Business: Schemes

Southward bound for the Federal Penitentiary at Atlanta last week were Charles Delos Waggoner who cunningly schemed $500,000 out of six Manhattan banks (TIME, Sept. 16) and George Graham Rice, arch U. S. promoter.* Also last week were broadcast charges which, if proven, may send other schemers to cells.

Scheme No. 1 concerned the Bankers’ Capital Corp. which recently failed, attributing its collapse to low levels of bank stocks. Investigation indicated that Bankers’ Capital, instead of dealing in bank stocks, formed affiliated companies, buying stock in one and then selling it at a profit to another. In turn the affiliates used their resources to support the market in Bankers’ Capital stock. From this procession of intramural deals Bankers’ Capital last year earned enough to pay a special dividend of $17 a share ($2,000,000). Outstanding stock of Bankers’ Capital and affiliated companies came to $10,000,000.

Scheme No. 2 involved William T. Kemper, for some years Federal Receiver of the Kansas City, Mexico & Orient Railroad, purchased last year by Atchison, Topeka & Santa Fé. Charges against Receiver Kemper were that in 1924 when stockholders thought the situation hopeless, he learned of oil discoveries along the line, of improved operating conditions, of terms in the Santa Fé deal that would make Orient gold convertible notes worth more than face value. Then, according to charges, he bought more than $1,000,000 of these notes at from 10¢ to 25¢ on a dollar, within a few months sold them with a profit of $1,875 on each $1,000.

*Suave, cultured, fond of clothes and horse-racing, Promoter Rice has long been the prime U. S. schemer. His latest efforts were centered in Boston where he ran the “Boston Curb,” dealing in his own stocks, most famed of which were Idaho Copper and Columbia Emerald. Through his “financial” paper, The Iconoclast, he kept in touch with gullible yokels, advising them of activities within the companies and upon the “Curb.” Faith-provoking methods of the Iconoclast were constant attacks upon margin trading, advice to buy sound New York Stock Exchange securities, instructions that widows and near-paupers keep their funds in savings banks. When at carefully regulated intervals Rice stocks went soaring on the “Boston Curb,” stockholders received personal telegrams from Promoter Rice, exhorting them not to sell. Specific charge against Mr. Rice was using the mails to defraud in the case of Idaho Copper.