THE BOGUS MINE.

$100,000,000 EACH YEAR LOST BY INVESTMENTS IN FAKE MINING SCHEMES.

To what extent investment swindlers have operated in Illinois will never be known, for some of them have so thoroughly covered up their transactions that it will be impossible to disclose them. This is especially true of a class of mining companies, the promoters of which remained in the background while their dupes were gathered in by seemingly respectable residents. These concerns operated by giving blocks of stock into the hands of unscrupulous men with good or fairly good reputations, and the latter disposed of it to such unsophisticated acquaintances as could be easily gulled.

Gold and silver mines in Colorado, Nevada, and Utah furnished the basis for most of these swindles. Sometimes the company really had an old mine or claim that had been abandoned, sometimes it had a lease on some worthless piece of property that was "about to be developed," but frequently it had nothing more than its gaudy prospects and its highly decorated shares of stock to give in return for the money it received. Money-grasping church deacons were the favorite agents for these swindles and widowed women without business judgment their most common victims.

It is estimated that in this country every year nearly $100,000,000 are taken out of the savings of people of limited means by financial fakers, especially mining and oil fakers. During the last five years Detective Wooldridge has observed the "financiering" of several thousand fake companies, each of which secured a great deal of money from ignorant people.

Bands of swindlers repair to mining camps and establish branches there. They expend a few hundred dollars for shreds and patches of ground void of present or prospective value.

They then form a mining corporation, place its capital stock at some enormous figure—a million, two or three million dollars—appoint themselves or some of their confederates, or even their dupes, directors, and sell the worthless claims to the company for a large proportion, or perhaps, all of the capital stock of the company.

The stock must be disposed of with a rush. It must all go within a year or shorter time. When it is gone the suckers who get the stock for good money may take the property of the company. They always find an empty treasury, worthless claims, and the rosy pictures that led them astray, smothered in the fog.

During the last five years the advertising columns of leading newspapers have been full of offers of mining stocks as "sure roads to fortune." Nearly all of these mining companies, into whose treasuries the public has paid millions, have either been abandoned or the properties have been sold for debts, and invariably they bring very little. The major portion of receipts of these companies from the sales of stock is stolen by their promoters.

Official statistics of the mining industry show that out of each one hundred mines, only one has become a success from a dividend-paying point of view. About five earn a bare existence, while the balance turn out utter failures.

Promoter's Word Valueless.

Investors will do well to consider that stocks of mines which are only prospective are the most risky form of gambling. In buying stocks of the undeveloped mines offered to the public on the strength of statements the only substance of which is the imagination of promoters, one runs up against a sure-thing brace game.

Don't take the promoter's word for it. When you wish to place money where it can work for you, don't bite at the first "good thing" you see advertised. It is to the interest of the man who wants to sell you stock to place it before you in the rosiest light. Otherwise he knows you would not buy it. If you want to buy stock, don't rely upon what the seller says, but consult others.

Before consulting persons whom you think may be able to express an honest and intelligent opinion, ask the promoter to furnish you a statement of the condition of the company, showing its assets and liabilities, profits and losses, and an accurate description of its property.

You will then be able to judge whether the company is over-capitalized; whether it is incumbered with debts (for debts may lead to a receivership), and if its earnings may lead to permanent dividends.

Also ask for a copy of the by-laws of the company. If, with such information at your disposal, you cannot get a correct idea as to whether the stock is desirable or not, consult your banker or somebody else in your community who may be able to advise you.

If some one offered you a mortgage on a certain piece of property, common sense would tell you to ascertain whether the property is sufficient surety for the loan, or if the title to the property is good and there are not prior incumbrances on it.

The man who would buy a mortgage without ascertaining the value and condition of the surety, would be considered an idiot.

Why not use the same precaution when buying stock? Don't believe what the promoter tells you about the value and prospects of the stock he wants to unload on you. Don't take it for granted the stock offered you will turn out a great money-maker and dividend-payer because the promoter tells you so.

