THE GREENWATER FIASCO
When the excitement was at fever-heat in Goldfield over the stupendous
rises in market value of Goldfield securities which were being
chronicled hourly, news came to town of the successful flotation in
New York of the Greenwater & Death Valley Mining Company. The
capitalization was 3,000,000 shares of the par value of $1 each. The
stock had been underwritten at $1 a share by New York and Pittsburg
Stock Exchange houses, had been listed on the New York Curb, and
had climbed to around $5.50, or a valuation for the property of
$16,500,000. Among the officers of this company were M. R. Ward,
brother-in-law of Charles M. Schwab; T. L. Oddie, now Governor of
Nevada, and Malcolm Macdonald, later president of the Nevada First
National Bank of Tonopah.
Greenwater is situated about 150 miles south of Goldfield, across the
State line in California. No one ever went to or fro without passing
through Goldfield. If there was a Greenwater boom, how was it that we
in Goldfield, who were in touch with all Nevada mining affairs, did
not know about it? Goldfield promoters soon began to give attention.
Shortly they caught the infection. A stampede from Goldfield into
Greenwater ensued. In fact, people flocked to Greenwater from every
direction. A bunch of Tonopah money-getters, headed by the indomitable
Malcolm Macdonald, were grabbing the money on Greenwaters in New York,
and Goldfield was not in the play.
The reports that came from Greenwater as a result of the first stampede
from Goldfield were of doubtful variety. Greenwater & Death Valley
was described as a raw prospect not worth over 10 cents per share.
Goldfield people shook their heads. There was no gainsaying the fact,
however, that Greenwater & Death Valley appeared to be a giant success
in the Eastern stock markets. Charles M. Schwab was reported to be
behind the flotation of Greenwater & Death Valley. Montgomery-Shoshone
and Tonopah Extension, two other Schwab enterprises, were selling at
hundreds of per cent. profit in the stock markets. The fact that Mr.
Schwab was interested in the camp was an argument that appealed with
great force to Nevada promoters, for the fraternity had learned to
attach just as much significance to having a market as to having a mine
before commencing promotion operations.
The Sullivan Trust Company not having had a failure of any kind on the
market, I hesitated to commit the trust company to any issue in the new
camp. Not to be entirely out of it, however, I sent our engineer,
"Jack" Campbell, into the district to report on all the properties.
News came thick and fast from the New York market as to the success of
the Greenwaters in the East. Furnace Creek Copper Company, originally
promoted by "Patsy" Clark of Spokane at 25 cents per share, with a
million-share capitalization, was reported to be getting the benefit of
Mr. Clark's personal market handling on the New York Curb, and the
shares soon reached a high quotation of $5.50. John W. Gates had been
let in by "Patsy" at around 50 cents and was reported to have unloaded
400,000 shares at all sorts of prices from $1 up to $5.50, and down
again.
On the heels of this advance came word of the successful promotion
of the United Greenwater Company, with C. S. Minzesheimer & Company,
members of the New York Stock Exchange, acting as fiscal agents for
the company. The promoters were named as Malcolm Macdonald, Donald B.
Gillies and Charles M. Schwab. J. C. Weir, the New York mining-stock
broker, who was conducting through the mails a nation-wide
market-letter campaign in favor of Greenwater, was reported to have
sold 150,000 or 200,000 shares at the subscription price of $1. The
offering was said to have been oversubscribed twice. The price then
shot up to $2.50 on the New York Curb. The market boiled.
Philadelphia was reported to be Greenwater-mad. When United Greenwater
had reached $1.50 on its way up and Greenwater & Death Valley had
passed the $4 point, the Schwab crowd announced the formation of
the Greenwater Copper Mines & Smelters Company to consolidate the
Greenwater & Death Valley and United Greenwater companies. This new
parent company was capitalized for $25,000,000, with 5,000,000 shares
of the par value of $5 each, and the East was reported to be eating up
the new stock "blood raw." The president of this company was Charles R.
Miller, who was president of the Tonopah & Goldfield Railroad Company,
and the vice-president was M. R. Ward, the redoubtable brother-in-law
of Charles M. Schwab. The directorate included Mr. Schwab; John W.
