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+ text-decoration: overline;} + + .bbox {border: solid 1px; + margin-left: 15%; + margin-right: 15%; + padding: .5em .5em .5em .5em;} + + .tn {font-size: small; + padding: .2em 1em .2em 1em; + background-color: #E6E6E6; + border-style: solid; + border-width: thin;} + + div.box { margin-right:auto; + margin-left: auto; + max-width: 20em; + border-style: solid; + border-width: .15em; + margin-top: 1em; + margin-bottom: 1em;} + + a:link {color: #00F; + text-decoration:none;} + a:visited {color:#F00; + text-decoration:none;} + +</style> +</head> +<body> +<div>*** START OF THE PROJECT GUTENBERG EBOOK 44274 ***</div> + +<div class="figcenter"><img width="361" height="575" id="coverpage" src="images/cover.jpg" alt="cover"></div> + +<h1> +MY ADVENTURES WITH<br>YOUR MONEY +</h1> +<br> +<div class="titlepage"> +<p class="ctr"> +BY<br>GEORGE GRAHAM RICE +</p> + +<div class="figcenter"><img width="138" height="175" src="images/logo.jpg" alt="logo"></div> + +<p class="ctrsmall"> +RICHARD G. BADGER<br> +THE GORHAM PRESS<br> +BOSTON +</p> + +<p class="ctrsmaller"> +Copyright, 1911, by The Ridgway Company +</p> + +<p class="ctrsmaller"> +Copyright, 1913, by Richard G. Badger +</p> + +<p class="ctrsmaller"> +All rights reserved +</p> + +<p class="ctrsmaller"> +<span class="sc">The Gorham Press, Boston, Mass., U.S.A.</span> +</p> +</div> + +<hr class="short"> + +<p> +To The American Damphool Speculator, surnamed the American Sucker, +otherwise described herein as The Thinker Who Thinks He Knows But +Doesn't—<em>greetings</em>! +</p> + +<p> +This book is for you! Read as you run, and may you run as you read. +</p> + +<p class="sig"> +G. G. R. +</p> + +<p> +<span class="sc">New York</span>, March 15, 1913. +</p> + +<hr class="short"> + +<h2> +CONTENTS +</h2> + +<table summary="Contents"> +<tr> +<td class="chpt"> </td> +<td class="txt"> </td> +<td class="pg"><small>PAGE</small></td> +</tr> + +<tr> +<td class="chpt">I</td> +<td class="txt">THE RISE AND FALL OF MAXIM & GAY</td> +<td class="pg"><a href="#I">11</a></td> +</tr> + +<tr> +<td class="div" colspan="3">The Birth of an Idea to Coin Money.</td> +</tr> + +<tr> +<td class="div" colspan="3">The Higher Mathematics of the Operation.</td> +</tr> + +<tr> +<td class="div" colspan="3">How "The One Best Bet" Was Coined.</td> +</tr> + +<tr> +<td class="div" colspan="3">Real Inside Turf Information.</td> +</tr> + +<tr> +<td class="div" colspan="3">The Public Asks to Be Mystified.</td> +</tr> + +<tr> +<td class="div" colspan="3">Prestige Restored by a Clerk's Ruse.</td> +</tr> + +<tr> +<td class="div" colspan="3">A Boastful Race Player Gives Aid.</td> +</tr> + +<tr> +<td class="div" colspan="3">Fortune Changes Her Mood and Smiles Again.</td> +</tr> + +<tr> +<td class="div" colspan="3">The Kentucky Colonel Falls in Line.</td> +</tr> + +<tr> +<td class="div" colspan="3">Betting the Public's Money at Great Profit.</td> +</tr> + +<tr> +<td class="div" colspan="3">$130,000 Is Lost and Won in a Day.</td> +</tr> + +<tr> +<td class="div" colspan="3">A Disastrous Newspaper Wind-up.</td> +</tr> + +<tr> +<td colspan="3"> </td> +</tr> + +<tr> +<td class="chpt">II</td> +<td class="txt">MINING FINANCE AT GOLDFIELD</td> +<td class="pg"><a href="#II">46</a></td> +</tr> + +<tr> +<td class="div" colspan="3">A Partnership of Pure Nerve.</td> +</tr> + +<tr> +<td class="div" colspan="3">Bucking the Tiger on the Desert.</td> +</tr> + +<tr> +<td class="div" colspan="3">Bidding $3,000,000 When Broke.</td> +</tr> + +<tr> +<td class="div" colspan="3">Millions in the Vista Held No Charms.</td> +</tr> + +<tr> +<td class="div" colspan="3">"Human Interest" Versus Technical Mining.</td> +</tr> + +<tr> +<td class="div" colspan="3">Beginning the Advertising Business.</td> +</tr> + +<tr> +<td class="div" colspan="3">Some Advertising that Paid.</td> +</tr> + +<tr> +<td class="div" colspan="3">Building Gold Mines with Publicity.</td> +</tr> + +<tr> +<td class="div" colspan="3">Hair-Raising Stories for Distant Readers.</td> +</tr> + +<tr> +<td class="div" colspan="3">The Mercury of Speculation.</td> +</tr> + +<tr> +<td class="div" colspan="3">The Birth of Bullfrog.</td> +</tr> + +<tr> +<td class="div" colspan="3">Enter, Charles M. Schwab.</td> +</tr> +<tr> +<td class="div" colspan="3">Why the Bottom Fell Out.</td> +</tr> + +<tr> +<td class="div" colspan="3">How About the Public's Chances?</td> +</tr> + +<tr> +<td class="div" colspan="3">Jumping Jack Manhattan.</td> +</tr> + +<tr> +<td colspan="3"> </td> +</tr> + +<tr> +<td class="chpt">III</td> +<td class="txt">THE BREWING OF A SATURNALIA OF SPECULATION</td> +<td class="pg"><a href="#III">89</a></td> +</tr> + +<tr> +<td class="div" colspan="3">Trying It on the Stray Dog.</td> +</tr> + +<tr> +<td class="div" colspan="3">Advertising for Thinkers.</td> +</tr> + +<tr> +<td class="div" colspan="3">Yes, "Business Is Business."</td> +</tr> + +<tr> +<td class="div" colspan="3">Fortunes that Were Missed.</td> +</tr> + +<tr> +<td class="div" colspan="3">The Tale of Bullfrog Rush.</td> +</tr> + +<tr> +<td class="div" colspan="3">Prize Fights and Mining Promotion.</td> +</tr> + +<tr> +<td class="div" colspan="3">The Year of Big Figures.</td> +</tr> + +<tr> +<td class="div" colspan="3">The Story of Goldfield Consolidated.</td> +</tr> + +<tr> +<td class="div" colspan="3">At the Height of the Frenzy.</td> +</tr> + +<tr> +<td colspan="3"> </td> +</tr> + +<tr> +<td class="chpt">IV</td> +<td class="txt">THE GREENWATER FIASCO</td> +<td class="pg"><a href="#IV">133</a></td> +</tr> + +<tr> +<td class="div" colspan="3">Getting Into the Game.</td> +</tr> + +<tr> +<td class="div" colspan="3">All the Copper in the World.</td> +</tr> + +<tr> +<td class="div" colspan="3">The Collapse of Greenwater.</td> +</tr> + +<tr> +<td class="div" colspan="3">The Shame and the Blame.</td> +</tr> + +<tr> +<td colspan="3"> </td> +</tr> + +<tr> +<td class="chpt">V</td> +<td class="txt">ON THE EVE OF THE GREAT GOLDFIELD SMASH</td> +<td class="pg"><a href="#V">144</a></td> +</tr> + +<tr> +<td class="div" colspan="3">The Rise of Wingfield and Nipon.</td> +</tr> + +<tr> +<td class="div" colspan="3">The Winnings of a Tenderfoot.</td> +</tr> + +<tr> +<td class="div" colspan="3">I Am Landed High and Dry.</td> +</tr> + +<tr> +<td class="div" colspan="3">The Beginning of the Raid.</td> +</tr> + +<tr> +<td class="div" colspan="3">Some Pertinent Personalities.</td> +</tr> + +<tr> +<td class="div" colspan="3">The Time When Money Talks.</td> +</tr> + +<tr> +<td class="div" colspan="3">Clouds in the Western Sky.</td> +</tr> + +<tr> +<td class="div" colspan="3">From Credit to Crash.</td> +</tr> + +<tr> +<td class="div" colspan="3">Down with the Sullivan Trust Company.</td> +</tr> + +<tr> +<td class="div" colspan="3">Some Hindsight that Came Too Late.</td> +</tr> + +<tr> +<td colspan="3"> </td> +</tr> + +<tr> +<td class="chpt">VI</td> +<td class="txt">NIPISSING AND GOLDFIELD CON</td> +<td class="pg"><a href="#VI">179</a></td> +</tr> + +<tr> +<td class="div" colspan="3">An Orgy in Market Manipulation.</td> +</tr> + +<tr> +<td class="div" colspan="3">The Guggenheims Enter Nipissing.</td> +</tr> + +<tr> +<td class="div" colspan="3">Nipissing on the Toboggan.</td> +</tr> + +<tr> +<td class="div" colspan="3">Who Got the $75,000,000?</td> +</tr> + +<tr> +<td class="div" colspan="3">The Wonder Mining-Camp Stampede.</td> +</tr> + +<tr> +<td class="div" colspan="3">Teague Attacks Senator Nixon.</td> +</tr> + +<tr> +<td class="div" colspan="3">"Calling for a Show-Down."</td> +</tr> + +<tr> +<td class="div" colspan="3">Manipulating Goldfield Con.</td> +</tr> + +<tr> +<td class="div" colspan="3">Enter, Nat. C. Goodwin & Co.</td> +</tr> + +<tr> +<td class="div" colspan="3">The Story of the Goldfield Labor "Riots."</td> +</tr> + +<tr> +<td class="div" colspan="3">The Death of Governor Sparks.</td> +</tr> + +<tr> +<td colspan="3"> </td> +</tr> + +<tr> +<td class="chpt">VII</td> +<td class="txt">RAWHIDE</td> +<td class="pg"><a href="#VII">219</a></td> +</tr> + +<tr> +<td class="div" colspan="3">Real Gold at Rawhide.</td> +</tr> + +<tr> +<td class="div" colspan="3">The Rawhide Coalition Mines Company.</td> +</tr> + +<tr> +<td class="div" colspan="3">A Race of Gamblers.</td> +</tr> + +<tr> +<td colspan="3"> </td> +</tr> + +<tr> +<td class="chpt">VIII</td> +<td class="txt">THE PRESS AGENT AND THE PUBLIC'S MONEY</td> +<td class="pg"><a href="#VIII">227</a></td> +</tr> + +<tr> +<td class="div" colspan="3">Publicity via Elinor Glyn.</td> +</tr> + +<tr> +<td class="div" colspan="3">"Al" Miller's Siege.</td> +</tr> + +<tr> +<td class="div" colspan="3">The Funeral Oration for Riley Grannan.</td> +</tr> + +<tr> +<td class="div" colspan="3">Among the "Big Fellows."</td> +</tr> + +<tr> +<td class="div" colspan="3">The Reverse English.</td> +</tr> + +<tr> +<td class="div" colspan="3">The Power of the Public Print.</td> +</tr> + +<tr> +<td class="div" colspan="3">Rawhide Again.</td> +</tr> + +<tr> +<td colspan="3"> </td> +</tr> + +<tr> +<td class="chpt">IX</td> +<td class="txt">THE WALL STREET GAME</td> +<td class="pg"><a href="#IX">264</a></td> +</tr> + +<tr> +<td class="div" colspan="3">Good Big Fish vs. Bad Little Fish.</td> +</tr> + +<tr> +<td class="div" colspan="3">Righteous Wall Street and the "Sucker" Public.</td> +</tr> + +<tr> +<td class="div" colspan="3">The Marketing of Mining Stock.</td> +</tr> + +<tr> +<td class="div" colspan="3">I Buck the Wall Street Game.</td> +</tr> + +<tr> +<td class="div" colspan="3">The "Double-Crossing" of Rawhide Coalition.</td> +</tr> + +<tr> +<td class="div" colspan="3">"Inside" Market Support.</td> +</tr> + +<tr> +<td colspan="3"> </td> +</tr> + +<tr> +<td class="chpt">X</td> +<td class="txt">ENTER, B. H. SCHEFTELS AND COMPANY</td> +<td class="pg"><a href="#X">288</a></td> +</tr> + +<tr> +<td class="div" colspan="3">More Truth on the "Mining Financial News."</td> +</tr> + +<tr> +<td class="div" colspan="3">The Scheftels Principles.</td> +</tr> + +<tr> +<td class="div" colspan="3">The Scheftels Company Against Margin Trading.</td> +</tr> + +<tr> +<td colspan="3"> </td> +</tr> + +<tr> +<td class="chpt">XI</td> +<td class="txt">A FIGHT TO THE DEATH</td> +<td class="pg"><a href="#XI">308</a></td> +</tr> + +<tr> +<td class="div" colspan="3">The Firing of the First Guns.</td> +</tr> + +<tr> +<td class="div" colspan="3">The Story of Ely Central.</td> +</tr> + +<tr> +<td class="div" colspan="3">The Assault on Ely Central.</td> +</tr> + +<tr> +<td class="div" colspan="3">The Clash of Battle.</td> +</tr> + +<tr> +<td class="div" colspan="3">A Bombshell in the Enemy's Camp.</td> +</tr> + +<tr> +<td class="div" colspan="3">A Government Raid Is Rumored.</td> +</tr> + +<tr> +<td class="div" colspan="3">The Raid on B. H. Scheftels and Co.</td> +</tr> + +<tr> +<td class="div" colspan="3">A Tool's Confession.</td> +</tr> + +<tr> +<td class="div" colspan="3">The Guggenheims.</td> +</tr> + +<tr> +<td colspan="3"> </td> +</tr> + +<tr> +<td class="chpt">XII</td> +<td class="txt">THE LESSON OF IT ALL</td> +<td class="pg"><a href="#XII">362</a></td> +</tr> +</table> +<hr class="med"> + + +<h2> +FOREWORD +</h2> + + +<p> +You are a member of a race of gamblers. The instinct to speculate +dominates you. You feel that you simply must take a chance. You can't +win, yet you are going to speculate and to continue to speculate—and +to lose. Lotteries, faro, roulette, and horse-race betting being +illegal, you play the stock game. In the stock game the cards +(quotations or market fluctuations) are shuffled and riffled and +STACKED behind your back, AFTER the dealer (the manipulator) knows on +what side you have placed your bet, and you haven't got a chance. When +you and your brother gamblers are long of stocks in thinly margined +accounts with brokers, the market is manipulated down, and when you +are short of them, the prices are manipulated up. +</p> + +<p> +You are on guard against the Get-Rich-Quick man, and you flatter +yourself that you can detect his wiles at a glance. You can—one kind +of Get-Rich-Quick operator. But not the dangerous kind. Modern +Get-Rich-Quick Finance is insidious and unfrenzied. It is practised by +the highest, and you are probably one of its easy victims. +</p> + +<p> +One class of Get-Rich-Quick operator uses crude methods, has little +standing in the community, operates with comparatively small capital, +and caters to those who do not think and have only small resources. He +is not particularly dangerous. +</p> + +<p> +The other uses scientific methods—so scientific, indeed, that only +men "on the inside" readily recognize them; occupies a pedestal in the +community; is generally a man of excellent financial standing, a +member of a stock exchange; employs large capital; appeals to thinkers +or those who flatter themselves that they know the difference between +a gold bar and a gold brick, and seeks to separate from their money +all classes and conditions of men and women with accumulations large +or small. +</p> + +<p> +The United States Government during the past few years, at the behest +of the big fellow, who seeks a monopoly of the game, has been raiding +the little fellow—the crude operator whose power to injure is as +nothing compared to the ravages that have been wrought by the +activities of his really formidable prototype. +</p> + +<p> +I have a message to communicate to every investor and speculator, a +story to tell of my experience through the great Goldfield, Bullfrog, +Manhattan and Greenwater mining booms in Nevada of 1905-1908, in which +the public lost upwards of $200,000,000, and of a series of great +mining-stock promotions in Wall Street and other American financial +centers, in which the public sank $350,000,000 in 1910. The narration +of the facts demonstrates that the Government's Get-Rich-Quick crusade +has made it less easy for some of the small offenders to thrive, but +that the transcendentally greater culprits are at this very moment +plucking the public to a fare-you-well, and that the Government has +not lifted a finger against them. +</p> + +<p> +No man, except a common thief, ever started out to promote a mining +company or any other company that he was convinced at the outset had +no merit; and the work of common thieves is quickly recognized and the +offenders are easily apprehended. +</p> + +<p> +The more dangerous malefactors are the men in high places who take a +good property, overcapitalize