The New York herald., 1922-08-15
SAYS CLARK-CH|LDS
BUCKETED MILLIONS
Trustee Charges Firm Was in
Reality Partner Of Bankrupt
Chandler Bros. & Co.
EXCHANGE CO-DEFENDANT
Account 502' Was Ruse En-
ployed, Barrows Asserts
Violations 'Ad Infinitum.'

| Charges Of ''bucketing" on a large
scale, involving the New York Stock
Exchange firm of Clark, Childs & Co.
Of 165 Broadway with the bankrupt
brokerage firm of Cha andler Brothers
& Co. in transactions running into
millions of dollars, are contained in
the complaint filed yesterday in the
suit which Willard r. Barrows Of Phil
adelphia, trustee for the bankrupt
firm has brought in the Supreme
Court here.
| The New York Stock Exchange and
James r. A. Clark. Herbert H. Childs.
Charles A. Morse, Frederick Pulsifer.
w. Charming Burbank. William L..
Meffert, Richard Wharton and Hans
Nova, as members of Clark, Childs &
Co., are defendants in the action. Mr..
Earrows is seeking to recover the pro-
ceeds of the sale Of a seat on the New
York Stock Exchange once held by
Fred L. Chandler.
| This sum. said to be approximately
100000, is being held in trust by the
Stock Exchange pending the litigation
| He also asks for an accounting of the
| Joint relations alleged to nave existed
between Clark, Chiids & Co. and Chand-
ler Brothers & Co. during the nine
months prior to the latter's failurS. when
the insolvent firm was under the man
agement of the former concern.
Chandler Brothers & Co. mad Offices In
Boston. Philadelphia end Chicago. as
we'll as in New York. The Arm was ad-
judged bankrupt in the United States
District Court for Eastern Pennsylvania
August II, 1921. Although the papers
| in the Supreme Court suit here were
served on r.. v. Cox, secretary of the
New York Stock. Exchange, for their
participation as defendant. the complaint
was not filed In the County Clerks Of
flee until yesterday.
Alleges Joint Management.
Mr. Barrows alleges that on Dccem-
| Der 10. 1920, Clark, Childs & Co. discov-
| cred that in it's account with Chandler
Brothers IL Co. there was an error
OF 81 900, 900 and It's balance or equity
| on securities held for advancements to
that Arm were $1,0O0.000 less than was
customary. This discovery he declares.
brought about a period of joint man
agement from that time until the in
solvency proceedings were started.
While to the public the two firms dur
| ing this period were represented as sep
arate and independent partnerships
| conducting brokerage businesses sub
| ject to the rules of the New York Stock
Exchange, he AYERS that they were
| partners. joint adventurers and coad-
| tutors and were not separate, indc-
pendent and distinct firms or partner
| ships"
| Following the discovery of the short
| age in collateral pledged by Chandler
| Brothers Mr.. Barrows traces the alleged
| course which was taken to bolster the
position OF the weaker firm. In his
| complaint he alleges that on December
| TO- 1920, the two firms entered intc an
agreement ito defraud the public and
! became and we're thereafter partners
| and coady enturers In a corrupt plan
| and purpose to obtain trade for Chand
Ter Brothers & Co" The profits of this
| undertaking, he says. were to go to
| Clark, Childs or Co. while the other firm
was to have sufficient funds to defray
| necessary expenses OF maintenance.
| Says Deals Were Bucketed.
! He charges that the brokers there
after had no source Of income except
! from commissions on the purchase and
ralc OF stocks and bonds and other Sc
curities. These deals, he further
charges had to be bucketed. and in this
the brokers acted Jointly in the manipu-
iation OF the accounts OF their customers
Account 502" on the books OF Chand-
Ter Brothers g. Co. was the arrange
ment which Mr. Barrows says made pos
slblc "a systematic bucketlng' Of deals
In stocks. &C. The account, according
to Mr.. Barrows. was used as a short
account ito play the market against
the customers of Chandler Brothers &
Co"
| Discovery of the $1,000, 900 error also
led 10 sales of large blocks Of stock
belonging to the customers of Chandler
| Brothers & Co.. which were pledged as
collateral with Clark, Chllds & Co. II
II alleged. these alleged Illegal sales fol-
lowing n demand for additional mar
gins. which the Chandler firm could not
| put up. At this stage Of the financing
Mr.. Barrow alleges that the con-
federating parties knew that a dis
closure of the truth would cause Chand-
ler Brothers & Co. to go into bank
ruptcy and suspend operations. 80 the
! fraudulent and unlawful device of using
Account 502 was adopted.
| He alleges that the shortages in this
account as of May 1. 1921, were for
stocks In the following shares:
| Pan American Petroleum. 1881;
Pan American Petroleum y, 3,147:
United States steel. 2.s10 Sinclair Con-
solidated oil Company, 32.42f Central
Leather Company. 1862; Shell Trans
port and Trading Company. 200 Gem
eraI Motors Corporation. 1929; Irwin
chile oil Corporation, 1885; Studebakcr
Manufacturing Company, 5,456; vana-
dunn Corporation OF Arv -ca, 1905;