THE GUGGENHEIMS

Probably the most surprised branch of the Government at the time of the Scheftels raid was the Post-Office Department. The crime charged was misuse of the mails. Why, if the Scheftels aggregation were guilty, didn't the Post-Office Department do the raiding? Why didn't it issue a fraud order? The Scheftels company has since been declared solvent by the courts and the temporary receiver discharged. To this day no fraud order has been issued. Only a short period before the raid, a presentation on the part of the Post-Office Department of all of the evidence in the case had been met with a decision that there was no ground for action.

That the Guggenheim interests did not fail to take advantage of the plight of the House of Scheftels immediately after the raid finds conclusive proof in the transpirations in the Ely mining camp. Soon after the Special Agent descended on the Scheftels offices, an application in Ely was made for a receiver to take charge of the assets of the Ely Central Copper Company. The attorneys making the application were Chandler & Quale, attorneys for the Nevada Consolidated Copper Company, a Guggenheim enterprise. When the court appointed a receiver he named this firm as attorneys for the receiver. Attorney J. M. Lockhart for the Ely Central made a protest that these lawyers, because of their connection with the Nevada Consolidated were not the proper persons to protect the interests of the now defenseless Ely Central stockholders. Then the court appointed another attorney, named Boreman.

Shortly after the receiver was appointed, he applied to the courts for permission to sell to the Nevada Consolidated for $30,000, which represented the entire cash indebtedness so far as the receiver knew, the surface rights to a large acreage of Ely Central and the rights through Juniper Canyon. This, if accomplished, would have given to the Nevada Consolidated a railroad right of way that would have solved the problem confronting it of the transportation of the ores from the lower levels of the steam-shovel pit. Without such an outlet these ores could not have been handled without great expense and much difficulty. The benefits that would have accrued to Nevada Consolidated were almost incalculable. At the same time, such action would effectually cut the Ely Central property into two parts. According to the petition it was stipulated that in selling the surface rights the Ely Central should cede to the Nevada Consolidated practical ownership, because it was specified that Ely Central could not interfere in its mining operations with any rights granted. Attorney Lockhart of Ely Central fought the receiver and his attorneys and won a victory. The Ely Central property was saved intact for the stock-holders.

Later, an application was made to the court to sell the entire property of the Ely Central for $150,000. This was believed to be in the interests of the Nevada Consolidated. In answer, a petition was filed to discharge the receiver on the ground that the court originally appointing him had no jurisdiction. The court finally decided that it was without jurisdiction, because neither fraud nor incompetency had been proved, and the property had not been abandoned. The receiver was discharged.

What has been the attitude of the Department of Justice since the raid was made? Since the raid the Government has spent several hundred thousand dollars to disclose sufficient evidence from the books to make a case of any kind. One stand after another has been taken only to be abandoned after exhaustive research for evidence to sustain the original excessive pretenses. Grand Jury after Grand Jury has thrashed over masses of evidence presented them. Armies of accountants have worked day and night for weeks and months in an effort to substantiate the action of the authorities who were led into the commission of a grave wrong.

The charge that the Scheftels corporation sold fake mining stocks has fallen to the ground. Government examinations of the properties have revealed them to be all that they were cracked up to be. Careful and industrious reading of the mass of market literature sent through the mails by the Scheftels corporation has failed to disclose deliberate misrepresentation regarding the potentialities of any of the mining properties.

The Scheftels corporation transacted considerable margin business with its customers in the stocks which it sponsored—Ely Central, Jumbo Extension, Rawhide Coalition and Bovard Consolidated. If the Scheftels corporation was run by rascals wouldn't they have been tempted frequently to throw their weight on top of the market and endeavor to break the price of stocks to wipe out the margin traders? Did the Government find any evidence of this in the books? No. It found evidence—overwhelming and cumulative—that on nearly all occasions the Scheftels corporation actually exhausted its every resource to support the market in its stocks and hold up the price in the interests of stockholders. Evidence was also found in quantity that the Scheftels company discouraged the practice of margin-trading.

The superseding indictment handed down by the Grand Jury late in August, 1911, eleven months after the raid, eliminated the charge of mine misrepresentation regarding the Scheftels promotions and reduced it practically to one of charging commissions and interest without earning them.

Not less than 85 per cent. of the total brokerage transactions of the Scheftels corporation were in their own stocks, and at nearly all times in the Scheftels history it had on hand, put up on loans or in banks under option, anywhere from three million to seven million shares of these securities. It actually bought, sold and delivered in this period over fifteen million shares of stock!

As already stated, the Scheftels corporation made it a practice to sell stocks on the general list as an insurance against declines in the market which might carry down the price of its own securities, and this, in the finality, was what the Government, after the expense of hundreds of thousands of dollars and the employment of the wisest of counsel, was compelled to tie to in order to justify in the eyes of the great American public the use of the rare power of seizure, search and arrest and of its denial of a prayer for a hearing to the victims which was made before the arbitrary power was used.

CHAPTER XII
The Lesson of It All

What is the lesson of my experience—the big broad lesson for the American citizen? This is it:

Don't speculate in Wall Street. You haven't got a chance. The cards are stacked by the "big fellows" and you can win only when they allow you to. The information that is permitted to reach you as to market probabilities through the financial columns of the daily newspapers is, as a rule, poisoned at its fountain. It has for its major purpose your financial undoing. Few financial writers dare to tell the whole truth—even on the rare occasions when they are able to learn it. Most of them are, indeed, subsidized to suppress the truth and to accelerate public opinion in the channels that mean money in the pockets of the securities sellers. As for the literature of stock brokers it is generally even more misleading. Few brokers ever dare to tell the whole truth for fear of embittering the interests and being hounded into bankruptcy and worse.

As for myself, what excuse have I had for catering to the gambling instinct? This is it: I thought the promoter and the public could both win. I now know that this happens only rarely. As the game is now generally played by the big fellows, the public hasn't got a chance.

I have not got a dollar. Who profited?

The answer is: If anybody, the aggregate. The world has been the gainer. It is richer for the gold, the silver, the copper, and other indestructible metals that have been brought to the surface, as a result of this endeavor, and added to the wealth of the nation.

But for the gambling instinct and the promoter who caters to it, the treasure-stores of Nature might remain undisturbed and fallow and the world's development forces lie limp and impotent.

THE END

Transcriber's Note:

Minor typographical errors have been corrected without note.

Irregularities and inconsistencies in the text have been retained as printed.