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American Agriculturist, May 19,1923 
Before You Invest, Investigate! 
0 
American Agriculturist Radio Talk on “How Scoundrels Get Rich” 
H ave you $100 or $500 on which 
you would like to realize handsome 
returns? If so, you are one of 
millions of people whose savings 
even on a $10 down and $10 a month plan, 
are snared by men who spend their lives de¬ 
vising law-proof traps for uninformed in¬ 
vestors. The American Agriculturist be¬ 
lieves it desirable that you should know about 
some of these schemes and through the 
courtesy of WEAF this practical message de¬ 
signed to help you guard against the wily 
promotor or fly-by-night vendor of securities 
is given gladly. 
Whether or not this knowledge will pro¬ 
tect you is for you alone to decide. How¬ 
ever, authorities have estimated that invest¬ 
ing is more or less of a closed book to most 
people. Mr. David F. Houston, 
Former Secretary of the United 
States Treasuury and now Presi¬ 
dent of the Bell Telephone Se¬ 
curities Company, said recently 
that possibly not one person in a 
hundred is well informed, con¬ 
cerning principles of safe invest¬ 
ment. 
Some of these principles can be 
stated here—the primary one is 
“Before you Invest, Investigate.” 
But at this particular moment it 
may be interesting to show the 
other side of the picture by men¬ 
tioning a few of the 57 varieties 
of methods by which tricksters 
get the savings of trusting in¬ 
vestors. 
Of course, the underlying lure 
—with emphasis on “lying”— 
used in the glowing literature 
and sales talks of irresponsible 
sellers of securities is the hope of 
large profits. One professional 
promoter admitted recently that 
the only way he could sell stock was to work 
on the principle that “hope springs eternal 
in the human breast.” A real estate de¬ 
veloper who has been selling boggy farm 
land at Muscle Shoals, Alabama, to wage- 
earners in New York at city lot prices, said 
that no one could ever sell anything in the 
slow-going, educational way and that he told 
his salesmen to “point” out the future, fea¬ 
ture the prospective profits and close quick. 
Henry Ford’s name and picture were used 
in this selling campaign, because of the auto¬ 
mobile manufacturer’s offer to take over 
from the United States Government the ni¬ 
trate plant and power dam on the Tennessee 
River which was projected during the war. 
In literature which may have reached you 
by mail you have perhaps noticed that vari¬ 
ous promoters of new and as yet unsuccess¬ 
ful companies feature the great proportions 
to which $100 or $500 invested in other com¬ 
panies has grown. These comparative fig¬ 
ures, of course, refer to long-established, suc¬ 
cessful concerns which developed from small 
beginnings by careful management over a 
long period of years. The figures cited have 
no bearing whatever on the prospect of the 
stocks offered you. They are featured to 
arouse your hopes, stir your imagination and 
to divert your attention from the truth about 
the company whose stock you are importuned 
to buy. 
The ‘‘Blind Pool” 
From time to time, “blind pools” which 
take the gullible investor’s money, have 
flourished in several cities. This swindle is 
very much akin to the notorious Ponzi affair. 
A “blind pool” is also known as a “partici¬ 
pating syndicate” or “discretionary pool.” 
Clients are assured of from 20 per cent tb 
120 per cent in yearly dividends, payable 
By H. J. KENNER 
monthly, after agreeing to pay the firm 30 
per cent of the profits. They assign to the 
firm full right to trade with the* clients’ money 
as it sees fit on the stock market. These pool 
operators always claim to have inside knowl¬ 
edge with which to “work’ ’ the stock market 
and to have close connections with the so- 
called Wizards of Wall Street. But as a 
matter of fact, dividends to clients are al¬ 
ways paid out of the golden flow of money 
into the office and when fresh clients fail to 
appear the blind pool proprietors disappear. 
Nearly every new method of serving in¬ 
vestors is imitated by unscrupulous men and 
firms to get-rich-quick at the expense of un¬ 
informed investors. One such scheme used 
“subscription rights” to fool the unwary. A 
circular . letter was sent to stockholders in 
well-known successful companies with a 
beautifully colored certificate attached pur¬ 
porting to give the recipient the “right” to 
buy stock in the new concern which, by the 
way, used a corporate name looking like and 
sounding like that of a large and established 
corporation in the same field. This created con¬ 
fusion in the mind of the reader: and by the 
ruse, payments were received from hundreds 
of investors who thought the “right” valu¬ 
able, which in fact, were worthless. 
