"The Western Mutual Life Association of this city has been weighed in
the balance by the Missouri and Michigan State Insurance Commissioners
and found wanting. An examination of the concern by these officials,
made as of August 31, 1898, has recently been reported upon. On that
date a deficiency of assets under the most favorable showing of
$55,635.36 was shown to exist. In other words, the association was
impaired that amount.
"President Thomas F. Rhodus and Vice-President Birch F. Rhodus each
received a salary of $10,000 a year, and there seems to have been
a handsome expense allowance besides. Secretary Charles S. Johnson
received $7,000 annually; Second Vice-President John B. Kirk, of James
S. Kirk & Co., and Treasurer J. V. Clarke, President of the Hibernian
Bank, under an arrangement, the annual sum of $27,000."
The facts here cited were disclosed by the investigation made by the
Insurance Commissioners mentioned above. The association did not long
survive this incident, and its assets were soon taken over by the
Illinois Life Insurance Company.
When the records of these men are considered, it is believed that
the boldness of their operations, the ease with which they have
obtained the endorsement of representative business men in Chicago and
elsewhere for their various schemes, and the way in which, unchecked,
they have personally profited from their operations in the name of
legitimate business, are absolutely without a parallel in the history
of this city.
Any number of stockholders in the different companies stand ready to
testify to the correctness of the foregoing. Every company started
and operated by these men appears to have been exploited for the sole
benefit of themselves. The stockholders have, with a few insignificant
exceptions, lost every dollar invested.
This was the opening gun in the Rhodus campaign. When Detective
Wooldridge began boring in he found that in addition to the Central
Life Securities Company (whatever that might mean), the Rhodus
brothers were promoting the moss-grown mining proposition, and that
the Mina Grande Mining Company, with certain holes in the ground
located in the State of Sonora, Mexico, was also a Rhodus Company.
The Mercantile Finance Company, which was capitalized at the sum of
$1,000 in the State of Maine, Maine being almost as easy as New Jersey
as a corporation state, was the basis for the manipulation of all the
other companies. Even Maine would not stand for a big capitalization
of penniless adventurers, so to make the capitalization bug the
services of the Mina Grande and the State of Sonora, where things are
still easier than in Maine, were called in and the capitalization of
the Mina Grande was rated at $2,000,000.
This did not look nice to the detective. There was too much hunting
of easy ground. He bored in further. Then he discovered the true
inwardness of the situation. Around Joplin, Webb City, Carterville
and other cities in Southwest Missouri, are certain very fine lead
and zinc mines. Joplin is the first zinc producing city in the world.
It has been known as such for a number of years. The lead from this
district is second only in output to that of Leadville, Colo. Here was
another easy chance.
Of course any one who knew anything at all about the lay of the land
in Jasper County, Mo., knew that all the possible lead and zinc lands
had been snapped up years ago; that "Pat" Sullivan of Joplin had been
a political boss on the strength of his turning monopolist of the very
districts which produced the lead and zinc. But the public did not
know it. At least not the great, gullible public. They only knew that
Jasper County was full of lead and zinc and they in some way formed
the conclusion that the whole county was underlaid with the precious
metals.
Therefore it was easy for the Rhodus "companies" to start the
"Independent Zinc Securities Company," bore a few holes in the ground
which would produce fish-worms and black ants and nothing else, and
"transfer the stock of the 'Mina Grande' to the 'Independent Zinc'."
This only was used as a safeguard where a stockholder of Mina Grande
began to get peevish because the holes in the hillsides of Sonora
produced nothing.
But the Rhodus game was not yet complete. The Mercantile Finance
Company, with its thousand-dollar capitalization in the State
of Maine, might get into difficulties transferring stock to the
"Independent Zinc," because somebody might know enough about Jasper
County to realize that there was not enough lead in that county
outside the control of the lead trust to make a small-sized pea.
Therefore it needed another company to "transfer" the peevish
stockholder to. So the Mexican Development Company was formed by the
Mercantile, the capital of the new company being $1,000,000, and its
assets 90,000 shares of the "Mina Grande" stock, the par value of
which would not buy a cigarette paper.
The literature of the new company also carried the literature of the
"Mina Grande," with a glowing account of how the new company was
going to turn Mexico upside down and enrich the whole world from the
scorpion holes in the Sonora hillsides.
The stockholders in the Mexican Development are still waiting for
returns on their investment. But the American people were getting
wise to the mining game, even when the magic name of Jasper County
was used. So to supplement Mexico and Jasper County the Mercantile
Finance Company, the old reliable thousand-dollar concern, organized
in rapid succession the Boise King Placers Company, which was going to
wash fortunes out of the inoffensive mud of Idaho rivers, the Moose
Creek Placer Company, which had the same end in view, the American
Fibre Company, which had about as much fibre about it as a paper candy
box, The Illinois Finance Company (frenzied finance, all right), The
Indiana Securities Company, which "secured" the money of the investor,
but secured nothing else, The Minnesota Securities Company, and then
with a great play to the galleries, The Finance Company of America.
