Evening star. [volume] (Washington, D.C.) 1854-1972, 1920-01-25
CRAFT SCHEMES SEEN
AS COUNTRY'S MENACE
Bill introduced in Senate Imposing Penal
ties on Promoters of Stocks Shown
to Be Fraudulent.

nave a rich field Of information at
'iano. The bankers know just who
o~h liberty bonds and in what guam
1ity' and who have cash in the banks.
rhey know what men are most like,v
70 De won over through guaranteed"
p'eierreo stock. which cannot fail to
pay or per cent" and what men
would rather take a chance on com
mon stock which the agents promise
VIII pay as high as 40 cents IN some
cases
ihiro' the farmers. with bonds and
money on hand. are a rich field for
the promoters. Especially those farm
ers VINO have done we'll and are plan
ming TO retire and live on their earn
'nss- Then there are the farm renters
VINO are persuaded to raise money on
'helr equipment and add it to their
earnings and take flyer" on stock
reported to be a sure thing"
Accept Notes In Payment.
In many cases. tho new stocks are
solo Tor notes. to be paid in the next
Few months. or even years The pro-
motors do not permit these notes to
remain In their hands overnight Tn.
notes are secured by farms or other
collateral. The promoters Immediately
discount them in the banks or sell
them to others. And then, even II the
stocks they have purchased prove
worthless, the signers of the notes
have to settle up with the holders OF
tho notes. 1t Is estimated that out OF
5000. 100000 subscribed to these stock
schemes $3.50. 100000 are In notes.
Ono case brought to the attention of
the committee was that of farmer
who paid $4,000 for some stock. and
the local agents who sold him the
stock divided $1.10o in commissions.
Another case showed a new corpo-
ration floating 100000 worth OF
stock. Tho first $3s.ooo worth OF
stock. the promoters sold themselves
at 500 a share. giving notes for H.
The second ss33.oo0 they sold to out
siders at $50 q share. alleging that ii
was In such demand that it was worth
that price. and tho third $3aa.ooo they
sold At 5000 q share. When they
started selling the second third of
the stock they began to unload their
own stock. making $50 a share
though as q matter of fact they
might be said to have made s15e,
since they only put up their notes
and on the second third Of the stock
they made e1aO . share. They actu-
ally pulled on this sale.
Sue and Are Called @welehers."
Sometimes the dupes of the stock
3obbers havensutti They are called
"weIchers" by the stock agents. I'm
mediately the promoters have brought
counter suits for libel. in many cases
demanding $4,000 to 100000 dam
ages. Thus the victims of stock job
bers are terrorized into keeping si-
lent over their losses. One man in
Iowa who purchased $4,000 worth of
stock and filed a petition against the
company when he found he had been
done" was sued for $4,000, and was
glad to get of by withdrawn his pc
tition. .t+,
The committee has evidence that an
other man purchased $500 worth of
stock and that in ten days the agents
returned and paid him $50. which they
claimed was interest. They sold him
IS, 900 more in stocks and then left
the state.
A prominent man in one Of the west
ern states. a churchman. too, the com
mittee has been told, has organized,
a corporation with a capitalization Of
100000. This corporation is to sell
a patent medicine. Yet half inter
est in this patent medicine was sold
two and one-half years ago for $500
and the man who sold it thought he
was being well paid.
Most of the stocks sold are oil and
mining stocks, though patent med
icines and even corporations planning.
to produce monkey wrenches and
other utensils are on the list Some
are land companies with worthless
land.
With billions of dollars of capital
needed for legitimate enterprises, al
ready well established, particularly
the railroads, the investment of these
hundreds of millions in worthless cor
porations is a sheer waste. The com
mittee realizes that il is up against
a difficult proposition to draft a fed
eral law that will stand the test VI
the courts. But it hopes to be able
tn reach the evil through the inter
state powers vested in the government
by the Constitution.