New-York tribune., 1903-07-07
BOND RECORD PROTECTS.
ONLY IN OWNER CAN SELL
Companies Held for Illegal Trans
ferS by Treasurer.


day rendered a decision in the three cases
brought by the Jennie Clarkson Home for Chill
dren against three railroad companies and a
brokerage house, that is one of the most i'm
portant ever rendered in this State with respect
10 responsibility for transfer of bonds. The ac-
tions grew out of the embezzlement from the
plaintiff. which is a benevolent corporation. of
$4,000 of railway bonds by its former treas
ur,r. George w. Lessels, more than a year ago.
These were bonds OF the Atchison, Topeka and
Santa Fe Railroad Company. OF the Chesa-
peake and Ohio Railway Company. of the
Union Pacific Railroad Company and of the
Missouri, Kansas and Texas Railway Company.
Lessels. who had held positions of responsibility
and who had long been a director Of this be
nevolent corporation. was elected its treasurer
in March, 1900.
In January 1901, Lessels visited the office of
the brokerage firm of H. Knickerbacker & Co,
in Broad-st. and exhibited four bonds of the
Union Pacific Railroad Company, saying that the
plaintiff corporation desired to sell them The
brokers' cashier. seeing that the bonds were
registered in the name of the Jennie Clarkson
Home for Children. informed Lessels that be
fore the bonds could be sold The registration
must be so altered that they would be payable
TO bearer. Lessels asked how that could be
done. and instructed 10 take them 10 the
transfer office of the railroad company and
find out what must be done in order to effect a
change in registration. Upon application to the
railroad company. Lessels was informed that It
would be necessary to furnish power of attor-
ney and copy of a resolution of the directors
of the home authorizing the transfer.
HOW FRAUD WAS PERPETRATED.
Lessels thereupon executed a power of attor-
ney. authorizing the transfer agent of the rail-
road company TO assign and transfer the bonds
TO bearer This power described the bonds by
number. and was signed The Jennie Clarkson
Home for Children George W. Lessels, Treas
urer," and was Witnessed by one Busch, who
was the cashier for H. Knickerbacker & Co,
and by William H. Gibson the active member
OF that firm. Lessels also drew up what pur-
ported to be a resolution of the board of di-
rectorS Of the home authorizing him, as treas
urer, TO cell and assign the bonds. To this pre-
tended copy OF the boards resolution he forged
the name of DR.. 7. Franklin Smith, its secre-
tary, and also affixed what purported to be the
seal of the corpora tion but which was in reality
a clumsy forgery. not even containing the cor
rect year of its Incorporation.
Upon the presentation of these documents the
transfer agent of the railroad company trans
ferred the bonds payable TO bearer and noted
the fact upon each bond. The bonds there
upon returned to H. Knickerbacker & Co, who
sold them and paid the proceeds of the sale over
to Lessels. by check drawn 20 his order treas
urer. Moreover. before he left the office the
.ashier Of the brokers permitted him to indorse
the check and paid him the cash. In the sum
mer of 1901 Lessels went through the same
operation with regard to the bonds of the Atchi-
son. Topeka and Santa Fe Railroad Company.
In March. 1902. substantially the same trans
action took place respecting the bonds of the
Chesapeake and Ohio Railway Company and
the Missouri, Kansas and Texas Railway Com
pany. The directors of the home had never au-
thorzed the transfer of the registry Of the bonds
or their sale. and had never adopted the reso-
lutions of which forged copies were presented
- the railroad companies, and the home never
received any part Of the proceeds of such sale.
FIRST DISCOVERY OF EMBEzzLEMENT
The first knowledge that the directors had OF
any wrongdoing on the part of Lessels was af-
ter Leonard D Whit, the banker, a member
of the auditing committee. in March 1892 asked
Lessels TO allow him TO examine the securities
OF the Home Lessels put Mr.. White off with
various excuses until he had completed his en-
bezZlement, and then fed the country The
board of directors of the Home at once met. APP
pointed Mr.. White treasurer. in the place OF
Lesses. who was Immediately indicted for his
crime. and notice was given TO the railroad com
panies that they would be held liable for the
loss of the bonds account Of what was
claimed to have been the illegal transfer by
them. The Atchson Topeka and Santa Fe
Railroad Company. acting under the advice OF
its counsel made good to the Home its loss, by
issuing 10 them new bonds.
The other railway companies refused to take
this action, and suit was brought by Sackett &
McQuaid, as attorneys for the Home, against
each of the three other railway companies, and
also against Mr Gibson, the responsible part
ner Of H. Knckerbacker & Co The matter was
brought before the proper committees of the
Stock Exchange. with the result that the rules
for the transfer of railway bonds in similar cir
cumstances were radically changed and greater
safeguards thrown around the transfer of regis
Try Of such property rights.
SEPARATE ACTIONS BROUGHT
The three actions were brought on for tria
together before Justice Scott in June. There
was large array Of counsel upon the trials
the lawyers representing all the railway com
panies and the brokers being permitted tc
examine witnesses in each OF the cases. Henry
W. Sackett the trial counsel for the Jennie
Clarkson Home for Children. Rush Taggert fol
the Union Pacific Railroad Company Henry "
HAYDEN for the Missouri, Kansas and Texas
Railway Company. John S. Sheppard, jr., ant
Melville T. ingalls,, jr.. were counsel for III,
Chesa peake and Ohio Railway Company, anC
William r. Bronx was counsel for H. Knicker
hacker & Co. 1t contended on behalf o
the home that not only were the railway com
panies responsible for permitting the embezzle
Inent by making the registered bonds negotiable
without authority on the part Of the d
rectors, but that judgment should also be ren
dered against the brokers because. knowing
that Lessels was the treasurer, they aided il
This illegal transfer. il admitted, however