My Adventures with Your Money

by George Graham Rice

SOME HINDSIGHT THAT CAME TOO LATE

I attribute the destruction of the Sullivan Trust Company to six factors, namely, (1) politics; (2) blackmail; (3) lack of wide distribution of our later promotions, we having sold most of these stocks in large blocks during the exciting boom days through brokers to speculators instead of disposing of them in small lots direct to investors; (4) my lack of knowledge of markets and inexperience in market manipulation; (5) my own stubborn pride and optimism, and (6) the failure of the State Bank & Trust Company to keep its pledge of assistance.

It is conceded in Nevada by all honest men that, without exception, all of the properties promoted by the L. M. Sullivan Trust Company had merit, and that money was lavishly provided for mine development as long as the trust company was in existence. The properties were selected with great care. They were very much higher in quality than the average. Those at Manhattan are yielding treasure to this very day, and may make good yet in a handsome way from a mining standpoint. Those at Fairview bid fair to duplicate the performance. Had I kept out of politics, been a good market general, and taken cognizance of the fact that the law of supply and demand is as inexorable in mining-stock markets as in every other line of human endeavor, I could have saved myself and associates from financial ruin.

It would have been the better part of valor to have emulated Bob Acres—back up and "live to fight another day." Instead, I attempted the impossible in my endeavor to stem the tide of liquidation, and exhausted our resources to the last dollar in buying back the Sullivan stocks at advanced figures over the promotion prices. I didn't know then, as I know now, that the accepted practice of the successful market operators is to go with the crowd—to help along an advance when the public is buying, and, with equal facility, to further a decline when everybody wants to sell. It was my first experience, and, like so many beginners, I was overconfident, lacking in judgment, and fatally ignorant of the finer points of the game.

The complete collapse of the financial structure I had labored so hard to construct came as an overwhelming blow to the camp and marked the beginning of the end of the great Goldfield mining-stock craze.

Our enemies had overshot the mark. Public confidence was irreparably shattered by the smash of the trust company, and it would have been better for Goldfield and Nevada had Wingfield and Nixon possessed sufficient foresight to go to our rescue instead of facilitating our destruction. Money that had poured into the camp without cessation month after month for mine development started to flow the other way.

Less than a year later, when Wall Street's financial cataclysm put a quietus on market activities of every sort, the great fortunes of Wingfield and Nixon themselves hung in the balance, and had it not been for a quick transaction by which the United States Mint at San Francisco forwarded by express to Reno and Goldfield $500,000 in gold, the failure of Wingfield and Nixon and their chain of banks might have happened as a fitting climax to the scheme of aggrandizement which they had fostered.

It was rumored at the time that this money had either been obtained from the Government as a deposit for the Nixon National Bank in Reno or was obtained at great sacrifice from Wall Street bankers, and that only by virtue of Mr. Nixon's position as Chairman of the Committee on National Banks of the United States Senate was he able to get the Sub-Treasury in New York to instruct the Mint at San Francisco to supply the gold at this crucial period when fiat money was current in the East. Whether it was a Government deposit or not, Senator Nixon got it—and he needed it.

Even to this day Wingfield and Nixon are engaged in an effort to shift the responsibility to me for the destruction of the great mining camp of Goldfield, which to-day marks the graveyard of a million blighted hopes.

On the eve of the Wall Street panic of 1907, every bank in Goldfield and Tonopah that had existed through the mining boom with the exception of those of Wingfield and Nixon, went to the wall, and every Goldfield broker, with one or two exceptions, went broke. The business interests of the camp suffered the same experience. Wingfield and Nixon succeeded in annexing the remnants of the Goldfield banking business, along with the control of nearly all of the Goldfield properties for which they had been seemingly gunning. Wingfield and Nixon are, in fact, to-day in control of the political as well as the banking and precious-metal mining industry of the State. They have triumphed, but Goldfield, except for the big mine and one or two others of little consequence which they do not own, has been throttled and is dying the death. Had Wingfield and Nixon played a broad gauged game, the camp would undoubtedly still be on the map and, instead of having only two or three mines, might now boast of thirty.

As quickly as possible I convened a meeting of the creditors of the Sullivan Trust Company, all of whom happened to be either Western brokers or banks. The market had gone to smash and our liabilities were $1,200,000. The assets, calculated at the low market price of the securities that was reached after the embarrassment was publicly announced, were still in excess of the liabilities. The creditors agreed in jig time that if we would turn over all of the securities they would accept 80 per cent. of the net proceeds as full payment of our obligation and return the other 20 per cent. to the trust company.

Thomas B. Rickey, president of the State Bank & Trust Company, was appointed manager of the pool, and was also elected president of the Sullivan Trust Company, which exists in moribund state to this day. Mr. Rickey had even a higher opinion of the value of the securities than we had, and he refused to sell any of them at the prices which then prevailed. He held on. During the bankers' panic of 1907 the State Bank & Trust Company failed for about $3,000,000. The Sullivan mines were compelled to shut down. Mr. Rickey still held on. Manhattan, the mining camp, struck the toboggan. The boom in Goldfield securities collapsed at the same moment. The Sullivan stocks shriveled, like the rest of the list, to almost nothing.

