The Republican journal., 1908-03-05
THE FRAUD ORDER.
Why it was Issued Against the Nutriola
Company.


ssNo man e'er felt the halter draw
With good opinion of the law"
When, for the protection of the public'
the Post Office Department issued fraud
order against the NutriOla Company of
Chicago, a pamphlet was issued in the
name of that company denouncing the post
| al officials and every one concerned in the
| investigation and an appeal was made to
| the public for sympathy. 1t wa sought to
| make it appear that the action taken
! against the Nutriola Company was brought
| about by blackmaiers and personal enemies,
and that the post office department was
! "wrecking the business, the reputation, the
| liberty and the homes of American citi-
zens," etc. Now what is the fraud order
law? The statutes on the subject provide
| for the issuance by the Postmaster General
| 'upon evidence satisfactory to him that
any person or company is engaged in con-
ducting any lottery, gift enterprise, or
| scheme for the distribution of money or of
any real or personal property by lot, chance,
or drawing of any kind, or that any person
is conducting any other scheme or device
| for obtaining money or property of any
kind through the mails by means of false or
| fraudulent pretenses, representations or
| promises" of what are now commonly
| known as fraud orders, and the effect OF
| which is to prevent the further delivery OF
mail and the payment of money orders to
| the person or concern against when the
order is directed, and to cause such mall or
orders to be returned to the senders.
| The Department relies principally for Its
| evidence of the unlawful nature of any
scheme upon the Investigations of its in
spectors. These inspectors are assigned IN
! corps to different parts of the country. 1t
| is their duty to investigate all cases in their
districts in which it is alleged that the mails
are being used in violation of these laws
and to report what facts they find to the
| Department.
If the facts found by the inspector estab-
| lish prima facie case of fraud, the person
| or concern involved is notified of the pen
dency and nature of the charges and given
| opportunity to appear before the Assistant
| ATTORNEY General for the Department and
make such answer thereto as it is desired
| to have the Department consider in diSpos-
ing of the matter. This it will be seen dis
poses of the pretence that there has been a
| snap Judgment OF condemnation without a
hearing. If upon conclusion of the hearing,
the Assistant Attorney General is OF the
opinion that fraud order should issue, he
reports the case to the Postmaster General,
by whom final action is taken III the matter,
based upon the Investigations of the in
spector and The facts adduced at the hearing
| before the Assistant Attorney General.
Was the issuing of fraud order against
the Nutrlola Company justihable? In a
memorandum by the Assistant Attorney
General for the Post Office Department on
the postal "fraud order" law he gives this
statement of the
NuTRIoLA CASE.
The fraud order against this concern was
issued in November, 1905, after an lnVeStl-
CATION of considerable length had been
made by inspectors OF the Department, and
after hearing before the Assistant Attorney
General The evidence in this case showed
that this Nutriola Company was a cOrpor-
alton formed by one f. f. Hanson at Bel
fast, Me-, about 1894, for the purpose OF
carrying on patent medicine business !,
that the business was conducted ~ small
way and without success Tor several years;
that about 1908 or 1904 Hanson moved the
business to Chicago, and shortly thereafter
commenced advertising extensively by
mail for money on the sale OF stock, the
capital stock of the company having been
increased from S150,00O TO S50O,0C0. 10
influence the public to send money to him
for these shares, Hanson held forth allur
ing and glittering promises of enormous
returns, such as the idea of 1920 for every
one dollar invested. AS a basis for such
promises, he represented the medicines OF
the company, from the sale OF which these
returns were to be earned, were something
new and unknown to the medical world;
that they possessed wonderful curative
potency, and were as much more powerful
than the present-known medicines of the
| medical fraternity ''as the electric light is
| in advance of the tallow candle" and 'aS
| Niagara is greater than the rivulet." He
| further represented that to discover these
medicines had cost $4,000 in cash. The
official inquiries OF the inspectors indicated
| that neither $4,000 nor any sum approx
mating it had been expended in discover
| ing the remedies. The Department of Ag
ricuture, after analysis of the remedies,
reported that there was nothing new or
wonderful in the drugs composing them,
| but that they were simply ordinary prep
aratiouS. Hanson made no effort to prove
| to the Department that the $1,000 repre-
| Sentati0n was true.
| At the same timex that these unWarranted
| promises as to fabulous returns were held
| forth and built upon false premises, the
| true financial cOEdition of the company
was concealed from the investor; the cir
cumstanceS surrounding the unsuccessful
ten years life of the business; the fact
| that profit had never been earned in that
| time; and the fact that the business was
| living on the proceeds from the sale of
stocks and not on the receipts from the
| sales of medicines, were not disclosed nor
| was the fact that the capital which had
| already been invested in the business had
| per cent permitted to be known While
| the business was Ostensibly held forth as
| medical concern. in fact there was no de-
mand for its preparations, and the only
receipts were the money subscribed by the
public for stock. The business existed
upon the money subscribed by the public
| At the time of the investigation, Hanson
admitted to the inspectors that he had
received $114,0O0 from the public and had
| spent some $65,O0O of that amount adver-
| tising for further sales of the stock. No
account was given of the funds expended
from this source for other purposes. This
| statement disclosed that the capital of the
company had been impaired over $4,000,
resulting from the use of proceeds from
stock sales in the creation of further de-
mand for stock, and not in the legitimate
prosecution of the business, namely, the
! sale of the medical preparations.
| 1t was further represented that Hanson
| possessed unusual and exceptional business
ability and had made wonderful success
of previous patent medicine business.