it, appraise its value at many times +what it is worth, use artful publicity and market methods to beguile +the thinking public into believing the stock is worth par or more, and +foist it on investors at a figure which robs them of great sums of +money. There are more than a million victims of this practice in the +United States. +</p> + +<p> +After years of experience behind the scenes, the conclusion is forced +upon me that the instinct to speculate is so strong in American men +and women that they choose to "take a chance" regardless of the fact +that at the outset they already half-realize they eventually must +lose. +</p> + +<p> +Myself, in boyhood, a victim of the instinct to speculate, I, years +afterward, at the age of 30, learned to cater to the insatiable desire +in others. I spent fortunes for advertising and wrote my own +advertisements. I constructed on big lines powerful dollar-making +machinery that succeeded in getting the money for my enterprises, and +I was generally my own manager. Ten years of hard work in a field in +which I labored day and night has disclosed to me that the instinct to +gamble is all-conquering among women as well as men—the rich and the +poor, the young and the old, the wise and the foolish, the successful +and the unsuccessful. +</p> + +<p> +Worse, if you have lost some of your hard-earned money in speculation, +your case is undoubtedly incurable, because you have a fresh +incentive, namely, to "get even." Experience, therefore, will teach +you nothing. The professional gambler's aphorism, "You can't kill a +sucker," had its genesis in a recognition of this fact, and now stock +promoters and manipulators of the multi-millionaire class subscribe to +its truth and on it predicate their operations. +</p> + +<p> +Nearly everybody speculates (gambles); few win. Where does the money +go that is lost? Who gets it? +</p> + +<p> +Are you aware that in catering to your instinct to "invest," methods +to get you to part with your money are so artfully and deftly applied +by the highest that they deceive you completely? Could you imagine it +to be a fact that in nearly all cases when you find you are ready to +embark on a given speculation, ways and means that are almost +scientific in their insidiousness have been used upon you? +</p> + +<p> +What are these impalpable yet cunningly devised tricks that are +calculated to fool the wisest and which landed YOU? I narrate them +herein. +</p> + +<p> +What are your chances of winning in any speculation where you play +another man's game? HAVE YOU ANY CHANCE AT ALL? +</p> + +<p> +In playing the horse races in years past you had only one chance if +you persisted—YOU COULD LOSE. +</p> + +<p> +In margin-trading on the New York Stock Exchange, New York Curb, +Boston Stock Exchange, Boston Curb, Chicago Board of Trade, Chicago +Stock Exchange, New York Cotton Exchange and kindred institutions, +experience among stock-brokers proves that if you stick to the game +you have only one chance—YOU CAN LOSE. +</p> + +<p> +In railroad, industrial and mining-stock speculation, where you buy +the shares outright and hold them for stock market profits, you have +two chances; if you are of the average and your operations are for a +period continuous—YOU CAN BREAK EVEN IF YOU ARE VERY LUCKY, OR LOSE +IF YOU ARE NOT; and in justice to myself I must be allowed to explain +that I had a much better opinion of the public's chances ten years ago +than I have now, and that experience on the inside has taught me this. +</p> + +<p> +The moral to the investor and speculator is "Never Again!" And yet you +WILL speculate again. Experience teaches that so long as the chance of +speculative gain exists in any enterprise, so long will the American +public continue in its efforts to appease its speculative appetite. +</p> + +<p class="sig"> +G. G. R. +</p> + + + + +<p class="booktitle"> +MY ADVENTURES WITH YOUR MONEY +</p> + + + + +<h2> +<a name="I"> </a> +CHAPTER I +<br><br> +<span class="smallsc">The Rise and Fall of Maxim & Gay</span> +</h2> + + +<p> +The place was New York. The time, March, 1901. My age was thirty. My +cash capital, tightly placed in my pocket, was $7.30, and I had no +other external resources. I was a rover and out of a job. +</p> + +<p> +Since August of the year before I had been loafing. My last position, +seven months before, was that of a reporter for the New Orleans +<cite>Times-Democrat</cite>. My last newspaper assignment was the great +Galveston cyclonic hurricane in which 15,000 lives were lost and +$100,000,000 in property was destroyed. I covered that catastrophe for +the New York <cite>Herald</cite> and other journals as well as for the New +Orleans newspaper. It was a "beat" and I netted a big sum for a few +days' hard work, but the money had all been spent for subsistence. +</p> + +<p> +At the corner of Fortieth Street and Broadway I met an old-time +racetrack friend, Dave Campbell. His face wore a hardy, healthful hue, +but he bore unmistakable evidence of being down on his luck. +</p> + +<p> +"Buy me a drink," he said. +</p> + +<p> +"I've got thirty cents in change and I must have a cigar," I answered, +"and you know I like good ones." +</p> + +<p> +"Well, I'll take a beer," he said, "and you can buy yourself a +perfecto." +</p> + +<p> +No sooner said than done. The cigar and the drink were forthcoming. We +sat down. It was a café with the regulation news-ticker near the lunch +counter. +</p> + +<p> +"Do you still bet on the horses?" asked Campbell. +</p> + +<p> +"No, I haven't had a bet down in more than a year," I answered. +</p> + +<p> +"Well, here's a letter I just received from Frank Mead at New Orleans, +and it ought to make you some money," he said. +</p> + +<p> +"There's a 'pig' down here named Silver Coin," the letter said, "that +has been raced for work recently. I think he's fit and ready and that +within the next few days they will place him in a race that he can +win, and he will bring home the coonskins at odds of 10 to 1." +</p> + +<p> +I had seen letters like that before, but my interest was aroused. I +picked up a copy of the New York <cite>Morning Telegraph</cite> from the +table. Turning the pages, I noticed a number of tipsters' +advertisements, all claiming they were continually giving the public +winners on the races. +</p> + + +<h3> +THE BIRTH OF AN IDEA TO COIN MONEY +</h3> + +<p> +"Do these people make money?" I asked Campbell. +</p> + +<p> +"Yes, they must," he answered, "because the ads have been running +every day for months and months." +</p> + +<p> +"Well, if poorly written ads like these can make money, what would +well-written ads accomplish, and particularly from an information +bureau which might give real information?" I queried. A moment later +the ticker began its click, click, click. +</p> + +<p> +"Here come the entries," said Campbell. +</p> + +<p> +He went to the tape and ejaculated, "By Jiminy! Here's Silver Coin +entered for to-morrow." +</p> + +<p> +The coincidence stirred me. +</p> + +<p> +"I've got an idea for an advertisement," I said. "Get me a sheet of +paper." +</p> + +<p> +It was supplied. I wrote: +</p> + +<div class="box"> +<p class="ctr"> +Bet Your Last Dollar On<br> +SILVER COIN<br> +To-day<br> +At New Orleans<br> +He Will Win At 10 to 1 +</p> +</div> + +<p> +And then I faltered. "I must have a name for the signature," I said. +</p> + +<p> +I picked up the newspaper again and turned to the page containing the +entries for that day at the New Orleans races. A sire's name was given +as St. Maxim. +</p> + +<p> +"Maxim!" I said. "That's a good name. I'll use it. Now for one that +will make euphony." +</p> + +<p> +"Gay!" said Campbell. "How's that? It's sporty." +</p> + +<p> +Thereupon I created the trade-mark of Maxim & Gay. +</p> + +<p> +In a postscript to this advertisement I stated that the usual terms +for this information were $5 per day and $25 per week, and that the +day after next Maxim & Gay would have another selection, which would +not be given away free. +</p> + +<p> +"Maxim & Gay" were without an address. Half a block away on Broadway, +at a real estate office, we were informed that upstairs they had some +rooms to let. I engaged one of these for $15 a month—no pay for a +week. Two tin signs were ordered painted, bearing the inscription, +"Maxim & Gay." One was placed at the entrance of the building and the +other on the door upstairs. The sign-painter extended credit. +</p> + +<p> +Before bidding me adieu, Campbell exclaimed of a sudden: +</p> + +<p> +"By golly! I can't understand that scheme. How can you make any money +giving out that Silver Coin tip for nothing?" +</p> + +<p> +"Watch and see!" I said. +</p> + +<p> +Around to the <cite>Morning Telegraph</cite> office, then on Forty-second +Street, I went. +</p> + +<p> +"Insert this ad and give me $7 worth of space," I said, as I shelled +out my last cent. +</p> + +<p> +When the advertisement appeared the next morning, its aspect was +disappointing. The space occupied was only fifty-six agate lines, or +four inches, single-column measure. It looked puny. Would people +notice it? +</p> + +<p> +That afternoon Campbell and I took possession of the new office of +Maxim & Gay. Luckily, a former tenant had left a desk and a chair +behind, in lieu of a settlement for rent. In walked a tall Texan. +</p> + +<p> +"Hey there!" he cried. "Here's $5. It's yours. Keep it. Answer my +question, and no matter what way you answer it, it don't make any +difference. The $5 is yours." +</p> + +<p> +I looked up in amazement. +</p> + +<p> +"Give me the source of your information on Silver Coin," he said. "I +bet big money. If your dope is on the level, I'll bet a 'gob.' If it +ain't, your confession will be cheap at $5, which will be all the +money I'll lose." +</p> + +<p> +I showed him the letter from Frank Mead. +</p> + +<p> +"That's good enough for me," he said, turning on his heel. +</p> + +<p> +Silver Coin won easily at 10 to 1. +</p> + +<p> +The betting was so heavy in the New York pool-rooms that, at post +time, when 10 to 1 was readily obtainable at the race-track, 6 to 1 +was the best price that could be obtained in New York. It is history +that the New York City pool-rooms at that time controlled by "Jimmy" +Mahoney were literally "burned up" with winning wagers. Pool-room +habitués argued it thus: "If the tip is not 'a good thing,' what +object in the world would these people have for publishing the ad? If +the horse loses, the cost of the advertisement is certainly lost. The +only way they can win is for the horse to win." It was good logic—as +far as it went. +</p> + + +<h3> +THE HIGHER MATHEMATICS OF THE OPERATION +</h3> + +<p> +But it was really sophistry. If the horse lost, the inserter of the +Maxim & Gay advertisement would be out exactly $7. If the $7 was used +to bet on the horse, the most that Maxim & Gay could win would be $70. +I was taking the same losing risk as the bettor, with a greater chance +for gain. By investing $7 in the advertisement, it was possible for me +to win much more money from the public by obtaining their patronage +for the projected tipping bureau. +</p> + +<p> +I recall that the experimental features of the advertisement appealed +to me strongly and struck me as being a splendid test of the +possibilities of the business. If the horse won and there were few +responses to the advertisement it would be convincing on the point +that there was no money in the tipster branch of the horse-racing +game. I argued that if the racing public would not believe that an +Information Bureau was what it cracked itself up to be, in the face of +a positive demonstration, how could it be expected to believe the +lurid claims of the fakers whose advertisements crowded the sporting +papers daily and in which they claimed <em>after</em> the races were run +that they named in advance the winners at all sorts of big odds? +</p> + +<p> +The next morning about ten o'clock, Campbell called at my home and +said that he had received another "good thing" by telegraph from Mead +and that the name of the horse was Annie Lauretta, with probable odds +of 40 to 1. +</p> + +<p> +"Jiminy!" he exclaimed. "If we only get a few customers to-day and +this one wins, what will happen?" +</p> + +<p> +Leisurely we walked to the office. "If we get ten subscribers to-day +to start with, we'll make a fine beginning," I said. +</p> + +<p> +As we approached the Hotel Marlborough, which is opposite the building +on Broadway in which the Maxim & Gay Company had its modest little +office, our attention turned abruptly to a crowd of people who were +being lined up by half a dozen policemen. +</p> + +<p> +"What theater has a sale of seats to-day?" Campbell asked. +</p> + +<p> +"Don't know," I answered. +</p> + +<p> +As we approached the office, we found that the line extended into our +own office building. As we ambled up the rickety stairs, we passed the +crowd in line, one by one, until we discovered, to our great +astonishment, that the line ended at our door. +</p> + +<p> +We turned the key, walked in, locked the door, and stood aghast. +</p> + +<p> +Holding up both hands, I gasped, "In heaven's name, what have we +done?" I was appalled. +</p> + +<p> +"Give 'em Annie Lauretta," cried Campbell. +</p> + +<p> +"But suppose Annie don't win," I expostulated. +</p> + +<p> +"Smokes!" exclaimed Campbell. "Are you going to turn down all those $5 +bills?" +</p> + +<p> +"Let's see that telegram," I faltered. +</p> + +<p> +I perused it over and over again. +</p> + +<p> +"Mead's judgment on Silver Coin is good enough reason to warrant +advising people to put a wager on another one of his choices," +Campbell argued. I agreed. +</p> + +<p> +How to convey the information in merchantable form was the next +question. A typist in the Hotel Marlborough, across the way, was sent +for and asked to strike off the name "Annie Lauretta" 500 or 1,000 +times on slips of paper. Envelopes were bought and a typed slip was +placed in each. The line increased until it was a block and a half +long. +</p> + +<p> +When all was ready, the door was opened. Campbell passed the envelopes +out as each man handed me $5. I stuffed the money in the right-hand +drawer of the desk, and when that became choked, I stuffed it in the +left-hand drawer. Finally, the money came so thick and fast that I +picked up the waste-paper basket from the floor, lifted it to the top +of