THE BOGUS SUBSCRIPTION
Later, on his way downtown, Mr. Rogers came to my rooms.
"Are you ready for the finals, Lawson?" he said cordially. He, too, had
dined, and doubtless philosophized; his whole air showed me he had
satisfied himself that I would submit to the logic of conditions. No man
knows the human animal from his heart's seed to its bloom better than
Henry H. Rogers--and I was human.
I told him I would hold the reporters until I got the word from him, and
that it must not be later than midnight. No questions were asked nor
assurances given. He left in a moment for the National City Bank, and
there in its solemn chambers he and James Stillman perpetrated the act
which is the crime of Amalgamated, in itself a stark and palpable fraud,
but aggravated by the standing of the men concerned in it, and the
pledges that were slaughtered, into as arrant and damnable piece of
financial villany as was ever committed.
About eleven o'clock my telephone rang. I heard Mr. Rogers' voice.
"Lawson, Stillman's tally is so far completed that we know about where
we are. Give out to the press that the subscription runs between four
hundred and four hundred and twenty-five millions, call it four hundred
and twelve millions, after throwing out one hundred and seventy millions
from speculators, and sixty-two millions as defective, and after
shutting out fifty millions more which were received too late. Each
subscriber will be allotted fifteen to twenty per cent. of his
subscription--call it eighteen per cent."
The figures were paralyzing. I made no attempt to analyze them. They
came so late that as soon as the newspaper-men with me got them they
flew to their offices and thus I escaped a strenuous ordeal of
interviewing. Our arrangements for distributing the facts throughout the
country were made through the _Boston Financial News_, to which we had
given the exclusive right to send out the details, and its special wires
were soon clicking the news to all the world. The next morning the press
contained the particulars. I reproduce from the papers of May 5th the
tale.
* * * * *
=$412,000,000 FOR AMALGAMATED COPPERS=
=$75,000,000 Subscribed More Than Five Times Over=
=FINANCIAL WORLD COPPER MAD=
Subscriptions of $412,000,000--the largest in any financial
deal in the world's history--are reported by the _Boston
Financial News_ to have been received toward the Amalgamated
Company. "The world has gone copper mad" in truth.
Subscribers can be allotted only eighteen one-hundredths, or
less than one share in five of the amount applied for.
One week ago, says the report, it was announced that the
Standard Oil magnates, Rogers, Rockefeller, and their
associates, had begun their conquering march upon
copperdom--that the much heralded copper consolidation was a
thing of fact--that the Amalgamated Company had been
incorporated, and that its first capital, $75,000,000, would
be offered to the public by subscription through the
National City Bank of New York at $100 per share--$100 per
share, without a discount, a commission, or profit to any
one.
Never before since the first dollar of civilization was
invented to take the place of the stone tokens of barbarism
had such a thing been heard of--$75,000,000 of stock to be
sold to investors at $100 per share, and in one week after
the birth of the corporation upon which it was based.
The financial world held its breath, and from that time up
to the closing of the books of subscription, at twelve
o'clock noon yesterday, the financial world, English,
German, and French, have awaited with bated breath the
outcome of this great feat of modern financiering.
During the entire week from all parts of the world have
poured into the National City Bank applications, accompanied
by checks for the first payment--one continuous stream of
entreaties--for some of the shares of this great enterprise.
Nothing in history tells of such a movement.
Early in the week it became evident to the managers of the
great industrial revolution that something must be done to
stop the movement or it would run to such an extent as to
cause serious trouble in the money markets of the world.
Since Monday most strenuous efforts have been made to
discourage the taking of large subscriptions. To that end
the powerful financiers interested have begged all who
contemplated subscribing for over $1,000,000 to keep their
applications down to that figure, and their efforts met with
complete success.
Again, all those who were connected with the enterprise and
who had intended subscribing on the same basis as outsiders
for very large amounts, agreed that if the subscription ran
over $150,000,000 they would refrain from subscribing that
those who had subscribed would not become dissatisfied with
the smallness of their allotment. Still the rush continued.
From all financial centres of the world came the unbroken
chain of applications, until those most interested in the
success of the undertaking were appalled at the magnitude of
the interest aroused.
