The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1900-12-20
Filed by the Attorney
General.
ALLEGATIONS OF FRAUD MADE
IT is CLAIMED THE OFFICERS RE-
SORTED TO MISREPRESENTATION.
Auditor of state Hart Makes n State
ment-Bad Companies to
he Prosecuted.

Judge Carter, Of the Superior Court, yes
terday appointed the Union Trust Company
receiver of the Fraternal Cooperative AS
ISOLATION upon information filed by the
auditor of state and attorney general. The
case was styled state Of Indiana on the
relation of Joh c. Ruckelshaus, prosecut-
ing attorney, against the Fraternal CO.
operative Association"
The affidavit of information says that the
association was incorporated June %, 1900.
with c. w. Horn. of Lima, o., A. w. La
mar jr., Cortice NJ. Warner, James E.
Neighbor and s.. NJ. Unger, Of this city,
incorporators. The object of the associa-
ton as set out in the articles of incorpora-
ton was to purchase real estate out of the
funds of the association and sell to mem
bers in good standing on small payments.
1t Is alleged in the afidavit that the ex-
pense fund of the association largely ex-
ceeds a reasonable compensation for the
services of the officers and that it is di-
vided among the officers. The plan OF
operation. it was said. provides for the ac-
emulation Of money or credit by small
monthly payments exceeding the power
granted only to building and loan associa-
tons and at the same time exacting for
FIXTURES by establishment of an expense
fund exceeding the power denied building
and loan associations. 1t is also alleged
that the association engaged in business
as an insurance agent or broker and ex-
tended its field of operation beyond the
SURRENDER OF CHARTER.
AS to evidence sufficient for the associa-
ton to surrender it's charter and right to
o.r .ho d1lo,tt aax,g
ats dealings are largely, if not altogether,
among the poorer classes of the community
who are unfamiliar with business methods.
and 1t has committed fraud upon its mem
bers in the following respects, to wit: III
has advertised that it possesses assets to
the amount OF $780, 900, whereas. in point
of fact. IL has no assets in excess of
4 1000"
The AFFIDAVIT says the plan of placing
members in possession of property cannot
be done under the scheme of its bylaws,
and, continuing, says: 1T falsely and
~fraudulently advertises itself as a mutual
and cooperative association, whereas its
plan is absolutely lacking in mutually In
this. that 1t c~ontemplates a disproportionate
and unfair profit to be made by certain of
its members to the loss and detriment OF
the others"
II is alleged that the name of the associa-
ton is false. that its methods of purchasing
property are wasteful, and limits the field
OF operation to a very small class of real
estate which can be sold on small payments
without interest on long time. Further il
Is averred:
"Its management is and has been dis
honest and corrupt in this. that IL
has used the funds of the association
in the purchase of property in such a
way that a wrongful and unlawful profit
has accrued to officers having charge OF
it's affairs.
1T has falsely and fraudulently adver-
tised that its officers are w~ell-known bust
ness men OF the city of Indianapolis. where
as, in fact, no officer of the association is
known as q business man in the city of IN
d~ianapolis. and no officer or trustee of said
association appears on the tax duplicates
of Marion county as the owner of any real
estate whatever. saving and excepting only
that one Of said trustees is taxed as owner
by entries with his wife upon real estate
valued at $780,"
The information was filed as an emer-
gency pr%ecaution, and the appointment was
made without a hearing. A suit of one OF
the stockholders against the association fol
the appointment of a receiver was tried in
Judge Leathers's court last week, but g
settlement was effected and the case was
dismissed.
AUDITOR HARRIS STATEMENT.
With reference to the action of the State
in having the receiver for the association
appointed yesterday Auditor of State Harf
made the following statement:
1.-The Fraternal Cooperative Association
is an organization formed under the vol
untary association act. Shortly after IL:
organization so many people came to tn,
auditors Office, and so many letters wers
received from the mails asking for infor
nation as to the plan n scope of it.
business as advertised, that after consul
tation with the attorney general / had Mr.
George l.. Bingham, the building-associa
ton expert of this Office, make an investi
cation of its business methods. This repor
was submitted to the attorney general. In
connection with a letter from the auditor
asking for an opinion as to whether thi.
organization did not In its methods en-
croach upon organizations formed unde'
the building n LOAF law of this State
On Nov. 2S the attorney general gave thu:
office an opinion to the effect that 1t wa.
undertaking to dc a business not author
lied by the voluntary association act, anS
hence was illegal. / at once asked tn,
attorney general TO proceed against thu
association for violating the building ans
loan law of Indiana. In the meantime
however, a suit had been brought by
member for the appointment of a receiver
but this suit was settled out of court. Th'
officers of the association were called low
to the Statehouse by the attorney general
and il was understood that they would no
dc any more business. In the last day o.
two, however, letters have been received
both by the auditor of state and the attor
ney general. in which calls had been mad
upon the membership with a view of prose
cutting the business, with a statement tina
indicated the state authorities had con
scented to this action. As soon as tn
attention of the attorney general wa
called TO this action on the part of tn
cooperative society Ii was decided to n
once proceed in the courts. and the actor
before Judge Carter and the subsequen
appointment of the Union Trust Compan,
as receiver is the result.
TT other associations that have bee
formed In this State TO do this sort O
business and the association from Lima
o., that had done such a large business
especially in the gas belt, have all notiie
this office that they have ceased business
In my judgment, no society can success
fully fulfill the promises held out as In
ducements under the plan of operation
that marked this company. II was only
scheme TO collect the pernicious expens
fund that formerly attached to the build
ing and loan association laws, and confs
cate lapses of members who. through an
cause, were unable to pay dues. The Stat
cannot, for a momen In duty to the gen
eral public, and especially those who ar
most apt TO be investors in such schemes
tolerate their existence, and 1t will be tn
policy Of the attorney general and tn
auditor of state TO keep on prosecuting 4
legal organizations and protect the peopl
against losses that arc most certain TO en
S1fpn