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.
The Indiana sucker bites at the bait and sends in his thousand
shares to be sold. No sooner do they reach the office than they are
immediately started off to Michigan to Wilson, after the precaution
has been taken to remove Johnson's name from the face of the stock and
substitute Wilson's. The authority for transfer in blank, and the fact
that the transaction is a transfer of stock, is thus kept from Wilson.
In due course of time a fat check from Wilson finds its way into the
coffers of the "Holy Moses" promoters. And also, in due course of
time, Johnson wants to know something about that sale.
"HOLY MOSES" FALLS.
He is met with the doleful news that while his stock was on the way
to Chicago, or elsewhere, the stock in "Holy Moses" had experienced
such a decided slump that it was impossible for them to sell it at a
profit. If he desires, they will hold the stock for a raise, which
they expect as soon as the present unfortunate financial panic has
passed, or until industrials begin to go up. The drop in "Holy Moses"
is not due to any slump in the production of the mine; far from it. It
is only the unfortunate financial depression which is to blame, and
there is no doubt but that "Holy Moses" will go up a-whooping very
soon.
Naturally Johnson bites again, and says hold the stock for that raise.
Meanwhile the stock has been procured again from Wilson and sent to
Baker, in Kentucky. And so on, indefinitely. It is only when some of
the swindled ones become particularly savage that their stock is
returned to them. And then it is not their original stock at all, but
a new thousand shares which some sucker has sent in.
One block of stock in one company was sold in this way in 1907 by a
Chicago mining company, no less than twelve times.
The activities of Detective Wooldridge afterward put this firm out
of business, and the head promoter was arrested in the West by the
federal authorities.
It is well that all these facts should be taken into consideration by
the public before investing in mining shares.