the desk and asked the buyers to throw their money into the +receptacle. When a man wanted change, I let him help himself. +</p> + +<p> +For two and a half hours, or until within fifteen minutes of the +calling of the first race at New Orleans, the crowd thronged in and +out of our office. When the last man passed out we counted the money +and found the day's proceeds to be $2,755. +</p> + +<p> +"What will we do next?" asked Campbell. "What's my job, and what do I +get?" +</p> + +<p> +"How much do you want?" I asked. +</p> + +<p> +"Ten dollars a day," he said. +</p> + +<p> +Thereupon he got possession of the $10 and he admitted it was more +money than he had seen in a month. +</p> + +<p> +"What will we do next?" he repeated. +</p> + +<p> +"Let us take a walk," I said. "Lock the office until after the fourth +race, when we see what Annie Lauretta does." +</p> + +<p> +We hied ourselves to a nearby resort and stood by the news ticker to +see what would happen to Annie. It was half an hour since the third +race had been reported. +</p> + +<p> +"Fourth race—tick—tick—tick," it came. "A—Al——," +</p> + +<p> +"We've lost!" I cried. +</p> + +<p> +"A—AL—ALPENA first." +</p> + +<p> +There was grim silence. +</p> + +<p> +"Tick—tick——," +</p> + +<p> +"Here she is!" yelled Campbell. +</p> + +<p> +"A-N-N-I-E LAURETTA second—40—20—10" (meaning that the odds were 40 +to 1, first, 20 to 1, second, and 10 to 1, third, and that those who +had played "across the board" had won second and third money at great +odds). +</p> + +<p> +I boarded a Broadway car, rode down to the Stewart building and rented +one of the finest suites of offices in its sacred purlieus. I ordered +a leading furniture dealer to furnish it sumptuously. At night I +walked over to the <cite>Morning Telegraph</cite> office, laid $250 on the +counter, ordered inserted a flaring full-page ad. announcing that +Maxim & Gay had given Annie Lauretta at 40, 20 and 10, second, and +previously Silver Coin at 10 to 1, won, and were ready for more +business. +</p> + +<p> +A telegram was sent to Frank Mead, instructing him to spend money in +every direction with a view to getting the very best information that +could be obtained from handicappers, clockers, trainers and every +other source he could reach. Mead continued to wire daily the name of +one horse, which we promptly labeled and thereafter advertised daily +as "The One Best Bet." Soon "One Best Bet" became a term to conjure +with. +</p> + +<p> +The success of this enterprise was phenomenal. In the course of two +years it earned in excess of $1,500,000. There were some weeks when +the business netted over $20,000 profits. At the height of its career, +in the summer of 1902, at the Saratoga race meeting, when the +pool-rooms in New York were open, our net profits for the meeting of a +little less than three weeks were in excess of $50,000. +</p> + +<p> +We established an office in Saratoga and our average daily sales on +race days were 300 envelopes at $5 each. In New York the average was +just as large, and, in addition, we had a large clientele in distant +cities to whom we sent the information by telegraph. The wire +business, in fact, increased to such an extent that it became +necessary to call upon the Western Union and Postal Telegraph +companies to furnish our office in the Stewart building with direct +loops. +</p> + +<p> +I spent the money as fast as I made it. I believed in our own +information and made the fatal error of plunging on it. My error, as I +afterwards concluded, was in not risking the same amount on every +selection. Had I done this, I would not have suffered serious losses. +The trouble was that every time a horse on which I wagered won, I was +encouraged to bet several times as much on the next one, and by +doubling and trebling my bets, I played an unequal game. +</p> + +<p> +The expense of gathering this information within a few weeks increased +to upwards of $1,000 a week, and it was not only our boast, but an +actuality, that the Bureau did really give more than value received. +</p> + +<p> +Undoubtedly, the evil of the venture was the gambling it incited; but +the effort to secure reliable information was honest, and what young +man of my age and of my experiences, having indulged in a lark of the +Silver Coin variety, could withstand the temptation of seeing the +thing through? +</p> + +<p> +Among the leading patrons of the Maxim & Gay Company were soon +numbered important horse owners on the turf, leading bookmakers and +many leaders of both sexes in the smart set. Maxim & Gay made it a +rule to sell no information of any kind to minors and often excluded +young men from the offices for this reason. +</p> + + +<h3> +HOW "THE ONE BEST BET" WAS COINED +</h3> + +<p> +Our methods of advertising were unique. We used full pages whenever +possible, and it was a maxim in the establishment that small type was +never intended for commercial uses. We used in our big display +advertisements a nomenclature of the turf that had never before been +heard except in the vicinity of the stables, and we coined words and +phrases to suit almost every occasion. The word "clocker," meaning a +man who holds a watch on horses in their exercise gallops, was +original with us, and has since come into common use, as has the +phrase, "The One Best Bet," which we also coined. +</p> + +<p> +It was our aim, in using the language of horsemen, to be technical +rather than vulgar, the theory being that, if we could convince +professional horsemen that we knew what we were talking about, the +general public would quickly fall in line. +</p> + +<p> +One morning we were alarmed to see in the <cite>Morning Telegraph</cite>, on +the page opposite our own daily effort, the advertisement of a new +tipster who called himself "Dan Smith." Dan went Maxim & Gay "one +better" in the use of race-track terminology. He evidently employed a +number of negro clockers, for the horse lingo which he used in his +advertisements smelled of soiled hay and the manure pile. It was +awful! But it made a hit with race-goers, and before a week had passed +we recognized "Smith" as a dangerous competitor. +</p> + +<p> +We were loth to believe that the use of this horsy language was +entirely responsible for Smith's success, for we knew that his tips +were not so good as ours. We investigated. His trick was this: In the +sheet that he sent out to his customers, he would name for every race +at least five horses as having a chance to win. He advised his +clients, in varying terms, to bet on every one of them, and if any one +of them won, he would print next morning what he had said on the +preceding day regarding the winner alone, leading the public to +believe that the only horse he had fancied was the actual winner. +</p> + +<p> +I decided to organize another Bureau to knock out Dan Smith. The +intention was "to go" our competitor "a few better" in the use of +vulgar horse-racing colloquialisms and exaggerated claims, and thus +nauseate the betting public and "put the kibosh" on Dan. We created a +fictitious advertiser whom we named "Two Spot," and the next morning +there appeared at our instigation in the <cite>Morning Telegraph</cite> a +large display advertisement, headed substantially as follows: +</p> + +<div class="box"> +<p class="ctr"> +TWO SPOT<br> +Turf Info. Merchant<br> +Terms, $2 Daily; $10 Weekly<br> +</p> +</div> + +<p> +Following the style which Dan Smith had adopted in his racing sheets, +"Two Spot" mentioned in his first advertisement, as a sample of his +line of "dope," four or five horses to win each race, each one in more +grandiloquent terms than the other, but these were selected because +they, in reality, appeared to be the most likely losers of all the +entries. +</p> + +<p> +A woman was sent over to the newly-organized office of "Two Spot" to +take charge of the salesroom. I was completely taken off my feet the +next day when she informed me that the receipts, as a result of the +first advertisement, were in excess of $300, and that the public not +only did not read between the lines, but had actually fallen for the +hoax. +</p> + +<p> +To cap the climax, on the second day one of the "outsiders" which "Two +Spot" named derisively as the one best bet "walked in" at 40 to 1! +</p> + +<p> +Next day "Two Spot" did a land-office business, and within a few days +we figured that the "Two Spot" venture would net $1,000 a week if +continued. "Two Spot" then went after the game hammer and tongs and +endeavored to gage the full credulity of the public. +</p> + +<p> +The distinctive difference between "Two Spot" and Maxim & Gay was +this: Maxim & Gay, except in one instance, which is chronicled herein, +never pretended to have selected a winner when it had not, while "Two +Spot" enjoying the same source of information as Maxim & Gay, worded +his daily advices to clients so artfully as to be able to claim the +next morning in his advertisements à la Dan Smith, the credit of +having said something good about every winner. +</p> + +<p> +The profits of Dan Smith's venture, I was informed, exceeded a quarter +of a million dollars the first year, and the profits of "Two Spot," +whose career was cut short within a month by a realization on our part +that we could not afford to be identified with such an enterprise, was +divided among the employees of the "Two Spot" office. "Two Spot" had +been brought into being for the purpose of killing opposition and not +for profit-making. The scheme failed of its purpose. +</p> + +<p> +To give an idea of the character of some of the raw kind of +advertising put out by "Two Spot," and for which the public fell, I +recall this excerpt from one of his tipping sheets: +</p> + +<div class="blockquote"> +<p> +I am my own clocker. I have slept under horse-blankets for thirty years. +I understand the lingo of horses. Last night, when I was taking my forty +winks in the barn of Commando, I heard him whinny to Butterfly and tell +her to keep out of his way to-day because he was going to "tin-can" it +from start to finish, and if Butterfly tried to beat him, he would +"savage" her. That makes it a cinch for Commando. Bet the works on him +to win. +</p> +</div> + + +<h3> +REAL INSIDE TURF INFORMATION +</h3> + +<p> +Maxim & Gay repeated the "Silver Coin" method of advertising only once +during the entire career of the company. This happened in the spring +of 1902, when John Rogers, trainer for William C. Whitney, sent to the +post a mare named Smoke. Our information was that the mare would win, +and our selections for the day named her to win—and she did. Two days +later, she was again entered, against an inferior class of horses, and +the handicap was entirely in her favor. Notwithstanding this, we +inserted an advertisement which appeared in the newspapers on the +morning of the race, reading substantially as follows: +</p> + +<div class="blockquote"> +<p> +"<em>Don't bet on Smoke to-day. She will be favorite, but she will +not win. Rockstorm will beat her.</em>" +</p> +</div> + +<p> +Sure enough, Smoke opened up favorite in the betting. The betting +commissioners of Mr. Whitney placed large wagers on the horse with the +bookmakers. The bulk of the public's money, however, went on +Rockstorm, and before post time thousands of dollars of the "wise" +money followed suit. +</p> + +<p> +Rockstorm won the race. Smoke led into the stretch, when up went her +tail and she "blew up." +</p> + +<p> +Immediately I was cross-questioned by messengers from the judges' +stand. They asked our reason why we were so positive that Smoke would +lose. Mr. Whitney, I was informed, was actually suspicious that his +mare had been "pulled." The reason for the reversal of form, as I +explained at the time, was this: +</p> + +<p> +William Dozier, our chief clocker at the race-track, who had witnessed +the preparation which Smoke received for the races, was of the opinion +that her training had been rushed too fast, and that her first race, +instead of putting her on edge, had caused a setback. Her first race, +in fact, had "soured" her. Being a veteran horseman, he was positive +that Smoke would lose. I afterwards learned that the training of Smoke +had been left to an understrapper, and that Mr. Rogers himself was not +responsible for her condition. +</p> + + +<h3> +THE PUBLIC ASKS TO BE MYSTIFIED +</h3> + +<p> +The judges were apparently satisfied, but the public could not readily +understand the truth, and we didn't point it out in our +advertisements, because our policy was always to appear as mysterious +as possible as to the source of our information. +</p> + +<p> +Mystery played an important rôle in our organization, and it would +have been better had we never succeeded in the Smoke coup. Up to this +time my personal identity had not been revealed at the race-track, and +even the bookmakers did not know who was the guiding spirit of Maxim & +Gay. "Jimmy" Rowe, trainer for James R. Keene; Peter Wimmer, trainer +for Captain S. S. Brown of Pittsburg, and John Rogers, trainer for +William C. Whitney, were at this early period at various times the +rumored sponsors for Maxim & Gay. The bookmakers and "talent" +generally conceived the idea that nobody but a very competent trainer +in the confidence of horse owners could possibly be responsible for so +much exact information regarding the horses. Of course, the track +officials who made it their business to know everything knew of my +connection with the organization. No sooner, however, did their +messengers ask an interview with me than the fact became public +property around the race-track and the mask was off. +</p> + +<p> +The effect for a while was very bad, for our business fell off +considerably. "Bismarck" Korn, the well-known German bookmaker, put it +to me this way on the day of the Smoke incident: +</p> + +<p> +"You are the first horse tipster I effer saw dat vore eyeclasses, +sported a cane, und vore tailor-made cloding. You look like a +musicianer—not like a horseman. You're a vonder!" +</p> + +<p> +Gottfried Walbaum, another old-time bookmaker, chimed in: "Dat vas +obdaining money under false bredenses. I gafe your gompany dwendy-fife +dollars a veek for two months alreaty. You gif me my money pack! You +are a cheater!" +</p> + +<p> +Riley Grannan, the plunger, said, "Got to hand it to you, kid! Any +time you can put one over on the Weisenheimers