Alves dos Reis was a Portuguese conman who almost brought Portugal to financial catastrophe in the 1920s. He exploited a loophole in the Bank of Portugal’s system and persuaded a British printer to produce fake escudo notes.
Dos Reis flooded the market with counterfeit currency, leading the country to hyperinflation and a deep financial crisis. His scheme accounted for 43% of Portugal’s circulating currency, severely damaging the nation’s economy and international relations. The scandal was central in the fall of the Portuguese Republic and set the stage for Salazar’s dictatorship. This audacious fraud left lasting scars on Portugal’s financial environment, with repercussions felt in the coming years.
Early Life and Criminal Beginnings
Artur Virgilio Alves dos Reis was born into a modest Portuguese family during the monarchy era. You might say dos Reis was a talented con artist from the beginning. His money manipulation started his criminal career by abandoning his engineering studies for a high-society marriage. When his bride’s family discouraged the union due to differences in social status, dos Reis took matters into his own hands.
In 1916, he moved to Angola, where he faked a diploma from a non-existent Oxford engineering school to become a railway director. But Reis didn’t stop there. Through deceit and forgery, he became a majority shareholder in an Angolan railway company, getting involved in arms trafficking and embezzlement. His criminal activities caught up with him, leading to his repatriation to Portugal in 1924.
Surprisingly, Reis was released after just 54 days in prison. It was during this time that he picked up a critical weakness in the Bank of Portugal’s control over escudo notes. This realization would lead him to conceive an audacious counterfeit operation that would shake the Portuguese economy to its core.
Portugal’s Political and Economic Turmoil
Portugal’s powder-keg politics paved the way for dos Reis’s audacious scheme. You would be hard-pressed to find a more chaotic period in the country’s history than 1910-1925. During this period, it was a “revolving door” of the country’s leadership, with nine presidents and 45 ministers trying to maintain order. The Portuguese Republic was hardly stable, as 25 uprisings and over 325 bomb incidents rocked the country.
Not surprisingly, Portugal’s economy was in shambles, plagued by rife inflation and increasing unemployment. This turmoil opened the perfect chance for Alves dos Reis to plan his elaborate counterfeit money operation. With the Banco de Portugal struggling to maintain control, Reis saw an opportunity to take advantage of the bank’s weak system.
His scheme, which involved the Portuguese colony of Angola and his company Angola e Metrópole, almost brought the Bank of Portugal to its knees. While Reis lived lavishly in his Menino de Ouro palace and purchased three farms and a taxi fleet (among other things), his country’s economic foundations caved in. This volatile period set the stage for Salazar’s military dictatorship that seized power in 1926-1928, promising stability after years of chaos.
The Counterfeit Scheme Takes Shape
As Alves dos Reis studied the Bank of Portugal’s operations, he uncovered a vital loophole in the control of escudo notes. This discovery set off his bold plan to produce 500 counterfeit escudo notes on a massive scale. Reis gathered a team of gentleman ne’er-do-wells and meticulously planned every detail of the operation.
Reis’s cunning may leave you amazed and aghast. He obtained essential information about the printing process in London, England, and forged documents to convince the Bank of Portugal to print new notes for Angola.
A reputable London-based currency printer, Waterlow and Sons, generated 580,000 counterfeit notes but was unaware of the deception. These printed notes were smuggled into Portugal through diplomatic bags, circumventing all controls.
Reis founded the Angola e Metrópole bank to distribute the fake money. The profits from this scheme funded his luxurious lifestyle and enabled him to invest heavily in the stock market. As the counterfeit notes flooded Portugal’s economy, suspicions rose within the Portuguese government and financial circles.
Reis’s downfall came in 1925 when he was arrested on a German ship bound for Angola, ending one of the most daring financial frauds in history.
