Evening star., 1938-12-14
$60O,000,0OO
Investment
Firm Accused
S. E. G. Files Fraud
Charges in Stock
Sale Plan
4y the Associated Press.

By the Associated Press.
The Securities and Exchange
Commission announced today it had
filed bill of complaint charging
fraudulent practices to the Fidelity
Investment Association, a company
which it said had sold 5000 000, 900
: In securities to the public.
The complaint, which was filed in
Federal District Court for the East
ern District of Michigan, asked that
the company be enjoined from SELL
ing securities in violation of Fed
eral and State laws.
Federal Judge Edward ]. Monet
the Associated Press reports from
Detroit, ordered the company to
show cause by 10 am next Monday
why it should not be enjoined from
using the mails or engaging in inter-
state commerce.
The company has So district Of
fees in leading cities throughout the
country. The main Office is in
Wheeling, w. Va.
(The company maintains Wash
ington branch Office in the Shore
ham Building. Chairman of its
Board of Directors is Washington
resident, John Marshall, a lawyer,
with Offices in the Union Trust
Building. Mr.. Marshall, a former
Assistant Attorney General, could
not be reached for comment on the
commissions action.)
Investment Loan Association.
Carmi A. Thompson, Cleveland,
former treasurer of the. United
States, is listed as president. Direc-
tors include Louis B. Hanna, Fargo,
N. Dak., former Governor of North
Dakota; Howard Sutherland, Elkins,
w. Va, former United States Sena-
tor and former United States alien
property custodian, and John S.
Brookes, jr., Washington, a director
of Republic Steel Corp, Interna-
tional Paper e. Power Co. and Pitts
burgh Steel Foundry Corp.
Col Thompson, the company
president, was in Washington today
and issued this statement after he
learned of the commissions action:
"I' came to Washington for a
regular meeting of our Investment
Committee, and since arriving have
learned that a complaint against
our company prepared by the Sc
curities and Exchange Commission
has been filed in Detroit, Mich.
I have not seen the complaint and do
not know the details Of 1t, nor do
I know exactly what the order is,
although am advised 1t is merely
an order to show cause why the
prayer of the bill should not be
granted.
Not Registered With S. &c.
"Our company is supervised by
the various State authorities where
we do business and we have enjoyed
tremendous growth within the last
few years. We are not registered
under the S. E. c., but this agency
has, nevertheless, been investigating
us, along with practically all other
investment concerns, and I pre-
sumo has concluded that it should
IN some measure regulate our
activities.
when study is made of the
bill of complaint and the order to
show cause a further statement
will be made"
The commissions bill of COM
plant said about $4,000 purchasers
throughout the United States have
sent and are continuing to send in
their monthly payments regularly to
the company through the mails
The company is an investment
loan association. 1t sells investment
contract certificates and bonds call
ing for initial and monthly pay
ments by investors.
The contract provides for either
a lump-sum repayment at certain
date or periodic payments to in
vestors over a period OF years.
The company reinvests the funds.
Fraud Alleged.
The commissions complaint said
the company 'shas engaged and is
now engaging in transactions, prac-
ticeS - which operate - as a
fraud and deceit upon the pur-
chasers of said securities"
1t added that the company failed
to purchase and deposit in trust
enf7ici funds ord otIor eao,,r;<;oc
required by West Virginia law and
by the terms of the various contract
securities issued by the defendant.
It also was charged that the COM
pany purchased and deposited with
We treasurer of West Virginia bonds
and other securities which either
were in default or which failed to
meet the requirements of West Vir-
ginia law.
Another charge was that the COM
pany failed to maintain at all times
q sufficient deposit with the treas
urer of West Virginia and with other
officers and agencies of other States
under the laws of the States in
volved.
Say Directors Benefited.
The commission also declared the
company did through its Invest
ment Committee and directors pur-
chase with moneys of contract funds
and the general fund securities in
so-called special situation in which
ofncers, directors and members of
the Investment Committee of de-
fendant were interested in capacities
tSee FIDELITY, Page A-5O
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