that have been making a +living on race-tracks for twenty years you are entitled to medals!" +</p> + +<p> +The attitude of "Bismarck" and of Walbaum was amusing, that of Grannan +flattering. But it was poor business, because most of these +professional race-track people ceased for a while to subscribe for the +Maxim & Gay service. +</p> + +<p> +For months I had purposely kept myself in the background, fearing a +dénouement of this very description. I recalled that in the late 80's, +in a town of northern Vermont, when John L. Sullivan was advertised to +appear in a sparring exhibition, his manager met him at the train, +and, although it didn't rain and the sun didn't shine, an umbrella was +raised to cover John L. while walking from the train to a waiting +landau. No sooner did Sullivan enter the vehicle than the blinds were +drawn. When the carriage reached the hotel, it stopped before a side +door. The manager alighted before Sullivan, again quickly raised the +umbrella and whisked the heavy-weight champion past the crowds and up +to his room without exposing him to the view of anybody whatsoever. +</p> + +<p> +Throughout the day Sullivan was screened from public gaze. His face +was not seen by a single citizen of the town until he appeared on the +stage that night. +</p> + +<p> +I asked the manager why he was so very careful to shield Sullivan from +the popular view prior to his appearance before the footlights. I +recall that he said: +</p> + +<p> +"If the public thought John L. was just an ordinary human being with +black mustaches and a florid Celtic face, they wouldn't go to see him. +The public demand that they be mystified, and to have shown people off +the stage that Mr. Sullivan is just a plain, ordinary mortal would +disillusion them and keep money out of the house." +</p> + +<p> +That piece of showman's wisdom was fresh in mind during the early +career of Maxim & Gay; and so long as Maxim & Gay kept race-track men +guessing as to who was directing its destinies, the organization was a +howling success. Its good periods were mixed with bad periods after +the mystery of sponsorship was cleared up to the satisfaction of the +professionals by the inquiry of the race-track judges into the Smoke +affair. +</p> + +<p> +A few weeks after the Smoke coup, our chief clocker informed us that +the entries for a big stake race which would be run on the following +Saturday had revealed to him a "soft spot for a sure winner," as he +expressed himself, and he said we could advertise the happening in +advance with small chance of going wrong. This we proceeded to do. +</p> + +<p> +Money poured in by telegraph from distant cities for the "good thing" +on Saturday. Our advertisement on the Thursday previous to the race +read like this: +</p> + +<div class="box"> +<p class="ctr"> +The Hog-Killing of the Year<br> +Will Come Off at Sheepshead Bay<br> +On Saturday, at 4 O'clock.<br> +Be Sure to Have a Bet Down.<br> +Telegraph Us $5 for the<br> +Information<br> +</p> +</div> + +<p> +One of our constant patrons resided in Louisville. He was among the +first to whom we telegraphed the information on Saturday morning. The +race was run and the horse <em>lost</em>. +</p> + +<p> +About 4:30 <span class="smc">P.M.</span> we received a dispatch from our Louisville +customer, reading as follows: "The hog-killing came off on schedule +time—here in Louisville. I was the hog." +</p> + +<p> +Another message from a pool-room habitué reached us, reading: "Good +game. Have sent for more money." +</p> + +<p> +We were often in receipt of messages of similar character on occasions +when our selections failed to win and our customers lost their money; +but these communications were generally in good spirit. +</p> + +<p> +On one occasion we had what we believed to be first-hand information +regarding a horse which was being prepared for a big betting coup by +Dave Gideon, one of the cleverest horsemen in the country. Following +our customary method of using vividly glowing advertisements, with the +blackest and heaviest gothic type in the print shop, we announced: +</p> + +<div class="box"> +<p class="ctr"> +A GIGANTIC HOG-KILLING<br> +We have Inside Information of a Long<br> +Shot that Should Win To-morrow at<br> +10 to 1 and Put Half of the Bookmakers<br> +out of Business.<br> +Be Sure to Have a Bet Down on<br> +This One. Terms $5.<br> +</p> +</div> + +<p> +The <em>argument</em> of the advertisement, which appeared beneath these +display lines, was couched in the most glowing terms, and made it very +plain that our information came from a secret source, and, further, +that we had spent legitimately a snug sum of money to secure the +information. We also pointed out that the owner was one of the +shrewdest betting men on the turf and seldom went astray when he put +down a "plunge" bet on one of his own entries. +</p> + +<p> +Next day the race was run. The horse did not finish "in the money." +</p> + +<p> +The following day we received many letters, as we always did when one +of our heavily advertised "good things" lost. One of the most unique +of these epistles contained a remonstrance from a Philadelphia +subscriber. He wrote in this vein: +</p> + +<div class="blockquote"> +<p> +Dear Sir:—You have been advertising for some days that you would +have a gigantic hog-killing to-day. I was tempted by your +advertising bait and fell—and fell heavily with my entire +bank roll. My bucolic training should have warned me that +"hog-killings" are not customary in the early Spring, but I fell +anyway. +</p> + +<p> +Permit me to state, having recovered my composure, that Armour +or Swift need have no fear of you as a competitor in the +pork-sticking line, for far from making a "hog-killing," you did +not even crack an egg. Pardon me. Thanks. Good-by. +</p> + +<p> +Yours truly, +</p> + +<p class="sig"> +—— —— +</p> +</div> + +<h3> +PRESTIGE RESTORED BY A CLERK'S RUSE +</h3> + +<p> +In the Summer of the second year of Maxim & Gay's great money-gathering +career, the Information Bureau was "out of luck" and the patronage of +the Bureau fell away to almost nothing. At this period I was seriously +ill and confined to my home. A man in my office decided to take +advantage of my absence from the scene to improve business a bit on +his own hook. +</p> + +<p> +It was the habit of our track salesmen, dressed in khaki, to appear +at the office at noon every day and receive a bundle of envelopes +containing the tips on the races, and then immediately to proceed to +the race-track, stand outside of the gates and vend them at $5 per +envelope. +</p> + +<p> +One day these men, without their knowledge, were supplied with +envelopes containing blank sheets of paper instead of the mimeographed +list of tips. When a handful of town customers reached the office, they +were informed that the selections would be late that day and would be +on sale at the track only. +</p> + +<p> +At about half-past one o'clock the 'phone bell rang, and word came +from the track messengers that apparently a mistake had been made, as +their envelopes contained blanks. They were being compelled to refund +money. They asked what to do. +</p> + +<p> +"Wait," they were told. "We will send a messenger immediately with the +tips." +</p> + +<p> +The messenger never reached the track. +</p> + +<p> +There were no tips issued. +</p> + +<p> +On that day May J. won at odds of 200 to 1. +</p> + +<p> +The next morning, the newspapers contained full-page advertisements +announcing that Maxim & Gay had tipped May J. at 200 to 1 as the day's +"One Best Bet." It could not have been done without a "come-back" if +any tips had been issued. +</p> + + +<h3> +A BOASTFUL RACE PLAYER GIVES AID +</h3> + +<p> +I was not present, but I learned as soon as I became convalescent that +on the afternoon of the day the advertisement appeared claiming credit +for May J. at 200 to 1, the office was thronged with new customers who +enrolled for weekly subscriptions at a rate that put new life into the +business. A few of the customers expressed some doubt as to whether +Maxim & Gay gave out the 200 to 1 shot or not. +</p> + +<p> +That afternoon there appeared on the scene a race player who, laying +$5 down on the desk, said, "Give me your good things. I played May J. +yesterday at 200 to 1 and I am rolling in money." +</p> + +<p> +"Where did you buy your information?" +</p> + +<p> +"From your man at the entrance to the track," he answered. +</p> + +<p> +"At what time?" he was asked. +</p> + +<p> +"A quarter to two," he replied. +</p> + +<p> +"Say, young man, there were a lot of people who came in here this +morning who said they were not sure we gave out that selection at all. +Would you make an affidavit that you bought the information from us?" +</p> + +<p> +"You bet I will!" he said; and thereupon a notary public was called in +and the caller swore that he had bought the Maxim & Gay tips at the +entrance to the race-track and that they contained May J. at 200 to 1. +</p> + +<p> +That affidavit was posted in the office during the remainder of the +day. When the clerk who performed this stunt was asked for more +information as to how he came to secure such an affidavit, he gave +absolute assurance that he did not offer the customer the smallest +kind of bribe to make it, and that nothing but an innate desire to +call himself "on top" had influenced the man to perjure himself. +</p> + +<p> +But I could not tolerate the misleading advertising that had been done +as a result of misplaced energy, and the man responsible for it did +not remain with the company. +</p> + + +<h3> +FORTUNE CHANGES HER MOOD AND SMILES AGAIN +</h3> + +<p> +Peculiarly enough, the May J. advertisement was followed by a series +of brilliant successes for Maxim & Gay in the selection of winners at +big odds, and, within a month our net earnings again reached $20,000 +per week. Horse owners, horse trainers and society people who +frequented the club-house at the race-track were our steadiest +patrons. +</p> + +<p> +The women particularly were most loyal to our bureau. The wife of a +young multi-millionaire of international prominence was one of our +most ardent followers. She would never think of putting down a bet +without first consulting Maxim & Gay's selections. On a notable +occasion, this lady arrived at the gate of the Morris Park race-track +with her husband, in their automobile, and took the long stroll to the +club-house. They were a trifle late for the first race; the horses +were already going to the post up the Eclipse chute. +</p> + +<p> +Suddenly the lady discovered she had forgotten to purchase Maxim & +Gay's selections. Hastily calling her husband, she gave him a sharp +berating for not reminding her to buy the selections. They had a short +but earnest interview, which was suddenly terminated by the young man +doing a sprint of a quarter of a mile down the asphalt walk from the +club-house to the main entrance where the tips were sold by the +uniformed employees of Maxim & Gay. +</p> + +<p> +Those who witnessed the sprint of the young financier attested to the +fact that he never showed as much swiftness of foot in his early +college days; but even his unusual speed failed to get him back on +time to acquaint his wife with the name of the horse selected by Maxim +& Gay for the first race, the race having been run and the Maxim & Gay +selection having won. The gentleman thereupon got a curtain lecture +from his better half that astonished and amused the society patrons on +the club-house balcony. Thereafter, he never forgot to get the Maxim & +Gay selections. In fact, he made assurance doubly sure by engaging the +colored attendant in charge of the field-glasses to deliver the +selections to him daily immediately upon his arrival at the course. +</p> + +<p> +Our popularity with racehorse proprietors was mixed. Among the horse +owners with whom we transacted business was Colonel James E. Pepper, +the late noted distiller and owner of a big breeding farm and a stable +of runners. He was an ardent lover of horses, and maintained that his +native Kentucky knowledge of thoroughbreds afforded him an opportunity +to pick probable winners of horse-races better than any of "them —— +faking tipsters." He had great confidence in his judgment for a while. +</p> + + +<h3> +THE KENTUCKY COLONEL FALLS IN LINE +</h3> + +<p> +After separating himself from much cash, while one of his very +intimate friends was "cleaning up" plenty of money on our selections, +he finally strolled into our office one morning and sheepishly stated +that one of his "fool friends" had asked him to step in and get our +"fool selections" for him. We explained that it was against our rule +to give out our choices before 12:30 <span class="smc">P.M.,</span> whereat he grew +exceedingly wroth. He finally agreed to our conditions, paid his money +and was given an order to get the selections at the track-entrance +from one of our messengers. +</p> + +<p> +Nearly all of our choices won that day. Colonel Pepper came in the +following morning and paid for another subscription, this time for a +week's service. We were "in our stride," the majority of our +selections winning from day to day, and Colonel Pepper had cause for +exultation. On one of these days we divulged, on our racing sheet, the +name of a "sleeper" that we were confident would win at 10 to 1, a big +betting coup having been planned by that Napoleon of the turf, John +Madden. The horse won at big odds, and Colonel Pepper made a "killing" +on the information. +</p> + +<p> +For the next day, our clockers had spotted another horse that had been +got ready by the light of the moon, and we spread it pretty strong in +our advertisements that the horse we would name could just fall down, +get up again and then "roll home alone." The horse did not fall down; +but he won; he "rolled home alone" by about ten lengths. He belonged +to Colonel Pepper. It was anticipated that about 20 to 1 would be laid +against this fellow, but on account of our strong tip, he opened at 10 +to 1 and was played down to 3 to 1. The bookmakers were badly crimped. +</p> + +<p> +The next day, as soon as the office opened, Colonel Pepper, hotter +under the collar than even his name might indicate, stamped into the +outer room. Slamming his cane down on the big mahogany table, he +demanded in stentorian tones: "What in the —— does this —— +business mean? Here I come and subscribe my good money to your —— +fool tips, and you-all are so low-down mean as to give my hoss for the +good thing yesterday! What does it mean, suh; what does it mean?" +</p> + +<p> +The use of considerable diplomacy was necessary to calm down the irate +Colonel, who had no compunctions in winning a big bet on Mr. Madden's +"sleeper," but "—— it, suh, it is outrageous to treat <em>me</em> so." +</p> + +<p> +The Colonel never got over that incident, and while he won a big bet +on his own horse, he always claimed that Maxim & Gay had ruined the +betting odds for him and that but for the vigilance of our clockers +his winnings would have been twice as large. This was true, and time +and again we ruined the price for many another owner who thought he +was going to get away with something on the sly. +</p> + +<p> +Bookmakers as a rule are very much self-satisfied about their +knowledge of the mathematics of the game. In order to show them that +they didn't know all about it, the Maxim & Gay Company inserted an +advertisement one day reading substantially as follows: +</p> + +<div class="box"> +<p class="ctr"> +YOU PAY US $5<br><br> +WE REFUND $6<br><br> +If the Horse We Name as<br><br> +THE ONE BEST BET<br><br> +To-day Does Not Win, We Will Not<br> +Only Refund Our $5 Fee, Which Is<br> +Paid Us for the Information, but Will<br> +Pay Each Client an EXTRA DOLLAR<br> +By Way of Forfeit.