The Marion daily mirror. (Marion, Ohio) 1892-1912, 1907-11-21
HoD St0irdlers Dodge the LalU
Schemes of Fleeing the Public Have Evolved from the
Shell Game to Gigantic Frauds Wearing the Cloak
Of Legitimate Business Enterprises
q By EDWIN w. SIMS,
United States District Attorney Chicago Formerly Solicitor Of the De-
N1NtHv partrnent Of Commerce and Labor Washington.

meet THIS d1mculty. Inc SWlnuier
would actually make pretens, OF
carrying on a real business. and then
simply wear out his victim by various
conditions and annoyances. The
scheme in its present form is clever
advance over all those previously
used. A swindler to-day is connected
in some way with corporation OF
some kind, and, whatever part he may
take. his profits are derived ultimately
from people who purchase the securi.
ties of these corporations In order
to avoid danger, the corporation will
have something. If 1t is mining
corporation, 1t will actually have some
place that II calls mine and II will
be making some show of operating
It; II II Is an oil company or any
other kind of fake corporation, there
will be some show of activity. Under
this scheme. the victim has his share
of stock, and the mine, or the oil well,
or the plantation, or whatever 1t is,
is there and, according to the swind-
ier, all the stockholder has to do is
to wait until the property Is "devel-
oped.' This tends to keep the victim
from prosecuting, for. of course. a
prosecution would destroy the value
of the business, and 1t affords a de.
tense In court.
Another scheme allied to this was
one in which number of clever
swindlers cleaned up a large amount
of money. A man would advertise
that he had ample capital to invest
in the securities of corporations pro.
vided competent examiner, after
thorough investigation. makes fav-
orable report upon the proposition.
The victim is led to choose as the ex-
aminer confederate Of the man with
capital. The examiner will receive
$500 to $4,000 for making the exam.
ination, according to the size OF the
business whose securities are ito be
marketed; then. after getting the
money, he will make the examination
and return an unfavorable re.
port, which releases the first swind-
Ter of his obligation to take the bonds
under the contract. Then, of course,
ination between them. This scheme
and one or two others very closely al
lied in principle we're fiourishing until
they fell into the hands of the federal
authorities here in n>Chicago.
This latter scheme, it will be OBJ.
served, Is more dangerous than the
selling OF worthless stocks and bonds
to the public. for the reason that II
can be proved that the swindler was
not in the position to purchase these
bonds even II favorable report had
been made. In the case Of these cor.
porations which exist in large mum
bers and who are robbing the people
of the country of millions every year
it is very difficult to secure conviction
of their promoters in majority OF
cases. When they are arrested and
brought into court, they are ready to
on some kind of business. and that
they have been simply unfortunate
| that expectations had not been realiz
! ed, and that a business failure Is moi
| a crime. The great difficulty Is tC
| prove criminal intent.
In the past both our state and fed
eral courts have SO interpreted the
law against schemes to defraud tha
they have been able to suppress Of
curb these schemes, whatever form
they took. Just what Is to be the at
| titude of the courts towards tho
swindler who poses. as promoter
and whether they are to so interpre
the law that 1t can deal adequatel,
with this form of fraud, Is at tn,
present time uncertain, as the court!
differ widely upon the subject. Some
OF our courts are now holding tha
even II a promoter does issue fals'
prospectus, and thereby induces peo
pie to invest in the securities OF |
corporation, that this does not corstl
tute scheme to defraud, and that I
must appear beyond all reasonable
doubt that the defendant intended t,
put the money thus obtained into hi
pocket and not into the business.
The difficulty of making this proc
has, already been indicated. In Eng
land, this difficulty was met by stat
ute Gath and 25th Wet, C 96, s. 94)
which Is as follows:
Whoever, being director, man
ager. or public officer Of any bod,
corporate or public company, shal
make, circulate or publish. or concu
in making. circulating. or publishing
any written statemot or accoun
which he shall know to be false Il
any material particular. with inten
to deceive or defraud any member
shareholder or creditor Of such bod
corporate or public company. or wit
intent to induce any person to becom
q shareholder or partner therein. o
to entrust or advance any property I
such body corporate or public con
pany, or to enter Into any securit
for the benefit thereof, shall be guilt
of misdemeanor. and being cor
victed thereof. shall be liable at tn
discretion of the court to any OF tn
punishments which the court ma
award, as hereinbefore last mer
toned"
Under this statute. the difficulty
met by making 1t crime to issue