For the past forty-eight hours the National City Bank has
had employed, night and day, a corps of forty-odd extra
clerks calculating and arranging the applications and
checks. At exactly twelve o'clock noon four uniformed
watchmen closed the doors of the subscription department of
the City Bank in the face of over three hundred intending
subscribers, who were frantic at their vain efforts to get
in their subscriptions before the appointed hour arrived.
Up to eleven o'clock to-night the entire bank force, regular
and extra, have been at work, and at this hour the figures
were announced which make the subscription of the
Amalgamated Copper the greatest event in finance since the
world began.
After throwing out bids that were, on examination, proved to
be the efforts of speculators to take advantage of the great
interest to make money with no risk, and after throwing out
bids unaccompanied by checks, or checks that were not
satisfactory, the first class amounting to over
$170,000,000, and the last to over $62,000,000, the total
cash subscription was found to have reached the gigantic sum
of $412,000,000, which gave to each and every subscriber
eighteen per cent. of his subscription.
It is not known how much was represented in the 300
subscribers who were too late, but it is estimated at
$50,000,000--five of the 300 had single subscriptions of
$1,000,000 each. It is estimated that the sum total of the
subscriptions that were thrown out or that arrived by
messenger or mail--for the mail is still pouring into the
bank--was between $300,000,000 and $400,000,000, which,
added to what insiders had intended to secure for
themselves, would have carried the total to over
$1,000,000,000.
It is estimated also that there are a great many who,
anticipating the enormous over-subscriptions, have refrained
from subscribing and will purchase in the open market.
Immediately after the subscription closed, 140, or forty per
cent. premium, was bid for the stock secured by the lucky
bidders.
It is said the company will issue the next $100,000,000 at
once, as those insiders who refrained from subscribing were
practically promised that they would at once be given an
equal opportunity to subscribe if they would hold back on
this issue. It is apparent that the next subscription will
be even greater and cause more excitement than the first
one, particularly as it is agreed by all that the price of
the stock will quickly mount to $200 per share, as it is to
be put upon the English, German, French, New York, and
Boston Stock Exchanges, and will undoubtedly become one of
the greatest investments sought for by the wealthy classes.
England sent in subscriptions for $50,000,000; Germany and
France, $20,000,000 each; Boston and New England showed
their steadfast faith in copper by subscribing for over
$200,000,000.
There is great excitement at the clubs and meeting-places of
investors and brokers to-night.
* * * * *
Here is what Mr. Rogers and Mr. Stillman did. After discarding all
unsatisfactory and imperfect subscriptions, there remained subscriptions
of between $125,000,000 and $150,000,000 which had complied with all
legal conditions, and accompanying these were checks aggregating between
$6,250,000 and $7,500,000. This was real money, in the bank and within
reach, and the two great financiers, hungering for every dollar of it,
determined to possess themselves of this great sum and use it as surety
to compel the payment of the balance. First, they agreed that not a
dollar of the five per cent. subscription should be returned; next, to
so use this amount that no one to whom stock was allotted would back
out, but, on the contrary, promptly take his whole allotment and pay up
the balance. To effect this they decided to allot each subscriber just
the number of shares of Amalgamated necessary to render the amount of
money accompanying his subscription equal to about a twenty-five or
thirty per cent. payment on his whole allotment. This would constitute
such a large margin as to assure the payment of the other seventy or
seventy-five per cent. due. For instance, a man who applied for a
hundred shares accompanied his subscription with a check for $500. He
was allotted twenty shares, value $2,000, on which his $500 check
represented a payment of twenty-five per cent. If the conditions of the
National City Bank's advertisement had been complied with, he was
absolutely entitled to three shares of every five subscribed for, or
sixty in all. To bring about the proportion which Mr. Rogers wanted, a
bogus subscription of five or six times the unallotted balance was put
in by him, and this is where the fraud was committed. The National City
Bank was in duty bound to protect the public from any such bogus
subscription, and to see that fair treatment was accorded to all
subscribers. Yet, unfaithful to the trust, it permitted this bogus
subscription to be put in, many hours after the bids had been opened. It
utterly failed to comply with the conditions of its advertisement, and
was thus a direct party to the fraud perpetrated by its president and
Mr. Rogers. The exact amount of the bogus subscription could not be
decided until the exact figures of the subscriptions had been compiled,
so the figures I gave out that night were only estimates. Within the
next few days it was ascertained that the genuine subscriptions totalled
$132,067,500, upon which an allotment of one share in five, or
$26,413,500 of stock altogether, was made to the public.