How “Reloading” Works 
By another method termed “reloading,” 
money is taken from stockholders in com¬ 
panies which have not paid dividends and 
which, though the stockholder does not know 
it, are badly in need of funds. This method 
is sometimes legitimate, but swindling or¬ 
ganizations have made a specialty of selling 
new allotments to old stockholders by elabo¬ 
rately building up the impression that the 
company is approaching prosperity, that a 
“melon” is about to be cut, and that as a 
special favor to those who had faith in the 
company by investing as an early investor 
in its shares, they are permitted to share in 
the large profits to come. In some of these 
instances shares were “reloaded” on victims 
at five or ten times the price the swindlers 
paid for the stock and at prices often twenty- 
five to fifty times actual worth. 
In the oil and mining promotions, one of 
the favorite devices of the dupester is the 
“special trustee” scheme. The faker sends 
a letter to stockholders of a legitimate com¬ 
pany on what appears to be the company’s let¬ 
terhead and signs it, “Special Trustee For 
Stockholders.” The letter intimates that the 
company is about to go on the rocks and 
urges the stockholder to turn in his shares 
for “something much better” with a bigger 
chance to win. When the frightened stock¬ 
holder does this, he gets stock of much more 
doubtful value for which he sometimes has 
to pay 25 per cent additional. And then the 
“alleged special trustee” ^unloads the stock 
he received at whatever it will bring in the 
open market, usually he pockets the proceeds. 
A scheme called “insured investing” is 
now in vogue. This plan calls for setting 
aside a third of the stockholder’s money with 
a trust company as a fund which accumulates 
and returns the amount originally invested 
at the end of seventeen or twenty years, if 
the promotion goes wrong. This creates a 
sense of false security in the mind of the 
prospect who is not at all insured against 
loss by this system, but in effect 
sets aside a portion of his own 
money to be returned with in¬ 
terest after twenty years. The 
rest of his so-called investment 
is divided between the promoter 
and the infant company’s treas¬ 
ury. 
Such practices as these by 
pirates of promotion and free¬ 
booters of finance, besides ex¬ 
ploiting unsuspecting people, cast 
a slur on legitimate investment, 
brokerage and banking business 
everywhere. Fair-dealing finan¬ 
ciers outnumber vastly illegiti¬ 
mate sellers of securities, but it 
is the latter who are active in 
schemes to separ-ate savings pain¬ 
lessly from the man or woman on 
the farm, in the office, store or 
factory. 
Realizing the great harm done 
due to losses brought about by 
these nefarious operations, the 
business men of New York have 
determined to set their hands strongly 
against practices which create false impres¬ 
sions about financial New York and which 
betray the confidence which investors have 
a right to place in New York business. To 
carry on a permanent and militant campaign 
against swindlers and serve as a Clearing 
House for information helpful to investors. 
New York business men have organized the 
Better Business Bureau. The Bureau’s func¬ 
tions are: 
^ 1. Developing facts about doubtful securities and 
vendors in order to correct abuses and to provide 
facts for investors before they invest. 
2. Reducing unfair competition in the Investment 
Field. 
3. Building confidence in legitimate business by pro¬ 
tective action in the public interest, and by help¬ 
ing to spread a better understanding of the 
principles of sound investment. 
4. Aiding the authorities in the enforcement of fraud 
laws designed to curb stock-swindling. 
An Association of Service 
In its service to the public the Bureau co¬ 
operates with organizations of similar name 
in 38 other principal cities and with the Na¬ 
tional Vigilance Committee of the Associated 
Advertising Clubs of the World. It is ready 
to cooperate with township and county farm 
organizations and with agricultural associa¬ 
tions in New York and other Eastern States. 
The Bureau has nothing whatever to sell. 
Its action is always disinterested and is 
taken in the public interest. It is supported 
by voluntary subscriptions made by financial 
and commercial firms of New York and is 
aided by the press in its distribution of pro¬ 
tective facts of interest to the public. 
By writing to the American Agriculturist 
or by consulting your banker or writing di¬ 
rect to the Better Business Bureau, 280 
{Continued on page 440) 
“Stop, Look and Listen!” 
W E never get over the feeling of amazement about the thousands 
of farmers, and other people, too, for that matter, who are 
taken in by the glib statements of scoundrels who make glittering 
promises about their get-rich-quick schemes. In spite of the very 
hard times on the farm we doubt if there is a single farm community 
where there is not at least one, and more often several, who have in¬ 
vested some of their small savings on promises of schemes that never 
work out. People do not tell of these investments to their neighbors, 
but we are constantly saddened by the large number of letters which 
we receive about them. Because of this, we are doing all we can to 
get people to “stop, look and listen” before they take steps that 
usually mean the loss of hard-earned savings. 
On this page is the speech of Mr. H. J. Kenne;’, Managing Secretary 
of the Better Business Bureau, which is an organization of business 
men to prevent people from losing their savings in unsafe schemes. 
This speech was broadcast on American Agriculturist radio program 
from the WEAF station at 6:30 P. M. Wednesday evening. May 16. 
A careful reading of it may save you a good deal of sorrow.— The 
Editors. 
