Evening star., 1942-11-10
Stock Fraud Charged
10 Two Banking Firms
And Five Ex-0fficers
Postal Law Violations
Also Claimed in Series
Of Indictments

The Southeastern Industrial
Bankers, Inc, and five of it's for
rner officers were indicted by the
District grand jury today on
charges of selling stocks by fraud
and Misrepresentation. Govern
ment prosecutors said that 1000
investors may lose about $3,000,-
600.
The defendants are:
Clifton M. Eisele, 40, Bethesda,
Md, former president of the South
eastern Industrial Bankers, Inc,
and OF the Southeastern Investment
Co., Inc, a subsidiary, which also
was indicted.
Lewis Eisele, 46, of Chevy Chase,
Md, brother of Clifton, who was
vice president and treasurer OF both
the defendant firms.
One Now in Army.
Ernest A. Hough, 36, former Ger
titled public accountant for the
whole Southeastern System, which
included the parent firm with the
title of Southeastern Industrial
Bankers, Inc, and II subsidiaries
located in the District, Virginia,
Maryland and West Virginia. Hough
is now lieutenant in the Army.
Charles R. Wilson, Sc, a former
vice president of the parent cor
poration.
Harry J. Donoghue, AZ, a former
vice president and secretary OF the
parent corporation.
The 33-page typewriter lndlct-
ment charges all defendants with
ii counts of fraudulent sale OF Sc
curities by use of the mails in viola
tion of the Securities Act Of 1888;
with seven counts of using the mails
to defraud in violation OF postal
laws, and another count OF consplr-
acy to violate these two laws.
Climaxing three-year investiga-
ton by the Securities and Exchange
Commission, the indictment was re-
turned on evidence presented to the
Jury by Assistant United States
Attorney George E. Mcneil, Will
liam M. Malone. regional admins
traitor of the SEC; Ben Brooks, SEC
attorney, and John D. Swartz,
special prosecutor with the Justice
Department. The jury heard evil
dence for two weeks.
S5,OOO,OOO in Stock.
The true bill charged that the
defendants, through false repre-
sentations, sold approximately So
100000 worth of stock in what
started out to be chain OF small
loan companies. Mr.. Mcneil SAID
that stockholders stood to lose
about S3OOO.OOO of their investment.
Most of the investors were persons
of moderate means, such as school
teachers and small businessmen, al
though, some of them lost sums
ranging up to $4,000, Mr.. Mcneil
said.
The defendants sold the stock by
representing that the parent firm
was making money, whereas in fact
dividends paid to the stockholders
were fictitious, the indictment
charged. ....
A scheme was outlined in the in
dictment by which the defendants
would form or acquire certain other
corporations and then lend these
firms money through subsidiaries Of
the parent firm. Through these So
called borrowing companies" the
defendants converted large sums OF
money to their own use, the indict-
uent stated.
Among these companies, the true
bill continued, we're the Connolly
Outdoor Advertising Co.. whose
name later was changed to Rown-
Gaines outdoor Advertising Co.,
Inc: Mckee Auto Service, Inc; Ra-
dio Cab. Inc; Dibb Motors, Inc:
Household Furniture Co.; Acme
Moving g. Storage Co., and the
Woodmoor Development Co.
Claim Secrecy in Dealings.
The Board of Directors of the
parent firm was kept in ignorance
of the type of loans made by the
company, the indictment charged.
The subsidiaries of the parent
firm were listed as the Washington
Industrial Loan Co., the Southeast
ern Discount Corp, the Southeast
ern Discount Co. of Silver Spring
formerly Silver Spring Industrial
Savings g. Loan Coz, Southeastern
Discount Co. of Bethesda formerly
Bethesda Industrial Savings & Loan
Coz, Hagerstown Industrial Saw
ings & Loan Co., Southeastern Dis
count Co. of Hyattsville formerly
City Industrial Savings & Loan Coz