The New York herald., 1922-08-17
CLARK -CHI[DS SUED
FOR Millions FRAUD
Sinclair and Chalmers AL
lege Non-Delivery OF
Securities.
CHANDLER BROS. CASE
Fraudulent Reorganization
of Now Defunct Firm
Is Charged.
ACCOUNT 5O2 CITED AGAIN
Was Used to Cover Up Sale of
Chandler Bros. Customers Sc
curities, 1t Is Alleged.
ACCOUNT 5O2 CITED AGAIN

Harry F. Sinclair and Hugh Chal-
mers, claiming damages of more than
81, 100000, have started suits in the
Supreme Court at Mineola, Nassau
county, against the members of the
Stock Exchange firm of Clark, Childs
& Co. and the bankrupt brokerage firm
of Chandler Bros. & Co. Mr. Sin
clair demands $S67,516.3S, Mr.. Chal-
mers 100000. Both have filed long
complaints at Mineola charging the
two brokerage firms with fraud.
Chadbourne, Hunt & Jaeckel Of 1876
Broadway and Ewing, Alley & Voor-
hees of Ill Broadway, counsel for the
creditors committee and for Messrs
Sinclair and Chalmers, said yesterday
that they had no statement to make
other than that the proceedings did
not involve the recovery of losses in
Cured in speculation, but had been
brought for the purpose Of holding
Clark, Childs & Co responsible for the
non delivery of the securities belong
ing 10 the plalntlffS.
Claims Aggregate $3,OOO,OOO.
The Sinclair and Chalmers suits are
two of a number which are said to be
typical of good many claims aggre-
eating more than $3,0O0,000 All these
claims are represented by a creditors
committee consisting of Hugh Chalmers,
James M. Phillips Jr., and Willard p.
Rarrows, the last named being the
trustee In bankruptcy of Chandler
Brothers & Co.
Louis Marshall, counsel for Clark
Childs & Co. and Chandler Brothers G.
Co.. said that every allegation made by
Messrs Sinclair and Chalmers would be
confuted and counter claim for money
due from them would be set up Before
Justice Mitchell May in Brooklyn on
Tuesday Mr.. Marshall contended that the
complaints were too complicated to un-
cerstand or answer and moved that each
suit be divided into several causes of
action. The Justice reserved decision.
Messrs. Sinclair and Chalmers were
customers of Chandler Brothers & Co.
The Sinclair complaint says that al
though the Chandler firm did not go into
bankruptcy until July, 1921. its insolv-
ency was known to Clark. Childs & Co.
on December 10, 1920. and that all the
defendants conspired to continue the
business of Chandler Brothers & Co. In
violation of the law and the rules of the
New York Stock Exchange and for the
purpose of defrauding the Chandler GUS
toners Clark, Childs & Co. are alleged
to have assumed complete domination
os the business" to have made huge
profits for themselves and to have
wrongfully sold. on March IA. 1921, 121,-
336 shares of stock belonging to Chand-
Ter customers at unfair values These
sales. the complaint alleges, were con-
cealed from the customers by false state
ments that their securities were still be-
ing carried for them, and for the pur-
pose of concealing them on the books
Of Chandler Brothers & Co.. it is alleged.
that firm entered as short in a fictitious
and fraudulent account known as the
Account 502 all securities belonging to
customers thus wrongrully sold.''
In order TO continue the business OF
Chandler Brothers & Co. the defendants.
according to the complaint, fraudulently
induced Mr.. Sinclair and other large
customers to enter into reorganization
plan. Mr.. Sinclair. in a written COM
pact, dated May 2. 1921. agreed, the
complaint says. to postpone for five
years enforcing his claim against Chand-
Ter Brothers & Co. for 1898 shares OF
the capital stock of the Sinclair Console
dated oil Company on condition that the
brokers get additional capital of $s60,000
from the partners. that other large cred
TORS besides Mr.. Sinclair be released OF
claims amounting to 900 and that
large creditors pay s315,000 additional
capital into the business At that time
SAYS Mr.. Sinclair, the members Of Clark
Childs & Co. posed as dIsinterested third
parties who were trying to save the
situation and concealed from him and
others the true facts. Continuation OF
the business resulted in further heavy
losses to the customers OF Chandler
Brothers e. Co. One of the charges IN
the complaint is that Clark, Childs 4
Co. conducted the business Of Chandler
Brothers & Co. without bona fide pur-
chasing, holding and selling securities
foi the accounts of customers In accord
arce with their Instructions, and made
use OF the fraudulent 500 Account for
playing the market against customers or
a gigantic scale.'