As far as I can learn, neither the bank or broker-creditors nor any of the members of the Sullivan Trust Company have ever received a dollar as a result of the settlement. Had the securities been disposed of immediately after the embarrassment, the trust company would have paid dollar for dollar. Those of the public who did not sell their holdings in the Sullivan companies when we were supporting the market to the extent of more than $3,000,000, lost most of their investment. Those who did sell—most of them—made money. The market value of these securities, at the height of the boom, was in excess of $5,000,000. The price paid for them by the public, as already stated, was in the neighborhood of $2,000,000.

After settling with the creditors of the Sullivan Trust Company on the basis just outlined, I departed from Goldfield as broke as when I arrived there three years before. The only money I or my partners had drawn from the business during the life of the trust company was about $5,000, just sufficient to pay living expenses. My expenses to New York, where I went to have my head operated on—are you surprised?—were supplied by the proceeds of the sale of my seat on one of the Goldfield stock exchanges, from which I netted $400. I landed back in the big city with $200 in my pocket, the exact sum with which I had left town three years before.

My reward for three years of untiring work on the desert was a big fund of Experience. Believe me, I thought it would hold me for a while! But it didn't.

CHAPTER VI
Nipissing and Goldfield Con

The embarrassment of the L. M. Sullivan Trust Company, was disastrous to Goldfield, The decline and fall of the camp dated from that very hour.

The Goldfield News, of nation-wide circulation in those days and up to then unshackled, sought to stem the tide. It published a double-leaded editorial, in full-face type, setting forth that the Sullivan Trust Company had gone down with its flag nailed to the masthead of a declining market and had lost its last dollar supporting its own stocks.

The camp took courage. Soon it became evident that the initial smash in stock-market values was not sufficient to convince the natives that the death-knell of the market for its long line of mining securities had been sounded.

The population of Goldfield was 15,000. Its life could not be snuffed out in a day. Great was the depreciation in the market price of Goldfield mining issues, but not to an extent as yet that indicated the almost complete annihilation of values which followed. Final destruction for the general list, with some scattering exceptions, came only after a "starving-out" siege on the part of investors, who refused to commit themselves farther and gradually resorted to liquidation.

Listed Goldfield securities, nearly 200 in number, and valued in the markets at above $150,000,000 during the boom, had within two months shown a falling off of $60,000,000 in market value, but the list on the average was still quoted higher than the promotion prices.

On January 18, 1907, fifteen days after the newspapers throughout the land carried front-page stories of the failure of the Sullivan Trust Company, the stocks promoted by the trust company were still in demand in all mining-share markets of the country at an average price not below that at which original subscriptions were accepted from the public.

Jumping Jack, promoted at 25 cents, was quoted at 30 cents bid. Stray Dog Manhattan, promoted at 45 cents, was in demand at 49 cents. Lou Dillon, promoted at 25 cents, was still wanted at 26. Indian Camp, sold originally to the public at 25, was quoted at 85 bid. Silver Pick Extension, promoted at 25, was 21 bid, a loss of 4 cents from the promotion price. Eagle's Nest Fairview was quoted at 25, off 10 cents from the promotion figure. These prices represented terrific losses from the "highs" that had been reached during the height of the Goldfield boom, yet the average market price was still above the subscription price of the shares at which the public was first allowed to participate. A remarkable part of this demonstration was that for twenty days no inside support had been lent to these stocks. The Sullivan Trust Company being in trouble, the markets had been left to the mercy of short-sellers and market sharp-shooters generally.

Having settled the trust company's liabilities of $1,200,000 by tying up in trust all of its securities and the other assets, of which the creditors agreed to accept in full quittance 80 per cent. of the proceeds and to turn back to the trust company 20 per cent., I returned to New York during the last week in January. I was again out of a job—and broke.

I visited the officers of mining-stock brokers in Wall Street and Broad Street. Wherever I went a hearty handclasp was extended. Not one of the Eastern stock brokers was involved to the extent of a single dollar in the Sullivan Trust Company failure.

The brokers were convinced that the embarrassment was honest. The trust company's credit had always been good. Had the failure been meditated, I could have involved Eastern brokers for at least $1,000,000. Because I didn't, New York brokers were not slow to express their good feeling. A number of them offered to extend a helping hand did I wish to embark on a new enterprise.

Peculiarly enough—or shall I say, naturally—after tossing off the trust company's millions, of which half were mine, in a vain endeavor to support the market for its stocks, I was as full of spirit as the month of May. I had been broke before, and the sensation was not new to me. Withal, I had profited. A new fund of experience was mine. Even though I had not gathered shekels as a result of my hard work in Goldfield, I had learned something—I had acquired the rudiments of a great business.

Goldfield had been the mining emporium—the security factory. New York was the recognized market center. Market handling had been my weak spot. I now had a chance to witness the performance of some past-masters in the art of market manipulation, and I tried to make the best of the opportunity.

I watched intently the daily sessions of the New York Curb. I was in and out of brokerage offices hourly. Nothing that transpired escaped me.

Within a month I heard enough and saw enough to convince me that, daring as were the operations of the mergerers and waterers of Goldfield Consolidated, in that they ballooned the price of their security at its inception some $29,000,000 (400 per cent.) above the accepted intrinsic worth and were able to get the public in at top prices, their activities were but amateurish when compared with the stock-market campaign in Nipissing, which was now transpiring on the New York Curb.

In the Nipissing campaign tens of millions of the public's money went glimmering, several great promoters' fortunes were reared as by magic, some big names and big reputations were tarnished, and dollars in $1,000,000 blocks were juggled like glass balls under the touch of sleight-of-hand performers.