The daily telegram. [volume] (Clarksburg, W. Va.) 1901-1926, 1914-08-25
Who Seeks to Enforce lis Pro-
visions in the Case of a
Mining Company.

4 CAANLESTON, aug. z0.--Deteuu1uS
both the necessity for such q statute
and his administration OF the measure.
State Auditor John S! Darst through
his attorneys, has filed in the United
\ States district court his answer to.
the petition of the Howfe Mining Com
pany, an Arizona concern, which seeks
through the federal courts to have the
West Virginia Blue Sky law declared
Unconstitutional
Smith n. Bracey, president OF the
Arizona Gold Mining Company, arrest
ed a few weeks ago in Ohio county for
attempting to dispose OF the stock OF
the concern without securing a license
lunderthe Slemaker act, secured a tenn.
Iporary Injunction before Federal
Judge A. g. Dayton. restraining Audi
tor Darst, Attorney General A. A.
Lilly and Prosecuting Attorney r. N.
Addleman, OF Wheeling, from prosecut-
ling him under the provisions of the
Blue Sky statute.
Bracey charged that the Blue Sky
law, with which he had made no effort
to comply, was in contravention OF
the state and federal constitutions,
averring thatit was violation Of the
Interstate commerce clause of the
Eorganic law Of the nation, that 1t de-
prived him Of his property without
due process Of law and that 1t vested
In the state auditor judicial as well as
executive powers in violation of the
state constitution.
In his answer to the bill Of COM
plant fled bysBracey, Auditor Darst
declares that III for any cause the
law Is rendered imperative it would
tbe a great calamity to our state" He
recites that while the Blue Sky law
does not guarantee the investment, it
llgives the investor an opportunity to-
know the essential facts and protects
him from the gross Misrepresentation
lof conscienceless promoters and con-
tends that the administration of the
law has saved the investors Of West
Virginia a great amount of money and
thus conserved 1t to the channels OF
legitimate Investment and develop
ment.
The state auditor recites that Blue
Sky legislation is popular in West
Virginia and recalls that not less than
eight members had such a bill to offer
lat the last session Of the legislature
and that the Legislation has been In
dorsed by the national convention Of
insurance commissioner the national
asso citation of conservation commits
missioners, numerous bankers assoc
iations and boards of trade.
In his effort to preserve the validity
Of the Blue Sky law, the auditor de-
clares that in the enforcement of the
law that he has endeavored to reduce
the labor and expense Of complying
with the law to minimum; to limit
the promotion expense to a reasonable
amount; to make the promoters profit
depend as far as possible upon the
success of the company, and to place
before the purchaser the most vital
information in regard to the PROPOSE
ton.
The auditor AYERS in his answer that
he has ruled that ten per cent of the
par value is the maximum allowance
for the sale Of stock under the en-
forcement Of the Blue Sky law and
that the Limitation Of commissions for
the sale OF capital stock has saved
thousands Of dollars to investors, not
only directly, but because such linz
ttation tends to establish the good
faith Of promotion and eliminates
the large number OF companies organ
lied principally for the benefit Of the
promoters.
He states further that he has at
tempted to prevent those holding pro-
motion stock in patent right" or
similar company from disposing Of
same under the guise of financing the
company; that he has required com
panies issuing bonds on the security
of a leasehold which may be forfeited
for number Of reasons to give the
purchaser notice OF the nature Of the
estate by which the bond issue Is SCI
cured; that he has required companies
to place on the stock subscription
blank the amount Of stock or cash ex-
pended for intangible assets, or assets
Of a speculative value, and required
the i company to recognize subscrip-
tons only when the approved sub
scription blank Is signed by the sub
scriber.
Since the Blue Sky law became
operative in West Virginia in 1913,
Auditor Darst says that 200 companies
have applied for investment company
license representing stock in the
amount OF $17 ,473 POI, and bonds in
the amount OF $9;075, 100. OF this
number twelve were refused license,
representing stock OF IS, 1853 1858, and
bonds OF $2,924,550. He says further
that a large number Of foreign com
: Ipanies did not make formal applica-
ton after ascertaining the require
ments, that large number of those
licensed we're required to alter their
plans in the interest of fairness to the
investor, and that before the Paw be-
came effective the citizens OF West
Virginia suffered heavy financial losses
by reasons OF promotion which would
have been prevented under the opera