The Washington times. (Washington, D.C.) 1894-1895, 1894-09-30
THE WASHINGTON TIMES, SUNDAY. SEPTEMBER 80 1894

uEOp out OF the company lOr the DeHeut Oh lu~
vestors who may stay in.
Operating among the poor and Ignorant
the managers of such concern reckon upon
q large percentage of lapses and forfeitures,
and the claim is bodily made that the extra
ordinary profits accruing from this source,
which go to swell the loan fund. will enable
them to repay more than 80 for 81 in two
years. This is the system under which hun
dreds OF victims here and elsewhere have
been practically swindled out of their earn
ings. Agents of investment concerns make
all sorts of representations to illiterate peo-
pie, who sign contracts they know nothing
about. These contracts are by no means
clear In their text. but their effect is to bind
the investor TO pay % cents weekly into the
concern on pain of fine and forfeiture for q
period of not less than two years. If at any
time within two years he falls in arrears six
weeks his ''arrearage works forfeiture OF all
claims" against the concern.
EASY TO GET IN; HARD TO GET OUT.
1t is constant succession Of these forfeit
ures that is depended upon for large pro-
portion Of the profits, and their amount
measures the size of the swindle perpetrated
upon the investing public.
The investor is simply at the mercy OF the
trustee of his funds. Ii he is compelled for
any reason to cease payments he loses all
he has paid in. without recourse. except
restoration of his status by the payment
of heavy fine and liberal "revival fee"
which in many cases amounts to confiscation.
Ordinary demands on the concern for repay
ment of deposits are refused, but threats OF
suit or the actual initiation OF legal proceed
ings will usually bring about settlement at
20 to 80 cents on the dollar.
What an investor would realize who re-
manned in one of these concerns for number
OF years is problematical. The true nature
of the contrast Is speciously yelled. In the
ordinary form the investor is assured that by
the payment of % cents per week for t1O2
months on each share of stock or total of
S110.50, he will be entitled to receive 5000,
that being the par or maturity value OF the
share. The certificate of stock fcontains this
positive declaration: This certificate Is guar
anteed to mature in 102 months, provided the
above conditions are complied with" The
"above conditions" refer to prompt and con-
tinuous payments of % cents week on each
share The bylaws contradict this assurance,
for they stipulate that 'when the accumu-
lated savings and the profits thereon reach a
sum equal to the par value of the shares in
any SERIES the mortgages of the borrowers
are cancelled and non-borrowers are paid
5000 for each share held by them"
In other words the share reaches maturity
when the concern has earned enough money
to pay its par value. OF course members will
not be required to make their payments be-
yond the period of 102 months, but the circu-
lars state in several places that the matured
value is the par value, that is. that the mem
bers will draw 5000 cash for SllO.5O paid In
at the end of 102 months. There is q mani
fest intent TO deceive all through the printed
matter of these concerns, many Of their state
ments bearing on their face evidence of their
catch-penny nature.
FALSE CLANS OF INCORPORATION.
M IN
the District has plan slightly differing In de-
tail from those described above, though
equally effective in deluding investors and
even more unfavorable in its terms of settle
ment with members Withdrawing. This con-
Germ pretends to be incorporated under the
laws of the District of Columbia, having filed
articles of incorporation with the recorder of
deeds, but such incorporation is in fact I'M
authorized by the District laws, and the al
legged articles are mere blind. In its certifi-
cate OF membership this concern agrees to
pay to the members 500 ten years after date
in consideration of an application fee of 20
cents and monthly dues of 80 cents for
period OF ten years, or S60.2 in all. Failure
on the part of the holder of the certificate to
meet all payments promptly as the same may
become due during the first years existence
Of the certificate acts as a forfeiture OF the
certificate, OF all rights and benefits arising
hereunder, and of all sums paid thereon. At
the expiration OF one years membership the
member may withdraw from the association
according to the certificate, and shall be en-
titled to receive so per cent. of the dues
placed TO the credit Of his certificate in the
loan fund: if he withdraws after two years he
shall be entitled to receive 70 per cent. of the
dues placed to his credit: if after three years,
sum equal to the whole amount of dues
placed TO his credit in the loan fund.
In the constitution of the concern, how
rla ofc az ont &c jaI
for. The clause relating to Withdrawals
states that after one years membership the
investor ''shall be entitled to a sum equal to
all dues placed to the credit of his certificate
in the loan fund, together with interest at the
rate of per cent per annum." Which of
these two methods of settlement is actually
practiced does not appear, but there is con-
siderable difference between the two, as in
vestors have discovered for themselves. In
this same concern the loan fund Consists of
IS per cent. OF the amount collected from all
sources, whether from dues, fines, or interest
arising from investments, except the applica-
ton fee and the first three months payment
Of dues, which shall 90 to the association for
its expenses. " Thus 10 per cent. of!the entire
income of the concern together with the first
three months dues on each new share and
the application fees, goes to the expense fund
In other words, less than SO per cent. GER
tainly, and probably not more than rs per
cent. of the total income of the institution, is
used for purposes of investment, constituting
the earning capital.
BIG EXPENSE PERCENTAGE.
1t will be interesting to see how the ordi-
nary investor fares under this system Sup
pose he invests in ten shares paying an ap-
plication fee of 20 cents a share and monthly
dues of so cents a share, withdrawing at the
end of twelve months. His account with the
investment concern will stand thus. He will
have paid in $50 in dues and 50 in appliea-
ton fees, or s62 in ALL OF this sum the con-
cer:I will have taken for expenses 81 in appl1-
cation fees, three months dues amounting to
SIS, and ID per cent of the remaining nine
months Dues amounting to 1915, or $23. rs
altogether. Deducting this sum from S62
paid in, the remainder is S3S. %, which is
So per cent. of nine months dues, the only
income the concern has received, and repre-
sents the amount TO the credit of the investor
in the loan fund.
According to one of the methods of settle
ment above referred to the Withdrawing in
weston is entitled to 1895. with per cent
interest. According to the other he is en-
titled to so per cent. of $685., or S19.12.5,
without any interest. In the first instance he
has lost about 1913 on an investment of $685.
in the second he has lost $42.S7.5 on the
same investment. Even should the investor
pay dues for three years and then withdraw
the entire amount to his credit in the loan
fund he would receive but S14025 in ex-
change for 1882 paid in, losing Salts by the
transaction. Investors do not as q rule
1r,I hat l,a