The New York herald., 1922-03-13

.ffectively to prevent any corporation
ON selling stock by fraud and dis
onesty.
Postal Inspectors Help.
Backing up and cooperating with the
Federal Trade Commission are the in
vestigators and business detectives OF
the Post Office Department. Spread
over every section of the country this
force or investigators continually is on
the lookout for stock swindling schemes
Complaints are received by the Post
Office Department at the rate of several
hundred a day and action by the In
spectors Is prompt and efficient.
In the Post Office Department Build
ing here is a large room crowded from
floor to ceiling with files containing re
ports OF Investigations by inspectors a
yery large percentage of the reports
have to do with stock swindlng
schemes.
Most corporations in conducting stock
selling campaigns use the mails to
very large extent. This gives to the
Post Office Department its lever TO dis
lodge dishonest promoters from their
| money grabbing. Misleading state
| ments in letters and advertising sent
through the mails lay the tricky pro-
| moter open to prosecution.
Oil production is the favorite vehicle
for the organization of corporations BY
| tricky promoters. This Is because pf
the publicity that has been given to the
oil business and TO the alleged large
fortunes made overnight through iucEv
ventures in drilling onerations. An
| oklahoma corporation recently ~as or
"an'zed to sell 5Oo0,000 shares or oii
| stock at 10 cents each. 1t was success
| ful until the Federal Trade Commission
exposed It. THE loss was In the neigh
horhood OF s5Oo000 Another oil concern
sold a large number OF shares at u
each.
Fraudulent Intent Hard 60 Prove.
Few oil corrorations BEGIN onerat'ors
with a capital stock plan OF less than
| 70 00n 0c0 the records show. a capitaii-
zation OF s., 100 COO IS considered modest
r. is very difficult for the Government
investigate TO prove fraudulent intent
ny promoters.
| There Is nothing illegal. OF course
| In Iaroe capitalization nor in the sac
| OF millions Of dollars In stock. II 's
rointed out however, that to drill
4 well 70 test a given locality Tor III
\ cost but $1,000 or $4,000. A concern
which sells millions OF dollars Of stock
before 1t bepins TO drill is regarded as
Suspicious Some have paid cash div!
dends before a single acre OF land WAS
| owned
The plan of the oil, stock rrnInoter Is
10 organize the coulpanv. tai ing a large
block of stock for his labor. This is
| LEGITIMATE But the plan. as " Is gen.
| erol'y worked Is for the promoter 10
4 aeli hts stock and then resign Iroii
| his nosition as executive OFFICER Tnis
usually leaves the stockholders with a
/ large number OF dehts. no assets ana
| most Frequently without land machinery
/ or other parapharnalia of production.
Some cornorations. Organized nv Dro-
moters who Intended to sell their stock
| and then make a getaway have gone
1 r. the point OF making money desn'te
/ the dishonesty OF The officers On rec
| ord at the Post Office Department are
several such cases This is contrary to
| the procedu~e of tho professional pro-
roter. It interferes with his p'ans.
Hts plans do not include the responsi-
h'litv attendant unon the manaseinene
| OF going concern
| Next to oil the favorite vehicle OF
rtoct prornotors Is the automobile.
! Then comes the rad'um comnanv. the
| a!rp,are manufa ctur'ng line and finally
/ the finance corporation.
| Some Test Questions.
Some OF the Information required OF
promoters In the q11esflonnaire used ov
| the Federal Trade Commission Is shown
| In the following questions chosen at
1 random from the duastionnaire form:
| Name Of company?
| State OF incorporation? Statutory OF
| ara3 orincinaI hrsiness Office?
| Places other than princinal office
where company maintains office or does
business?
| Amount of preferred and common
| stock authorized: state par value OF
each?
Amount OF preferred and common
state the name Of promoter or organ
| izer.
state previous business connections Of
promoter or organizer.
What compensation or benefit was
received bv promoter or organizer?
Annex comics Of all promotion agree
ments and proposals.
To whom was such stock issued and
for what consideration?
po=criha briefly the business pnrposaa
and objects OF the connoany; where II Is
10 be conducted: the facilities and plant
available therefor?
What is thn company's immediate plan
OF action? What amount of money will
be necessary TO accomplish Il: how is II
proposed 70 raise this money what
stocks or securities are 0 be sold there
for or have been sold, and on what
basis?
How much has been paid TO date es
commissions, bonus or salary TO stock
salesmen7
Demand for Lfterature.
Annex copes OF all literature. adver-
tisements. rrospectuses and circulars
used In furtherance OF the sale OF stocks
and securities by company or others,
and anv Instructions 70 stock Snles-1en
Describe accurately, but briefly, the