In this way the conspirators secured from the public $26,413,500 of the
original cost, $39,000,000, and yet retained over $48,500,000 of the
authorized stock of $75,000,000. In other words the public paid
two-thirds of the purchase price, and the conspirators retained nearly
two-thirds of the property.
The fraud thus perpetrated amounts to this: Every subscriber legally
entitled to three shares of Amalgamated stock was deprived of two of
them by the National City Bank, and the proof is to be found in the
books of said National City Bank. My readers may say here that this
constitutes a fortunate condition rather than a crime to be punished,
for the less Amalgamated a man had, the better he was off, as the stock
afterward declined. This conclusion is a false one, however.
Here, in simple terms, is an illustration of what was done in
Amalgamated and of what the wrong was.
B had a valuable race-horse and decided to dispose of him in five
shares. He offered these five shares for public subscription and
advertised that if over five were subscribed for he would split up the
shares and allot them pro rata. There were on the final day seven
subscriptions. Instead of turning over the horse to the seven
subscribers to own and race in their own way, B notified them that
twenty-one subscriptions had been received, and that for their seven he
had allotted them a one-third ownership, while the other subscribers
would retain two-thirds. In the two-thirds resided the right to manage
and race the horse, and the seven had no say whatever in this direction.
The seven honest subscribers, not suspecting that B had simply sold them
one-third of his horse for nearly his whole cost, and that he still
retained a two-thirds ownership in him, supposed that fourteen others
had subscribed on the same terms as themselves. If the horse were really
able to race and thereby earn large sums of money, it was by this fraud
in B's power to make him appear so worthless that the seven bona-fide
subscribers would be inclined to turn over their ownerships to B at his
own figure. Contrariwise, B could so dose the horse as to make him
appear more valuable than he really was, and use the advantage to
dispose of his fourteen shares for fictitiously high prices.
The world assumes an attitude of horror and amazement at the mention of
crime, and thousands of words are written to describe what led up to and
away from any given overt deed; but the deed itself, however grave,
shameful, or portentous, seems strangely barren and bloodless set down
in naked words. Yet the mountain peak that tops the great ranges is but
a shoulder over its neighbor, though it may be the apex of a continent.
A misconstrued word has caused the spilling of the blood of millions;
the needle-point of a stiletto has severed kingdoms. Between temptation
and consequence there is but little space, yet it is deep and wide
enough for all the poison in the tongues of all the world's serpents.
To-day, a simple peasant, humble, gentle, is an insignificant atom in
the great Russian Empire, and Nicholas is the supreme ruler of rulers.
To-morrow, by a simple swing of an arm a bomb is thrown, and the peasant
is the one human being in all the world; the face of Russia is changed,
and Nicholas--is not.
The first crime of Amalgamated is a matter of mathematics. It involved
plain fraud and misrepresentation, the insertion of a bogus subscription
and the disruption of solemn pledges, but the commission of it was
nothing more than a matter of arrangement between two men, one the
master of the greatest of all business organizations, and the other the
head of the strongest bank in the United States. The consequences were
world-wide. That night no bomb was thrown, but a seed was sown for the
cruelest harvest of crime, dishonor, unhappiness, and desolation ever
reaped within the confines of our republic.
NOTE.--The above statement has now been in the hands of the
public, has been printed and commented on in thousands of
the leading journals of the world for twelve months, and no
Government official has taken cognizance of it. The charges
I make constitute one of the gravest business crimes ever
committed by any national bank. If they are true, the
Government at Washington has no more important duty than to
punish the criminals. If they are false, I should be sent to
prison. What a commentary on our boasted freedom and
equality! The National City Bank does business at the old
stand. Rogers, Rockefeller and Stillman walk the streets; so
do I, and since I published the above statement and
submitted the above proof, at least half a dozen poor
national bank clerks and officials who have stolen a few
hundreds or thousands have been sent to prison, or have
committed suicide to avoid being sent there.