Evening star., 1922-03-12
NEUTRALITY-SUSPICIOUS.
OFHALFBILLION DOLLARS
Yearly Toll by Sales Of Worthless Stock,
Which Traffic Congress Plans to
Help States Stop. j! >..

through the United State. mails and
other agencies Of interstate COM
merce. These promoters have mail
ing lists for every state. and often
for every county. and, fearing prose-
cutfon II their agents enter the states
where their securities cannot be quail
flied. they carry on the greater part
of their fraudulent promotions
| mail-order business.
+ + X 4
So 1t will be seen that while the
state laws are all right the crooks
have been evading them. The state
I securities officials banded themselves
! into a national body to fight this
| evil, and have been cooperating with
Representative Denison in perfectinG
this legislation. J. Weston Allen, at
| torney general of Massachusetts. has
been very helpful to Representative
Denison. having been responsible for
| the enactment of the excellent blue
| sky law passed by Massachusetts
| last year. After the PonzI blow-up.
Vice President Coolidge, then Gov
ernor of Massachusetts, appointed a
commission, headed by Mr. Allen, to
study the situation. and the blue-slsy
| law resulted.
Michigan Is another good example
OF how the states are cooperating.
| Michigan has a good biue-sky law
| The president of the national orsani-
| cation of state securities commission
ers Is Hezekiah Duff. who is officer
| IN charge OF enforcement OF the Mich
fgan law. and he has been assisting
Representative Denison in every way
possible.
So the bill about to he passed by
| the House fortifies the states in their
! EFFORTS to stamp out the business of
| those leeching upon the small wage
earners. 1t does two things-first. It
| forbids the transportation by aEen-
| cies of interstate commerce. mails.
| express. railroads, etc, of any stocks
| or securities into any state the sale
OF which stocks or securities would
be unlawful within that state: sec
| ond, 1t forbids the sending by agen-
cies OF interstate commerce any cir
| culars. prospectuses or pamphlets pro-
| noting the sale of any stock that
could not be sold by agents within
| the state.
It is the official estimate of Treas
ury officials that in this way $500
| 100000 a year is taken from the
pockets Of the people. The Treasury
also estimates that $4,000 900 worth
! Of Liberty bonds were taken from
purchasers in some western states in
few months in exchange for worth
less securities that promised large re-
! turns. An Oklahoma newspaper.
| after careful survey, stated that the
stock promoting companies produced
less than two one -thousandths OF
| NJ oil ha oil ~
in that year. For every s555 worth
of capitalization only 81 worth OF oil
was produced. There are 44S0o COM
panies whose stocks are worthless,
| and obsolete listed in books available
! to bankers. This shows the scope Of
the evil which Congress proposes 10.
| eradicate.
Congress has taken to the Denson
bill especially because, different from
this sort, it does not call for any
commission no new jobs are pro-
vided for. and there is no cost what
ever for enforcement. 1t utilizes and,
puts life into the state laws. The
| enforcement is placed in the hands Of
| the Attorney General. heavy penalties
are provided for infringements and
specific civil remedies are given. II
fraudulent or worthless stock is sold
or sent or rendered. the person buy
ing can recover under this law not
only the money he put into that stock
but also his expenses for bringing ac-
| ton. 1t is generally recognized in
| Congress that this legislation has
| plenty of good sharp teeth.
The broad principle underlying the
| bill is that the several states ought
| to be permitted to protect their own
1 citizens from the sale of fraudulent
and worthless securities in such q
manner as they think best. And
| since the federal agencies-the mails
and other agencies of interstate COM
| merce-are being used to violate.
evade and practically nullify the
state securities laws. the federal gov
| ernment ought to cooperate with the
4 several states to the extent of pre-
venting the use of it's agencies for
| promoting the sale of fraudulent Sc
curities in the different states con-
trary to the laws of-such states.
In the committees report on this
measure are quoted number of prec-
edents for legislation of this kind.
including the national bankruptcy
act. the Webb-Kenyon act, the Reed
bone-dry amendment. the migratory
bird treaty act, etc.
1t is emphasized in this connection
that conditions connected with or
| growing out OF the WOflO war nave
greatly facilitated the increasing
evils connected with the promotion
Of fraudulent and unsubstantial se-.
curities. The people who, through
patriotism, became educated and ac-
| customed to investing, owning and
dealing in government bonds. found
| it an easy step to investments and:
dealings in industrial stocks and
bonds which promised much larger
returns. When hundreds and thou
sands got stuck" it created a preju-.
| dice against legitimate promotions
| and tended to keep money out of i'm
dustrial enterprises which needed
| financing as never before during the
after reconstruction period.
| There is considerable organized ef-'
fort. even from those who previously
opposed the "blue-sky" legislation, to
have the Denison bill passed, and
there has developed no real opposi-y
ton to it. Congress feels very hope
full of wiping out the fake stock
evil, against which the Treasury De-
partment has issued repeated circu-
J lar warnings. ,.