The Saint Paul globe., 1903-08-09
DUMMY PLUTOCRATS
SUCCEED INLOND)N
--- THE GUINEA Pig
Boys and Cheap Clerks Stand
as the Possessors of Large
Fortunes in Stocks, Whihc
They Hold for Their En-
pioyers.

There are hundreds of junior clerks
on the London Stock Exchange who
are technically plutocrats.
While they continue to draw their
pound or two week, they are nomi-
nally the possessors of fortunes. This
is one of the results of the dummy"
system which obtains so largely
amongst company promoters. in which,
for business reasons. large sums of
money stand in the names of persons
in subordinate positions.
A certain firm promotes. say, one
company a week. 1t wishes to attract
the investing public. In the first in
stance, list of the shareholders must
be deposited at Somerset house, where
it is open to the public for inspection.
Now let us suppose that Messrs Smith
and Brown have foated the East ST.
berian Mining company at a capital of
$4,000 in 6 l shares. The shares are
really entirely in their own hands. But
1t would never do to allow that to be
known to the would-be investor. He
would glance at the list and say: "All
these shares are held by Smith &
Brown. The concern is a one-man
company. l don't much care to put
my money into an affair which is en-
urely directed by one or two persons. %
To avoid this, the promoting firm
would have to fake" shareholders.
They would retain for themselves say,
10000 worth of stock. The remain
ing $4,000 would be, to the outward
eye, held by the public, whose names
would appear as shareholders. In re-
ai1ty, these would be either the stock
brokers clerks, relations, friends, or
friends friends. One clerk might have
so much as 6 10000 in his name alone.
which he would be merely holding on
his employers behalf until they were
franSfnrTn6 FL
chaser
This clerk, if he were disloyal to his
employers, could use his nominal fortune
TO feather his own nest. Banks lend
money on share certificates usually at 20
per cent. less than the amount held The
clerk who held in his name 10000 worth
OF shares; could go to the bank and say:
Il am hard up and want a loan. Here
is my security-e1 10 600 worth of Siberian
mining stock"
On this it would be possible for him to
secure a loan Of something like $4,000
the 6 1000 being deducted by the banker
against possible depreciation in the
value of the shares.
Dummies" are used also, by ordinary
shareholders, with a view to securing their
own election as directors. Supposing a
man owns 500 shares in a company and
wishes to secure his own nomina ton as a
director with a salary; one of the methods
he would adopt would be to split up his
holdings among, say, twenty five friends,
IN each OF whose names he would place
twenty shares.
Then, when the meetings of sharehold-
ers came around he would secure the Ger
tain vote of his twenty-five friends for
his own election as director He could
carry this even further. by getting friend
to take 500 shares and divide them among
twenty friends, sc. that the first man would
be sure of fifty votes,
Dummy directors are constantly be-
ing employed by promoters to figure on
their prUSectuSeS.
In America the law allows these ssdum-
mics certain privileges which may be
turned very much to their own advantage.
A certain Engiishnan had foated a
big company ingsNew York, Of which he
was the sole proprietor; but to turn it into
q company, he had to nominate certain
people-chief1y clerks-as dummy di-
rectors, with small holdings. He was sud
denly called back to Britain Directly he
was on the seas, the dummy directors
summoned a meeting, got large salaries
voted to themselves and when the pro-
, prietor arrived in London he found a
cable telling him that he had been out
nem9eted rae11a9 re on his own company, and com
pelled TO pay out large sums of money to
, people Who We're mere men. of straw
by the freaks of stock exchange life.
therefore, the Hennifess clerk may be the
! TlghtfuI possessor of fortunes. The same
5 freaks, on the other hand, can NAL gen
u1ne pfutocratS actual paupers A firm
which which cannot meet its obligations on ac-
exchange On MANY occasions the firms
hammered that is, made ba11kruNts-
have been really amongst the weaithfest
end most straightforward in the "house -
Here is case:
Messrs. G. & Co. have bought a lot of
shares in clients name The client.
who should pay for them Immediately. is
suddenly taken ILL or disapnears ana
omits to forward his check at the nec-
essary time. This means that the firm
has to pay out perhaps tens OF thou
sands to the sellers, It is quite possible
that money may be very scarce. The
firm may be unable to borrow the amount,
or may have no security on which to be
able to do SO. When account day comes
obligation. and may not have Donnd
With M which to meet 1t. So they are