American Agriculturist 
THE FARM PAPER THAT PRINTS THE FARM NEWS 
“Agriculture is the Most Healthful, Most Useful and Most Noble Employment of Man .”—Washington 
Reg. U. S. Pat. Off. 
Established 1842 
Volume 113 
For the Week Ending February 16, 1924 
Number 7 
Where the Dividends Came From 
Examples of High Financiering by the Farmer’s Standard Carbide Company 
EADERS of the American Agriculturist 
will remember that in a recent article 
concerning the Farmers’ Standard Car¬ 
bide Company, we promised to give more 
tails of the intricate business methods of this 
m and its success in getting money from the 
ablic. 
You will also recall that we told how we had 
tiled upon the Farmers Standard Carbide Com- 
any for certain information and how our ques- 
ons remained unanswered. We promised to tell 
me of the methods used by salesmen, including 
ie practice of delivering dividend checks for 
1.75 in person. But first let us see 
hether the company, after taking over 
ie plant at Plattsburgh and making 
is initial stock-selling effort, wms in a 
isition to declare dividends on profits 
'ade from selling its product, cal- 
um carbide. 
A form letter sent to stockholders in 
ptember, 1921, signed by Samuel 
ull, President, ended w 7 ith the sen¬ 
dee, “In view of the business and 
’ogress of your Company, the Board 
Directors, I am pleased to say, will 
ortly meet to vote on payment of a 
vidend on the common stock.” This 
me letter, although it gave no figures 
the business which the company 
Jad done in selling carbide, stated that 
^your company” had gained control 
the National Generator Company, 
c., which thus became a subsidiary, 
our last article we pointed out that 
e stock of this company w*as listed 
an asset in the financial statement 
the Farmers Standard Carbide 
ompany under the heading “ Securi- 
les and Investments.” As the sub- 
§diary company seemed to exist 
rgely on paper, the “congratula- 
ons” extended by the carbide com- 
|any to its stockholders on its ac- 
isition seemed rather premature. 
However, the letter did give an 
ect of general activity, even if it w r as 
zy as to details and the near-promise 
a dividend looked very attractive 
investors who had anxiously awaited a return 
i their money. 
Among such investors was Mr. K., of Pennsyl- 
ania, who in 1920 had subscribed to five shares of 
referred stock at $10 a share. He was promised 
per cent, dividends. Let Mr. K. tell his own 
ory of how a dividend w r as personally delivered 
him under rather odd circumstances. 
In the Fall of 1921, a man saying he represented the com- 
pny called at my home, when I was absent. He said he had a 
(vidend check for me, and held it in his hand, while talking 
V rn . v wife. He wouldn't let her see it, neither would he give 
i to anyone but me. After learning at what time I would be 
pine, he left, saying he would be back that same evening, 
fowever, he never returned and 1 never received the check. 
June 6, 1922, another man also representing them, called 
my home and tried to induce me to give up my preferred 
fouk for common. He told me if I didn’t, I would positively 
' compelled to by the company. I didn’t give up the certifi- 
r e though and he left, after giving me a check which he said 
| as to pay for the dividends.” 
I In the following October, there came through 
the mail a certificate for half a share of stock in the 
Standard Acetylene Company, this in place of the 
overdue dividend. Mr. K. enlisted the aid of a 
lawyer who pointed out to the company that it 
must be rather expensive to send salesmen to 
deliver in person checks for $1.75. However, the 
company neither paid additional dividends nor 
took back the stock which Mr. K., finding the 
agreement violated, asked them to do. 
Now, to go back a little, let us see what founda¬ 
tions the Farmers’ Standard Carbide Company 
had for paying Mr. K. and other stockholders this 
or any dividend. Remember that such payments 
The Results cf Speculation 
-From Capper's Weekly 
are supposed always to be made ON EARNED 
PROFITS; IN THIS CASE, SUCH PROFITS 
COULD ONLY BE MADE LEGITIMATELY 
FROM THE SALE OF CARBIDE MANUFAC¬ 
TURED AT THE PLATTSBURG PLANT. 