The promoter, generally a person from another city and entirely unknown to you, has no interest in you, but is prompted by his own selfish interest to sell you something which, in many cases, he himself would not buy. He may Offer you a good thing, but it is up to you to find it out.

Investigation Necessary.

In most cases, an intelligent investigation will prompt you to let alluring offers of great wealth for little money severely alone. The observation of the common-sense rules outlined above will save investors bitter disappointments and heavy losses.

It is safe to say seventy-five per cent of the so-called "Mining, Plantation and Air Line" schemes and "Security" companies now paraded before the public in flaring advertisements in the daily papers, and through glittering prospectuses sent through the mails, are vicious swindles. Men who operate these frauds pretend to be honest and high-minded. By constant practice of their wiles upon others they develop self-deception and come to believe in their honesty to such an extent that when questioned, they assume a good counterfeit of honest indignation.

Most of them do not own the furniture in the offices they occupy while swindling the public. It is a common practice for them to rent offices in national bank buildings and to furnish them with rich furniture bought on the installment plan, to make the necessary "front." They spend their cash capital for flaring advertisements, sell as much stock as they can induce the gullible public to buy, and then decamp, leaving unpaid bills for advertising, if they can get credit after their cash is exhausted, and their furniture bill unpaid. The absconding swindler is usually succeeded by an "agent" or "manager," who repudiates the bills against his rascally predecessor and continues the work of fleecing the gullible under some new title or by means of some new trick.

Keep Lists of Suckers.

Every well-equipped fraudulent concern acquires the names and addresses of susceptible persons. Painstaking revisions of the lists made up of these names and addresses form an important part of the labor of the principals or employes. The lists grow as each advertisement brings inquiries from persons who, either through curiosity or desire to invest, write for particulars. Affiliated swindles operated in succession by a gang of "fakers" use the same list of "suckers."

In affiliated swindles if the "sucker" does not succumb and remit his money on the inducements offered by one concern, his name is transferred to the lists of another, and he is then bombarded with different literature. Thus a man must pass through the ordeal of having dozens of tempting offers made him before he demonstrates that he is not a "sucker," or has not got the money. His name is then stricken from the list.

There are so many "get-rich-quick" operators at present that competition between them has become strenuous. They are now infesting the entire country with local solicitors, who frequent saloons, hotels, and even residence districts, where victims are found in foreigners, ignorant servant girls and inexperienced widows.

These solicitors get 50 per cent commission on all sales of stock. This fact in itself is evidence that the propositions are rank swindles. When the swindling operator finds things getting too hot he disappears from his office and bobs up in some new place with a new proposition.

Pecksniffian Tears Delude.

A few attempts have been made to prosecute the swindlers, but for the most part the local officials have failed. In but few instances have the victims been able to give anything like intelligent statements of the representations made to them. Where the right sort of agents have been used the people who have lost their money have not awakened to the fraud passed upon them. A few Pecksniffian tears have deluded them into the belief that the swindlers as well as themselves were victims of some third party who is in another state and out of reach.

Where cases have been brought to trial it has been a difficult matter for juries to understand how the persons aggrieved could have been caught with the sort of chaff thrown to them, and there has been little disposition to show charity for the victims. Then, too, the men hauled before the courts have always made it appear they were in the same boat with the complaining witness, and that the culprit was many, many miles away. So, usually, they have escaped.

Difficult to Convict.

Even in the most flagrant cases and where every advantage was taken of the ignorance, inexperience or trustfulness of the person deluded it has been difficult to bring the offense under the state statutes. It requires more than ordinary misrepresentation and lying to make out a criminal case, and under the rules of evidence which prevail it is almost impossible to overtake a cheat who has not put his misrepresentation into writing or made them in the presence of third parties.

Where the swindlers have used the mails, however, it is not such a difficult matter to convict. The United States is scrupulously jealous of its postal service, and under its statutes every fellow who undertakes to utilize it for improper purposes can be brought to book. He can not hide behind some one in another state, for the federal jurisdiction is general and the other man can be brought in. Nor can he plead that the business was legally licensed in another state, or that its incorporation was regular. If it was a cheat and the mails were used in furtherance of its design, no corporate cloak thrown around it by any of the commonwealths can save the promoters.

