The Republican. [volume] (Mountain Home, Idaho) 1903-1909, 1908-02-27
How S,uindlers Dodge the LaW
Schemes of Fleeing the Public Have Evolved from the
Shell Game to Gigantic Frauds Wearing the Cloak
of Legitimate Business Enterprises.
United States District Attorney Chicago Formerly Solicitor of the De-
parment Of Commerce and Labor Washington.
By EDWIN w. SIMS,

would actually make a pretense 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 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, 1t will actually have some
| place that it calls mine and 1t will
| be making some show of operating
it; II 1t 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 stakeholder 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 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 a 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 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 al
lied in principle were flourishing until
they fell into the hands of the federal
authorities here in 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 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,
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 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
differ widely upon the subject Some |
OF our courts are now holding that |
even II promoter does issue a false |
and thereby induces peo-
pie to invest in the securities of a |
corporation, that this does not consti. |
tute 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
and, this difficulty was met by stat
ute Gath and 25th Wet, SO. 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
n making, circulating, or publishing
my written statement or account
which he shall know to be false In
my material particular, with intent
o deceive or defraud any member,
shareholder or creditor of such body
corporate or public company, or with
intent to induce any person to become
shareholder or partner therein, or
o entrust or advance any property to
uch body corporate or public com.
,any, or to enter into any security
or the benefit thereof, shall be guilty
# misdemeanor, and being con.
'icted thereof, shall be liable at the
discretion Of the court to any of the
which the court may
ward, as hereinbefore last men.
ioned."
Under This statuta tho diAsoul., l. |