Exploiting Waterlow and Sons
Waterlow and Sons unwittingly became the linchpin in Reis’ daring scheme. You would be amazed how Reis exploited this printing firm to produce 200,000 fake 500 escudo banknotes, totaling a mind-boggling 100 million escudos. Reis didn’t just walk in and place an order. He carefully forged documents, including a letter of authorization from the Bank of Portugal, to convince Waterlow that he was acting on behalf of the Portuguese government.
What is genuinely astonishing is that the Bank of Portugal failed to detect the fraud. The counterfeit notes were unmistakably identical to the genuine ones and entered Portugal through diplomatic channels, bypassing the usual scrutiny. Reis’s scheming ways didn’t end there. He used his ill-gotten gains to buy shares in the Bank of Portugal, aiming to gain control and thwart any potential investigations into his scheme.
The operation’s scale was unparalleled, with the potential to print up to US$150 million worth of forged currency. Imagine the severe threat it posed to Portugal’s economic stability before the scheme was finally exposed.
Distributing the Fake Currency
The distribution of fake currency was central in dos Reis’s bold scheme. He established the Banco Angola Metropolis to launder and distribute the fake escudo notes throughout Portugal. The intricate steps he took to guarantee the successful circulation of his fake money are nothing short of amazing. Here are these steps:
- Recruiting petty criminals to initially circulate the counterfeit notes
- Investing profits in legitimate businesses and infrastructure
- Bribing the officials and politicians
- Attempting to gain control of the Central Bank of Portugal’s shares
These tactics enabled dos Reis to flood the market with counterfeit currency. He didn’t stop at just circulating the notes. He even aimed to take control of the same institution responsible for detecting fake money. By November 1925, his counterfeit notes made up 43% of the Central Bank’s shares, allowing him to block any potential investigation into his scheme.
Dos Reis’s schemes led to disastrous consequences. The massive influx of fake currency almost brought Portugal’s economy to its knees, drastically devaluing the escudo and causing critical economic upheaval. Dos Reis’s distribution strategy was so effective that it threatened the entire nation’s financial stability.
Consequences for Portugal’s Economy
Alves dos Reis’ successful distribution of fake currency triggered a financial catastrophe in Portugal’s economy. The injection of more than 150 million counterfeit escudos into circulation caused severe hyperinflation and led Portugal into a deep financial crisis.
As the Bank of Portugal attempted to withdraw Reis’ counterfeit notes, it only exacerbated the problem, causing the escudo’s sharp devaluation. The Portuguese economy was left reeling, with international trade and relations suffering drastically. Foreign banks and governments lost confidence in Portugal’s financial system, further isolating the country economically.
The scheme’s severe repercussions extended beyond the economy, as it discredited the Portuguese Republic and its institutions. This political instability set the stage for Salazar’s military dictatorship in 1926-1928. The economic turmoil created by dos Reis’s counterfeiting scheme took years for Portugal to recover from, hindering the country’s development and leaving lasting scars on its financial landscape.
Legacy of the Escudo Scandal
The “Escudo scandal” left an unforgettable mark on Portugal’s history, extending beyond its immediate economic impact. Its legacy deeply ingrained the nation’s political and economic environment in the following ways:
- The scandal was pivotal in the fall of the Portuguese Republic in 1926, paving the way for Salazar’s economic theories and eventual dictatorship.
- It exposed major flaws in the Bank of Portugal’s system, resulting in a complete overhaul of the country’s financial institutions.
- The massive influx of counterfeit currency triggered hyperinflation and severe economic instability, which lingered for years.
- Dos Reis’s 20-year prison sentence set a precedent for punishing financial crimes.
One cannot underestimate the scandal’s far-reaching consequences. It undermined public trust in Portuguese banks and the government’s ability to manage the economy. Dos Reis originally planned the scheme to finance Angolan railways. However, it ended up derailing the nation’s financial stability.
Ironically, the counterfeit 500 escudo notes have become highly sought-after collector’s items, with authentic reprints fetching over $7,500 at auction. This twist of fate is a lasting reminder of the scandal that almost bankrupted Portugal and drastically altered its future.