Evening star., 1920-02-29
blue sky BILL
0FFERED|N IN HOUSE
BY Mr.. V0[STEAD
Judiciary Committee Head
Would Prevent Fraud in
Various Forms.

Chairman volstead Of the House
judiciary committee has introduced
new blue sky" bill. designed to pre-
vent fraud respecting securities oner-
ed for sale and to provide summary
proceeding therefor.
This is a measure in which the cap
ital issues committee Wnicn was ara- 1a
ed into being during the war to sa1e
guard capital for essential needs: Is
particularly interested. It was or1gi-
nally drafted by federal Treasury OF
fcials at Mr.. Volstead's solicitation.
and then he redrew it to conform TO
his own ideas. He has submitted IL 10
the Attorney General.
Mr.. Volstead explains that he In
troduced this bill because he was con.
vinced that some sort OF olue Sky
law must be put on the statute DOCKS
to protect government bonds from De-
ing swapped for practically worthless,
highly speculative stocks, and to pro-
tect capital generally. He was con-
vinced that the bill which Repre-
sentative Edward T. Taylor. democrat.
Of Colorado has fathered. and which
was urged by the Federal Trade Com
mission, could be passed by Congress.
Provides New Remedy.
This new measure would enlarge
existing law and provide an entirely
new remedy for its enforcement 1t
seeks to prevent the commission OF
fraud before 1t is consummated, while
under existing law frauds can be pun
ished only after they have been per-
petrated. Then. too. the existing law
covers only frauds through the me-
dunn Of the mails. while Representa-
tive volstead proposes to include all
instrumentalities Of interstate COM
merce e telephone, telegraph, express
companies. etc.
able no hearings will be held upon
this bill. because extensive hearings
have been held on the general princi-
pie Of blue sky legislation and they
are in printed form. available for all
members of Congress. 1t will expe-
dite passage of this safeguard. he
thinks, to eliminate further hearings
He expects to have this measure
passed before June, when Congress
expects to recess in time for the po-
litical conventions
The Volstead bill provides that If
it shall appear to the Attorney Gen
eral that in the issuance, sale. pro-
motion. negotia ton or distribution of
any stocks. bonds. notes or other Sc
curities that involves the use of the
mails or any agency OF Interstate or
foreign commerce any person. part
nership or corporation is employing
or about to employ any device. scheme
ing money or property by means of
any false or fraudulent pretense. rep
resentation or promise, and he be-
lieves it to be in the interest Of the
public that an investigation be made
with a view to the issuance of an or
der, as provided in the bill. he may
require such person. partnership or
corporation to file with him a state
ment in writing. under oath.
May Call for Courts Aid.
The Attorney General is also d.
rected in the bill to require such fur
ther data and Information as he may
deem relevant, and make special in
vestigation when he deems 1t neces-
sary. He may issue subpoenas. ad-
minister oaths, etc, and invoke the
aid of the Supreme Court OF the Dis
trict Of Columbia or any district court
of the United States in case OF dis
obedience to a subpoena or contumacy
Of any witness.
The Volstead measure also provides
that the Attorney General. upon evil
dence satisfactory to him, in case of
the issue. sale. promotion, negotiation
or distribution of any stocks, bonds.
notes or other securities, involving
/ the use of the mails or any agency
of interstate or foreign commerce,
where an person. partnership or cor
| poration is employing or about to
employ any device, scheme or artifce
| TO UclTduO OF IOE OOIAlnAuS IIlOuty OF
property by any false or fraudulent
pretense, representation or promise.
| may issue and cause to be served an
order requiring the guilty party to
cease and desist.
II 1t appears to the Attorney Gen.
eral that an irreparable public in
jury 10 imminent unless such order
is issued before a full investigation
can be made, he may. pending such
] investigation, issue such order, but
| it shall be accompanied by a request
| for information as to the facts relied
on in issuing the order and such tenn
porary order shall remain in force
only until such Information Is fur
nished and two days thereafter.
Any person. partnership or corpora
tion affected or aggrieved by such an
order of the Attorney General shall
be entitled to a hearing before the
district court upon fling bond to
cover the actual costs of the pro-
ceedings. The court would have pow
er during the tendency Of this action
to suspend or modify the order Of the
Attorney General and to enter a de-
cree at the end Of the hearing. The
Attorney General may also set aside
or modify such order at any time be-
fore application is made for the hear
ing by the court.
The bill carries punitive clause
making a fine of not more than $1o.-
900 or imprisonment for not more
than ten years the penalty for viola
tion OF the restraining order Of the
Attorney General.