The evening times. [volume] (Washington, D.C.) 1895-1902, 1901-04-18
BOND INVESTMENT OFFERS.
Conditions Under Which the Mails
Can He Used in Their Interests.

Conditions Under Which the Mails
Can He Used in Their Interests.
An opinion was recently rendered by
the Attorney General for the P6stof5ce
Department. and approved by the Post
master General. holding that certain So
called bond investment schemes are in Vi
olation of the fraud ard lottery statutes
Notice was given to all companies known
to be operating such schemes that they
must entirely abandon the use of the
mails or make such changes in their plans
OF business as would remove the objec-
ionable features.
A number Of companies have presented
new plans and forms of contract, which
have been held not to be on their face,
or according to the method Of operation
stated by said companies Objectionable to
the postal laws Notices OF these rulings
have been sent to the pOStmasteTs at the
offices where such companies DO business
G. a. G ChristiaHcy. Acting Assistant
Attorney General for the PostOffiCe De
partment, has requested postmasteTs at
whose offices bond investment companies
are doing business through the mails IN
der plans which have not been submitted
to and approved by the Postofice Depart
ment, to procure copies of the literature
t1--N- Unit c1ftS tl St8ti ttiIl JuttttH anu
transmit them to his Office for examina-
ton He said no action viii be taken
against any such companies without fur
Their instructions.
Speaking of the bond investment idea,
Mr. Christiancy said this moriug
The general character of the schemes
held to be in violation of the postal laws
Is where contracts, certificates, deben-
lures, etc, are issued upon the payment
of a certain amount monthly or weekly
for fixed or indefinite period. and either
at a stated or uncertain time a greater
amount is to be returned. The receipts
are aDportioued to redemption. reserve.
and expense funds. The redemption fund
consists generally of over 50 per cent of
the receipts, and is applied weekly or
monthly TO the redemption of contracts,
or of coupons attached thereto. either
consecutively or by some numerical sys-
tenn
The profits on contracts or coupons
vary at different periods of redemption
ranging often from 100 per cent per an
mum at the end of q few months to 10 or
10 per cent at later periods. The small
reserve fUnd - the only earning power of
the company, and large portion of the
contract holders must lapse before the re
maindsr can all receive the profits for
the money of-other contract holders is
taken 10 pay these amounts without any
regard u actual earnings or accumuIa-
tons The payment Of cxhOTbitant prof
its to one contract holder out of amounts
paid In by others without sufficient earn
ing power TO supply the money to pay the
same profits 10 them is wholly indefen-
sible-
we have been advised that several
bond Investment companies understand
that the ruling Of the O 1paTITnent is mere
Iy q technical one, and that if profit Of
only per cent or per cent IS guaranteed,
with sufficient latitude in the time Of final
payment to earn such amount on the re-
serve fund and q surplus OF any amount
over this - estimated profits are scaled
on The basis OF monthly interest COM
pounded monthly, that the entire redemp-
ton fund can be- used to redeem at such
%stImated profits as many contracts or
coupons taS such fund VIII pay} without
regarI TO actual earnings or the inter
ests of other contract holders
The ruling of the department is not
technical one, and PCStmaSteTs have been
instructed to warn ali bond investment
companies doing business at their Offices
that II contracts which are Questionable
on their face, and have been approved by
The department are operated In this man
Her, action viii Dc taken toward ciepTiv-
ing such companies of the use OF the
mails. The department has neld that there
IS no objection to the use of the mails in
the promotion OF a bond Investment plan,
where q certain amount IS promised upon
3 tBtEttdIL rL maturity WHICH can ne real
ized from the earning power OF the funds
which are held for investment together
with an equitable portion Of any surplus
profits. the right being reserved to redeem
such contract Or coupon prior to maturity
BY payment OF the amount paid in with
interest at The rat promised, and any
surplus appouiOned TO such contract or
Such early TedempttOns are not TO be
held except where the amount on hand
IN either cash OF assets, to the credit of
TO the amount paid in thereon, together
with interest at the rate promised and
any surplus profits Heretofore appor-
toned 10 such contracts or coupons In
short the money paid IN by one contract
holder cannot be taken to pay 'eStirlat-
ed profits 20 another without regard TO
actual earnings OF accommodations IeaV-
ing the former TO depend upon sufficient
IaDses 70 provide the same profits
Most Of the plans approved, however.
nave provided q larger guarantee than
could be earned on the reserve fund by |
the time payments are to cease on con-
tract, bat the time OF final payment is /
not fixed and the amount guaranteed IS |
not 10 be paid until it is in the several |
funds Of the company TO the credit of the |
contract and contracts or coupons at |
tached thereto cannot be redeemed be
fore maturity exceut By the pavnlant of /
actual earnings credited thereto. and no |
Tedemptions can be held unless the |
amounts on hand. IN either cash or as
sets, are equal 70 the sums paid in on
such contracts. with interest to date at |
the rate promised, and any surplus pro
fits heretofore appOTuOGed to such con |
tracts or coupons
The department holds that either the |
actual profits to the credit Of a contract
or coupon at the time of its redarrpti9r
can be paid. or a maximum can be placed /
on suCn profits. but such ma Eimura must
be scaled on the basis Of monthly or
weekly interest, compounded monthly OF
weekly, as the case may be. so as to be
equitable Several plans of business have !
also been approved. in which the earIv |
redemption feature has been entirely
FOR A FOREST RESERVE.