Power of Uncle Sam.

An example of the power of the federal authorities was given when Secretary of State Rose of Illinois was trying to keep the swindling investment companies out of the state. This was before the enactment of the present law regulating the licensing of corporations. A number of concerns had been formed in southern states, and they were insolently demanding licenses to do business in Illinois. The secretary of state was powerless under the Illinois statutes, but when the matter was called to the attention of the federal authorities they wiped out the whole lot of companies with a postal fraud order.

Wooldridge Finds Smooth Scheme.

Detective Wooldridge, in looking into many of these mining frauds, discovered one or two which proved quite a revelation even to the United States authorities. This was a system of "kiting" stocks, just as other fraud concerns have been known to kite checks. The method is very simple.

James Johnson, of Indiana, is "roped in" by one of the smooth young men who operate for the schemers. James buys 500 or 1,000 shares in the Holy Moses mine, located in or near Goldfield, Reno, Rawhide, Cripple Creek, or some other well known mining camp. The "Holy Moses" is a hole dug in the side of a hill, and all that will ever come out of it is soil. But that part does not matter. Under certain strict laws now prevailing only so much stock can be issued even by the schemers.

James Johnson holds his thousand shares for three months. By this time all the stock has run out and the firm is at the end of the rope, apparently; but no, they have found a way to stretch that rope.

William Wilson, of Michigan, is clamoring for a thousand shares of the "Holy Moses." There is no stock to sell him, and if any more is printed and issued the waiting detectives will swoop down at once, for word has gone forth that the "Holy Moses" is a non-producer. How to get that thousand shares for Wilson is the problem.

"Holy Moses" Rises?

Aha; it is easy. A letter is drafted to James Johnson, bearing to him the gladsome news that "Holy Moses" has gone up, away up, and that the stock is mounting by leaps and bounds. Does James Johnson wish to sell his stock at a substantial advance? James Johnson does.

Well, the philanthropic owners of the "Holy Moses" will put that stock on the market for him at once and send him the proceeds, if he will kindly send in his stock with authority for transfer in blank.

The Indiana sucker bites at the bait and sends in his thousand shares to be sold. No sooner do they reach the office than they are immediately started off to Michigan to Wilson, after the precaution has been taken to remove Johnson's name from the face of the stock and substitute Wilson's. The authority for transfer in blank, and the fact that the transaction is a transfer of stock, is thus kept from Wilson.

In due course of time a fat check from Wilson finds its way into the coffers of the "Holy Moses" promoters. And also, in due course of time, Johnson wants to know something about that sale.

"Holy Moses" Falls.

He is met with the doleful news that while his stock was on the way to Chicago, or elsewhere, the stock in "Holy Moses" had experienced such a decided slump that it was impossible for them to sell it at a profit. If he desires, they will hold the stock for a raise, which they expect as soon as the present unfortunate financial panic has passed, or until industrials begin to go up. The drop in "Holy Moses" is not due to any slump in the production of the mine; far from it. It is only the unfortunate financial depression which is to blame, and there is no doubt but that "Holy Moses" will go up a-whooping very soon.

Naturally Johnson bites again, and says hold the stock for that raise. Meanwhile the stock has been procured again from Wilson and sent to Baker, in Kentucky. And so on, indefinitely. It is only when some of the swindled ones become particularly savage that their stock is returned to them. And then it is not their original stock at all, but a new thousand shares which some sucker has sent in.

One block of stock in one company was sold in this way in 1907 by a Chicago mining company, no less than twelve times.

The activities of Detective Wooldridge afterward put this firm out of business, and the head promoter was arrested in the West by the federal authorities.

It is well that all these facts should be taken into consideration by the public before investing in mining shares.

First Principles in Mining Purchases.

Here are a few good leads to follow in buying mining stock. First make sure that there is a producing mine. Then make sure that the stock you get is not kited stock. But, above all, make sure of the responsibility, respectability and solidity of the firm from which you make the purchase.