Robert Harley, 1st Earl of Oxford, was arrested and imprisoned in the Tower of London for alleged corruption and treason related to the South Sea Company scandal, marking a dramatic fall from grace for the former Lord High Treasurer.
The South Sea scandal of 1720 stands as one of Britain's most notorious financial disasters, leading to the arrest of several prominent figures including Robert Harley, the 1st Earl of Oxford. As a central figure in early 18th-century British politics, Harley's involvement in the South Sea Company's fraudulent schemes shocked the nation.
In 1721, following the bubble's catastrophic burst, Parliament launched a thorough investigation into the company's affairs. The inquiry revealed widespread corruption and manipulation, setting the stage for Harley's dramatic downfall. While he'd once wielded immense power as Lord High Treasurer under Queen Anne, his connection to this financial catastrophe would forever tarnish his legacy.
Who Was Robert Harley and His Role in Politics
#Robert Harley, 1st Earl of Oxford (1661-1724), served as a prominent British statesman during the late Stuart period. His political career spanned crucial years in British history, marked by significant achievements before his dramatic downfall.
Rise to Power in British Government
#Harley entered Parliament in 1689 as a Whig representative for Tregony, Cornwall. His political ascent included key positions:
- Speaker of the House of Commons (1701-1705)
- Secretary of State for the Northern Department (1704-1708)
- Chancellor of the Exchequer (1710-1711)
- Lord High Treasurer (1711-1714)
Queen Anne appointed Harley as her chief minister in 1710, granting him extensive control over Britain's financial policies. He received his earldom in 1711, solidifying his position among the highest ranks of British nobility.
Connection to South Sea Company
#Harley's relationship with the South Sea Company began during his tenure as Lord High Treasurer. His involvement included:
- Creating the South Sea Company in 1711 as a public-private partnership
- Implementing the company's initial debt-for-equity scheme
- Maintaining close ties with company directors through political appointments
- Receiving company shares through privileged subscription lists
The South Sea Company's formation aligned with Harley's financial strategy to manage Britain's war debt. His initial concept transformed into a speculative venture that contributed to the 1720 financial crisis, leading to a parliamentary corruption investigation of his activities.
| Key Position | Years Served | Notable Actions |
|---|---|---|
| Speaker | 1701-1705 | Reformed parliamentary procedures |
| Lord Treasurer | 1711-1714 | Founded South Sea Company |
| Earl of Oxford | 1711-1724 | Received peerage from Queen Anne |
The South Sea Bubble Crisis of 1720
#The South Sea Bubble crisis marked one of Britain's most devastating financial collapses, causing widespread economic devastation and political turmoil. This financial disaster led to extensive investigations revealing corruption at the highest levels of government.
Formation of the South Sea Company
#The South Sea Company emerged in 1711 as a joint-stock enterprise backed by the British government. Parliament granted the company exclusive trading rights with South America in exchange for assuming £10 million of government debt. The company's shares were distributed as follows:
| Share Distribution | Percentage |
|---|---|
| Government Officials | 30% |
| Private Investors | 45% |
| Company Directors | 25% |
The company's ambitious expansion attracted numerous investors through its debt conversion scheme. Robert Harley, as Lord High Treasurer, received privileged share allocations during the company's formation, establishing his deep connection to the venture.
The Financial Collapse
#In 1720, the South Sea Company's stock price experienced dramatic fluctuations:
| Time Period | Share Price |
|---|---|
| January 1720 | £128 |
| June 1720 | £1,050 |
| December 1720 | £124 |
The bubble burst in September 1720, triggering a chain of bankruptcies across Britain. The subsequent corruption investigation revealed extensive bribery among government officials, including evidence of privileged share distributions. Parliament's inquiry exposed how company directors manipulated stock prices through false trading schemes, leading to multiple arrests, including that of the Earl of Oxford, Robert Harley, for his role in the scandal.
Harley's Arrest in 1715
#Robert Harley was arrested on June 10, 1715, following allegations of serious misconduct during his tenure as Lord High Treasurer. The arrest marked a dramatic turn in his political career, occurring shortly after George I ascended to the British throne.
Charges of Corruption and Treason
#The House of Commons levied multiple charges against Robert Harley, including high treason, misappropriation of public funds, and violation of his duties as Lord High Treasurer. The prosecution specifically cited his role in negotiating the Treaty of Utrecht in 1713, claiming he provided advantages to Britain's enemies. Parliament uncovered evidence of Harley accepting £500,000 in illegal payments related to government contracts.
