New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1911-08-20
'CHARGE REALTY SW|NDLE
Postoffice inspectors Arrest 3
Men of Gavigan & Co.
II PER CENT FOR INVESTORS
Dividends Paid from Sale Of
Stock, and Not Earnings,
Federal Officials Assert.

Stock, and Not Earnings,
Federal Officials Assert.
Postoflce inspectors made a raid on tho
Offices Of J. Q. Gavigan & Co. in the Mar
bridge Building. yesterday, and arrested
three men on charges Of using the mails
20 defraud Investors in the stock OF the
Manhattan Real Estate Company. The
! prisoners were arraigned before Peter Alex
ander. United States Commissioner, who
held James c. Gavigan and Irving J. Isbell
in $1,000 bail each. Bail for George Plane
/ was fixed at $3.50 In default Of 4 surety
the men were sent 10 the Tombs.
! The raid was the outcome Of investi-
/ cation started by W W Dickson. chief
/ postoffice inspector FOR the New York dis
/ trict. upon complaints received from IN
/ vestors outside the state. The specific COM
/ plant upon which the warrants were OBJ
/ tanned was made by Mrs. Jessie NJ. cap
/ well. Of No. PIP Adams street Scranton.
/ Penn. 10 whom Isbel and the other defend
ants ara alleged 10 have represented by
/ mail that the Manhattan Real Estate COM
/ pany was in a strong financial position ana
earned sufficient money 20 pay 4 dividend
| Of II per cent on its stock
After an investigation made by Postofi1ce
| inspectors Barber and Kincaid the postal
authorities charged that the representations
were false, because the company was not
earning running expenses and that. al
/ though ii paid dividends the amounts dis
/ tributed among the stockholders were the
proceeds from the sale OF stock.
Concerns Books Disappear.
( The books or the enterprise showing
/ transactions prior 10 August, 1910. have dis
| appeared, 'but the records seized by the
postofnce inspectors yesterday, Il was
charged. showed that the total legitimate
4 income Of the Manhattan Real Estate Com
/ pany from August 1 10 December 1, 1910,
was 5000, derived from payments made
upon real estate sold by the company.
! During that time $1,000 was distributed
among the stockholders as dividends and
the running expenses Of the company
amounted 10 $4,000, the inspectors assert
To meet this outlay, the inspectors say,
the officers Of the company used $4,000 OBJ
tanned through the sale OF stock
The principal benefciaries in the sale Of
stock Of the Manhattan Real Estate Com
pany appear 10 have been the members Of
J. c. Gavigan & Co., the federal investga-
tors say. Their agreement uas 20 push the
sale Of the stock. which was turned over
10 them az 3 a share, one-half Of It's par
value. while they in turn sold II at from
so 10 SO share From August 20 De-
( Gem Der, 1910, the inspectors charge, Gavigsn
g. CO. sold S371,5e0 IN stock, more than half
OF which amount represented clear profit
10 them.
The postoffce inspectors say the Man
haitian Real Estate Company acquired some
property subject 70 heavy mortgages. But
the inspectors assert that the company
made no efforts whatever 70 improve the
land OF 70 sell the lots. The proposition
Of unloading stock upon credulous inves-
tors appeared so much easier and so vastly
more profitable, they said. that the pro-
moters concentrated all their energies on
selling stock
The history of the company. as told by
Inspector Barber, shows the earmarks Of
the great get-rich-duick schemes originated
by such men as Peanuts" Robinson, who
is now in the Saltwater Penitentiary and
Cardenio Tlavius King who is serving
term in a Massachusetts, prison. Isbell
and Gavigan we're. Inspector Barber says.
connected with the enterprises ~ these
men.
Big Imitation Charged.
The largest piece Of real estate owned
by the company is Linden Beach, pur-
chased for $4,000 and mortgaged for $500
The company valued It at $1,000. although
since the purchase no improvement visible
10 the eye had been made on the lots. The
company has smaller parcels at Linden
hurst Square, North Babylon Park. Ridg-
way Park. Higbie Park and Ridgway. The
actual value Of all the holdings OF the
company. It is charged. does not largely
exceed the se1, 900 held as mortgage on the
properties.
The Manhattan Real Estate Company
vas incorporated in 1907 IN New Jersey.
with a capital stock Of S50r0 The total
issue was used 10 buy I'D the real estate
business Of Heron Bayley, who became
president Of the corporation. The property
conveyed by Bayley 10 the corporation con-
sisted Of about ten acres at Ridgway and
Ridgway Park, y. J. In June 1917, the
Stockholders authorized the purchase OF
property at Lindcnhurst Square and In
cldentally declared a dividend OF per cent.
A quarter Of which was paid in February.
1905 BY December. 1873. the company had
purchased all the property II holds now,
and meanwhile more dividends were de-
cla-ed ut each meeting Of the stock
holders
To get q standing in the state courts.
the Manhattan Real Estate Company Of
New York was formed. in 1910. and from
that time 1t held the title TO all the prop
ertv of the Manhattan Real Estate Com
panv OF New Jersey. This occasion seemed
TO call for an outward sign OF prosperity,
and the capital stock OF the original COM
pany was increased 10 $4,000 and an addi-
tionaI dividend was voted on the whole
issue.
Although named as defendants IN the
complaint against the arrested men. Her
ron Bayley, Mary l.. Dugan and two others
were not arrested yesterday. lsbell was
formerly q partner Of J. g. Gavigan & Co.
and Plane IS the secretary OF the concern.