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.