<br><br> +Pay Us $5 To-day for Our One Best<br> +Bet, and if the Horse Does Not Win<br> +We Will Pay You $6 To-morrow.<br><br> +MAXIM & GAY CO.<br> +</p> +</div> + +<p> +Our receipts that day were approximately $5,000. The horse did not win. +We refunded $6,000 next day, and netted a considerable sum of money on +the operation. +</p> + +<p> +It happened to be a two-horse race. Our horse was at odds of 1 to 6 +in the betting, that is to say, the bookmakers laid only one dollar +against every six bet by the public. The other horse ruled at odds of +5 to 1, meaning that here the bookmakers laid five dollars against the +public's one. +</p> + +<p> +The Maxim & Gay Company sent to the track $1,000 out of the $5,000 paid +in by its customers and wagered the $1,000 on the contending horse at +odds of 5 to 1, drawing down $4,000 in winnings. From this money it +paid its clients the thousand-dollar forfeit, netting $4,000 on the +operation, after of course returning to them their own $5,000. +</p> + +<p> +Had the 1 to 6 shot won, the clients who had received the winning tip +would have been happy, while the Maxim & Gay Company would not have +been compelled to refund any money and would have been ahead $4,000 on +the operation, the $1,000 wagered and in that event lost in the betting +ring on the other horse being subtracted from the $5,000 paid in by its +customers. No matter which horse won our gain was sure to be $4,000 and +we had here the ideal of a "sure thing." +</p> + +<p> +It was a case of "taking candy from a baby"; and yet many of the wise +bookmakers could not at first figure it out. Nearly all of them +subscribed for the information. As for the public, they did not seem to +catch on at all. +</p> + + +<h3> +BETTING THE PUBLIC'S MONEY AT GREAT PROFIT +</h3> + +<p> +The Eastern racing season was about to close and it was decided to +remove the entire force of clerks to New Orleans for the Winter and +there to depart from the usual practice of selling tips only, and to +bet the money of the American public on the horses at the race-track in +whatever sums they wished to send. The company employed Sol +Lichtenstein, then the most noted bookmaker on the American turf, to +bet the money, and made him part of the organization, giving him an +interest in the profits. +</p> + +<p> +The Maxim & Gay Company at this time had made close to $1,000,000, and +recklessly and improvidently I had let it slip through my fingers. It +was "easy come and easy go." As I review that period in my career, I +recall that the whole enterprise appeared to me in the light of an +experiment—just trying out an idea, and having a lot of fun doing it. +Because of its dazzling success I became so confident of my ability to +make money at any time that I didn't take serious heed whether I +accumulated or not. Besides, I had never loved money for money's sake. +All the pleasure was in the accomplishing. +</p> + +<p> +The races at New Orleans were advertised to start on Thanksgiving Day. +On the 15th of October I ordered $20,000 worth of display advertising +to run in thirty leading newspapers in the United States four days a +week, until Thanksgiving. Credit was extended for the bill by one of +the oldest advertising agencies in America. +</p> + +<p> +The advertisements told the public to send their money to Maxim & Gay, +Canal Street, New Orleans. On my arrival there, two days before +Thanksgiving, I called at the post-office, and asked if there was any +mail for Maxim & Gay. The post-office clerk appeared to be startled. He +gazed at me as if he were watching a burglar in the act. His demeanor +was almost uncanny. He didn't talk. He didn't even move. He just +looked. Finally I asked, "What is the matter?" +</p> + +<p> +"Wait a minute," he muttered. +</p> + +<p> +He left the window. He did not return. Instead, what appeared to me to +be a United States deputy marshal ambled up to my side and said, "See +here; the Postmaster wants to see you." +</p> + +<p> +I was escorted into a secluded chamber in the post-office building, and +a few minutes later a post-office official, along with three or four +assistants, came into the room. +</p> + +<p> +"What's the trouble?" I asked. +</p> + +<p> +"You bring us a recommendation as to who you are and what you are and +all about yourself before we will answer any of your questions as to +how much mail there is here for you," the official said. +</p> + +<p> +I smiled. The advertising, then, was a success. +</p> + +<p> +Having been employed as a newspaper man in New Orleans a few years +before, I knew one of the leading lawyers of the city and several bank +officials. Within thirty minutes I had lawyer and bank men before the +Postmaster, vouching for my identity. Thereupon I was informed that +there were 1,650 pieces of registered mail, evidently containing +currency, and, in addition, twelve sacks of first-class mail matter, +which contained many money-orders, checks and inquiries. The official +said that in the money-order department they had notices of nearly +2,000 money-orders issued on New Orleans for the Maxim & Gay Company. +</p> + +<p> +I sent a wagon for the mail, and notwithstanding the fact that a force +of four men under me opened the letters and stayed with the job for two +days, the task was not completed when the first race was called on +Thanksgiving Day. On adding up the receipts, we found a little over +$220,000. +</p> + +<p> +The meeting continued 100 days, and our total receipts for the whole +period were $1,300,000. +</p> + +<p> +Maxim & Gay's system of money-making at New Orleans was as follows: +</p> + +<p> +We charged each client $10 per week for the information. We charged 5 +per cent. of the net winnings in addition, and we further contracted to +settle with customers only at the closing odds for bets placed, +retaining for ourselves the difference between the opening odds and the +closing odds. The profit averaged approximately $7,000 a day for 100 +days—to us. +</p> + +<p> +As a guarantee of good faith, the Maxim & Gay Company agreed with its +clients that each day it would deposit in the post-office and mail to +them a letter bearing a postmark prior to the hour of the running of +the race, naming the horse their money was to be wagered on; and this +was always done. An honest effort, too, was always made to pick a horse +that was likely to win, for even a child can see that if we did not +intend to bet the money and wanted to pick losers, all we would have +had to do was to make book in the betting ring at the race-track and +not spend thousands of dollars in advertising for money to lay against +ourselves. +</p> + +<p> +Did we invariably bet the money of our clients on the horse we named? +</p> + +<p> +Yes, always—except once! +</p> + + +<h3> +$130,000 IS LOST AND WON IN A DAY +</h3> + +<p> +That incident is not easily forgotten by several. On this day the entry +which we selected was one of Durnell & Hertz's string. The horse was +known to be partial to a dry track. The "dope" said he could not win in +heavy going. It was a beautiful sunshiny morning when we selected this +horse to win, and at noon the envelopes containing the name of the +horse were mailed in the post-office, as usual. +</p> + +<p> +Something happened. +</p> + +<p> +Half an hour before the race was run it began to rain in torrents and +the track became a sea of mud. Durnell & Hertz, realizing that they +were tempting fate to expect their horse to win under such conditions, +appeared in the judges' stand and asked permission to scratch their +entry. The judges refused. I asked Sol Lichtenstein, who had the +wagering of our client's money in charge, what he proposed to do about +betting on the horse under the changed conditions. He exclaimed, "Bet? +Do you want to burn up the money?" +</p> + +<p> +"Well, if he wins," I replied, "we will have to pay, because if he wins +and you don't bet and we say we changed the selection on account of the +rainstorm, they will not believe us and we will have trouble." +</p> + +<p> +"Very well," he said. "You bet my book all the money, and we will, for +the first time, book against our own choice. It's fair, because we must +pay if we lose, and there is no way out of it. But don't burn up that +money." I agreed. +</p> + +<p> +The opening odds against the horse were 2 to 1. Had it been a dry +track, he would have opened a hot favorite at 4 to 5 or so. Slowly the +odds lengthened to 10 to 1, which was the ruling price at the close. +Durnell & Hertz bet on another horse to win. Standing before Sol +Lichtenstein's book, I said: +</p> + +<p> +"Thirteen thousand on our selection, Sol." +</p> + +<p> +"One hundred and thirty thousand to $13,000," he answered. "Here's your +ticket." +</p> + +<p> +Sol and I repaired to the press-stand to see the race. Durnell & +Hertz's entry got off in the lead. At the quarter he was in front by +two lengths. At the half the gap of daylight was five lengths. At the +turn into the stretch the horse was leading by nearly a sixteenth of a +mile. Then I heard a noise behind me as if a miniature dynamite bomb +had exploded. Sol's heavy field-glasses had dropped to the floor. +</p> + +<p> +Sol did not wait to see the finish. The horse won in a gallop. +</p> + +<p> +At the office of Maxim & Gay accounts were figured and checks signed +for the full amount of our obligations, and they were immediately +mailed to all subscribers. +</p> + +<p> +At midnight I met Sol in the lobby of the St. Charles Hotel. He looked +worn. +</p> + +<p> +"I guess that will hold us!" he moaned. +</p> + +<p> +"Hold us?" I answered. "Nothing better ever happened. It'll make us!" +</p> + +<p> +"You poor nut!" he exclaimed. "Lose $130,000 in a day and it will make +you! Stop your noise!" +</p> + +<p> +"Listen!" I rejoined. "At an expense of $3,000 for tolls I have +telegraphed a full-page ad to fifty leading city newspapers, telling +the public that we tipped this horse to-day at 10 to 1 and that we +mailed checks to our customers to-night for $130,000. The gain we will +reap in prestige and fresh business will repay our loss on the horse." +</p> + +<p> +The next day the Western Union Telegraph Company found it necessary to +assign three cashiers to the work of issuing checks to the Maxim & Gay +Company for money telegraphed by new customers. Some individual +remittances were as high as $2,000. The money telegraphed us amounted +to about $150,000, and within ten days eighty per cent. of our own +dividend checks were returned to us by our customers, indorsed back to +us with instructions to double their bets, and within two weeks we were +able to figure that in the neighborhood of $375,000 was sent us as a +result. +</p> + + +<h3> +A DISASTROUS NEWSPAPER WINDUP +</h3> + +<p> +During the progress of the New Orleans meeting, I purchased a +controlling interest in the New York <cite>Daily America</cite>—a newspaper +patterned after the <cite>Morning Telegraph</cite>—from a group of members +of the Metropolitan Turf Association, who had sunk about $75,000 in the +enterprise. The <cite>Morning Telegraph</cite> was in the hands of a +receiver. I calculated that, by transferring the Maxim & Gay +advertisements from the <cite>Morning Telegraph</cite> to the <cite>Daily +America</cite>, I could make the <cite>Daily America</cite> pay and force the +<cite>Morning Telegraph</cite> out of the field. Later, the late William C. +Whitney, who was a shining light on the turf as well as in finance, was +induced to purchase the <cite>Morning Telegraph</cite>. Then trouble began to +brew for me. +</p> + +<p> +One morning I was summoned to the offices of August Belmont on Nassau +Street. +</p> + +<p> +"For the good of the turf, you must omit your Maxim & Gay +advertisements from the <cite>Daily America</cite> and other newspapers +hereafter," declared Mr. Belmont on my entering his room. +</p> + +<p> +"Why?" asked I. +</p> + +<p> +"They flagrantly call attention to betting on the races," he replied. +</p> + +<p> +"But you allow betting at the tracks." +</p> + +<p> +"Yes," he replied, "but public sentiment is beginning to be aroused +against betting, and an attack is bound to result." +</p> + +<p> +It occurred to me that at that very time Mr. Whitney was engaged in +disposing of his stock in various traction enterprises in New York to +Mr. Belmont and his syndicate, and that in all probability Mr. Whitney +had sought the assistance of Mr. Belmont to put the <cite>Daily +America</cite> out of business in this way. It was apparent that the +<cite>Daily America</cite> would lose money fast without the Maxim & Gay +advertising. Maxim & Gay, too, would practically be compelled to close +up shop if it could not advertise. I promised to consider. +</p> + +<p> +Returning to the <cite>Daily America</cite> office, I decided to pay no +attention to Mr. Belmont's request, having become convinced that it was +conceived in the interest of the <cite>Morning Telegraph</cite>. +</p> + +<p> +A