The Salt Lake herald. [volume] (Salt Lake City [Utah]) 1870-1909, 1905-10-05
CHARGES FRAUD:
ASKS RECEIVER
Isaac Frost Demands Accounting
From Western Loan and Madsen.
MANY ALLEGATIONS MADE
OFFICERS OF COMPANY ACCUSED
OF ILLEGAL PRACTICES.

A LLEGING that the officers and di-
rectors OF the Western Loan &
Savings company for many years
past have been and are continuing TO
mismanage grossly the affairs of the
company TO the fraudulent and Illegal
advantage of certain officers. and that
the company is insOlVent, Isaac Frost
yesterday filed I'm the district court a
suit against the company and r. W.
Madsen, its president and general man
aSer, demanding an accounting. the APP
pointment of a receiver for the concern
and The return 10 the treasury of funds
which, he alleges have been unlawful
ly Withdrawn by the officers Of the COM
pany.
Frost alleges thst for many years
past Madsen has been president, direc-
tor and manager of the company and in
actusl control of H. and that by reason
of his prepOnderating influence i'm its
affairs and through gross mismanage-
ment has UnlaWfully caused d sum
amounting 10 about $4,000 to be paid TO
him for his services, contrary to the
laws under which the company was or
ganized and To the rights of Frost and
other stockholders similarly situated
Ia each and every application for stock
in the company, Madsen Is named as
proxy 10 vote the stock, Frost alleges,
and thus solely and absolutely con-
trolls the management of said defend
ant company and causes a board of di-
rectOrs 10 be elected who are relatives
and creatures of and subservient To his
VIII and diCtatiOn."
Frost's Deal With Company.
~T.a.
seven shares of class e general stock
lof the company on March % 1898. en-
Cutting him TO "a loan of 500. which he
received after delivering TO the COM
pany his note IN which he promised to
repay the sum on OF before April 16
1906, with monthly payment of $3.50
interest and further monthly payment
OF $3.50 premium. and also to pay all
installments and charges upon his
stock. and in addition 10 this was re-
quired To assign the stock 10 Madsen
as security for the loan. Ii was repre-
scented to him at the time that all pay
ments which might be made by him
would be applied as credits unOn the
stock, Frost continues and that all div
idends would be applied as credits on
his stock account, so that when diVi-
aends and payments equalIed the sum
borrowed the stock would be applied in
full satisfaction of the loan. any surplus
TO be paid To him He alleges that he
has paid i'm premiums and installments
$4,000. and i'm interest S311.J0. ma king
a total of Sl.Ol6. and that he has fully
Copplied with all of the terms and con-
dltlOns of the transaction Yet. he al
leges. the company has failed and re-
fused To allow him the credits TO which
lie is entitled and has credited only the
sum of S37S on the indebtedness, refus-
ing 90 credit the balance paid. TO pay
any dividends on the stock or to render
an accounting.
Stock Manipulation Charged.
In support Of his allegat lions of fraud
and Acknowledgements. Frost charges
that the company has created a special
class of stock designated as reserve
fund stock. from which the officers are
elected to the exclusion of all other
stockholders; that although the arti-
cles of incorporation require that this
reserve fund shall be CHARGED with all
losses arising from depreciation of Sc
curitivs or otherwise, except expenses.
taxes and fire insurance. losses have
been charged against the stock of the
plaintiff and other stockholders SINH
larry situated, while holders OF. reserve
fund stock have been permitted TO an.
Jcipate profits. despite the deprecia-
tion of a large proportion of the securi-
ties of the company, that the board of
directors has permitted holders of COM
mon stock To withdraw before the ma
turity of their stock without deducting
the withdrawal fee provided for BY the
articles of Incorporation; that MadSen
aud other officers of the company ex-
ecuted a contract with zone Hicks" and
after acquiring the interest of Hicks I'm
the contract, created "a fictitious fund
designated the sinking fund" by
which they were enabled 10 receive
considerable sums of money. thereby
causing q loss 10 the general fund and
a consequent loss on account of eX-
penses and therefore not chargable
against the reserve fund.
Varying Rates Of Interest.
Frost further alleges that about the
time of the organization of the COM
pany. Madsen has issued 20 himself 100
shares of reserve fund stock al the par
value Of 500 per share, upon which ne
paid $1,000 and gave his note for 1000
al u per cent interest, but that he later
caused the interest 10 be reduced 20 10
per cent and paid il ON that basis, not
Withstandng the fact that upOn an
other stock loans the defendant com
pany had and is now eNdctug and re-
ceiving interest AT the rate of y Der
cent per annum, and upon all real es-
tate loans interest AT rates varying
from - per cent 10 L. per cent per am
mum, dependent upon the place and
state in which such loan is made, and
whether a Condding stakeholder could
and can be secured with limited knOWl-
edge of interest rates and methods OF
computing interest"
In conclusion, Frost alleges that. for
the reasons enumerated, the company
is insOlVent and will be unable 10 meet
its obligations to the stockholders Be-
cause of the preDOEderaLhg Influence
Of Madsen, il is impOSsible for himself
or other stockholders similarly situ-
ated 10 take steps within the corpora
ton 20 remedy the wrongs complained
Of Frost alleges, and he therefore asks
the court TO appoint a receiver 10 de-
mand an accounting and 10 compel the
repayment OF funds alleged TO have
been secured by fraud If the tHegauty
of the transactions is proved 10 the sat
isfaCJiOn OF the court.
&. :. Price j. attorney for Frost. and
", NJ. McCrea is of counsel for The
plaintiff.
Statement by Matsen.
p ". Madsen last evening gave out the
following statement regarding the salt
7 M Frost became connected with the
company in 1898 through the sale 20 him
or 2 small hoUsc and lot owned hy the
company IN the western part Of the city.
The price and terms of the sale were fair
Is agreed upon, and the company agreed
70 execute a deed 20 Frost as soon as the
purchase price was paid. AS further Sc
curity for this purchase price, and as "a
convenient method OF paying g.. frost also
subscribed 10 seven shares of stock in the
company. The installmeujs upOn the par
chase price ana lhe dues upon ihe stock
WHAT To FAT