The Greeley tribune., 1908-03-05
How S,uindlers Dodge the Eau
Schemes of Fleeing the Public Have Evolved from the
Shell Game to Gigantic Frauds, Wearing the Cloak
of l. legitimate Business Enterprises
United States District Attorney Chicago Formerly Solicitor Of tie De-
uartment of Commerce and Labor, Washington.
By EDWIN w. SIMS,

/ meet this difficulty. The Swiud.f
would actually make a pretense o
CARRYING on real business. and t0e'
simply wear out his victim by yariuI
conditions and annoyances. The
scheme In its present form is a5,4'e
advance over all those preyioJsl
used a swindler today is come
in some way with a corporate o
some kind, and whatever part HI may
take, his profits are derived ultinll'h hl
from people who purchase the s. tu-.
ties of these corporations. In rit
to avoid danger. the corporation Hi.
have something, If it is nlNl0-
| corporation, il will actually have s1w.
| place that it calls n mine and Il sill.
! be making some show of operagn-
! 1t: il ii is an oil company OF ar'
! other kind of a fake corporation. there
| win be some show of activity. lul"'
/ this scheme the victim has his sha-t
| of stock. and the mine. or the oil we'll
or the plantation, or whatever 1 IS
is there: and. according TO the svinj
Ter. all the stoCkholder has to do is
TO wait until the property Is ''deye'
oped." This tends TO keep the victim
from prosecuting. for, of cours5 a
prosecution would destroy the value
of the business, and it affords de
fense in court
Another scheme allied to this was
one in which a number OF cleye'
swindlers cleaned up a large amoaul
Df A u.nn1I o. -
that he had ample capital to invest
in the securities of corporations pro
vided competent examiner. after
thorough investigation. makes a fav.
orable report upon the proposition
The victim is led TO choose as the eN
aminer confederate of the man with
capital The examiner will receive
$500 to s2.500 for making the exam,
ination, according TO the size of the
business whose securities are to be
marketed; then, after getting the
money. he will make the eNaminati0u
and return an unfayorable re
port, which releases the first swiud.
Ter of his obligation TO take the bonds
under the contract. Then, of cour sc
the two divide the fee for the exam.
ination between them This scheme
and one or two others very closek al
lied in principle were fiourishing until
they fell into the hands of the federal
authorities here in Chicago.
This latter scheme. it will be, oh
served. is more dangerous, than, the
selling of worthless stocks and hdtds
to the public. for the reason ttH u
can be proved that the swind'4r was
not in the position to purchase tliese
bonds even If a 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 a majority of
cases. When they are arrested and
brought into court. they are ready to
show that they were really CARRYING
on some kind OF business, and that
they have been simply mfortuna ate.
thai expectations had not been realiz.
ed, and that business failure is not
crime, The great difficulty is to
prove criminal intent.
In the past both our state and fed
erai courts have so interpreted the
law against schemes to defraud that
they have been able to suppress or
curb these schemes. whatever form
they took. Just what is to be the st-
utude of the courts towards the
swindler who poses as promoter
and whether they are to SO internrat
the law that it can deal adequa taIy
win this form of fraud. Is at the
present time uncertain, as the courts
oiier widely upon the subject. some
vi our courts are now holding that
even II a promoter does issue a f,Ise
prospectus, and thereby induces nao.
PIE To invest in the securities ns .
corporation. that this does not consf,.
tu'e a scheme to defraud. and thai 4,
| must appear beyond all reasorah1a
doubt that the defendant jntendod -
pu1 tne money thus obtained into his
pocket' and not into the businesg
me di'hculty of making this nr,,,
mas ALREADY been indicated. In F,,p
land, this difficulty was met bv
ule t2ith and 25th Wet. c SO ,II
which is as follows: ~
I w hoeyer, being a directnr
ager' or public officer of apv nIa.
corporate or public company sTai,
make circulate or publish or cr,cnr
IN making. circulating, or pub1f,Fi ~ ~
any written statement or ancarn,
which he shall know to be forss e. q,
any material particular. with io,.n.
10 deceive or defraud any urr,r =.
ShafehoideF or creditor of sucB -,
eorpofate or public company. Or y.iti,
intent TO induce any person 10 - w
shareholder o. partner therein ~ =,
10 ehtrnst or advance any pronnr,,. ~ ~
such body corporate or pubIIc ~
pahy; or to enter into any socnst,, ~
ior the benefit thereof shall ba o'Ii.y .',,,.'y
hisaemeanor and being -
Victed thereof, sh# Ne IiabIs Ioh
IN.ata