The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1932-10-08
FRAUDLAID TO
5. v. STRAUS
BOND COMPA
Temporary ReceiverShlp Is
Ordered: Enjoined From
Further Deals.
'WCI0US,' IS BRAND
Giant Investment Firm Says
Mortgages Back of
Securities Weak.
VICIOUS IS BRAND
BY OTIS PEABODY SWIFT
United Press staff Correspondent

NEW YORK, Oct. S-s. w.
straus & Co., real estate bond
mortgage firm. said to have sold a
billion dollars worth of bonds in its
more than fifty years history and
having 100000 customers today, has
been ordered into temporary re-
ownership and enjoined from fur
Their dealings in securities.
The application for receivership,
made by Attorney-General John j.
Bennett, charged the banking and
securities house with fraud on the
public generally" Receivership &C
ton was taken by Supreme Court
Judge j. Alfred Norton in Brooklyn.
Joseph Lazarus, assistant to Ben
nett described the firms activities as
vicious and reprehensible.'
He alleged statesmen of the house
we're given bonuses for inducing pur-
chasers to take issues in default,
and that bonds we're sold on prop
critics whereon taxes and interest
we're unpaid without knowledge of
the purchaser.
Fraud Is Charged
He charged that statesmen repre-
sented the house as a first mortgage
institution when bonds sold we're
backed by second, third and fourth
mortgages.
Justice Norton ruled in part:
Il am fully satisfied upon the
record before me that the defend
ants permitted an unsuspecting pub
lie to purchase the so-called 'Straus
bonds in the belief that tfN de-
PENDANT, S. w. Stratus g. Co., Inc,
was issuing same as direct obliga-
ton and in consequence was re-
sponsible for the payment thereof.
After the defendants many years
of intensive advertising to the eff
feet that they issued real. estate
mortgage bonds that were first liens
in every respect, it readily can be
understood that a heterogeneous
public might we'll be misled into
believing that it actually was pur-
chasing first bond mortgages, when
in fact the security received was
one of a junior lien.
Tragical, Says Judge
"A further charge is made that |
at least since January, 1928, these /
defendants sold hundreds of thou
sands If dollars and perhaps an ag-
gregate of millions of dollars worth
of real estate bonds to the public
at a time subsequent to defaults in
the payment of interest and prin-
ciple of the mortgages or in pay /
ment of taxes upon the mortgaged /
property.
These bonds we're represented as
being in good standing at the time
of the sale to the public.
ut is tragical to say the least to
compare the practices as engaged in
by the defendants with the glowing
representations of good faith set
forth in the particular circular is
sued ythe defendants.
Defendants maintain that the in
junction should be denied since they
are usin gtheir best energies to aid
the bond holders in the reorganiza-
ton of defaulted property. No doubt
these efforts are commendable as
evidencing partial atonement Sub
sequent repentance and subsequent
attempted atonement, however, do
not condone prior reprehensible
conduct falling within the proscrip-
ton of the statute.
Received Many Complaints
The states proceedings against
S. w. Straus x Co. have been car
ried on through the late summer
anly early autumn, when Deputy
Attorney General Joseph, who drew
the initial complaint, asserted that
$300,000000 worth of Straus bonds
were in default, and that he had |
received complaints from purchas-
ers who had asserted they had lost
100000 in bonds of the concern.
A statement by S. j. T. Straus,
chairman of the board. had, on Aug.
"a, emphasized that the firm has
been in business for more than
fifty years." that it had conducted
its business along the highest ethi-
cal lines during that entire time.
He denied charges then made and
said that after full and fair day
company's course of business de-