The New York herald., 1922-03-13
Officials Unable to Catch
Up With Task of mves-
tigating Frauds.
INVESTORS ARE WARNED
Advised to Communicate With
Washington on Suspicious
Stock Selling Concerns.
Special Dispatch to THE New York fiErALD.
New York Herald Burrau
Washington, ID, c., March lZ

New York Herald Burrau !
Washington, ID. c.. March 1x.
Swindling of thousands of small in
vestors through wildcat stock promo
ton and bucket shop schemes Is being
fought throughout the United States.
Cooperating with the Post Office
Department and the Treasury the
Federal Trade Commission is engaging
in nationwide campaign against the
class Of swindlers exposed by THE
NEW YORK HERALD.
Thousands of letters are being re-
ceived from persons who have been
persuaded by false statements and
advertising TO invest their life savings
in worthless stocks. Complaints are
piling up on the commission faster
than they can be handled with the
present force OF investigators.
Advice to Investors.
Given a reasonable time, the COM
mission can learn the exact financial
standing and plans OF almost any cor
says. in advising that before investing
In stocks and bonds concerning which
there Is suspicion, investors communi-
cate with TIE commission.
The commission is in a position to
throw the full light of publicity upon
the financial standing and methods Of
operation of all corporations In the
country when this action is deemed ad-
visable In addition the commission
Is exercising its authority where de-
liberate fraud is found to halt the sale
OF stock by tricky promoters doing an
interstate business.
The commission can issue an order
to any corporation to cease and de-
sist" from the sale of its stock where
fraud is proved. This is under the
statute giving to the commission au-
thority to prohibit practices in busi-
ness which are unfair to competing
concerns and to the public. Fraud al
ways is classed as unfair"
Motor Concern's Promotion.
Thus far the commission has investi-
gated the affairs OF thirty-two corpora
tions at the request of owners OF stock
In them. II recently investigated an
Illinois automobile manufacturing cor
poration which was selling stock in
Southern States. Although this con-
Germ never had produced a car. It had
disposed Of nearly $3.0o0c00 stock and
other securities. 1t offered TO sell cars
at discount to all stockholders. Tn
der this plan the concern Interested
fhNtfHandg 0f ~
lost their money.
IN the case OF q Delaware corporation
organized to conduct an oil producing
company and bank. an Investigation
showed that the officers were finding
ready sale for worthless stock by
pretending to set aside a certain per-
centage of earnings for charitable and
philanthropic purposes This corpora
tion was organized with the assistance
of woman. who was the wife of the
president Of the company The couple
were advertised rs promoters who had
accumulated $i,010.010 in private for
tune in oil and were endeavoring TO
operate q big business for the benefit
OF charitable purposes. The corpora
tlons advertisements and prospectuses
were found to contain untruthful and
misleading statements.
Method OF Investigation.
When complaints concerning stock
schemes are received by the commits
sion IT'S first act Is to send to the corr
roration promoters a questionnaire.
Failure to reply makes the corporation
officials liable to fine OF $500 or one
year in prison or both. a correspond
ingly heavy penalty Is attached TO tho
return OF false information.
Almost every aspect OF the corpora
tion's financial affairs, plans for the
future. method of doing business and
standing OF the officers must be dis
closed IL the questionable be correctly
answered. Under the law the Federal
Trade Commission may make public the
QUESTIONABLE in whole or In part.
Agents of the commission are trained
IN the study OF these questionnaires. II
is explained that Il Is very difficult for
a shady promoter or trick corporation
TO conceal dishonest motives. Where tre
questionable indicates that the corpo-
ration intends not 10 operate to the best
interests OF Its stockholders. the COM
mission may make public the answers
to warn other investors
Under the QUESTIONABLE system the
Federal Trade Commission Is In po-
sition to exercise the powers OF Fed
eral blue sky law agency
Publicity Exposes swfndIfng.
Publicity Is death to swindling stock
schemes. Because of the necessary
legal delay involved in the collection
and announcement Of the information
contained In the questionnalres IL Is
sometimes possible for trick promoters
to bring their stock selling campaign
TO whirlwind close before the commis-
sion can bring to bear upon them the
presBfrn of rftblfcfty
The commission is powerless 10 act
against corporations which arc operat-
Ing completely within the boundaries
or single State. It Is only when their
selling campaign stretches over state
line that the Federal Government can
get into the game.
When complaints are received BY the
commission and the ques,ionnaire pro-
cess Is complete. tho next step ia to hold
hearings for the presentation OF owl
dence. Under the "a respond ut
corporation may have thirty days IN
which to prepare It's evidence. Several
moro weeks are required before the case
finally gets to the point Of final adjudi-
cation by the commission.
When the evidence IL al In the COM
mission reviews Il and decides whether
an order shall be Issued to tho corpora
tfOu tp ICON NJ Tccfetss rrcv,, - -,