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in that way. Furthermore there hasn't nels the record of each man in the combeen any favoritism about refusing the pany was obtained. Probably no fewer applications that have been turned down. than a thousand different sources of inKansas corporations have been turned formation were tapped, the net result of down just as quickly and just as coldly which was that the certificate was reas foreign corporations.
fused. Taken all together, these inquiries For instance, a railroad, which, if con- have extended into every state in the structed, would very likely be a good Union, Canada, Mexico, Central and paying proposition, has been projected South America, Europe, Japan, the Philthrough a part of the state which needs ippines and South Africa. Generally just such a line. Farmers and business speaking, banks are the best sources of men in several towns have given consid- information, because the banker has a erabie money toward it in the way of lively interest in protecting his depositors bonuses and some work has been done. against fraud. The state bank examiners Application was made for permission to 'act as a sort of detective force, also, picksell stock and the correspondence in the ing up here and there stray bits of informatter, representing inquiries into every mation which often prove quite valuable. phase of the company from the legality One of the numerous land development of its charter to the birth records of the companies was found to have no other promoters, makes a file fully two inches asset than a cancelled concession in thick. The application was refused, first Nicaragua to a tract of land which, even on the grounds that the company had no if the concession were valid, could be assets, and second, because the character bought from the government at twenty of the men promoting it was not deemed cents an acre. The company had stocked by the bank commissioner to constitute a this at five hundred dollars an acre. The sufficient guarantee of the proper disposi- plan, of course, simply was to sell all the tion of the proceeds from stock sold. One stock and let the stockholders fight it out of the promoters, for instance, was found with the government of Nicaragua and to have "jumped" a board bill in a dis- get, if they won, land which was worth tant city, and later to have become en- just one twenty-five hundredth part of tangled with the postoffice department what they paid for it. so seriously as to have been forced to A majority of the applications made take an involuntary “rest cure" for a year to the bank commissioner have come or so.
from mining and oil companies. These The file of correspondence in that com- present the most difficult problem under pany's case is a good example of the the law, because only an expert is quali- : manner in which the “Blue Sky” Law is fied to pass judgment upon an oil or minapplied.
ing property—and if the property is in "We don't take any man's word for an oil or mineral district any man's guess anything," is the keynote of it, and while is as good as an expert's opinion on an it may appear that the thing is carried undeveloped property. It is the miner's to the extreme, Mr. Dolley estimates that axiom that “Gold is where you find it.” the few thousand dollars the bureau has So is oil. About the best that can be cost the state has saved the investors done with these companies is, when the already no less than a million and a half property is in a recognized oil or mineral dollars. The first thing that was done district, to base the action to be taken when the company applied for a certifi- upon the character of the men who comcate was to call for a copy of its charter, pose the directorate. Then Mr. Dolley by-laws, balance sheet, promotion litera- plays safe by refusing certificates to ture, blue prints, and references for each nearly all of them. In mining and oil of the officers of the company. Every stocks the safest rule to go by is that promise, estimate or possibility in the nobody is giving anything away. If a literature was noted and each man given group of men have a gold mine with as reference was written to. At the same reasonably good prospects—and bear in time, through confidential channels, the mind that the only mine with a reasonmen given as references were investi- ably good prospect is one that algated, and through various other chan- ready is "in ore”—there is no need for
THE BLUE SKY LAW
them to sell stock-in other words to contract was then sub-contracted to an give away part of their mine for less agency company. Stock on both comthan it is worth. The same holds good, panies was sold to investors and it is estiin a general way, with oil companies. mated by Mr. Dolley that not less than
One of the "mining" companies, for $100,000 of the two stocks was sold which a certificate recently was applied in Kansas, some of which was sold even was found to consist of the keeper of a after the life insurance company had desert water-tank grocery store, a saloon- learned of the fraud and cancelled the keeper, a gambler, an employee of a liv- contract, which was the only asset of ery stable, the porter of the saloon, and both companies. the clerk in the grocery store. The mine Wireless telegraph companies also was a ten-foot hole in country rock that .
have offered a big field for wouldn't assay a dollar to a million tons.
fraud in the last few years. Another com
One of them pany, composed
disposed of an of a bunch of
enormous gamblers, had
quantity of located half a
stock in Kandozen claims on
sas before poststate school
office inspectors land already
raided the comunder lease, to
pany's office which the com
and sent sevpany couldn't
eral of its offiget the shadow
cers' to prison. of a title. The
In Topeka, the land had ore,
state capital, all right, but
alone, Mr. Dolthe only thing
ley found stock the stockholdHow's This FOR PAINSTAKING CARE?
for which $80,ers could get The correspondence in the investigation of one company made a file 000 had been
two and a quarter inches thick. out of it would
paid, and found be the right to
only part of sue the state for possession.
what had been sold. Probably there was With manufacturing, plantation or irri- at least $20,000 more invested in the comgation companies, it is a simple matter pany in that one city, and not one cent almost at once to decide the merits of of it ever will come back. Widows, the securities offered for sale. One Ari- elderly maiden ladies who hoped to lay zona company, for instance, offered land aside enough to afford them a compe"close to the Roosevelt Dam.” It was tence when they should be no longer able close, too, but it couldn't have been to work; young men investing for the watered for a million dollars an acre. same reason, and business men who Just the opposite was a Gulf Coast town wouldn't put a cent into a legitimate site proposition where it would have re- manufacturing enterprise in their home quired a deep sea diver to set the sur town, all were caught. veyor's stakes.
