The Abbeville press and banner. [volume] (Abbeville, S.C.) 1869-1924, 1921-04-13
WARNING AGAINST
FAKE SCHEMES IS
MADE BY BANKERS

New methods Of operation utilized
by fraudulent promoters in Virginia
and the Carolinas in victimizing in
vestors, especially those with small
savings, in. take schemes and in
which bankers are made unconscious
assistants are outlined in a recent
communication sent broadcast by
the Virginia Bankers Association.
The letter says in part:
4. "There is understood to have
been of late an alarming increase In
the number and amount Of so-called
investments by citizens of Virginia,
largely farmers and laborers, in
shares Of stock in enterprises most
Of which it is entirely proper to call
questionable and many Of which are
fraudulent throughout. It is estima-
ted that through schemes Of this ma
ture,. several millions of dollars have
been withdrawn from North Caro-
lima and South Carolina during the
past twelve months and one Of the
most serious features Of the. situa-
ton is that certain of the. promoters
have obtained licenses to sell stock
in Virginia. %
"The state authorities. are in , no
way to blame for this, for they are
administering most effectively the
provisions of the Blue Sky Law. It is
painfully true. that the b~estrdrawn
law of the kind must always be in
sufficient to give one hundred per
cent protection to a public unlearn-
ed in business methods and eager
for quick and large returns. !
Following is a general outline of
the methods employed by operators
of the kind referred to;.A, stock
salesman will secure a list of prom
inent farmers around one Of our
smaller towns. He will approach the
farmers and endeavor to sell them
stock under the Blue Sky Law In
approaching the farmer he is told by
him that while he is perfectly will
ing to purchase the stock in the pro-
posed corporation, he has no money
at that time, but if the stock sales
man will take a note, he will take 30
many shares Of stock. The salesman
knows that the farmers is good and
takes his note for, say,
$500 and deliver five shares Of stock
TO HIM, i'm. -. )
HE then takes the note to the
bank where the farmer does bust
ness and persuades the banker to
buy the note from him but instead
of giving him cash. to give him a
certificate of deposit, drawn to ma
ture two weeks after the maturity of
the farmers note, explaining to the
that he will have the oppor-'
to collect the note before the
certificate of deposits natures. As
an extra inducement to the banker
he allow him to draw interest on/the
note Of the farmer from the date of
maturity, and thereafter, if not paid
at maturity and does not require in
terest on the certificate Of deposit.
"Having secured the certificate
the company represented by the
stock salesman uses this certificate
Of deposit as collateral against it's
note, borrowing money from some
bank other than the issuer of the
certificate, Of deposit in the hands
of innocent holders for value. This
prevents the farmer from recovering
from the company on his note in the
event that the project proves to be a
fraud or the company fails and the
bank issuing the certificate Of
redeem it."
In sending cut this appeal the vir-
ginia Bankers association is CO.
operating with the work of the Saw
ing Division Of the Treasury De-
part,ent which is endeavoring
education in personal finance
and through the sale Of safe govern
ment securities to protect the small
inveator frnn fraud