In the late 1800s, the Scottish whisky industry was enjoying an unprecedented surge of growth. Distilleries across the isle were flourishing and expanding their capacities, laying down huge amounts of aging stock to keep up with the seemingly insatiable demand. Distilleries were going public on the stock market, and investment was rolling in from both large institutions and personal investors. Men young and old rushed to get involved in the whisky industry and its promise of quick profit.
And as it happened, the money was increasingly flowing in the direction of blended scotch whisky. The industry had been in an upswing in the last two decades of the 1800s, and investing in distilleries had become fashionable. Part of the upswing was related to the demise of the French brandy industry, whose grapes had been devastated by anWith brandy supply drying up, the U.K.
At the same time, production of scotch overall was soaring to peak levels in the 1890s that would eventually prove to be far more production than was actually demanded, driven along by men like the Pattison’s outward appearances of profit and solvency.“Stocks were built up … to ridiculous levels.
As it turns out, Robert and Walter Pattison had been engaging in any number of shady activities. They routinely over-valued company property when negotiating for lines of credit. They sold and bought back their own whisky stocks, artificially inflating the valuation of those stocks to levels far higher than they should have been in reality. They kept their creditors and shareholders in the dark by paying them dividends from their operating capital, as in the style of a pyramid scheme.