Such instances might be multiplied to Another favorite form of swindle is an indefinite length, but they may be the life insurance agency. The investor taken fairly to illustrate what no longer believes he is buying stock in the com- is going on in Kansas, but which is going pany itself, but as a matter of fact he on in every other state. People are being simply is buying stock in a company swindled right and left, without the which has a contract to write insurance slightest compunction on the part of the for some established company—a mighty swindlers or any fear of the law. The doubtful asset at its best. For instance, lawmakers are too busy protecting their there was a certain company in Detroit constituents against the “rapacity” of the whose only asset was a contract to write railroads and other forms of legitimate insurance for a certain percentage. This industry into whose securities the people might put their savings if they were not one defect, and it will exist either until frightened away from them by the law- every state in the union has enacted a maker's cry of "wolf.”
. law similar to the Kansas statute, or until The value of a law such as the Kansas the government requires the same con“Blue Sky” law lies, of course, in its ditions of the investment companies that enforcement. Enforced partially it is is required in the Kansas statute before nearly as bad as no law at all, but en- permitting them the use of the mails and forced impartially, and by giving the in- express companies. As the situation now vestor the benefit of the doubt, it is bound is there is nothing to prohibit the fake to save—and is saving—the people of investment companies from advertising Kansas, millions of dollars. And Kan their insecure securities and transacting sas is fortunate in having such a law and a large business through the mails before in having it impartially enforced.
the postoffice inspectors can ascertain the But Kansas is not alone in profiting by status of the company and obtain evithe law. The little corner of Mr. Dol- dence which will warrant the arrest of ley's office, set aside for the one clerk the swindlers for using the mails to who was expected to handle all of the defraud. routine work pertaining to the enforce- The work of the postoffice department ment of the law, has grown into a na- has been greatly facilitated, however, by tional institution which might well be co-operation with the Kansas banking decalled a national bureau for giving free partment, whereby information of fake advice to investors. The one clerk has stock and bond companies regularly is multiplied into two clerks and three ste- exchanged. The information furnished nographers who are kept busy six days by the Kansas banking department has in the week answering inquiries that resulted in the arrest of a number of come from every state in the union as to fake promoters and the driving of several the advisability of purchasing stock or others out of business. The difficulties bonds in this or that company, or under which the postoffice department whether investments already made are works are so great, however, that, as considered safe. In one week, by actual shown in the annual report of the Decount, there were 842 letters of that kind partment of Justice, only ten cases of received from other states.
that kind were brought before the courts In addition to this heavy correspond- in the last fiscal year, while there must ence, every letter of which is answered be anywhere from a thousand to five with all the information considered neces- thousand companies whose stock is for sary, come hundreds of letters thanking sale but is worthless at any price. Mr. Dolley for warnings already ex- So far as the states are concerned, it is tended.
probable that within another two years “God bless you for your work, you a majority of them will have laws similar have saved me from ruin," is not an un- to the Kansas statute. Every day's mail common statement in them. Some of brings to Mr. Dolley letters from memthem are pitiful. “I have invested every bers of the legislatures of other states cent I had in Blue Sky Consolidated. Is asking for copies of the Kansas law with there any way I can recover it?" is the a view to drafting a similar measure. question contained in hundreds of the Every state in the union is represented letters. The majority of these letters in these letters, and in one case, Missouri, are from women, whose writing and sta- ten members of the legislature were reptionery indicate a station in life where resented. Five requests have come from their little savings have been a fortune to other countries. them. After reading half a dozen of “I never dreamed of the extent of the them, one rather wishes the law provided swindling operations carried on by dealthat any male, able-bodied citizen mighters in stocks and bonds until I heard of take an axe and send a few of the Blue your Kansas law and made an investigaSky peddlers in the opposite direction tion here at home," an Illinois legislator from the location of their stock in trade. wrote. “My investigation was neither
In this admirable plan for the conser- extensive nor deep, yet it leads me to vation of the poor man's money, there is believe that three out of five persons in THE BLUE SKY LAW
the ordinary walks of life who have the Brothers,” were the Kern-Western Oil saving habit have been swindled at some Company, the Coalinga Aladdin Oil Comtime or other in the purchase of worth- pany and the People's Associated Oil less stocks. If the conditions I found in Company. A list of seventeen companies, my own neighborhood obtain throughout all of which had gone out of existence, Illinois, the swindlers must have obtained also was given, in all of which the Burrs millions of dollars."
