New-York tribune., 1919-05-28
District Attorney Asserts
Courts Ruling Against
Seizure of Books Kills
Probe by Grand Jury
Can't Obtain Convictions
Legitimate Brokers Look
to Postoffice Men Who
Send One Lot to Prison

Hope that the grand jury investiga-
tlon into oil stock frauds, announced to
begin next week, would help put an
end to the wholesale swindling of the
public abated yesterday when District
Attorney Swami declared in substance
that his office is practically powerless
to obtain convictions.
The reasons assigned for this are
the rulings of the United States Court
of Appeals in the case of Jared Flagg,
by which the seizure of books en- which
to base conviction was denounced,
and the difficulty of proving that the
claims of the promoters are untrue,
owing to the fact that the properties
they describe are usually in a distant
state
Legitimate brokers. who for years
have fought the swindlers. pointed out
yesterday that Mr.. Swann's statement
left the Postoffice Department the only
effective instrument against the swim
dlers. This can act under the law for
bidding the use of the mails with in
tent to defraud. 1t has large staff
Investigators, which Mr.. Swami has
not, and it has been getting convic-
tions. Within the week it obtained
the conviction of one group of swim
dlers, who with fake oil company
had swindled hundreds, mainly women.
Practised Unusal Methods
This group operated under the name
of the Pecos Oil Company of New
Mexico Their methods were typical
of those used by stock swindlers gen
orally. The head Of the group was
John F. Hermann, for many years one
of the inhabitants of Wall Streets twi-
light zone. With him were associated
Herman Luther, likewise a dweler in
the twilight zone, and Gus Aurecht,
who had grown old selling stocks of
little or no value.
Aurecht had formed a company to
produce oil in New Mexico and after he
had worked it for all it was worth,
turned 1T over to Hermann and Luther.
For the books of the company he was
given $3.50 With these as a founda-
ton, Hermann added several hundred
acres of desert land, formed new
company with capital of millions and.
announcing that the government was
likely to take over his properties, pro-
ceeded to peddle reams of stock. Among
the victims testifying against them
were washerwomen and school teachers.
Judge John G. Knox sentenced Herr
mann to three years in Atlanta. Luth.
er was given year, Aurecht was COM
mlttcd to the Essex County. N. j., Jail
Dozens of Like Operators
A government official said yesterday
that this case was typical of dozens Of
other companies.
THE difficulty of the situation" said
he, "is that there is no way Of pre-
venting the frauds All we can do ia
proceed after a crime has been com
mitted. This is difficult because tAe
average man is too proud to make his
losses known. Again, not every per-
son knows how or where to proceed
against the crooks. The man in Paint
ed Post knows very little, if anything,
of the general inspectors office.
"Thc crooks turn almost everything
printed about oil to their advantaqe
Recently a periodical of national cir
culatlon printed a big article on the
Texas oil fields. Now we find one
group has reprinted this in booklet
form and is using it as bait
The people have no idea Of the
difficulty to be overcome in these
cases. said Mr.. Swami in his state
ment. Because Of the requirements
OF the law it is almost impossible to
successfully place any of these
swlndlers on trial with the hope of OBJ
tanning conviction. In the first place
the decision in the Jared Flagg case
prohibits the raidng of offices to Sc
cure evidence. In the next case it
has been held that certificate of a
county official, authenticated by the
seal of a presiding Judge in another
state, cannot be used against de-
fendant.
This makes it necessary to send to
distant state, search records and be
III position to prove that the defend
ant did not own an oil we'll at the
place he said he did. There is a diff
Guilty in proving the lack Of mineral
wealth in the property described.
'l am firmly convinced the solution
of the problem is with the newspapers.
If they will refuse to print the glitter
ing advertisements of the promoters
until they have been thoroughly in
vestlsated the pubic would not be apt
TO lose It's money. | hope to enlist
the aid of the newspaper publishers
and the big advertising agencies. In
the meantime we Will 20 on Investigate
ing"