From one to another of these absolutely bankrupt and worthless
concerns the investor was thrown back and forth like a shuttlecock. If
he was sore on Independent Zinc he got American Finance. If he became
convinced that American Finance was worthless paper he got Idaho mud
in the shape of "Moose Creek Placers."
Interest-bearing bonds with coupons attached were floated on a number
of these companies and sold largely through the mails.
Just here Uncle Sam, urged on by reports made to the Chicago
Postoffice Inspectors by Wooldridge, took a hand. When Wooldridge
began boring in the bankers and other influential friends of the
Rhodus people, who had been wise enough to get good political
affiliations as an adjunct to their business, became extremely busy
and influences were brought to bear to call Wooldridge off the case,
because he was the most feared man in America on a fraud game.
Wooldridge accepted the recall gracefully, but immediately stepped
over the way to the Federal Building, and called upon Postoffice
Inspector William Ketcham, who is acknowledged by everyone in the
secret service of the United States and the general public to be the
shrewdest, most astute, and most indefatigable man in the service
of the United States Government. Wooldridge convinced the great
inspector that there was something doing in the "Rhodus" line. Ketcham
complimented Wooldridge highly on the manner in which he had gathered
the data together. Then Ketcham got busy himself. When two such men
as Wooldridge and Ketcham get busy it is not long until the explosion
comes.
Nor was it long coming in the Rhodus case. First came the receivership
of the Central Life Securities Company. And here another big man
and an incorruptible one got into the game--none other than John C.
Fetzer, founder of the "Fetzer System" of receiverships that receive
for the victims of defunct concerns, in place of and for the receiver.
This man was fresh from the great Stensland Bank fraud, where as
receiver he had paid 72 cents on the dollar and wound up a record
receivership in less than one year, whereas the usual time taken in
such cases was ten years.
[Illustration:
With some of the water out of her food,
All profits milked out, too,
With little to eat and going dry,
What is the poor beast to do?
]
When Fetzer's name appeared as receiver there was dismay in the
Rhodus camp. The triple combination was enough to frighten anyone,
especially where the guilty conscience was a factor. Fetzer
immediately went to work. He called in his fighting aids. He told
Ketcham and Wooldridge to "keep it up." When the Rhodus people began
to give evasive answers before the Referee in Bankruptcy, it was a
short step, with the information which had been gathered, to bring
the matter before the Federal Grand Jury. And the indictments of the
Rhoduses followed.
The investigation of the Rhodus manner of doing business showed
that the shrewd manipulators of fish-worm holes and scorpion nests
had not neglected the feminine element. The treasurer of the old
thousand-dollar stand by hailing from the pine tree state, the
Mercantile Finance Company, was Mary C. Scully, who had been with the
Rhodus gang since 1894. Katherine T. Scully, a very young woman, who
had recently appeared on the scene, was listed as treasurer of the
good old "thousand-dollar" medium. She came into the secretaryship as
a result of a shuffle of officers of the Rhodus companies, the shuffle
of officials being found to be as necessary as that of the shuffled
stock.
It was also found that the Rhoduses came to Chicago about 1894 and
organized the Western Mutual Life Association. This company had a
stormy career and was finally merged into the Illinois Life Insurance
Co. The methods of the Rhoduses were severely criticised in connection
with this company and all confidence in it was destroyed.
Prior to coming to Chicago, Thomas and Birch F. Rhodus operated a
lottery at Denver, Colo., and in 1889 came in conflict with the
Federal authorities. Indictments are on record against them and it is
claimed that they used various aliases. Thomas Rhodus was convicted at
Denver in November, 1889, and fined.
During the past four or five years the Mercantile Finance Co. has
offered the stock of numerous mining schemes, none of which has shown
any merit, but were officered and owned by the Rhoduses and their
associates. The methods employed to sell stock in these enterprises
were (according to bills filed in court by the persons victimized)
those of the ordinary swindler, and a close study of the schemes and
the manner in which they are floated leads to the conclusion that the
Rhoduses are not entitled to any confidence.
At the time of going to press the Rhodus brothers are still under
indictment. The tangle in their affairs seems to show conclusively
that the matter will be long and bitterly fought, but the facts that
have come to light make matters look very dark for the manipulators of
the moss-grown stock-kiting game.
Samples of the literature secured by Wooldridge and Ketcham prove very
enlightening to the general public as to the methods of the Rhodus'
and kindred concerns. Here are a few of them:
"It is a rule of this company," one pamphlet of the company reads,
"not to act as fiscal agent for any corporation unless this company is
prominently represented in the management, so as to be able to protect
the interests of our clients."