sold stock. According to the postmasterOnly a few days ago four members of general, not one of the twenty-eight comthe firm of Burr Brothers, one of the panies, for which the Burrs sold stock most successful promoters of worthless “has paid a dividend and most of them stock in the country, pleaded guilty in are failures." the United States court in New York to A postal inspector, who was in charge a charge of using the mails to defraud, of the offices after the raid said: and were sentenced to one year each in “Burr Brothers played fast and loose the penitentiary on Blackwell's Island. with their clients and the most pitiful Shelton and Eugene Burr, president and feature is the manner in which widows secretary-treasurer of this company, were have been fleeced on absolutely worthless born and reared in Leavenworth, Kas. stocks. Mrs. Laura E. Lawrence of Their offices in New York occupied an Philadelphia had invested $4,000, the entire floor of the Flatiron Building and amount of life insurance she had repostal inspectors who raided the offices ceived at her husband's death, in worthand arrested the members of the com- less mining stock. Mrs. David Crabb, a pany November 20, 1910, estimated that poor widow with a large family, had inthey had taken in somewhere between vested all her savings, $2,500, in absoforty and fifty million dollars.
lutely worthless oil stock. The first day's Mr. Dolley estimated at the time the mail after the raid brought in $650 in arrests were made that something like cash and $20,000 in money orders, in $300,000 of that amount had been re- addition to which there was a large ceived from Kansans. Later, when it bunch of telegrams, making reservations was learned that the Burrs, through their of stock, from deluded victims who were wide acquaintance in Leavenworth, had afraid they would lose the chance to be sold large quantities of stock there, the swindled out of their money." estimate was raised to one-half million Wisconsin is the only state which has dollars. Out of their operations, the four a law the effect of which is designed to partners in the Burr concern are esti- protect investors, but it has failed in atmated to have made fifteen million dol- tempts to enforce it, in the work it was lars, and they had just entered upon an designed to do. But the Wisconsin law advertising campaign which would have will be amended or repealed and a new cost one million dollars when the postal law enacted, for a number of legislators authorities arrested them.
in that state have asked for copies of the After the raid, Postmaster-General Kansas law.. Hitchcock, who was in personal charge So, the poor widows of Kansas, who of the raiders, gave out an official memo- gave their little all in exchange for worthrandum which showed that when the less sheets of gaudy paper have not lost Burrs ran short of stock in companies in vain. They have been the instruments already organized, they organized new for putting on the Kansas statutes a law companies to keep up the golden stream which has saved millions of dollars for which poured in on them. Among the those who could not afford to lose it, and stocks which were entirely sold out and for awakening the legislators in other of which the postmaster-general said, states to one of the cruelest systems of "the greater portion of the money evi- robbery that has ever flourished anydently has gone into the hands of Burr where in the world.
of thethe Pacific.a broad high
OUT on the
Aleutian dots of land Pacific
form the earth's most Coast they are By William Thornton Prosser agitated volcanic redeveloping the
gion. Half a hundred fascinating idea of a broad highway, in volcanoes have been counted west of sight of the Pacific, from the southern Cook Inlet, some of them smoking and tip of the South American continent to quavering, and throwing ash and lava the snows of the Arctic Circle. It is not far and wide, while the famous Bogoslof beyond the pale of probability that some Islands, just off the route of steamship day this highway may not only be com- travel into Bering Sea, rise high in the pleted, but may cross to Asia on a new air and sink again into the sea with an continent arising to link the old and the attendant demonstration of such grandniew hemispheres, where Bering Sea's eur and awe-inspiring magnitude as eye shallow waters now ebb and flow, and so witnesses declare will be their most vivid continue on through Siberia, and turbu- remembrance until their dying day. lent Cathay until it terminates in sight of Even in the gulf of Alaska the restless the Atlantic.
forces of nature are extremely active, for But it is not this highway that inter- within the last two or three years submaests us here; it is the possibility that the rine mountains have suddenly arisen in fires of earth now disturbing southwest- the depths of the sea, snapping the govern Alaska and the 1,000-mile chain of ernment's Alaska cable in twain with Aleutian Islands, will combine with other such a jerk that the ends, on one occacauses to raise the floor of Bering Sea sion, were separated by more than a mile. until it emerges high and dry, joining Repeatedly has the copper strand been the Americas with Asia, the Occident separated in this way, and soundings with the Orient, man's newest conquest have shown the earth to have arisen with the cradle of his race.
much nearer the surface of the gulf than Nor is this possibility so remote, for it was ever known to be before in that the western reaches of Alaska with the particular locality.