Evening star., 1936-01-06
Conspiracy Count Grows
Out of Testimony in
Recent Trial.
FIVE CALlFORNIANS FACE
PROSECUTION BY S. {. c.
False Statements Alleged on Reg
istration Statements Made
Under Act.

indicted today on cnalee VI con.
spiracy to defraud the Government
as a SEQUEL to startling testimony IN
q recent District Supreme Court tax
trial which hinted of extensive "nx-
ing" of income tax assessments.
Accused in the same indictment
was John w. Hardgrove, formerly
associate chief conferee OF the In
ternal Revenue Bureau, who. with
two others, was convicted here
month ago on similar charge. Hard
grove now is in prison. Those con-
victed with him we're Frank E. Nc
Elhill, New York tax expert. and
Henning r. Nelson, formerly an audi
tor at the Internal Revenue Bureau.
Suspicion was directed against
Pearce through admissions made by
Hardgrove from the witness stand that
he had received advances totaling
$500 from the New Yorker.
Californians Indicted.
The District grand jury also re-
turned today indictments against five
Californians in the first criminal
prosecution undertaken against per-
sons alleged to have made false as
sertions On registration statements
under the securities act. BY a recent
order of the Securities and Exchange
Commission, all such cases must be
prosecuted here, regardless of the
location of the registrant.
In the tax conspiracy indictment.
It Is charged that Hardgrove would
Use his official position to obtain in
formation for Pearce of borderline
income tax cases pending before the
Commissioner of Internal Revenue.
Pearce, it was alleged, then would
seek out the taxpayer and arrange
to represent him, and at the same
time Hardgrove would use his in
fluence to secure a favorable decision.
10 Overt Acts Alleged.
The conspiracy was said to extend
back as far as 1927. Nineteen overt
acts we're alleged. Numerous large
tax accounts were said to be involved,
among them those of the New York
Title and Mortgage Co.; the Bogota
IN. J.) Paper and Board Co.; the
estate of Pedro r. deFlorez of New
York City, and Charles Tfsch of
Brooklyn.
United States Attorney Leslie c..
Garnett brought out during the prose-
cution of Hardgrove, Nelson and Nc
Elhill that Hardgrove banked more
than $81, 900 in excess Of his Govern
ment salary between 1924 and 1884.
Hardgrove denied the accuracy of these
figures, but admitted having outside
income, saying he won $4,000 on
horse races.
Numerous conferences between
Pearce and Internal Revenue officials
and the making Of numerous checks
are among the overt acts cited. In
several cases the date of the check was
just prior or subsequent to a confer
ence.
Seven Checks Mentioned.
Seven checks. in all, were mentioned
In the true bill, six Of them CORE
spending to advances Hardgrove ad-
mitted under oath he received from
Pearce. These ranged from $500 to
$4,000, and eventually were secured
by $500 mortgage Hardgrove gave
Pearce on his home at 1725 Varnum
street after investigation of his ac-
tivities began. Hardgrove admitted he
never paid interest on any of the So
called loans until the mortgage was
executed in September. 1884, al
though some Of them dated back to
1928.
The seventh check was for $1.250
and was executed March 30, 1929. Just
13 days before Hardgrove approved
o settlement in the tax assessment
against the Bogota Paper and Board
Co., involving q sizable refund.
Hardgrove was said to have ap-
proved the report on the assessment
against Charles Tisch in June, 1928,
ive days after he received a check
for $500 from Pearce.
Trio Convicted by Jury.
The original case against Hard
grove. Nelson and McEh:ll involved
an offer to clear up" a $4,000 in
come tax assessment of Thomas N.
McCarter, New Jersey public utilities
masnate, for a fee Of $4,000.
The three were found guilty by
Jury and sentenced to serve from four
months to two years in prison.
The indictments returned today
charging violation of the securities act
concern officers and employees of the
Big Wedge Gold Mining Co. of Los
Angeles. False statements concerning
corporate organization and the value
Of mineral deposits under lease by the
company were alleged.
Those charged were E. J. Harrison,
formerly Of Shanghai and Manila,
who invested considerable sum IN
the Big Wedge when it was organized
In the Spring of 1894: Hy Schwartz,
Los Angeles attorney; Max e. zim-
mon, sportsman and formerly in the
jewelry business in Los Angeles, and
William Molloy. said to be associated
with Schwartz, all OF whom were con-
nected with the company and signed
its registration certificate. and Harold
A Pelton, mining engineer, who made
the allegedly untrue geological report.
The company's first statement was
filed July II, 1884, and amended Sep
tember 10. 1884, when Pelton's report
was appended to 1t.
Pelton was charged in separate
Indictment. The first count alleged
the engineer stated leaseholds of the
company in Inyo County, Calf, were
Of great commercial value for the
mining Of ore." whereas they were
worthless for mining purposes.
The second count branded as untrue
reltons statement that q group Of
unpatented mining claims Ill miles
northeast of Lone Pine. Inyo County,
Cahfs contained 250,000 tons OF
hlocked-out ore valued at $2,125, 900.
sThe indictment against Harrison.
schwartz. Zimmon and Molloy alleged