The commonwealth. (Greenwood, Miss.) 1896-1923, 1908-01-10
;Dodge the Law
Public Have Evolved from the
&c Frauds, Wearing the Cloak
Business Enterprises.
WIN w. SIMS,
Chicago, Formerly Solicitor Of the De.
.rce and Labor, Washington.

nd Labor, Washington.
be making some show Of operating
It: II 1t Is an oil company or any
other Kind Of a i41a corporation, there
viii be some show Of activity tnde
this scheme, the victim has his share
Of stock, and tho mine. or the oil well,
or the plantation. or whatever II IA,
Is there. and, according TO the swind'
Ter, al. the stakeholder has to do IS
TO wait until the property Is 'drYel-
opcd." This tends to keep the vicllm
from prosecuting. for, of course, a
prosecution would destroy the value
Of the business, and 1t affords a de-
fcnge In court,
Another scheme allied to this was
one In which Il number OF clever
swindlcrs cleaned up a large amount
Of money, A man would adEeftbf
that he had ample capital to invest
In the securities Of corporations pro
vided d competent examiner. after
tnVIoubh investigation, makes a IaE'
orable report "rJH tho proposition
The victim Is led to choose rs tho az
aminer a confederate Of the man with
capital. The examiner VIII recelY"
$500 to $500 for making the exam
nation, according TO the size Of the
business whose securities are to be
marketed; then. after getting the
money, he VIII 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
nation between thor~, This scheme
and n or two othe <2ry closely nl
lied In principle were nGutiBhing untli
they fell into the hands Of the federal
authorities here In Chicago.
This latter scheme. II will be OBJ
served, Is more dangerous than the
selling of worthless stocks and bonds
TO the public, for the reason that 1t
can be proved that the swtndler was
not In the position to purchase these
IDS wen II II favorable report had
ep's"e a3Rade. In the case Of these cor
which exist In large mum
who are robbing the people
y,..sgb Ibuntry Of millions every year,
(AcKY NV difficult to secure conviction
W tleir promoters In a majority of
'Nehsea, Whom they are arrested and
brought into court, they are ready to
show that they were really carrying
Aon some Kind OF a business, and that
they have been simply unfortunate,
hat expectations had not been reaIia
d, and that a business failure Is not
crime. The great difficulty Is to
,rove criminal intent, .
In the past both Dur state and fed
al courts have so interpreted the
" against schemes to defrnud that
~ have been able TO suppress or
b these schemes, whatever form
Y took. Just what Ia to be the AT
tde of the courts towards TIE
gw& adldr who poses as Il promoter,
and whether they are to 50 interpret
the law that 1t can deal adequately
with this form OF fraud. Is at the
present time uncertain, ms the courts
differ widely upon the subject. Some
of our courts are now holding that
even II n promoter does issue a false
prospectus, and thereby induces PEG
pie TO invest In the securities Of a
corporation. that this does not consti-
tute u 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 vs. proof
has already been indicatedk1 In Eng
land. this difficulty was NV by a stat
ute cath and 2bth Vioi4e S6, $, 9a),
which is as follows;
whoever, being director, man.
ager, or public xrdilcer of any body
corporate or .MblIc company. shall
make. circulate or publish, or concur
In making, circulating. or publishing
any written statement or account
which ho 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 CON.
pany, or to enter into any security
for the benefit thereof, shall be guilty
of u misdemeanor. and being con
yicted thereof, shall be liable at the
discretion Of the court to any of tho
p~unishments which the court may
award, AS hereinbefore last men
toned"
Under this statute, the difficulty Is
met by making II a crime TO Issue a
false prospectus, Some Of courts
have held that the issuing of a false
prospectus Is q scheme IN defraud
within section $3.50 OF the United
States revised statutes, Other courts
however, hold to the contrary; but,
whether by judicial Interpretation or
by legislation, II is absolutely essen
tial that the issuing OF a false pros
pectus be made a crime before II Is
possible TO deal effectively with the
largest class of swindlers that now
prey upon the public,
While the United States govern
ment cannot directly prosecute
schemes to defraud, yet. II the mails
are used In the mrtherance Of the
scheme. the government can act. As
most Of these schemes contemplate
the use OF malls. It is possible for the
government 70 proceed against them
under sections $3.50 and $40 of the