The Carlisle independent., 1908-01-16
54O S1Dindlers Dodge tue Law
Schemes of Fleecing the Public Have Evolved from the Shell Game to Gigantic Frauds Wearing the Cloak
 of Legitimate Business Enterprises.
United States Dc Attorney Chicago Formerly Solicitor of the De-
 parment of Commerce and Labor Washington.
By EDWIN ". SIMS,

century, and millions of dollars thus obtained from the credulous.
 A swindler today is connected in some way with a 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 it is a mining corporation, it will actually have some place that it calls mine and it will be making some show of operating it; if it 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 it is, is there; and. according to the swind- Ter, 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, prosecution would destroy the value of the business, and it affords a de- fense in court.
 Another scheme allied to this was one in which a 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 flaw 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 $2,500 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 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, the two divide the fee for the exam ination between them. This scheme and one or two others very closely all lied in principle were flourishing until they fell into the hands of the federal authorities here in Chicago
 This latter scheme, it will be ob served, is more dangerous than the selling of worthless stocks and bonds to the public, fog the reason that it can be proved that the swindler was not in the position to purchase these bonds even if a favorable report had been made. In the case of these cor porations which exist in large num- bers and who are robbing the people of the country of millions every year, 1t 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 a business, and that they have been simply unfortunate, that expectations had not been realiz- ed. and that business failure is not a crime. The great difficulty is to prove criminal intent
 In the past both our state and fed eral 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 at titude of the courts towards the swindler who poses as a promoter, and whether they are to so interpret the law that it can deal adequately with this form of fraud, is at the present time uncertain, as the courts diffnp widely fhn cl,1ninCt of our courts are now holding that even if a promoter does issue a false prospectus, and thereby induces peo- pie to invest in the securities of a corporation, that this does not consti- ute scheme to defraud, and that it must appear beyond all reasonable doubt that the defendant intended to put the money thus obtained into his pocket, and not into the business.
 The difficulty of making this proof has already been indicated. In Eng land, this difficulty was met by stat ute (24th and 25th Vict., 96, s. 94), which is as follows:
 Whoever, being a director, man. ager, or public officer of any body corporate or public company, shall make, circulate or publish, or concur in making, circulating, or publishing any written statement or account which he shall know to be false in any material particular, with intent to deceive or defraud any member, shareholder or creditor of such body corporate or public company, or with intent to induce any person to become a shareholder or partner therein, or to entrust or advance any property to such body corporate or public com pany, or to enter into any security for the benefit thereof, shall be guilty of a misdemeanor. and being con-