Evening star., 1943-07-04
investors Syndicate
Hearing Scheduled :
For Next Friday
~ the Associated Press.

Securities and Exchange Com
mission moved today In Federal
District Court here for a re-
straining order to halt what 1t
termed fraudulent practices" on
the part Of Investors Syndicate
Of Minneapolis and two assoc
lated firms having combined as
sets Of more than $200, ,000, 900.
The SEC said it was the biggest
case it had ever handled.
In q statement issued by E. E.
Crabb, head of the three Arms, he
said, I'VE firmly deny these charges.
This action does not question the
solvency of these companies and no
certificate holder needs to be dis
turbed as to the soundness Of his in
vestment." he added.
Hearing Postponed.
Hearing, scheduled today, on the
SEC motion for q temporary re-
straining order, was postponed un-
til 10 am. Friday by Federal Dis
trict Judge Gunnar H. Nordbye at
the request of syndicate attorneys.
Business Of the firm Is frozen"
pending the hearing.
Named in the 16-count complaint,
filed Friday. were Investors Syn
dicate and Investors Syndicate OF
America, Inc, both Minnesota cor
porations. Investors Mutual, Inc, q
Nevada corporation, and SO prin-
cipal officers, directors and employees
Of the firms.
A demand for appointment Of
receiver for Investors Syndicate cli-
makes four SEC requests, including
those for temporary restraining or
ders and for preliminary and final
injunctions. Only question before
the court Friday, however, will be
issuance of the temporary restrain
ing order.
SEC Warns on Loss.
In its complaint the SEC stated
that unless the temporary restrain
ing order is granted immediate and
irreparable injury. loss and damage
will result to many thousands OF
certificate holders throughout the
United States.
such restraining Is necessary to
prevent these corporate defendants
from profiting by any change in the
position of certificate holders and
to prevent multiplicity OF suits and
TO permit the court to do complete
equity and justice ."
According to the complaint. In
vestors Syndicate sold certificates
with q face value of more than
81 500 900 900 to investors through
out the country between 1925 and
1910.
The complaint alleges that since
January 1. 1s4l. Investors Syndicate.
rs principal underwater of the
other two Arms, has been guilty OF
gross misconduct and gross abuse
Of trust" in respect to the firms, in
"salesswitching operations and Of
fers Of exchange involving double,
loading deductions, fees, charges
and selling commissions"
Sales switching" is persuading an
investor to sell one security and
buy another. which makes it pos
sible for a salesman to obtain a Sec
ond commission. a practice known
as double loading" Mr.. Crabb de-
MED in his statement that methods
used by his company come under
these headings.
I'VE understand" he said in his
statement, that one Of the prin-
making of premium cash offers to
our certificate holders. These offers
have been made for a number of
years and the SEC and the Nationa.
Association Of Securities Commits
sioners have had knowledge Of such
premium offers since 1889"
SEC Charges Deception.
He added orally that certificate
holders who did surrender their Sc
curities in response to premium Of
fers were not required to buy other
securities and that two-thirds Of
them did not.
The company also is charged with
offering and selling shares Of certif-
icates of special series for cash and
lin exchange for its own outstanding
certificates. by means Of misrepre-
sentation Of material facts. includ-
ing the relations of the corporate
defendants to the war effort. to the
United States, to the Securities and
Exchange Commission, and to each
other, by means of omission to state
material facts. including fees and
charges and by means of false and
misleading comparison with United
States War savings bonds
The commission accused the group
of telling prospective investors that
the purchase of mutual shares "ac-
complishes the identical purposes
of the purchase Of War bonds and
"vitally aids the war effort: that
such shares were "safer" than War
bonds and yield more"
In his statement Mr.. Crabb de-
clared that certificate holders, as Of
May l, could have demanded $143.-
TAG, 6,532.29, from the company, which
he said mad quick marketable as
sets Of $l72.338. 1890.
This represents a margin OF over
1913 per cent" he went on. These
assets had a market value of at
least $4,000 more than book
value on May 81. 1943. In addition
to these assets. represented by cash,
bonds, FHA insured mortgages and
other mortgages. the company owned
on the same date over $4,000, 900
worth of other sound assets"
Airport Has Hostesses
Ground hostesses" are being en-