Brock, who represented Philadelphia interests on the directorate of the
very successful Tonopah Mining Company; Malcolm Macdonald, the champion
"lemon" peddler of Nevada; Frank Keith, general manager of the Tonopah
Mining Company, and others. It was a "swell" directorate.
It was learned that the stock of the new company had been underwritten
by New York Stock Exchange houses, principally those with Philadelphia
and Pittsburg branches where the Schwab crowd was influential, at $1.80
per share, and that large blocks were being sold to the public at up to
$3.25 on the New York Curb, a valuation for the "properties" of more
than $16,000,000.
GETTING INTO THE GAME
The birth of the $25,000,000 merger, to take in two properties that had
not yet matriculated even in the baby-mine class and were actually
suspected at the outset by mining men in Goldfield to be wildcats,
was the signal for an outpouring in quick succession of Greenwater
promotions from all centers, of which the annals of the industry in
this country chronicle no counterpart.
At the height of the boom there was promoted out of Los Angeles and
New York the Furnace Creek Consolidated Copper Company, with a
capitalization of $5,000,000.
From Butte, home of the copper-mining industry, the Furnace Creek
Extension Copper Mining Company was promoted, with a capitalization
of $5,000,000, and also the Butte & Greenwater, capitalized for
$1,500,000. Malcolm Macdonald the "hero" of Montgomery-Shoshone at
Bullfrog, hailed from Butte. He it was who interested the Schwab crowd
in Greenwater, as he did in Tonopah and Bullfrog.
"Patsy" Clark, the noted mine operator of Spokane, having prospered
marketwise with his Furnace Creek Copper Company, promptly headed a
new one, the Furnace Valley Copper Company, with a capitalization of
$6,250,000. These shares were listed on the Spokane, Butte and Los
Angeles Stock Exchanges, but did not appear on the New York Curb.
A San Francisco crowd of brokers and stock-market operators organized
the Greenwater Bimetallic Copper Company. "They let her go Gallagher"
with a capitalization of $1,000,000.
The C. M. Sumner Investment Securities Company of Denver opened
subscriptions for the Greenwater-Death Valley Copper Company. (The
title of this company was a play on the name of the Greenwater & Death
Valley Copper Company.)
Tonopah citizens, not to be outdone, sallied forth with the Greenwater
Calumet incorporated for $1,500,000. Hon. T. L. Oddie, later Governor
of Nevada, then of Tonopah, and his brother, C. M. Oddie, followed the
lead and headed the Greenwater Arcturus Copper Mining Company, with a
capitalization of $3,000,000.
The Consolidated Greenwater Copper Company was fed to the hungry public
out of a Pittsburg trough, with general offices in the Keystone Bank
Building, and with a high-class Tonopah crowd on the directorate.
Eugene Howell, cashier of the Tonopah Banking Corporation, of which
United States Senator Nixon was president, was treasurer. John A.
Kirby, of Salt Lake City, until recently associated with George
Wingfield in the ownership of Nevada Hills, was president.
Arthur Kunze, who had sold the control of the Greenwater & Death Valley
Copper Company to Malcolm Macdonald, who in turn had interested the
Schwab coterie in the organization, put out a new one called the
Greenwater Copper Mining Company, with a capitalization of $5,000,000.
H. T. Bragdon, formerly president of the Goldfield Mining Company,
which is one of the integrals of the Goldfield Consolidated, headed the
Greenwater Black Jack Copper Mining Company, with a capitalization of
$1,000,000.
ALL THE COPPER IN THE WORLD
UNITED STATES Senator George S. Nixon of Nevada lent his name, along
with H. H. Clark, William Bayley and H. J. Woollacott, as a director of
the Greenwater Furnace Creek Copper Company, with a capitalization of
$1,500,000. The prospectus of this company announced that the ores were
"melaconite, azurite, chalcocite, and occasionally chrysocolla,
averaging 18 to 36 per cent. (copper) tenor."
"Taking the lowest percentage of ore reported by the company," says
Horace Stevens in the _Copper Handbook_ of 1908, "and the company's
own figures as to the size of its ore-bodies, the first 100 feet in
depth on this wonderful property would carry upward of 20,000,000 tons
of refined copper, worth, at 13 cents per pound, the comparatively
trifling sum of five billion, two hundred million dollars."
