The New York herald., 1922-03-06
$75O,O0O,OOO LOOT
in FAKE STOCK sales
BantOn Bases Bucket Loss
Estimate on Complaints
Put LIN by Victims.
WOULD END DISGRACE
District Attorney Urges
Law to Prevent Wildcat
Operations.
DEMANDS BOOKS BE OPEN
Says Exchanges Heard Idea Of
Inspection Of Records With
Holy Horror
DEMANDS BOOKS BE OPEN

"A plea for preventive legislation to
protect the public frcm bucket shops
and wildcat stock swindlcs was is
sued yesterday by District Attorney
Joab Fl. Banton.
The complaints he has received in
dicate loss of 750,000,000 to the
public in fake stock saies, Mr. Banton
says. He suggests laws TO regulate
brokerage houses similar to those now
in force governing bank and insur-
snce companies.
Although there is provision for the
Punishment Of brokerage frauds there
- no law to prevent them, and this
ondition Mr. Benton calls disgrace
10 the State. Recently, he says, he
called upon the various exchanges to
permit the books of their members
IL be examined by the District At
torney on demand. This suggestion
was received with holy horror" he
declares.
The statement in part is as follows:
'sThe conditions which nave been re-
NCAiou tuTOuSu llC LluttiCIOuS SOiIPieliHto
made to the District Attorney within the
last two, months show great need Of
some legislation. not SO mach to punish
as to prevent crime. But. strange as it
gnay seem, New York has only punish
rlent statutes against those who prey
upon the investing public either by Of
fering and selling wildcat securities by
pucketing orders, by trading against or
ders or by conducting wash sales.
Two Classes of Complaint.
The complaints that have come into
this Office fall into two general classes !:
"First-Those in which the complain
ants have been defrauded by false rep
resentation OF existing facts or false
promise OF future conditions and wlere
hy reason Of these false representations
cr promise large sums have been stcicn
from the public. The sale of wildcat
securities has gone to such an cn0r-
nous extent that it Is estimated that the
people Of the United States have been
swindled out or $3.50, 100000 within the
last few years. This class or crime
fourishcs during days OF prosperity.
When money is abundant the smooth
tongued salesman is able to obtain from
the gulible public any amount of money
for fake securities.
'"rhe pending legislation at Albany
relates TO this first class of cases and is
an effort to prevent the continuance OF
this kind Of fraud on the people.
Second. The other general class OF
cases includes those who act as brokers
taking an order to buy or sell securities
and who bucket the order. which means
tfat they take an order. but never buy
o. sell or who trade against orders.
which means that they use their supe-
r:or knowledge OF the market against
the knowledge of their customer; or
those who make wash sales. (which
,,eans tha. the brokers operating to-
erther make pretended sales Of securi-
ties but which in fact are not sales, and
bv which a false market value Is. Gre
q ed. either above or below the actual
value OF the securities
'rf A broker destroys his books or If
hs has gone into bankruptcy, and a Fed
eral Judge refuses to permit the receiver
10 deliver them to the District Attorney,
~ if for any reason the. District Attor-
rey cannot procure the books. these
crimes will go unpublished. That we
permit such condition to prevail Is a
NTgrace.
For Government Inspection.
FREQUENT visitations Of Insurance
companies by the State Superintendent
" Insurance and frequent visitations OF
banks By the State Superintendent Of
Banks prevent the recurrence in insur-
ance or banking circles OF the condi-
ions that have manifested themselves
sach day In The Offices of brokers in
his county.
"why should brokers have any
slirors? Is there any saNctity about
the brokerage business which should
make the broker immune from prosecu-
tion when he steals from his customer
any more than there Is about a banker
which should make him immune from
prosecution when he steals from his de-
positor? In fact, the law holds that
the relationship Of depositor and
banker Is that OF creditor and debtor
and by statute creates crimes growing
out OF that relationship, while each
or the crimes or which brokers are ac-
cused and which are enumerated above
is indlctable under the common law re-
lating to larceny.
"rn other words. most Of the crimes
that bankers commit against their de-
fiositors are crimes created by statute.
whereas the crimes which brokers COM
NIT against their customers are acts
NllC1. uHurT tUe lAWS VI HdluTt ana
society are considered immoral and
criminal, and yet we have taken away
from the banker his right 10 fall behind
the constitutional privilege that his
books should not be used against him
and hesitatcs 10 enact laws for like
protection TO those who deal with
brokers.
Recently | called upon tho exchanges
10 take II upon themselves. until proper
legislation could be passed. TO make fire.
ruent visitation OF their members and
require. as a condition precedent to
membership. that each member should
permit his books to be open to the Dis
irict Attorney for use In prosecution OF
such member In event that the books
reveal criminal conduct. This suggcs-
tlon was received with holy horror. Yet
il is suggestions based upon common
honesty"
STEAL $500 IN CHANGE.