The sun. [volume] (New York [N.Y.]) 1833-1916, 1914-09-07
COURT SAYS TRADING
COMPANY CAN'T QUIT
Great Northern, Which Prom
Used rs Per Cent, Charged
With Gross Fraud.
81. 900 PUT IN BY 4 WOMAN
Referee Reports Concern Should
Re Held Together to Per-
init Suits.

An order signed by Supreme Court
Justice Donnclly denying the application
of the directors Of tho Great Northern
Trading Company for permission to dis
solve because It is insolvent discloses =
novel scheme OF high finance which has
resulted In losses to persons who bought
bonds Of the company on representations
that 1t mad made q cash profit of &c per
cont. on ita capital The company never
made profit
Justice Donuelly acted on report OF
Percival H. Gregory. who took testimony
az referee in the proceeding and who sug-
gcsted that because Of the manner in
which the affairs Of the company had been
conducted its corporate existence should
bc continued To- permit the company
to sue its officers and directors for
the msladmlnistration of its affairs
Tho referee called the courts attention to
the fact that three of the persons most
actively connected with the company were
| attorneys
J Tho report shows that the hea, lest
| loser in tho concern Is Mrs Fannie
! Bloxom Of Westbury, l.. l.. who invested
| $1,000 in bonds II was chiefly through
tho opposition OF Mrs. Bloxoms attorneys
that the court dismissed the dissolution
application OF four directors. Albert
Halsey, William J. Brook, Dudley 8.
| O'Neal and Frederick Il. Knowlton.
ITslsey. who Is n lawyer but who for
nineteen years was employed az an eS-
aminer by the Tito Guarantee and Trust
Company. promoted the company in 1908
Ii was Incorporated 20 do general real
estate business. manage estates, make
loans. conduct n general stock brokerage
business and TO do manufacturing and
mercantile business. The directors
adopted a resolution giving Halsey alb
solute power over the company's funds
authorizing him to Invest them without
notice to thc company and to deal In
securities, grain and cotton. either out.
right or on margin.
Referee Gregory reported that the only
business done by the company was specu
lating on margin IN securities. cotton ant
provisions The company took In $40 .00C
cash nv tho sple Of bonds and with each
bond gave away an equal amount of pre-
ferred and double the amount Of common
stock Thu referee saws that Hllsey de
posted the money IN his own name anC
conducted series OF speculative trans
actions for his own account while specu
lating for the company.
= The only evidence as to which trans
actions were for the company and whicl
for Halsey individually was memo
rantlum written by Halsey with a lea,
pencil on loose pieces OF paper. TIL
losses and expenses exceeded the proflt
every year but in spite OF It the compan,
, paid dividends at least every three month
up 10 July |. 1918. and sometime
monthly Halsey claimed to have pai
out $2O,525 and TO have received onl
5 sli,372 He made no claim against tn
l company for the balance.
= The referee found that the only remain
ing assets Of the company are $1,000 cas-
and 100 shares Of New York Air Brak
stock bought on margin, tho actual valu
= Of which Is uncertain.
THAT the enterprise should have end"
: I'm insolvency is not rems rkahle." sal
y the referee The bonds were prepare
70 and offered for sale upon representation
Of the most grossly falls" and frauduler
e. character. The shares ~ preferred an
= common stock were not invariably give
= 10 the purchasers OF the bonds Som'
= times they wer given 10 intermediate
3 or in the graphic phrase Of one wtnes
o 10 the person who got the other perso
c in In this way one Of the witnesst
II who Invested only 500 in bonds owne
l. sl0.0 900 In stock
The testimony showed that Charl,
= Lewis, n lawyer. also employed by Il
IS Title Guarantee and Trust Company, WI
II helped Halsey dispose Of bonds got IL.
a shares Of the stock that went with Mr.
e Boxom's 81 900 IN bonds, while she g
II only 93s shares.
e Counsel for Mrs. Bloxom charged b
$ fore the referee that Halsey fraudulent
y concealed the true financial condition
'e the company, and that the alleged loss
charged to the company in Halseys spec
"a latlon In stocks were his own IT
lie attorneys also commended that all q
N dividend payments were Illegal becau
$. they we're made out OF capital and II
lie out of profits and that tho directo
Is should be held responsible TO the cor
go pany for the improper dividends
n The court held that separate 81
M must be brought against the directo
u to determine their liability for pay!
Illegal dividends,