Mr. Stevens goes on: "The fact that a Major is manager of this company,
and a United States Senator is vice-president, will prove a great
consolation to the shareholders. It is indeed lamentable to note that
this magnificent mine, which carries, according to the company's own
statements, more copper than all the developed copper mines of the
world, is idle, and present office address a mystery."
Donald Mackenzie, of Goldfield, promoter of the successful
Frances-Mohawk Mining & Leasing Company at Goldfield, which netted over
$1,500,000 from Mohawk ores, and distributed all of 20 per cent. of
this amount to stockholders in the shape of dividends, pushed out the
Greenwater Red Boy Copper Company and the Greenwater Saratoga Copper
Company, with a capitalization of $1,000,000 each. Thomas B. Rickey,
president of the State Bank & Trust Company of Goldfield, Tonopah and
Carson City, was president of both of these companies, and J. L.
("God-Bless-You") Lindsey, cashier of the State Bank & Trust Company,
was treasurer.
Greenwater Consolidated, Greenwater Copper, Furnace Creek Oxide Copper,
Greenwater Black Oxide Copper, Greenwater California Copper, Greenwater
Polaris Copper, Greenwater Pay Copper, Pittsburg and Greenwater Copper,
Greenwater Copper Range, Greenwater Ely Consolidated, Greenwater
Sunset, New York & Greenwater, Greenwater Etna, Greenwater Superior,
Greenwater Victor, Greenwater Ibex, Greenwater Vindicator, Greenwater
Prospectors', Greenwater El Captain, Greenwater & Death Valley
Extension, Greenwater Copper Queen, Greenwater Helmet, Tonopah
Greenwater, Furnace Creek Gold & Copper, and Greenwater Willow Creek
were the names of a score of others with capitalizations ranging all
the way from $1,000,000 to $5,000,000 each.
Among these the Greenwater Willow Creek Copper Company boasted of the
fanciest directorate. George A. Bartlett, Nevada's lone Congressman,
was president, and Richard Sutro, then head of the world-known New
York banking house of Sutro Bros. & Co., was advertised as first
vice-president. Henry E. Epstine, the popular Tonopah broker, was
second vice-president, and Alonzo Tripp, general manager of the Tonopah
& Goldfield Railroad, was a director.
Did I fall for Greenwater? Yes, and at the eleventh hour.
On the half-hearted recommendation of the trust company's engineer,
"Jack" Campbell, the L. M. Sullivan Trust Company paid $125,000 for a
property in Greenwater that boasted of two ten-foot holes. On two sides
it adjoined the property of the Furnace Creek Copper Company, the
original location in the camp. Our engineer reported that if "Patsy"
Clark's Furnace Creek Copper Company, shares of which were selling in
the market at a valuation of $5,500,000 for the property, had any ore,
we certainly could not miss it. No matter which way the veins trended,
our ground must be as good as "Patsy's," because the identical vein
formation passed through both properties.
The Sullivan Trust Company thereupon incorporated the Furnace Creek
South Extension Copper Company to operate the property. The
capitalization was 1,250,000 shares of the par value of $1, of which
500,000 shares were placed in the treasury of the company to be sold
for purposes of mine development.
New York Stock Exchange houses having the call as purveyors of this
particular line of goods, the Sullivan Trust Company tendered the
selling agency of Furnace Creek South Extension treasury stock to E. A.
Manice & Company, members of the New York Stock Exchange, whose
officers are located in the same building in New York as J. P. Morgan &
Company. We offered for public subscription 100,000 shares of treasury
stock at par, $1, through E. A. Manice & Company, and this firm
advertised the offering in New York newspapers over their own
signature. The Sullivan Trust Company paid the bills.
THE COLLAPSE OF GREENWATER
THE offering turned out to be a "bloomer," the first the Sullivan Trust
Company had met with. E. A. Manice & Company did not dispose of as many
as 30,000 shares. Neither did the stock offered later by the Sullivan
Trust Company through brokers in other cities sell freely. Just at the
moment when we announced our offering of Furnace Creek South Extension
the Greenwater boom began to crack.
Oscar Adams Turner, who promoted the Tonopah Mining Company of Nevada,
which has paid $8,000,000 in dividends on a capitalization of
$1,000,000, is responsible for the early bursting of the bubble. Mr.
