The brokers would then take the men seeking the underwriting to the offices of the guarantee companies and arrange for guaranteeing the bonds on payment of a fee of 1 per cent of the amount of underwriting.
The men arrested never entered into a proposition on which less than $100,000 was involved, and that they, in some cases, obtained $5,000,000 worth of stock to underwrite.
Detective Wooldridge secured proof that the application fee which was paid by the officers of the corporations to the underwriting companies was always divided among those companies and the fraudulent brokers who had sent the corporation's officers to the supposed underwriters.
The Guarantee Co. Methods.
The Guarantee Company system is a new phase of "promotion" that has come to the surface during the past two years, but which, through police and legal investigation, has about reached its limit.
A strictly legitimate guarantee company is modeled much after the Fidelity and Insurance Bond corporations. They issue secured bonds for all necessary business purposes, and are reputable and responsible. About 1903 a promotion gang in Chicago stole the name "Guarantee," and half a dozen fake guarantee companies were started.
In all the phraseology of tricky finance there is no word so overworked as "guarantee." And this means that experience has proved it to be highly effective in the hooking of "suckers." Depend upon it, that no word or phrase achieves marked popularity in the literature of the "small investments" appeal which has not demonstrated its rare effectiveness as an agency of deception; the phrase that does not draw the money is promptly thrown out by these shrewd fishers of men, who check up their returns as accurately and systematically as the most legitimate mail order business.
If the small investors of this country could reach anything like a fair knowledge of just how much and how little there is in each of these appealing "catch words" in each phrase, the plausibility of which has been scientifically tested, they would be well on the way toward being able to protect themselves against the cleverest and most convincing of these appeals. Perhaps the writer can do the public more service in analyzing a few of these "star phrases" than by any amount of denunciation of the wildcat schemes and schemers which deserve as harsh a characterization as any man can frame.