few days later I was again summoned over the 'phone to Mr. Belmont's +office. When I was ushered into Mr. Belmont's presence he said: +</p> + +<p> +"If you don't quit advertising the Maxim & Gay Company in the <cite>Daily +America</cite>, I will see William Travers Jerome, and he will stop you." +</p> + +<p> +Mr. Jerome was then District Attorney, and the idea of doing anything +that Mr. Jerome considered illegal appalled me. +</p> + +<p> +"If Mr. Jerome sends word to me that the Maxim & Gay advertising is +illegal, I will discontinue it," I said. +</p> + +<p> +I did not hear from Mr. Jerome, and so went on with the advertising. +</p> + +<p> +Within a few weeks the Washington race meeting opened at Bennings. When +the Maxim & Gay staff reached there, we were all informed that the +Post-office department was about to begin an investigation into our +business affairs, and all of our staff voluntarily appeared before the +inspectors and underwent an examination. Our books were also submitted. +This investigation, coming on the heels of Mr. Belmont's threat, +convinced me that the influence of Mr. Belmont and Mr. Whitney reached +all the way to Washington, and I concluded that if I did not +discontinue the Maxim & Gay advertising in the <cite>Daily America</cite>, +and then, of course, discontinue the <cite>Daily America</cite>, they would +make serious trouble. So I hung out the white flag. I announced my +retirement from the Maxim & Gay Company and offered to sell my +newspaper to Mr. Whitney. +</p> + +<p> +My exchequer was low. Nearly every dollar I had made in the Maxim & Gay +enterprise had been lost by me in plunging on the races myself. +</p> + +<p> +During the following week Mr. Whitney received me at his palatial home +on Fifth Avenue just after his breakfast hour. He interviewed me for +about an hour, obtained my price on the paper, which was what I had put +into it, namely $60,000, and promised to cable to Colonel Harvey, then, +as now, the distinguished editor of the Harper publications, who was in +Paris, asking his advice, saying that Colonel Harvey advised him in all +newspaper matters. I did not hear from Mr. Whitney again; but I did +discover that my business manager was in close communication with Mr. +Whitney and that the state of my financial condition every evening was +being religiously reported to him. +</p> + +<p> +A few weeks later I was compelled to put the paper in the hands of a +receiver, and a representative of Mr. Whitney bought it for $6,500, or +about 10 cents on the dollar, and put it to sleep, leaving the field to +the <cite>Morning Telegraph</cite>. From that moment the <cite>Morning +Telegraph</cite>, which for a short period had been refusing all tipster +advertising, resumed the acceptance of such business and has continued +that policy up to this day. +</p> + +<p> +A year after I retired from Maxim & Gay, Attorney-General Knox decided +that racehorse tipping is an offense against the old lottery law, and +those who now advertise tips instruct that no money be sent by mail. +</p> + +<p> +Having lost the <cite>Daily America</cite> and having "blown" the Maxim & Gay +Company, I was again broke. But my credit was good, particularly among +race-track bookmakers. That Summer, 1904, I became a race-track +plunger, first on borrowed money and then on my winnings. By June I had +accumulated $100,000. In July I was nearly broke again. In August I was +flush once more, having recouped to the extent of about $50,000. Early +in September I went overboard; that is to say, I quit the track losing +all the cash I had and owing about $8,000 to a friendly bookmaker. +</p> + +<p> +Disgusted with myself, I longed for a change of atmosphere. I stayed +around New York a few days, when the yearning to cut away from my +moorings and to rid myself of the fever to gamble became overpowering. +I bought a railroad ticket for California and, with $200 in my clothes, +traveled to a ranch within fifty miles of San Francisco, where I hoed +potatoes, and did other manual labor calculated to cure race-trackitis. +In less than six weeks I felt myself a new man, and decided to stick to +the simple life forevermore—away from race-tracks and other forms of +gambling. +</p> + +<p> +But I didn't. +</p> + + + + +<h2> +<a name="II"> </a> +CHAPTER II +<br><br> +<span class="smallsc">Mining Finance at Goldfield</span> +</h2> + + +<p> +I had never visited San Francisco. Being close to the city of the +Golden Gate—within fifty miles—I decided to "take a look." So one +evening, in the late Fall of 1904, I packed my grip and within two +hours was comfortably housed in the old Palace Hotel. +</p> + +<p> +The first man I met on entering the lobby was W. J. Arkell, formerly +one of the owners of <cite>Frank Leslie's Weekly</cite> and of <cite>Judge</cite>. +</p> + +<p> +"Hello, Bill!" I exclaimed. "What are you doing here?" +</p> + +<p> +"Same as you," he answered. "Morse trimmed me in American Ice, and I'm +broke. I am in hock to the hotel. They think I am worth $2,000,000. I +haven't 20 cents." +</p> + +<p> +During the evening we consoled each other over a series of silver gin +fizzes, several of which Arkell paid for with the stub of a pencil. My +companion promulgated a scheme for the quick putting on their feet of +two Eastern rovers adrift in the big Coast city, and that night there +was formed the W. J. Arkell Advertising Agency. Then the horse-tipping +firm of "Jack Hornaday" was established. I declared that I preferred to +have little to do with it except to show "Willie" how it had been done +in New York by Maxim & Gay. +</p> + +<p> +"I will do it for you, Bill," I said; "but no more for me—I've had +enough." +</p> + +<p> +"Jack Hornaday" advertisements appeared daily in all the San Francisco +papers. Capable clockers and handicappers were hired and some excellent +information was obtained. Race-goers got a run for their money. +</p> + +<p> +But something happened. The race-track trust, which enjoyed a big pull +in the San Francisco <cite>Examiner</cite> office, soon realized that +somebody outside of the inner circle was getting the public's money, +and every day that "Jack Hornaday" tipped a loser the <cite>Examiner</cite> +carried on its sporting page a notice to the effect that "Jack +Hornaday's" tip had resulted very disastrously to his clients. +</p> + + +<h3> +A PARTNERSHIP OF PURE NERVE +</h3> + +<p> +"Jack Hornaday" discontinued business. +</p> + +<p> +I began to like San Francisco and the Coast. Being thrown among +Arkell's associates in the Palace Hotel lobby, from time to time I +naturally heard a great deal of talk about the new Nevada mining camp +of Tonopah. +</p> + +<p> +"Rice," said Arkell one evening, "come with me up to Tonopah and be my +press agent. We will get hold of a mining property up there, promote a +company and make a barrel of money." +</p> + +<p> +"What do you know about mines?" I asked. +</p> + +<p> +"Well, I've lost enough in 'em to know a great deal," he answered. +</p> + +<p> +"I don't know a mine from a hole in the ground, and I know nothing +about the stock-brokerage business; so I don't see how I can be of any +assistance," I said. +</p> + +<p> +"Don't let that bother you," he replied. "I'll show you how. You come +with me." +</p> + +<p> +"I will go on one condition," I said. "I am in for half on anything you +do." +</p> + +<p> +We shook hands and it was a bargain. +</p> + +<p> +We went to the depot. I had a trifle less than $150 in my pocket. +Arkell had $75. +</p> + +<p> +"Suppose we get stranded out there, what will happen?" I propounded. +</p> + +<p> +"Oh, forget it!" he answered. "How can a couple of Easterners like us, +wide awake and with phosphorus brains, get stranded in a place where +they dig silver and gold out of the ground?" +</p> + +<p> +We journeyed to Tonopah—a thirty-six-hour ride. The altitude is 6,000 +feet, and it was cold, nasty, penetrating Winter weather. During the +last hundred miles of our journey across the mountainous desert we +looked out of the car window and saw trainload after trainload of what +was said to be ore coming from the opposite direction, and we decided +that Tonopah was a sure-enough mining camp and that some of the +sensational stories about bonanza mines that we had heard were really +true. +</p> + + +<h3> +BUCKING THE TIGER ON THE DESERT +</h3> + +<p> +Arriving In Tonopah after dusk, we sought hotel accommodations. The +best we could get was a bed in a forbidding looking one-story annex, +walled with undressed pine and roofed with tarpaulin. It was located +100 feet to the rear of the hotel, which was already crowded with +miners and soldiers of fortune drawn from all quarters of the world by +the mining excitement. Its aspect was so inhospitable that Arkell and I +decided not to retire for a little while. We gravitated out toward the +barroom, where the click of the roulette wheel caught our ears. +</p> + +<p> +We sat down to watch the game. Soon we were buying stacks of checks and +ourselves bucking the tiger excitedly. In an hour the remnants of my +$150 passed to the ownership of the man behind the game, and Arkell had +put his last two-bit piece on the black and lost. +</p> + +<p> +I looked at him. He looked at me. +</p> + +<p> +"Umph!" he grunted. "Better hit the feathers!" +</p> + +<p> +Meekly I followed him to the annex. When we got under the soiled gray +woolen blankets, I remarked: "I've got a cane and an umbrella and three +suits of clothes. Do you think we can sell them in the morning for +enough to provide breakfast money?" +</p> + +<p> +"Oh, come off!" exclaimed my partner. "Wait till I present my card +around this burg in the morning; then we will get all the breakfast we +want." +</p> + +<p> +We awoke hungry, as all men have a habit of doing when they are broke. +</p> + +<p> +"I am going over to the Montana-Tonopah Mining Company's office," said +Arkell. "A mining engineer by the name of Malcolm Macdonald makes his +headquarters over there and he wants to sell some mining properties at +Goldfield and in other parts of the State for about three million +dollars." +</p> + +<p> +"Three millions!" I exclaimed. +</p> + +<p> +"Yes," said Arkell. "I'll get the facts and wire them to my friend Joe +Hoadley in New York." +</p> + +<p> +"Say, Bill," I remonstrated, "they have a privately-owned jerkline +telegraph in this town, and if you send any 'phony' telegrams over the +wire, they'll be on to you. So don't do any of that kind of business." +</p> + +<p> +"Nothing of the kind!" replied he promptly. "Any message I send to +Hoadley he'll answer." +</p> + +<p> +"I guess you have it fixed on the other end," I remarked. He laughed. +</p> + +<p> +We strolled over to the State Bank and Trust Company building, across +the street, and there met Malcolm Macdonald, a mining engineer from +Butte, Montana, and his friend, Mr. Dunlap, who was at the time +secretary of the Montana-Tonopah Mining Company. The conversation was +not more than five minutes old when Arkell suggested that he would like +to eat breakfast, but "didn't want any restaurants in his," intimating +that he would like to have some good, old-fashioned home cooking. Mr. +Dunlap remarked modestly that the camp was too young to boast of much +home cooking, but that if we would be his guests he would guarantee to +make arrangements for some special cooking at the Palace restaurant. +</p> + + +<h3> +BIDDING $3,000,000 WHEN BROKE +</h3> + +<p> +After breakfast, which consisted of mountain trout, the flavor of which +was more delicious than anything I had tasted in many years—probably +because of the artificial hunger which an empty purse had created—we +returned to the office of the bank. There Arkell explained to Mr. +Macdonald that he wanted "a big mining proposition or nothing." He said +he represented big Eastern capital and that he was prepared to pay from +one to three millions for the right kind of property. Mr. Macdonald +named some mines and prospects which he said he was willing to +sacrifice for $3,000,000. +</p> + +<p> +One of them was the Simmerone, of Goldfield, which Mr. Macdonald +offered for $1,000,000. We afterward learned that he had paid $32,000 +for it. At that time there was a six-foot hole in the ground, and the +whole property contained less than five acres. A stockade had been +built around the workings on account of the extreme richness of the ore +that had been opened at grass-roots. +</p> + +<p> +Mr. Macdonald also offered for sale a lead property at Reveille and a +lead-silver property at Tybo, both situated about 70 to 100 miles from +a railroad. (Later these properties, along with some others, were +promoted by Charles Minzesheimer & Company, a New York Stock Exchange +house, as the Nevada Smelters & Mines Company and passed on to the +public at a valuation of $5,000,000. The market value of the entire +capitalization of this company is now less than $10,000.) These "mines" +were to be put into the deal at $1,000,000 each. +</p> + + +<h3> +MILLIONS IN THE VISTA HELD NO CHARMS +</h3> + +<p> +Arkell wrote a dispatch to the East in the presence of our newly-made +friends, describing the offering. Then he and I held a consultation, +and he vouchsafed the information that we would certainly get a free +automobile ride to Goldfield and have a chance to see there the new +boom mining camp. +</p> + +<p> +I got "cold feet." Arkell's talk of visionary millions in that bleak +environment of snow-clad desert and wind-swept mountain didn't enthuse +me at all. I protested against the proposed trip to Goldfield, and +insisted that I should be allowed to telegraph to relatives for money +with which to return to the Coast. +</p> + +<p> +But Arkell persisted. He declared that the expense of the trip to +Goldfield and back to Tonopah would be borne by the vendors of the +mines and that our return trip to San Francisco would be delayed only +one day. I left my grip, umbrella and cane in Tonopah, intending to +return the same evening, and boarded the automobile for Goldfield. +</p> + +<p> +Arrived in Goldfield, we were escorted to the Simmerone. Arkell +appeared to be very much impressed, although he remarked to me a few +minutes later that he would not give $34 for the whole layout. And +therein he was wise. The Simmerone was later capitalized for 1,000,000 +shares, each share of a par value of $1, ballooned on the San