How to Swindle Your Creditors, Or the Unedifying Story of an Ancient Greek Insurance Scam

The Mysterious Noise

3rd century B.C.
Off the coast of Attica, on the approach to Athens.

The sun is beating down on a calm, brilliantly blue Aegean but a refreshing breeze is caressing our faces as we’re sitting on board a fat merchant ship sailing from Byzantium towards Athens with a cargo of grain. A fellow passenger, by the name of Zenothemis, is waxing lyrical about the beauty of the Acropolis and the Parthenon, now visible in the distance, to the Captain and Dikaiopolis, a busybody merchant who embarked in Euboea. Suddenly the Captain hears a noise. Zenothemis is either deaf or too fond of his own voice, for he claims to hear nothing, but the Captain and Dikaiopolis can both hear the noise coming from below and we all – captain, sailors, Dikaiopolis and our invisible selves – troop down into the hold to see what’s going on…

There’s a bloke down there – it’s the ship’s owner, Hegestratos.

Captain: “Hey, you! What are you doing? (Suddenly realising it’s Hegestratos.) But what are you doing, o Hegestratos? What’s the noise?”
Hegestratos (innocently): I’m not doing anything, o captain, nor can I hear any noise. Don’t worry.”
Dikaiopolis (looking behind Hegestratos’ back): “Come here and look, o captain. For Hegestratos is holding something in his right hand.”
Captain: “What have you got in your right hand, o Hegestratos?”
Hegestratos (desperately trying to cover up): “I’ve got nothing, o friend.”
Dikaiopolis: “O Zeus! Hegestratos is not telling the truth. He’s got an axe in his right hand. The man is sinking the ship!”

Eh? How’s that? He’s trying to sink his own ship? The ship on which he himself is sailing?

Well, yes. You see, we got caught up in an insurance scam.

The Story of the World’s First Recorded Insurance Scam

Demosthenes practising oratory by Jean-Jules-Antoine Lecomte du Nouy [Public domain via Wikipedia]
You have to excuse the somewhat primitive nature of the conversation above: it’s from the very first lesson of Reading Greek, an Ancient Greek language course by the Joint Association of Classical Teachers (if you ever contemplate learning Ancient Greek, I highly recommend it). The interesting thing about it is that the classical teachers didn’t make the story up: it has been handed down to us from antiquity: our source for it is the Orations of Demosthenes.

The Man with Pebbles in his Mouth: Demosthenes (384 B.C.-322 B.C.) 

Famous Athenian orator and a political opponent of Macedonian hegemony. 

Demosthenes was orphaned at the age of 7 and started to study rhetoric and practise the delivery of speeches because he wished to sue his guardians who squandered his inheritance. As he had a stammer and a weak voice besides, he practised speaking with pebbles in his mouth and by shouting over the noise of the breaking waves on the shore. He took his guardians to court when he came of age and won his case although he managed to recover only part of the fortune his father left him. 

Afterwards he made a living as a speech-writer and advocate, then turned to politics: he's most famous for his vitriolic speeches opposing the spread of Macedonian power under Philip II and Alexander of Great - for which he ultimately paid with his life. 

Demosthenes's most famous speeches were collected in a book titled the Orations and became textbook material soon after his death. The famous Roman orator, Cicero, called him the greatest Greek orator.

JACT has embellished the story somewhat and combined it with details from other ancient authors to create an entertaining first lesson which introduces the learner not just to the Ancient Greek language but also Ancient Greek history and customs. I will spare you further details translated from simplified Greek however; instead we turn directly to Demosthenes, who summed up the case in the Athenian court as follows:

I beg of you all, men of the jury, if you ever attended closely to any matter, to attend to this. You will hear of a man’s audacity and villainy that go beyond all bounds, provided I am able, as I hope to be, to tell you the whole tale of what he has done.

Zenothemis, who is here before you, being an underling of Hegestratus, the shipowner, who he himself in his complaint states to have been lost at sea (how, he does not add, but I will tell you), concocted with him the following fraud.

Both of them borrowed money in Syracuse. Hegestratus admitted to those lending money to Zenothemis, if inquiries were made, that there was on board the ship a large amount of grain belonging to the latter; and the plaintiff admitted to those lending money to Hegestratus that the cargo of the ship was his. As one was the shipowner and the other a passenger, they were naturally believed in what they said of one another.

But immediately on getting the money, they sent it home to Massalia, and put nothing on board the ship. The agreement being, as is usual in all such cases, that the money was to be paid back if the ship reached port safely, they laid a plot to sink the ship, that so they might defraud their creditors.

Hegestratus, accordingly, when they were two or three days’ voyage from land, went down by night into the hold of the vessel, and began to cut a hole in the ship’s bottom, while Zenothemis, as though knowing nothing about it, remained on deck with the rest of the passengers. When the noise was heard, those on the vessel saw that something wrong was going on in the hold, and rushed down to bear aid. Hegestratus, being caught in the act, and expecting to pay the penalty, took to flight, and, hotly pursued by the others, flung himself into the sea. It was dark, and he missed the ship’s boat, and so was drowned. Thus, miserable as he was, he met a miserable end as he deserved, suffering the fate which he purposed to bring about for others.

As for this fellow, his associate and accomplice, at the first on board the ship immediately after the attempted crime, just as though he knew nothing of it but was himself in utter consternation, he sought to induce the sailing-master and the seamen to embark in the boat and abandon the vessel with all speed, declaring that there was no hope of safety and that the ship would presently sink; thinking that thus their design might be accomplished, the ship be lost, and the creditors thus be robbed of their money.

(Against Zenothemis, from the Orations by Demosthenes)

Demosthenes then goes on to explain how the ship was eventually brought safely in to Cephalonia (an island on the western coast of Greece), and how, to top it all, Zenothemis then had the cheek to bring a court case to Athens in which he claimed to be an injured party – but not being a court of law, nor running a class in rhetoric, we will not go into all the remaining tedious legal details here. 🙂

Bottomry: The Most Disreputable Form of Money Lending?

He used to loan money also in the most disreputable of all ways, namely, on ships…

Plutarch: The Life of Cato the Elder (from Parallel Lives)

What made the scam possible, of course, is the actual practice of lending money, often at high interest, with the ship and/or its cargo being the security: a form of lending cum marine insurance which goes by the picturesque name of bottomry (this supposedly being a reference to the ship’s bottom, or to be exact, the keel).

bottomry, n a system of merchant insurance in which a ship is used as a security against a loan to finance a voyage, the lender losing their money if the ship sinks 
(Oxford Dictionary of English)

It was not really an insurance policy in the sense we understand the term today, and a far cry from Lloyd’s practice later, but it’s not difficult to see how it could serve as an insurance for the ship owner or the merchant whose cargo was being shipped: if the ship came a cropper (which, let’s face it, was not uncommon in antiquity), they didn’t have to pay the loan back. In other words they might have lost their ship or cargo but they were financially no worse off.

Hegestratos and Zenothemis, in this first recorded case of an insurance scam in history, went one better: they never actually loaded the ship with any grain at all.

They probably weren’t the only ones to realise the potential for fraud in the arrangement. No wonder bottomry had acquired an unsavoury reputation already in antiquity and soon fell out of practice afterwards.

Links / Sources:Against Zenothemis from The Orations by Demosthenes (Online text)The Orations by Demosthenes (Online text)Reading Greek by the Joint Association of Classical Teachers (Online text)Demosthenes (Encyclopaedia Britannica entry)The Life of Cato the Elder from Plutarch: Parallel Lives)Brutus, or the History of Orators & Orator by Cicero (Online text)

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