Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-12-10

from said persons to be defrauded.
THE said defendants would, and did,
from time to time, organize various cor
porationS, the affairs of which corpora
tions would be controlled and directed
by Henry G. Maddux and certain of his
agents acting under his direction and
control, to the end that each of these
corporations would and did respective
ly acquire the title to certain real and
personal property which was heavily in
numbered by deeds of trust and mort
cages"
The report then details the method
of financing these enterprises, which
resulted in the investigation by the
grand jury.
The report outlines the manner in
which bonds were issued, bringing in
Representative Zfhlman's name for the
first time at this point as member of
the board of directors which authorized
such action. Referring to the board of
directors, the report says: by virtue
of the respective ofices held by them.
they had and exercised at all times in
this and in all subsequent counts of
this indictment mentioned, q certain
power of control, direction and man
agement of the affairs Of the r. H.
Smith Co., including the offering, ad-
vertiSing and sale of said bonds to said
persons to be defrauded in the manner
dAAO Uy tLC HlCdLlS z1OKcSdl1ss A.
1T was part of said scheme and
artifice that defendants on December 3,
1928, would and did incorporate under
the laws of Delaware the Properties
Investment Corporation and that aaid
defendant, Henry c. Maddux, would
and did become president thereof.
Through this corporation the defend
ants. on December 10, 1928, acquired
title to certain real estate and personal
ira NlHaT i1kS - (Nr1, hafa
Owners Are Listed.
The report then sets forth in detail
various lot numbers, with the names of
the owners from whom title was ac-
/ quired.
Referring to the Hamilton Hotel, the
report says: THE Properties Invest
ment Corporation acquired the property
for approximately the amount of the
mortgage Indebtedness then existing
81 100000. On December 10 they
caused a secondary and inferior
mortgage on the Hamilton Hotel to
be made and executed, purporting to
secure the payment of a bond issue
of S1,250,000, said bonds being wholly
in excess of the true value of the un-
incumbered equity of the corporation in
the Hamilton Hotel and wholly beyond
and in excess of any sum that the
corporation could pay; and that the
defendant did cause to be issued other
bends in the sum of $1,050,000, with
the former $1.250,000 issue pledged as
the principal purported security for the
payment of the subsequent bonds. The
secondary bond issue was sold by the
F. H. Smith Co. to various persons as
being ultimately secured by said sec
ondary and inferior mortgage through
pledge of the said bonds issued in
connection with that mortgage as afore-
said. The bonds were further repre-
sented as being secured by a pledge of
the capital stock of the corporation, all
of the defendants we'll knowing and in
tending that the said bonds of each
one of those two issues would be and
were wholly in excess of the true value
of the equity of the corporation in the
property described in the mortgage.
The capital stock of the corporation so
pledged was wholly worthless as security
because the liabilities Of the corpora
ton, increased by the mortgage. and
bonds, were far greater than the value
of its assets.
Advertising Matter.
THE defendants placed letters, cir
culars and other advertising matter in
the United States mails and did pub
lish therein, among other things. false
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