Francisco +and Goldfield stock exchanges to $1.65 a share, and then allowed to +recede to nothing bid, one cent per share asked. The rich ore "petered +out." +</p> + +<p> +There was an indefinable something in the atmosphere of Goldfield—a +new, budding mining camp, at an altitude of 5,000 feet and on the +frontier—that stirred me, and I decided to stay awhile. +</p> + +<p> +Arkell determined that he would go back to Tonopah and get an option on +the control of a mining company known as the Tonopah Home, which Mr. +Dunlap had mentioned to him in the automobile en route to Goldfield. He +said he would then go to San Francisco to promote it. The reason why he +decided to handle the Tonopah Home, I afterward discovered, was that it +was already incorporated and stock certificates had been printed, +thereby eliminating the delay and expense incident to preparing +something for the immediate consumption of the San Francisco public. +</p> + +<p> +"How am I going to subsist here for a few days until I can begin to +make a living?" I asked Arkell. +</p> + +<p> +"How am I going to get back to Tonopah and from there to San +Francisco?" Arkell asked me. +</p> + +<p> +At that moment we stood in front of the Goldfield Bank and Trust +Company's building—a tin bank literally as well as figuratively. It +was constructed of corrugated iron and tin. A few months later, when +the bank went up the flume, the cash balance found in the safe +aggregated 80 cents. +</p> + +<p> +"You take me into this bank and introduce me and I will cash a check," +he said. +</p> + +<p> +"A check on what?" I asked. +</p> + +<p> +"On my bank in Canajoharie, New York," he said. "I was born and brought +up there, and they wouldn't let one of my checks go to protest. +Besides, I can get back to 'Frisco and protect it by telegraph, if +necessary, before it reaches Canajoharie." +</p> + +<p> +We entered the bank. I introduced myself to the cashier as an Eastern +newspaper man, and then introduced W. J. Arkell as the former publisher +of <cite>Leslie's Weekly</cite>, <cite>Judge</cite>, and so on. +</p> + +<p> +After a brief parley, Arkell exchanged his paper for real money to the +amount of $50. On leaving the bank, I said: +</p> + +<p> +"Now, Bill, come across! I'm flat broke, on the desert." +</p> + +<p> +He handed me $15. I was satisfied, because he needed all of the $35 to +get back to civilization. +</p> + + +<h3> +"HUMAN INTEREST" VERSUS TECHNICAL MINING +</h3> + +<p> +After Arkell's departure for Tonopah I went to the office of the +Goldfield <cite>News</cite> and asked for a job. I got it, at $10 a day. My +first assignment was to interview an old miner named Tom Jaggers. I +wrote what I considered a first-class human-interest story, and handed +it to the owner and editor, "Jimmy" O'Brien. He thought it was fair +writing, but not the sort of matter the Goldfield <cite>News</cite> wanted. +It wanted technical mining stuff. Of course I didn't know a winze from +a windlass, nor a shaft from a stope, and some of the weird yarns I +handed in about mine developments certainly did make Mr. O'Brien jump +sideways at times. +</p> + +<p> +Within a week I was discharged for incompetency. +</p> + +<p> +I was not at all appalled at losing my job on the Goldfield +<cite>News</cite>. I had begun to like the life and was convinced there were +some real gold mines in the camp. I was a tenderfoot and knew little or +nothing about the mining business, but the visible aspect of shipment +upon shipment of high-grade ore leaving the camp by mule-team was +convincing. What probably impressed me most was the evident sincerity +of the trail-blazers who had been on the ground since the day the camp +was born. These men had suffered all kinds of hardships to hold their +ground and make a go of the camp which, when discovered, was situated +100 miles from a railroad station and at least 25 miles from a known +water-supply. Tradition said that men had died of thirst on the very +spot where Goldfield was now adding daily to the world's wealth. +</p> + +<p> +My environment became an inspiration. +</p> + +<p> +There were a few penny-mining-stock brokerage firms doing business with +the outside world, and the idea of starting an advertising agency +appealed to me strongly. Here was an opportunity for the great American +speculating public to take "a flyer" on something much more tangible +and lasting than a horse-race, I determined. +</p> + +<p> +Failing to locate a furniture store I ordered a long, rough, pine board +table made by a carpenter, rented desk-room from the Goldfield Bank and +Trust Company right in front of the cashier's counter, and secured the +services of an expert male stenographer from Cripple Creek. The +Goldfield-Tonopah Advertising Agency was born. +</p> + + +<h3> +BEGINNING THE ADVERTISING BUSINESS +</h3> + +<p> +The idea of applying to the American Newspaper Publishers' Association +for recognition did not occur to me. I did not know that such was the +practise of agents. I did believe, however, from my ad-writing +experience with the Maxim & Gay Company, in New York, that I could +write money-getting advertising copy. Further, my experience in making +contracts with advertising agents for the publication of Maxim & Gay's +advertising in the newspapers throughout the land had, it seemed, +conveyed to me sufficient information regarding that end of the +business to fortify me in my new field. +</p> + +<p> +Next morning I entered the office of the Mims-Sutro Company, a newly +established brokerage firm, and urged advertising. +</p> + +<p> +"We are already spending about $100 a month," said the manager. +</p> + +<p> +"One hundred dollars a month!" I exclaimed. "Why, you ought to be +spending that much every hour!" +</p> + +<p> +At first they thought me a fanatic on the subject, but within a +fortnight I succeeded in inducing them to spend $1,000 in a single day +for advertising. It was not, however, until after I had shown them how +to follow up their correspondence successfully that they began to +believe in me. I wired to nearly all of the important city newspapers +throughout the country for rates. After obtaining their replies I +decided to spend $500 in the Chicago Sunday <cite>American</cite>, and $500 +in the San Francisco <cite>Examiner</cite> in one issue. I forwarded the copy +with the money, and it appeared promptly. The results were good—so +good, indeed, that within two months the Mims-Sutro Company was +spending at the rate of from $5,000 to $10,000 a week for advertising, +and my commissions amounted to thousands. +</p> + +<p> +My contracts with the advertisers required them to pay me one-time +rates, and my contracts with the publishers permitted me to send in +copy at long-time rates, and the profit was about 45 per cent. And +inasmuch as I always sent cash with the order, my copy was in great +demand. Indeed, my agency was fairly inundated day after day with blank +contracts from newspapers all over the country, the managers of which +were clamoring for the Goldfield business. In addition to the +Mims-Sutro account, I soon had many others; in fact, I had all the +others. Within six months after my arrival in Goldfield my agency +netted me $65,000. +</p> + + +<h3> +SOME ADVERTISING THAT PAID +</h3> + +<p> +My second best customer was January Jones, the noted Welsh miner, and +later, when the corporation of Patrick, Elliott & Camp swung into +business as promoter, I placed its advertising. I held it, too, until +the death of C. H. Eliott, when the control of that firm fell into +other hands and it ultimately went out of business. In the course of +three years my advertising agency inserted in the neighborhood of +$1,000,000 worth of advertising in the newspapers of the United States, +chiefly those of the big cities, and all of the advertising made money. +It simply had to make money, because the brokers who did the +advertising had little or nothing to begin operations with except the +mines, and the mines were not their property. +</p> + +<p> +The most remarkable feature of that advertising campaign to me was that +I had never been a stock-broker, had never been a mine-promoter, and +had never been in a mining camp before; but still, despite my utter +lack of knowledge, to begin with, of the technical end of the business, +my advertisements pulled in the dollars. +</p> + +<p> +I was an enthusiast. I believed in the merits of the camp, and my +enthusiasm undoubtedly carried itself to the readers of my +advertisements. But the quality of the advertising copy did not +entirely explain my success in bringing the money into Goldfield. The +stock offerings undoubtedly <em>struck a popular chord</em>. Tens of +thousands of people who for years had been imbibing the daily financial +chronicles of the newspapers, but whose incomes were not sufficient to +permit them to indulge in stock-market speculation in rails and +industrials, found in cheap mining stocks the thing they were looking +for—an opportunity for those with limited capital to give full play to +their gambling, or speculative, instinct. +</p> + +<p> +Time and again promotions were almost completely subscribed by +telegraph in advance of mail responses reaching Goldfield; and it +frequently needed but the publication of a half-page advertisement in +40 or 50 big city newspapers, of a Sunday, to bring to Goldfield by +wire before Monday night sufficient reservations to guarantee +oversubscription in a few days. +</p> + +<p> +It was easy to give full play to my penchant for experimenting, in the +evolution of mining-stock promotion in Goldfield. The old system, and +the one which recently has enjoyed much vogue among financial +advertisers, was the endeavor first to get names of investors rather +than immediate results from the advertisements, and to follow them up +by correspondence. In spending the first $1,000 appropriated for +advertising from Goldfield, I split the money between two newspapers on +one day. I constructed large display advertisements and appealed for +direct, quick replies. This succeeded. +</p> + + +<h3> +BUILDING GOLD MINES WITH PUBLICITY +</h3> + +<p> +A little later I organized a news bureau as an adjunct of the +advertising agency. +</p> + +<p> +It is acknowledged that this news bureau accomplished much for Nevada. +As a matter of fact, it is generally conceded by Goldfield pioneers and +by mining-stock brokers throughout the country that the news bureau was +directly responsible for bringing into the State of Nevada tens of +millions of dollars for investment, and was indirectly responsible for +the opening up of the Mohawk and other great gold mines of the +Goldfield camp and of the State. +</p> + +<p> +The prospectors who located Goldfield were without means. George +Wingfield, the man who is now president of the merged Goldfield +Consolidated, came into the mining camps with only $150. No funds of +consequence were available from home sources. The money that later made +Goldfield the "greatest gold camp on earth" came from the outside, and +the news bureau secured it by focusing the attention of the American +public on the great speculative possibilities of investments in the +mining securities and leases of the camp. One of the leases, known as +the Hayes-Monnette, operated with Chicago money, afterward opened up +the great Mohawk ore deposit at a period when there was no money in the +treasury of the Mohawk Mining Company to do its own development work. +And there are scores of other instances which bear me out. +</p> + +<p> +I was head of the news bureau, and the news bureau was Nevada's +publicity agent. I have always considered my work in this direction in +the light of an achievement. No one contributed a dollar to the news +bureau except myself. +</p> + + +<h3> +HAIR-RAISING STORIES FOR DISTANT READERS +</h3> + +<p> +That news bureau, with its headquarters on the desert, at a time when +water was commanding $4 a barrel in Goldfield and coal could not be +obtained in the camp for love or money, was operated with as much +calculating judgment as it could have been were it subsidized by the +most powerful interests in America. Human-interest stories that were +written around the camp, its mines and its men, were turned out every +day by competent newspaper men. These were forwarded to the daily +newspapers in the big cities of the East and West for publication in +the news columns. +</p> + +<p> +Most of the stories were accepted and published. Whenever hesitancy was +observed, publishers were tempted by the news bureau with large +advertising copy to continue to give the camp publicity. +</p> + +<p> +Of such great assistance in arousing public interest did I find this +work that noted magazinists like James Hopper were imported to camp and +pressed into service by the news bureau to write readable stories. At +times, when public interest appeared to lag, the wires were used by the +camp's newspaper correspondents to obtain publicity for all kinds of +sensational happenings that were common on the desert. Reports of gold +discoveries, high play at gambling-tables, shooting affrays, gamblers' +feuds, stampedes, hold-ups, narrow escapes, murders, and so forth, were +used to rouse the public's attention to the fact that a mining camp +called Goldfield was on the horizon. +</p> + +<p> +I felt confident that the speculating public was going to make a great +big "killing" in Goldfield. Tonopah, twenty-six miles to the north, was +making good in a wonderful way. It had already enriched Philadelphia +investors to the extent of millions. I could see no reason why +Goldfield should not at least duplicate the history of Tonopah. Never +in my life had I lived in an environment that inspirited me as this +one. The visages of those around me were, as a rule, roughly hewn; the +features of many were marked with all the blemishes that had been put +upon them by time, by sleepless nights, by anxiety and by contact with +the elements; but courage, sincerity and honesty of purpose were +written in every line of their faces. +</p> + +<p> +I became imbued with the idea that investors who put their money into +Goldfield stocks were not only going to get an honest run for their +money, in that the mines were going to be developed and many would make +good, but that the opportunity for money-making, if embraced by the +public at that time, would earn a great