The sun., 1919-05-26
Prosecution of Crooked Stock
Brokers Is Expected to
Be Vigorous.
BR0GAN OUTLINED TASK
He Pointed Out Penal Law Sec
tons That Would Eluci-
date Procedure.

-~~--
public has given renewed energy to the
work of the Commercial Frauds Bureau.
Mr.. Swami has promised that he will
no after these dishonest brokers and pro-
moters with all the powers at his COM
uAnd. and to that end has appointed
two Of his ablest assistants to direct the
bureau. 80 .t
This week undoubtedly WIN see moro
work done in the bureau than for months
past Judge Swami has asked every one
who has n complaint against dishonest
broker or promoter to come to him.
and he will SEQ that the complaint Is in
~sstigated ito tho bitter end"
1t IL probable that now after more
than q year the method OF procedure
against bucket shops and lying promo
tiers which was outlined by Edward 8.
Brogan soon after he took charge Of
the ONCE will be put into effect In
that plan Brogan called attention to con-
ditions he had found and Indicated tho
portions OF the criminal law which he
Thought would be most applicable to
them, most of the sections having never
been used since they were placed on the
statute books in 1915.
Memorandum OF Conditions.
It took Brogan but short time TO find
the following conditions. which he said
he referred to Swami in a memorandum
'.The organisation and promotion Of
hundreds OF competitions OF every de-
scrtption. organized usually under the
laws Of Delaware and selling stock in
New York. having practically no real
SHANGHAI standing. in many cases with
out any assets excepting the printing
press to turn out worthless shares Of
stock. and reaping thousands of dollars
from foolish investors by false state
ments and prospectuses about the stock
and the corporation. tr...-..
''The unwarranted and unauthorized
use Of the names Of prominent business,
financial and professional men on the
boards of directors of fake corporations.
The publication Of misleading pros
pectuses and the insertion OF false adver-
tisements by promoters. underwriters
and brokers, containing false material
representations regarding the stock and
the financial condition Of the corpora
lions.
Tho manipulation of prices Of securi-
ties BY pretended purchases ana sales
Of securities. followed very often by
Bankruptcy and friendly receiverships
which cover up the criminal methods OF
the promoters.
Continuing business after insolvency
by brokerage firms. Twenty brokerage
houses are transacting business to-day
although insolvent and robbing Peter
to pay Paul
THE bucketing orders BY brokerage
houses. covering up their methods by
q system Of obtaining comparisons .frun
confederate brokers or employees OF
other houses who receive $50 to $500 q
week outside OF their salary to supply
these comparisons
"Hypothecation OF customers securi.
ties without their consent
continual violation of section s57
which states that brokers shall deliver
complete memorandum OF purchase O,
sale Of stock even after written demand
BY customer by refusing 70 deliver
any memorandum within twenty -foul
hours after such demand, or by the de.
livery Of an incomplete or false mem
orandun. leaving out the proper do
scription OF the securities. the full nam,
. of the Arm from whom bought ard t.
whom sold. the date and the hours be
tween which the transaction took place
making II impossible for the. customer
( TO verify the transaction and possibl,
for the broker to cover up his bucket
ing transaction.
Larceny by brokers and salesme,
from local and especially out OF tow
customers and clients, by accepting thei
money for the purchase of stock an,
refusing to execute the orders, .delive
the securities or return the moacy I,
customers. until. in many cases, the,
are informed that the matter Is yoini
TO be brought to the District Attorney
when they are always too glad to settl
and deliver the stock to avoid invest
cation"
Method OF Prosecution.
The way in which to prosecute thes
violations was outlined by BroEah in an
other communication to Swami, writer
about a month and a half a;rcr he en-
tered the bureau. II was by the use o
the statutes to which he calls attention
that he secured his first indictments Il
the first two months Of his activitie.
Indictments which he says no receives
no help In pushing and many of whic
are still hanging fro. In that lette
he wrote:
1.-THE State of Illinois recently. startc
q crusade against these takers unde
the blue sky law which went into ei
feet January l. 1918. with the rcsul
that a number OF brokerage offices wer
closed. leaving signs on their doors. Re
moved to our New York ONCE ar
Informed that conditions are worse tina
ever in the history Of Wall Street. Con
fdence men. wire tappers. some VT
police records, are now promoting frau
duient oil schemes and other fake ven
lures and are reaping a harvest.
"If the evidence warrants It I wi
1 proceed under sections 800 to 895, Art
cie SO. Of the Penal Law, relating {
bucket shops. and under Sections s51 {
s57 OF Article 80 Of the Penal Law
relating to fraudulent stock transaction
These last sections were passed In 191
( by the Legislature as q result OF I'll
commission appointed by Gov. Hughe
in 1903. and later by the Democratic ad
/ ministration under Gov, 6ulzer an
Gov. Glynn.
I Section s51 relates to reporting {
7 publishing fictitious transactions In, o,
rurities.
II Section s52 makes It q felony I
make, publish or Issue any false statemeT
or advertisement as TO the value or as I
the facts affecting the valu9S,of stock
IL bonds and other evidences of debt OF
corporation or association, or" as to 1,
financial condition. Any person WI
M knows. OF has reasonable grounds to b,
ueve. that any material representation
prediction or promise IN such statemei
or advertisement Is false, Is guilty Of
RI kelony punishable by q fne of $500
and Imprisonment for three years.
"Section sbS makes II q felony
III manipulate the prices OF securities
pretended purchases or sales of secur
III ties
vi .9eetion s54 relates to the trading f.,