An illuminating bit of information is contained, 
therefore, in a statement made and sworn to by a 
carbide man who was formerly employed as sales 
manager of the Farmer’s Standard Carbide Com¬ 
pany. His connection w r ith the company was on 
a purely business basis and he set himself at once 
to the task of making and shipping carbide to fill 
accumulated orders. This is what he has to say 
of the payment of dividends in April, 1921, soon 
after he started work for the company. 
“About the 1st of April, dividend checks were made out for 
the entire issue of preferred stock, and an intense sales cam¬ 
paign was engineered to accompany the delivery of these 
dividend checks. I know that about $300,000 worth of com¬ 
mon stock was sold the first week after this drive and {.he drive 
has been continued ever since, but of course, with varying 
success. 
“Dating from the 1st of April, 1921, to the 1st of April 
1922, the overhead expense of the office at 15 W. 37th St., 
inclusive of the sales expense for the product carbide and the 
salaries of the Plattsburg office TOTALLED MORE THAN 
THE TOTAL SALES OF THE MANUFACTURED PROD¬ 
UCT, calcium carbide; therefore, there could be no profit.” 
Naturally, the plan of paying dividends from 
capital, effective as it was in encouraging unsus¬ 
pecting farmers to invest more of their hard- 
earned savings in a stock which apparently w T as so 
productive, could not be followed for very long. 
Already letters of complaint from investors whose 
checks were overdue were coming in heavily to the 
Farmers Standard Carbide Company’s office at 
15 W. 37th St., New York. Another 
device was hit upon and put into prac¬ 
tice. It was the payment of dividends 
in stock of a subsidiary company. 
Former Governor Miller of New 
York, when sitting as a Judge of the 
Supreme Court, had before him a case 
where directors of a certain company 
were sued by a stockholder for fraud 
because they declared a dividend and 
caused it to be paid out of capital 
when there was no surplus or earnings 
in the company. He said: 
“A declaration of a dividend by a going con¬ 
cern implies earnings from which to pay it, and 
the publication of the fact of such declaration is 
certainly calculated to induce the public to be¬ 
lieve that the dividend has been earned and that 
the corporation is prosperous. If, intending the 
public to act thereon, the defendants had made 
and published a report expressly stating that the 
dividend declared had been earned, there would 
be no doubt of their liability to a person thereby 
deceived to his injury. The familiar cases of 
false prospectuses need not be cited. Why 
distinguish between a false affirmation and an 
act calculated to have the like effect, the motive 
and the result in each case being the same? 
Certainly the law makes no such distinction. 
We have had many illustrations in cases before 
us of the devices to deceive thte public employed 
by managing directors, who misuse their posi¬ 
tions to promote stock speculation, and the 
payment of dividends out of capital is a familiar 
one. When that is done to induce the public to 
purchase shares of the company and thereby 
to create a fictitious value, upon which the 
wrongdoers may trade, they should be held 
accountable precisely as though the like decep¬ 
tion had been practiced by actual misstatements.” 
The foregoing statement of law by 
Ex-Governor Miller was adopted by the Court of 
Appeals, the highest court of New v ork State. 
The opinion of the highest Court in New York 
show's that the law 7 considers the declaring of 
dividends a statement that there had been profits. 
We are still waiting to hear from the Farmers 
Standard Carbide Company, as to when and how 
they made profits. Mr. Null, the president of the 
Company, is a lawyer and doubtless w'ell ac¬ 
quainted w ith the law in reference to such matters. 
In fact, he recently appeared as counsel for two of 
the parties w r ho on February 1 , 1924, were sen¬ 
tenced by United States District Court Judge 
Hand, in connection with the famous Crager 
system, dealing with the glass casket swindle. 
The stockholders of the Farmers’ Standard 
Carbide Company wrnre interested to know w r hy 
they ceased to get their dividends. Most of them 
w r ere farmers, and did not make a distinction 
between the use of the words “interest” and 
{Continued, on page 153) 
