Newark evening star and Newark advertiser. [volume] (Newark, N.J.) 1909-1916, 1911-02-27
Referee Adams Recommends
That Prisoners Be Compelled
to Turn Over $273,1lO.
THEY WERE PROMOTERS
OF LOCAL COMPANY
Accused of Never Having Paid
for the Stock They
Purchased.


proceeding will be that Charles e.
Ellis and Erwin r. Graves Jointly and
severally pay over to the trustee the
sum Of $27S,11o. being the amount as
sessed against them for unpaid shares
of stock, and that such payments as
may be made by either of them under
the order in the turnover proceedings
shall be credited against the amount of
this decree in this stock assessment
proceedings.
(Signed) EDWIN G. ADAMS,
Referee in Bankruptcy"
This is the summary of a lengthy
report made today by Referee Adams
to the Supreme Court in the turn
over" proceedings against the personal
property of Charles E. Ellis and Err
win r. Graves.
Ellis and Graves are now serving
three-year sentences at Atlanta, Ca
for illegal use of the mails. This was
subsequent to the adjudication of bank
ruptcy jof the Kornit Manufacturing
Company at Belleville. The concern,
Of which Ellis and Graves were the
promoters, Incorporated in 1904 with an
authorized stock of 100000. Ellis and
Graves were credited with $171,OO0
worth of stock they did not pay for.
Bankruptcy proceedings were instl-
tuted in 1909, and the matter has peen
hanging fire in the courts since tnat
time. hi OctobeA 1910, Ellis and Graves
were tried in the criminal branch OF the
Federal Court and convicted of fllegal
use of the mail.
The assessments of the two promoters
did not meet the many claims OF the
creditors and the turnover. proceed
ings, in which Referee Adams gave his
opinion on today, were brought oy
julius Henry Cohen, New York attor-
ney, who represents the trustee
Were CO-Partners.
In the opinion the referee laid stress
upon the fact that Ellis had declared
all persons buying shares in the Kornit
company would become "copartners"
and "coshareholdeI 81 with him.
He called attention to the fact that
ELLIS had said he had invested many
thousands of dollars in the company
and had advertised he shouldn't pc
surprised if these shares paid dividends
as high as 100 per cent. in the not Tar
distant future.
"Ellis and Graves" reads tie opinion,
s'had absolute control of the atfalrs OF
the bankrupt corporation and there
was no one to question any payments
which they made to themselves out OF
the corporation treasury.
Referee Adame in his report, says:
"The shares of the stock were adver-
tised in certain magazines puohsheo
by Ellis or by some of his corpora
tions. called The Magazine OF Mys-
teries' and Metropolitan and Rural
Homes as we'll as in other magazines
There were many assertions mace py
Ellis that are of the nature usually IN
dulged in by stock-swindling promo
terS.
"All shares were sold at par con-
tinues the referee. ELLIS and Graves
charged the corporation 81 for each
$40 treasury share sold, upon the 'nscal
agency theory. He also charged the
expenses of advertising, circularizing
and all other expenses connected with
the sales of stock, including pay
ment of $1,000 to Elliss Magazine of
Mysteries for the list of persons who
might be induced to invest their saw
ings in these shares"
The turn over'' and assessment pro-
ceedings were brought before Referee
Adams by Attorney Cohen, represent
ing the trustee, who filed two petitions
for relief.
Adds $4,000 for Costs.
The referees opinion reads: Il find
the amount of unpaid debts to be $273,-
110, to which must be added the sum
of $4,000 to cover all possible costs of
administration. The amount of these
costs can only be approximated. They
will be unusually large because of the
lengthy and expensive litigation made
necessary by the acts of these respond
entS
Against the liability of $499, 900, the
respondents are entitled to be credited
with the sum of $125,025. which 1 find
to be the full sum which in conscience
they are entitled to charge against the
corporation out of their alleged dis
bursements. This would leave the sum
of $373,975 for which they are liable
upon the stock received by them and
not paid for"