The Idaho Republican. [volume] (Blackfoot, Idaho) 1904-1932, 1923-07-12
LOCAL MEN WIN LAWSUIT

! Seventeen people of Shelley, WHIT
made some bad investments three o.
four years ago have just recent.
| won a lawsuit that entities them tt
again get possession of some liberty
bonds that have been awaiting 6
court decision to see who they be
long to.
Some folks organized what they
called The Liberty Insurance com
pany, and then organized two othel
corporations to sell the stock of the
insurance company. They then made
contracts between the insurance
company and the sales companies by
which those who did the selling were
to receive the big end of the money
obtained from the sales, the com
missions running as high as $66 pei
hundred dollars of sales.
Their mode of operating was tC
sell insurance stock as par, and get
as much money for it as they could,
and take liberty bonds at par for as
much more as they could. This was
at time when everybody had some
liberty bonds and did not know what
to do with them, so the sales were
rather easily made.
The insurance company is re-
quired by law to deposit gilt-edge
securities in the states where it does
business, so these people deposited
the liberty bonds in local bank near
where they were-bought. After they
had worked a community and de-
posted the bonds in the bank, TAX
ing certificates of such deposits as
evidence of their presence in the
bank, they would go to some other
bank and borrow money on the
bonds, or rather on the certificates
of deposit, and would endorse the
certificates and surrender them to
the bank making the loan to them.
In this way the sales company got
more than enough cash to pay them
selves the commissions for making
the sales, and it did not matter so
much that there was little left for
the insurance company proper. 1t
seems that the chief interest lay in
the sales and the sales company.
Further on in the line of events,
the stockholders became interested
in the welfare of the company it.
self, and on learning that it had very
little of assets, they applied for re-
lief and the return Of their liberty
bonds which were still lying in the
local bank, but which had in reality |
been sold, or left as collateral on the
loan.
The seventeen investors at Shelley
brought suit to show fraud for the
purpose of determining who should
take possession of the bonds, the
people who had sold them outright
and delivered them, or the people
who had loaned money on them and
we're holding the receipts or certifi-
Gates of deposit. The case was tried
in the district court at Pocatello and
decided in favor of the banks that
held the receipts. 1t went up to the
supreme court Of the state on appeal
and was reversed, so the Shelley
people receive their liberty bonds
back when they are worth par or
better. The cash they paid out in
he deal, and the money they have
spent in the litigation, Of course Is
OSt.
The suits were brought by L. Ivan
Jensen of Shelley and r. w. Adair of
3lackfoot, and when Mr.. Adair be-
zane district judge, ] w. Jones of
3lackfoot took Adair's place, and
conducted the trial at Pocatello and
he appeal at Boise.
1t is said that the sales of stock
we're made in violation of what is
lnown as the "Blue Sky law" that
equires persons offering to sell
took in any organization, to submit
he whole proposition to the secre-
airy of state and get his approval
md certificate that it is sound and
worthy investment. Not every
,cdy knows about this law, and
many who know about it do not
now how to proceed to secure pro-
ection under it. If they ask to be
hown the certificate of the secretary
f state, the salesman probably has
ONE plausible way of side-stepping
! and allaying suspicion, so II a man
) bold enough to ignore the law he ]
lay be able to separate people from
money and leave the .
tate before an investigation reveals
ne fraud.