Martinsburg W Va evening journal. [volume] (Martinsburg, W. Va.) 1913-1920, 1916-04-03

fcr a number of years. until the face
amount of these bonds outstanding in
West Virginia totalled about one and
one-halt million dollars. \ law was
passed. giving the Insurance Commits.
sioner supervision over such com.
panies. In due course, an examination
of this company was made at Atlanta
by a representative OF this depart
ment 1t was discovered that the com.
pany. instead of being financially
sound, as claimed, was in a most dan.
Eerous condition. The Insurance Com
missioner feeling that he owed his
first duty to citizens of West Virginia.
agreed with the company not to pub
fish his report il they would take care
of their West Virginia bondholders.
The proposition was accepted and
finally these bond contracts were trans.
ierred to sound COMPANY Many OF
the bond holders were displeased; they
had faith in the Atlanta company, ana
were outspoken in their criticism OF
the Insurance Commissioner to all OF
which he could say nothing because
of his agreement And the facts would
not be known today. had not this com,
pany been placed in the hands of a
receiver about one year after this ac.
tion WIS taken its thousands of bond
/ holders outside OF West Virginia
losing practically all they had paid in.
Needless to add, this criticism has
turned to praise.
Another Example.
Many of you remember the STANDARD
Home Company case. II, as we'll as
several similar companies, was selling
so called home purchasing contracts
in West Virginia. The purchaser paid
5000 per month and was eligible ia
loan of $1,000 after six months, to be
used in building a home A tremend.
GUS business was being done in West
Virginia among a class of citizens
least able TO lose money. The In.
surance Commissioner suspected fraud
and although his authority was doubt.
full, finally secured an unwilling con.
sent to an examination at Birmingham,
Ala. which confirmed his suspicious
of fraud. AS the company refused to
stop doing business in the State, IT..
representatives were arrested, and
the case finally came to the State
Supreme Court, which found It neces.
sary to hold that the Insurance Com
missioner had no Jurisdiction How.
ever, in the meantime, the company
had been given such publicity that it
could no longer continue its fraudulent
business in West Virginia with any
degree of success. A year or two later,
its officers were sent to prison by the
Federal authorities, and the company
placed in a receivers hands
And so I could continue to give you
example after example of the services
rendered by this department in the
face of threats and criticism, and in.
deed beyond its necessary scope
Whether or not such things are under.
taken depends TO a large extent on the
man at the head for these are at best
discretionary acts.
"BIue Sky" Department.
This department, charged with tho
administration of the Blue Sky Law
has for its object the prevention OF
fraud as applied TO promotions. II
aims to lock the barn doors before the
4 horse is stolen. rather than after
wards. by requiring the plans and
financial condition of all companies
with a few exceptions) to be sub.
mitted to the Auditor, and his per.
mission received before stock may be
sold.
Until a few years ago, statesmen OF
fake stocks considered this State one
of their richest fields.
Finally, about five years ago, the
Auditor began agi-ating the question
Of protection and, although such
action was entirely beyond the scope
Of his official duties. exposed many Of
( the most vicious frauds
AS result OF awakened public
opinion, the Legislature of 1913 pass
ed a Blue sky" Law. The admin
stration of the law was placed in the
hands of the Auditor. who has handled
it with practically no expense to the
State. During the first year, two hun
dred applications were passed upon
involving stock and securities in the
amount of tweEty-seven million dollars
and license was refused in many cases
"Fake Promotions"
Fake mining companies and land
companies with their estate seyera
feet under water we're forced to give
this State wide berth after the pass
age of this law II was rigidly en-
forced, and in 1874 Smith II. Bracy
foreign promoter who had been
arrested for an alleged violation in
connection with the sale of gold min
ing stock, carried his case to the
United States District Court, which
decided that the Law was unconstitu
tional. The Auditor gave notice of his
intention to appeal, but as the Legis
lature convened before the end Of the
time to take such appeal, and in order
that the State might be saved the
great expense Of au appeal to the
United States Supreme Court, he pre-
pared new la@ which omitted the
objectional matter pointed out by the
court. but which was designed to &C