New-York tribune., 1907-01-27
Some of the Tricks by Which
They Are Made to
Disappear.

s-zvhers are the assets OF yesterday?" ia a
daily question in the bankruptcy courts OF TINS
district. and the answer. Melted like yester-
DAVIS SHOWS" for q long time satisfac-
tory as any other. As result. wholesale and
commission houses, especially IN the drygoods
trade. suffered heavy losses from patiently dis
honest failures. The cost Of running down as
sets and Furnishing the legerdemaiu OK fraou-
lent debtors was so great that an individual
creditor rarely bore the expense OF oomplete
Investigation More recently. however num-
Der OF large commission houses have combined
and by sharing this expense have thoroughly
probed q large number OF failures. One Of the
Immediate results Of this combined campaign
against fraud has been at least 70 establish
clearly number OF the methods by which bank
rupts cause their entire stock and all their
money 20 vanish into thin. Il auriferous. air.
And with these systems now well understood
this group OF men hopes eventually to find meas
ures for circumventing much sharp practice.
One OF the well established ways under which
a bankrupt's assets take wing just prior to fall
ure for revenue only is sale for cash az ha4I
value" Under this method the intended bank
Eupt nrst secures on ninety days credit All
the materials he can--then comes great show
OF prosperity The tailoring shops are run night
end day with an Increased force. Every yard
OF goods and trimming bills for which are not
yet due Is turned into clOaks or suits-forms in
which goods are found TO be far more ready to
take wing than in the piece. Cnmade goods are
not good flyers, because the courts DO not regard
their migration from the bankrupts shop 10
another dealer as being legally natural. As soon
Bs the $4,000 worth Of unpaid for goods Is made
uD IL is taken to some firm which does such
q business and sold for cash, for just about %
Per cent OF the value. Inasmuch as the goods
have not been paid for, the 90 per cent received
IS, R1th the exception OF the cost Of manufact-
Ure, clear profit And the bankrupt may not even
have paid his help or his rent, SO that he may
take the entire $4,000 so received. The cash is
safely slowed away, and the bankrupt rais. no
trace OF this cash be found. The buying
firm explains that II always does a cash ouSl-
ness and so always has a large amount OF
money at hand The bankrupt" 1t says,
wanted cash and got it,
The second rule of disappearance established
by many ooincideutal cases is allied TO the first
This is known as ''auctloning and hooking the
equity" Under this rule the bankrupt manu-
features his creditors goods as beforehand
again busy shop is not always good indica-
tion for the creditor. The resulting cloakS ana
suits are, however sent TO an aueuon e5 eStao- .O
lshment which advances In cash 90 or % per
cent Of the value OF the goods and gives the
seller an equity IN any amount less auction!ng
commission. which is realized over the money
paid in advance. Now, this equity is an asset
and could be seized for creditors, the pro-
Epective bankrupt hooks or discounts this equity.
Commonly as he afterward testifies, ne owed
some friend or relative some money and gave
him the equity. II can rarely be brought out
that this friend was dummy creditor, and re-
turned this equity When all is disposed OF, even
to the equity. failure follows as corollary.
ferring al equities" is a third conjurer's for
mula for making assets vanish. Under this
system the bankrupt obtains goods on from
sixty days to eight months credit These goods
he manufactures and sells 20 trustworthy Gus
toners on much shorter time. Wnen he has
thus sent on all his unpaid-for stock he takes
his bills receivable to q loan broker, who gives
him cash TO the amount Of 90 or 60 per cent OF
their value and equity IN the rest after col
lection and interest charges are deducted This
equity is then hooked" 70 convenient friend
or relative This is the psychological moment
for failure The broker cannot apparently be
made 20 refund creditors, because his transac-
ton is On its face bona tide loan. Attempts
10 reach brokers on a charge OF usury in re-
oeivfng both interest and a collection fee far
Rave failed In the courts. The cash the bank
Tupt received; er course: osaPearea ISs, on on
the races!" Dropped cut of pocket" Paid to
6octorF' or "StoIeni"
scotton. cotton. who's got the cotton?'' is the
Under this rule piece goods dodge IN and
cut from shop 70 warehouse and from ware
house TO private residence. and from private
residence TO the country and back again 20 the
receptive store OF some relative. Meanwhile the
lawyers dodge hither and thither. tracing trunks
and cases OF goods back and forth Every once
tn q while they say to some one. You've got
the cotton. or furs." But the cotton" has been
passed quickly to some one else. It isn't an
entirely satisfactory game for the lawyer who
IS ''it" because with hundreds OF players IN
New York the cotton" sometimes gets entirely
lost The players are shrewd Frequently the
cotton Is passed on, IN q trunk, 70 some un-
known person at the Grand Central Station,
whence Il goes 20 Connecticut or Hester street or
Brownsville Sometimes the cotton" Is stolen
or burned IN a fire. Just before the game begins,
according TO the bankruprs explanation OF its
disappearance.
Twenty thousand dollars under the note'' IS
another legerdemaln plan. This is simple. A
relative with a convenient promissory note for
$500 leyfes cruelty the stock OF the bankrupt,
and is not contented until he has dragged away
snent Immediately after this seizure the rela-
tive begins TO shift the goods in accordance with
the rules OF the "cotton, cotton" game. The
creditors may may ncf get the fixtures. but
they rarely find the cotton"
Under all OF these systems OF hocus- -pocussing
assets creditors have had little show IN the
past Of recovering any money. As a result ner-
chants and particularly drygoods commission
houses were being constantly hit by such fail
which already numbers more than forty dry
goods commission houses, employs regular coun-
SCI and is ready 90 eXpend thousands OF dollars
% run down assets and punish fraud. AS soon
as e failure affects one OF its members the as
ISOLATION puts its elaborate machinery 60 work.
The bankrupt's affairs are sifted carefully, the
entire neighborhOod Is questioned, his employees
are examined, esIpresgnen who transferred goods
are sought out, elevator men are made to tell
men are examined 20 any property Of the
bankrupt. In one case the association took a
hand IN the "cottOn. cotton" game and finally
found some cases OF goods. ali marks on which
had been censored out by the use Of marking
tnk This ink was ecraped or OF one OF the
fVo,ces and the name Of the bankrupt revealed
A little soap and water washed out other con-
nealing marks and disclosed the same name
seep in the soft pine. AS result this bank
Y-pt may have fittings 70 explain in an fnVestt-
CATION having for its object his punishment