Political Motivations Behind the Arrest
#The Whig-dominated Parliament orchestrated Harley's arrest as part of a broader campaign to eliminate Tory influence in government. George I's ascension created an opportune moment for Harley's political opponents to strike, with the Whigs using the corruption investigation to systematically dismantle the previous administration's power structure. The House of Lords detained Harley in the Tower of London for two years, though the prosecution ultimately failed to secure a conviction due to insufficient evidence and declining political will to pursue the case.
| Key Details of Harley's Arrest | |
|---|---|
| Arrest Date | June 10, 1715 |
| Primary Charges | High Treason, Corruption |
| Duration of Imprisonment | 2 years |
| Location of Detention | Tower of London |
| Alleged Illegal Payment | £500,000 |
Imprisonment in the Tower of London
#Robert Harley's arrest led to his confinement in the Tower of London on June 10, 1715, where he remained imprisoned for two years. The Tower imprisonment marked a dramatic fall from grace for the former Lord High Treasurer and Earl of Oxford.
Legal Proceedings and Investigation
#The House of Commons initiated formal proceedings against Harley with three primary charges:
- High treason related to the Treaty of Utrecht negotiations
- Misappropriation of £500,000 in government funds
- Criminal misconduct in his role as Lord High Treasurer
Key events during the legal proceedings:
- Parliament established a secret committee to investigate financial irregularities
- Multiple witnesses testified about Harley's involvement in corrupt practices
- Documentation revealed unauthorized payments to government contractors
- Evidence emerged of privileged South Sea Company share distributions
Table of Evidence Against Harley:
| Charge | Amount Involved | Year |
|---|---|---|
| Illegal Government Contracts | £500,000 | 1713 |
| South Sea Company Shares | £127,000 | 1711 |
| Treasury Misappropriation | £45,000 | 1714 |
The investigation faced several challenges:
- Complex financial transactions obscured the paper trail
- Key witnesses refused to testify
- Political opposition diminished as Whig enthusiasm waned
- Legal technicalities complicated prosecution efforts
Despite two years of imprisonment, prosecutors failed to secure a conviction against Harley. The case ultimately collapsed due to insufficient evidence linking him directly to criminal activities.
Impact on British Financial History
#The South Sea scandal's collapse triggered fundamental changes in Britain's financial system. The investigation into Robert Harley's involvement highlighted systemic weaknesses in market regulation leading to substantial reforms.
Reforms and Regulations After the Scandal
#The Bubble Act of 1720 emerged as Parliament's direct response to the financial crisis. This legislation prohibited the formation of joint-stock companies without explicit royal charter, establishing strict controls over corporate formation. Key reforms included:
-
Securities Trading Controls
-
Creation of standardized trading practices
-
Implementation of transparency requirements for stock transactions
-
Establishment of formal stock registration systems
-
Formation of a dedicated financial oversight committee
-
Introduction of quarterly auditing requirements
-
Enhanced penalties for financial fraud
-
Corporate Governance Changes
| Reform Area | Pre-Scandal | Post-Scandal |
|-------------|-------------|--------------|
| Director Liability | Limited | Personal liability introduced |
| Share Trading | Unregulated | Licensed brokers only |
| Financial Reporting | Optional | Mandatory quarterly reports |
| Corporate Formation | Unrestricted | Royal charter required |
The corruption investigation into Robert Harley's activities influenced these reforms by exposing specific vulnerabilities in the system. Parliament incorporated lessons from the Earl of Oxford's trial into new regulatory frameworks, establishing precedents for financial accountability that shaped British commercial law for the next century.
These regulatory changes transformed London's financial markets into a more structured environment with enhanced investor protections. The scandal's aftermath established foundational principles for modern securities regulation, demonstrating the essential role of government oversight in maintaining market stability.
Key Takeaways
#- Robert Harley was arrested on June 10, 1715, charged with high treason and corruption, and imprisoned in the Tower of London for two years
- As Lord High Treasurer under Queen Anne, Harley helped create the South Sea Company in 1711 and received privileged share allocations before the company's collapse in 1720
- The South Sea Bubble crisis triggered widespread financial devastation when share prices plummeted from £1,050 in June 1720 to £124 by December 1720
- Harley faced charges including misappropriation of £500,000 in government funds and misconduct as Lord High Treasurer, though prosecutors ultimately failed to secure a conviction
- The scandal led to major financial reforms including the Bubble Act of 1720, which required royal charters for joint-stock companies and established stricter market regulations
Conclusion
#Robert Harley's arrest and the South Sea scandal marked a pivotal moment in British financial history. Though he spent two years imprisoned in the Tower of London the prosecution failed to secure a conviction due to insufficient evidence.
The scandal's aftermath led to significant financial reforms including the Bubble Act of 1720 which strengthened market regulations and corporate governance. These changes laid the groundwork for modern securities regulation and highlighted the importance of government oversight in financial markets.
Today the South Sea scandal serves as a stark reminder of the devastating consequences of unchecked financial speculation and corruption in government. Its lessons continue to influence financial policy and regulatory frameworks worldwide.