Evening star. [volume] (Washington, D.C.) 1854-1972, 1903-02-17
CASE OF ARNOLD { CO.,
Recalled by Acting Assistant
Attorney General.
CHRISTIAN TALKS
QUESTION OF ISSUE OF FRAUD
ORDER uN1MPoRTANT.
Post Office Department Without Prece-
dent-Amendment Needed to Pres
emit Law on Such Cases.

ed by Inspector Dicer" Mr.. Christiancy was
asked.
Although Mr.. Dice's report is not before
me. l 90 not recall that he recommended
fraud order. But that is, in fact. an UNI
important matter. for this office Is able to
and does accept full responsibility for its
actions. Whether or not that report con-
tanned recommendation for fraud or
der, the case waS considered upon the evil
dence secured and presented. The evil
dence presented did not disclose any actual
existing fraud, In the opinion Of General
Tyner. the assistant attorney general for
the Post Office Department, and he there
fore closed the case.
ARNOLD & Co. refused to give the inspec-
tors who made the investigation list OF
their subscribers, but did present them with
statements OF their assets. liabilities and
earnings, but the inspectors were not per-
mitted to verify these figures by an exami-
nation Of the company's books. The inspec-
tors, in their report on the case. stated that
they were unable to furnish any substantial
evidence for the department as to whether
or not the company were paying unearned
dividends, or whether they were In a solvent
condition.
Department Without Precedent.
"E. ]. Arnold & Co. and John J. Ryan &
Co., the only St. Louis 'book-making'
schemes which have been before this Office
for consideration did guarantee to their
subscribers the payment of a dividend Of
from to per cent per week; but they
stated to this office that these profits had
not been paid from the principal, but only
from the earnings; and they gave the hold
ers of their certificates the option of with
drawing their principal or leaving 1t with
them without any guarantee of dividend eX
cept. l believe they were to share in the
profits II any, up to from to per cent
per week
1T appeared to the department that this
insured the return of the money to those
who had been foolish enough to place it
with these concerns: and then if they REIN
vested it. they did so at their own risk. The
department is without precedent or law to,
and cannot. hold scheme of this kind to
be fraudulent upon Its face.
1T is, however, my opinion that law
declaring them to be- such. should be en-
acted, and time time ago, in a personal let
ter to Senator Jones. with whom had had
some correspondence in regard to bill
amending the fraud law. introduced by him,
l suggested a further amendment to the
present law which would include within it's
prohibitions the class of betting schemes
such as the ones under consideration. which
are becoming numerous. anil which are OPP
Grated, almost wholly, by mail
I'm the memorandum sent to Senator
Jones regarding this proposed amendment
stated that 1t is believed that the use
Of the mails should not be permitted for
purposes of gambling on horse races and
like events. Schemes devised for these
purposes are becoming very numerous and
are widely advertised, remttances Of
money being solicited from the public by
gambling concerns to be bet or wagered
on such events under se-called systems of
betting.
Amendment is Necessary.
THAT such an amendment Is necessary
is apparent from the increasing number OF
such enterprises throughout the country,
and from such climaxes as those at Chi
cago, st. Louis and New York.
II am glad to see that the legislature OF
Missouri is taking up this question. II
the states would more closely follow up
these and other kindred schemes, so-called
cooperative investment and bond-invest-
ment' schemes, operating within their own
states, there would be much less chance
for fraud than now exists.
IF the Postmaster General were to issue
a fraud order against concern without
there being sufficient evidence to show that
the promoters have been guilty Of fraud, or
that the scheme must result in fraud he
would then be. as the Supreme Court says,
going outside of the statute, and no such
order could or would be sustained by the
courts.
1--WE may feel certain within ourselves
that such schemes as Arnold's and others
of the same sort. will result in fraud, yet to
recommend the issuance Of a fraud order
which will be sustained by the courts, we
must have evidence OF actual fraud, or evil
a.
suit in fraud. Many culprit goes free be-
cause the evidence is insufficient to convict
him, whole the Judge sitting in the. case
may feel thoroughly convinced of his guilt.
Il hope that Arnold and the others IL
they have been guilty Of fraud, will be sue
cessfulIy prosecuted and punished to the
full extent of the law: although have less
sympathy for Investors in these schemes
than l would have for those in almost any
other, for they must know that they are
risking their money on gambling pure and
simple.
Gen. Tyner's Letter
81 have noticed some criticism of an off,
cial Of the Post Office Department beca use
Of letter addressed to Arnold & Co..
which it appears they. have published in
their literature This letter, I presume, is
the one written by gGeiterai Tyner. who con-
sidered the case and recommended no action
because of lael, Of evidence at that time to
fraud. AT-ta - =
when the easesIwas cloyed General Tyuer
wrote formal fetter. addressed to Arnold
& Co. at the reIuest Sf their counsel in
1T ls proper. however,to remark that the
closing of the case blythe department does
not necessarily prevent the reopening of
the same and tie taking Of such action
thereafter as maybe deemed necessary IL
any violation Of the law should be brought
to it's notice. ys an
THE addressingIof merely formal COM
munication to a Goncefn which had been
investigated by past office inspectors, in re-
Spouse to lettepfrorfr them asking what
disposition had been made of their case is,
of course, above oriticism.
What use Arnold & Go. could have made
of this letter / fail to see, as | think it
would put investors upon their guard,
rather than otherwise to know that a con-
Germ had been under examination by thu
department The letter 1 have Just men
toned was inclosed with another to coun-
sci for Arnold & Co. in which 1t is stated
that the investigation by post office inspec-
tors had been very fully considered at
their request, and the case Closed; and the
request was made of the counsel of the
company that the same be forwarded TO
Arnold & Co.. at st. Louis.
Case of Ryan & Co.
81 rotice by the papers that John J. Ryan
OF John ]. Ryan & Co. OF ST. Louis has been
arrested. Ryan & Co. We're called upon to
appear ard show cause why a fraud order
should not be issued In November last.
This was upon the report and Recommended
tion of Inspectors Fulton and Plsu OF st.
Louis, and one of the Inspectors who inves-
tigated the case was requested to be pres
ent at the hearing, as the office had had no
other case Of this nature before II. and
therefore We wanted a government witness
-an inspeetor-preseut.