Los Angeles herald., 1906-11-21
SchemersGet Millions
by Their Daring
Operations
Underwater and Broker
Work Insurance
Victims
Seven Bold Promoters Caught In Net
by Postal inspectors, Who
Say Mails Were
Misused


CHICAGO, Nov. 20.--Several UNDER
writing companies which are alleged
to be the largest fraudulent concerns
of the Kind ever operated in Chicago
were raided here today by United
States marshals, assisted by postal in
spectors
Seven men, accused of promoting
the fraudulent enterprises, were ar
rested
According to the federal authorities
the men accused of operating the
swindles had many victims and OBJ
tanned nearly a million dollars by the
scheme.
The names of the men arrested and
the companies with which the federal
authorities say they are connected
follow: w. j. Root, president; w. H.
| Welch, vice president and w. ID. Hurl-
but secretary of the Central States
Underwriting and Guaranty COM
pany; Charles Endicott Brown, pres
ident of the Prudential Securities cor
poration brokers; Frank Winslow,
president of the American Corporation
and Security company; Ezra c. Kar-
mum, president of the National Stock
and Guaranty company and the
Bankers Credit and Mercantile COM
pany; David o. Owings, National
Stock and Guaranty company.
| Hurlbut, Root and Welch were taxi
en- to the United States district court
and gave bonds of $4,000 each for their
appearance for trial. According to the
postal authorities the other men who
were arrested were locked up in Jail
because they We're unable TO secure
i bonds.
Leagued With Brokers
The alleged fraudulent operations
of the men as explained by the postal
authorities is that the underwriting
companies were In league with certain
of the brokers with whom they divid-
ed the fee taken for the supposed
underwriting which was never done
by the alleged underwriters.
The plan by which the swindles
were carried on. it is alleged by the
federal authorities, involved represen-
tations in the United States mails that
the underwriting and guaranty COM
panies had given trust companies cer-
tain assets and collateral security to
indemnify bonds given the investors
until the time the bonds matured.
! The corporations were given bonds at
maturing periods all the way from
| tWeSty to forty years.
In using the mails to circulate their
methods of doing business the alleged
fraudulent companies Informed corpor-
ate enterprises desiring money that
they could secure funds by calling at
the Chicago Offices.
On arrival in Chicago the corporation
officials would be introduced to the al
legged capitalists, who represented that
they had available capital to finance
business propositions and would buy
the underwritten stocks provided the
corporation officers would have them
| n a an INy nCiI lr1tx
companies.
Bad Advice Given
1t is asserted that the alleged capital
lists would then advise that the work
be done by the Central States Under
writing and Guaranty company, the
American Corporation and Securities
company or the National Stock and
Guaranty company of San Francisco.
The brokers in the alleged fraudulent
transaction would represent to the pro-
posed victim that they would get no
compensation for their work unless they
actually sold the stocks and they would
be content with a commission of from
a half to one per cent on such stocks
as they sold.
The victim was assured there could
! be no doubt that the stocks underWrit
ten would realize, as the capitalists to
whom the victim had been introduced
would be certain to buy them.
The brokers would then take the men
seeking the underwriting to the offices
of the guaranty company and arrange
for guaranteeing the bonds on pay
ment of a fee of one per cent of the
amount of underwriting.
| The federal authorities assert that in
each case the underwriting company
was given fee and that in many cases
the officers representing the company
seeking the underwriting had scarcely
left the underwriting office by the front
door before the broker who introduced
| the capitalist would enter through am
other entrance and get half the under
writing fee, and the underwriting Ven
| ture would then be closed by the
underwriters ana the brokers, no at
| tempt being made to sell the stock.
| The government officials say the men
arrested never entered into PROPOSE
ton i'm which less than 100000 was in
volVed, and that they In many cases.
obtained as much as S5,OOO.OO0 worth
of stock to underwrite.