1935 Pepper Debacle

The prosecution and imprisonment of Lord Kylsant in 1931, following the collapse of the Royal Mail Shipping Group, has long been acknowledged as a landmark event in the history of financial accounting. Far less attention has been given to the equally high profile conviction and imprisonment of three businessmen four years later in the wake of the notorious pepper scandal. This paper examines the background to the scandal, particularly the role played by an investment vehicle called the Tobacco Securities Trust, and compares the subsequent trial and conviction to that of the Royal Mail case. The findings of the paper serve to endorse studies by accounting historians arguing that Britain’s legal environment played a critical role in promoting improvements in the financial disclosure policies evidenced amongst leading British companies during the second quarter of the twentieth century.