Turner had invested in the Greenwater camp on the reports of an
engineer. He organized the Greenwater Central Copper Company. Then he
decided that it was advisable for him to take a look at the property
for himself. He visited Greenwater. Two hours after arriving in camp he
sent a telegram to Philadelphia reading substantially as follows:
Stop offering Greenwater Central. Make no more payments on the
property. Do not use my name any further. There is nothing here.
The tenor of the message leaked out. Indiscriminate selling ensued by a
noted bank crowd in Philadelphia who were loaded up with Greenwaters.
Others followed suit. The market became sick.
At the first sign of a market setback inquiries began to pour into
Nevada from all over the East, and noted copper experts from Montana,
Arizona, California and other points came piling into the Greenwater
camp to examine the properties. Soon a chorus of adverse opinion found
its way into every financial center. Market values crumbled as rapidly
as they had risen. Paper fortunes evaporated in thin air.
I make a conservative statement when I say that the American public
sank fully $30,000,000 in Greenwater in less than four months.
Not all of the Greenwater promotions were over-subscribed--not half,
not a quarter--and the American public may well congratulate itself
that the boom "busted" when only approximately $30,000,000 had passed
into the pockets of the promoters.
What of the camp?
It exists no more. All mine development work ceased long ago. There are
green-stained carbonates on the surface, but there are no copper
ore-bodies. The "mines" have been dismantled of their machinery and
other equipment, and not even a lone watchman remains to point out to
the desert-wayfarer the spot on which was reared _the monumental
mining-stock swindle of the century_. Every dollar invested by the
public is lost. The dry, hot winds of the sand-swept desert now chant
the requiem.
Fix the responsibility here if you can. The job is not easy. Let me
attempt it. The buccaneers who took Greenwater & Death Valley down to
New York and allowed the public to subscribe for it with the name of
Charles M. Schwab as a lure, at a valuation for the property of more
than $3,000,000, and then ballooned the price on the curb until the
shares sold at a valuation of $16,500,000 for the property, without an
assured mining success in sight in the entire camp--these men, in my
opinion, were criminally responsible. They have never been called to
account.
Members of the New York Stock Exchange who aided and abetted them by
lending their names to the transaction, and Charles M. Schwab, who
permitted the use of his name and that of his brother-in-law, are
morally responsible. Not for an instant do I entertain the thought that
the Stock Exchange crowd and Mr. Schwab realized that the mines of the
company were absolutely valueless, but I do maintain that men of their
standing and prestige have opportunities which men of smaller caliber
do not enjoy and that their conduct for this reason was reprehensible
to an extreme.
THE SHAME AND THE BLAME
I CITE the instance of the Sullivan Trust Company "falling" for
Greenwater, after hesitating about embarking on the enterprise for
weeks, and I am convinced that others fell the same way. The Sullivan
Trust Company did not touch a Greenwater property until its clients and
its clientele among the brokers throughout the Union had burned up the
wires with requests for a Greenwater promotion, and when it did finally
"fall" it lost its own money, the only other sufferers being a handful
of investors who at the tail-end of the boom subscribed for a
comparatively small block of treasury stock.
Not all of the promoters "fell" innocently, however. There were
half-baked promoters and mining-stock brokers in almost every city in
the Union who had witnessed the enhancement in values during the
Goldfield boom, and whose palms had itched for the "long green" that
for so long came the way of men on the ground. These, at the first
signal that the Greenwater boom was on, with Charles M. Schwab in the
saddle, lost no time in annexing ground in the district with the single
view of incorporating companies and retailing the stock to the public
at thousands of per cent. profit.
The Greenwater mining-boom fiasco stands in a class by itself as an
example of mining-stock pitfalls. The only Greenwater stock which at
this time has a market quotation is Greenwater Mines & Smelters, which
reflects the true state of the public mind regarding all Greenwaters by
actually selling at a valuation of less than the amount of money in the
company's treasury--6 cents per share on an outstanding issue of
3,000,000 shares--there being $189,000 in the treasury along with an
I.O.U. of C. S. Minzesheimer & Company, the "busted" New York Stock
Exchange house, for $71,000, of which the company will realize 27 cents
on the dollar through the receiver.