reputation for the man who +educated the public to a full understanding of the situation. +</p> + + +<h3> +THE MERCURY OF SPECULATION +</h3> + +<p> +Mining-stock speculators and investors at a distance who responded to +the red-hot publicity campaign which marked those early days of +Goldfield rolled up enormous profits, and I made no mistake. Terrific +losses came eighteen months later, as a result of a madness of +mining-stock speculation which followed on the heels of the great +Mohawk boom and the merger of various Goldfield producers into a +$36,000,000 corporation. This was taken advantage of by "wild-catters" +in every big city of the country, and the public was fleeced to a +finish. But of this more and a plenty later. +</p> + +<p> +In those early days my agency advertised Goldfield Laguna at 15 cents +per share in order to finance the company for mine operations. Within +a year thereafter Goldfield Laguna sold at $2 a share on the San +Francisco Stock Exchange, and was absorbed by the Goldfield +Consolidated at that figure. And there were many others which +duplicated or exceeded the performance of Laguna. +</p> + +<p> +At the time of which I tell, when Laguna was promoted at 15 cents, +Goldfield was about a year old. A population of about 1,500 had +gathered there from all sections of the country. There were mining +experts from Salt Lake, San Francisco and Colorado, and miners from +every part of the Western mining empire; saloon-keepers from Alaska and +Mexico; real-estate brokers from practically every Western State and a +scattering of "tin-horns." It was about as motley a gathering as one +could find anywhere in the world, but compositely they were a sturdy +lot. +</p> + +<p> +The camp was enjoying its maiden boom. In sixty days real-estate values +had jumped from $25 for a lot on Main Street to $5,500. Roughly +constructed business houses banked the main thoroughfare for two or +three blocks. The heavy traffic incident to hauling in supplies from +Tonopah had ground the dirt of the street into an impalpable mass of +dust to the depth of fifteen inches, and the unchecked winds of the +desert, sweeping from the Sierra Nevadas to the high uplifts east of +Goldfield, whipped the dust into blinding clouds that daily made life +almost unendurable. +</p> + +<p> +Practically the entire population was housed in tents that dotted the +foothills. At night-time these presented the appearance of an army +encampment. Provisions were scarce and barely met the requirements. The +principal eating-place was the Mocha Café, which consisted of a 14 by +18 tent with an earthen floor and a roughly constructed lunch-counter. +Here men stood in line for hours, waiting to pay a dollar for a dirty +cup of coffee, a small piece of salty ham and two eggs that had long +survived the hens that laid them. +</p> + +<p> +The popular rendezvous was the Northern saloon and gambling house, +owned and managed by "Tex" Rickard and associates. Here fully +seventy-five per cent. of the camp's male population gathered nightly +and played faro, roulette and stud-poker, talked mines and mining, sold +properties, and shielded themselves from the blasts that came with +piercing intensity from the snow-capped peaks of the Sierras. The +brokers of the camp gathered every night in the Northern and held +informal sessions, frequently trading to the extent of 30,000 or 40,000 +shares of the more active stocks. +</p> + +<p class="break"> </p> + +<p> +The mining stocks which were advertised through my agency in those +early Goldfield days were generally of the 10, 20 and 30-cent per share +variety. The incorporators of the companies were enthusiastic on the +point of their "prospect" making good, but I argued to myself that if +the chances of any mining prospect of this character proving to be a +mine were only about one in 25 or one in 50, and my agency advertised +25 or 50 companies of the average quality, and one of them made good in +a handsome way, he who purchased an equal number of shares in each +would at least "break even" with the profits from the one winner. +</p> + +<p> +Later this principle was "knocked into a cocked hat" for conservatism +by Mohawk of Goldfield advancing from 10 cents to $20 a share, proving +that if Mohawk had been one among 50 companies, the shares of which +were purchased by an investor at 10 cents, he would have gained +handsomely. Early purchasers of Mohawk gathered 200 to 1 for their +money, many times more than could usually be won on a long shot at the +horse-races, and not so very much less than was formerly won by lucky +prize-winners in the Louisiana Lottery. And Mohawk was only one of a +dozen of the early ones which advanced in price on the exchanges and +curb markets more than 1,000 per cent. +</p> + +<p> +At this early stage in Goldfield, "wild-catting" was not indulged in +from the camp, unless this long-shot gambling in shares of "prospects" +can by a grave stretch of imagination be termed such, the +promoter-brokers being able to offer stocks of close-in properties. +Among the prizes were Red Top, which advanced within two years +thereafter from 8 cents to $5.50 per share; Daisy, which sky-rocketed +from 10 cents to $6; Goldfield Mining, which soared from 10 cents to +$2; Jumbo, which improved from 50 cents to $5; Jumbo Extension, which +rose from 15 cents to above $3; Great Bend, which jumped from 20 cents +to around $2.50; Silver Pick, which moved up from 10 cents to $2.65; +Atlanta, which was promoted at 10 and 15 cents and sold up to $1.25; +Kewanas, which was lifted from 25 cents to $2.25, and others. +"Wild-catting" in a small way was prosecuted in Goldfield's fair name +even in those days, with Denver as the headquarters of the swindlers. +</p> + +<p class="break"> </p> + +<p> +<em>Eighteen months later, when the Mohawk mine of Goldfield was in the +midst of its greatest half-year of production, at the rate of +$1,000,000 a month, and the consolidation of the important mining +companies of the camp was in progress, "wild-catting" became general +from office buildings in the large cities. There were more than 2000 +companies incorporated during this last period, not one of which made +good, and the public lost from $150,000,000 to $200,000,000 as the +result of this operation alone. Fully $150,000,000 more was lost by the +ballooning to levels unwarranted by mine showings of listed Goldfield +stocks on the New York Curb and the San Francisco Stock Exchange, at +the same time.</em> +</p> + +<p class="break"> </p> + +<p> +But I am ahead of my story. +</p> + +<p> +It was late in the Spring of 1905. I had been at work in Goldfield more +than six months, and my campaign of publicity was beginning to gather +momentum. The mines, however, were not at the moment keeping lively +pace. The Mohawk was yet undiscovered. +</p> + + +<h3> +THE BIRTH OF BULLFROG +</h3> + +<p> +At this juncture the new mining camp of Bullfrog, 65 miles south of +Goldfield, was born. My publicity facilities were sought by owners of +properties in Bullfrog "to put the camp on the map." +</p> + +<p> +C. H. Elliott, a Goldfield pioneer, put an automobile at the disposal +of myself and my stenographer, and we departed for Bullfrog. Elliott +and his associates had staked out a townsite which they called +Rhyolite. I was presented with seven corner lots on my arrival, to help +along my enthusiasm. +</p> + +<p> +There, on the saloon floor of a gambling house, which was the chief +place of resort in the camp, I met for the first time George Wingfield, +then the principal owner of the Tonopah Club at Tonopah, a gambling +house which had lifted him from the impecunious tin-horn gambler class +to the millionaire division; United States Senator George S. Nixon,<a href="#note1" name="noteref1"><small>[1]</small></a> +his partner; T. L. Oddie, later elected Governor of Nevada; Sherwood +Aldrich, now one of the principal owners of the Chino and Ray +Consolidated mines, and worth millions, and others who have since +accumulated great riches. +</p> + +<p> +They were on the ground and buying properties. Mr. Aldrich purchased +the controlling interest in the Tramps Consolidated for about $150,000. +It was incorporated for 2,000,000 shares of a par value of $1 each, a +year later boomed to $3 a share on the New York Curb, and is now +selling at 3 cents, without ever having paid a dividend. +</p> + +<p> +Mr. Elliott had a large stock interest in the Amethyst mine and the +National Bank mine, which were capitalized for 1,000,000 shares +respectively, and he presented me with 10,000 shares of stock in +each. He and his partner sold the control of the Amethyst to +Malcolm Macdonald of Tonopah. Later, when Amethyst's neighbor, +Montgomery-Shoshone, was selling at $20 per share, the market price of +Amethyst was pushed up to above $1 a share on the San Francisco Stock +Exchange, and I took my profit. The Amethyst has since turned out to be +a rank mining failure, as has practically every other property in the +camp, not one ever having earned a dividend. +</p> + +<p> +The Bullfrog National Bank stock, representing another property that +looked for a while as if it would make good, I disposed of on the San +Francisco Stock Exchange at 40 cents a share, and I sold the town lots +at figures which netted me, in all, in excess of $20,000 for my one +day's trip to Bullfrog. +</p> + +<p> +During my stay in Bullfrog I became very much impressed with the +Montgomery-Shoshone mine. This property, in fact, was the powerful +magnet which attracted everybody to the camp. +</p> + +<p> +I was escorted through a tunnel seventy feet long. On each side as I +walked were walls of talc. I was told these assayed in places anywhere +from $200 to $2,000 a ton. Information was also forthcoming that the +width of the ore-body was more than seventy feet. (It afterward turned +out that the tunnel had been run along the ore-body and not across it, +and that the ore-body was about 10 feet wide.) Some specimen ore was +given me to assay, and the returns were staggering, running all the way +from $500 to $2,500 a ton. +</p> + +<p> +In my enthusiasm I wrote stories about the property for publication +which must have induced the reader to believe that when all the riches +of that great treasure-house were mined, gold would be demonetized. As +a matter of fact, the stories from my news bureau, picturing the riches +of that Golconda, are said to have been indirectly responsible for the +purchase of control of the property by Charles M. Schwab and his +associates. +</p> + +<p> +The history of the Montgomery-Shoshone is mournful but highly +instructive. For purposes of exposition of pitfalls in mining-stock +speculation it possesses striking qualifications. Here are the facts: +</p> + +<p> +Malcolm Macdonald, mining engineer, acquired a half interest in the +mine from Tom Edwards, a Tonopah merchant, for $100,000, on time +payments. On the strength of the showing in the 70-foot tunnel an +effort was made to sell the control to the Tonopah Mining Company at a +profit. It did not succeed. Oscar Adams Turner, of New York and +Baltimore, the promoter of the highly successful Tonopah Mining +Company, which to date has paid back to the original stockholders $16 +for every $1 invested, examined the Montgomery-Shoshone, and turned it +down because the property did not show him any well-defined veins or +other marks of permanency, and the ore-body appeared to him to be only +a superficial deposit of no great extent. +</p> + +<p> +Many a good "prospect" has been condemned by mining men of the highest +standing, and has afterwards made good, particularly in Nevada. Mr. +Turner's turn-down did not daunt the owners. +</p> + + +<h3> +ENTER, CHARLES M. SCHWAB +</h3> + +<p> +Engineer Macdonald incorporated a company for 1,250,000 shares of the +par value of $1 each, to own and operate the mine. Investors were +permitted by him to subscribe for small blocks of treasury stock at $2 +per share. Shortly afterward Mr. Macdonald and the owner of the other +half interest, Bob Montgomery, sold a controlling interest to Mr. +Schwab and associates for a sum which has never been made public. Mr. +Schwab at once reorganized the company, took in two adjoining +properties that were undeveloped, and changed the capitalization to +500,000 shares of the par value of $5 each. He, in turn, permitted his +friends and the public to subscribe for the new stock at $15 per share. +Later the shares advanced to $22 on the New York Curb. +</p> + +<p> +Undoubtedly Mr. Schwab thought well of the proposition, for he loaned +the company $500,000 to build a reduction works on the ground. +</p> + +<p> +To date the mine has failed to pay for its equipment. Work on the +property has been abandoned and the mill has been advertised for sale. +</p> + +<p class="break"> </p> + +<p> +<em>The company still owes Mr. Schwab about $225,000, the net profits on +the ore in six years being insufficient to repay his loan to the +company. In fact, the enterprise has proved to be one of the sorriest +failures in Nevada. The mine in six years produced $2,000,000 GROSS, +and although mine and mill were operated in an economical way, the net +proceeds from the ores were insufficient to pay off the Schwab debt. +Recently the shares have been nominally quoted at from 2 to 5 cents on +the New York Curb. The public's loss mounts into millions.</em> +</p> + +<p class="break"> </p> + +<p> +Investigation proves to me that Mr. Schwab was merely a mining +"come-on" and allowed his enthusiasm to run away with him, but the +public suffered just as much as if Mr. Schwab had perpetrated a +cold-blooded swindle. +</p> + +<p> +I have heard the question propounded by a stockholder, "What possible +excuse could a man, with a good business head like that of Mr. Schwab, +have for promoting the Montgomery-Shoshone at a valuation of $15 a +share, or $7,500,000 for the property, afterward allowing the stock to +be quoted up to $22 a share on the New York Curb, or at a valuation of +$11,000,000 for the property, when, as a result of six years of mine +operations, the company is practically insolvent?" +</p> + +<p> +An excuse acceptable to mining men might be offered were the +Montgomery-Shoshone property situated in a nest of other great mines, +intrinsically worth many times the valuation placed on the +Montgomery-Shoshone at the time of its promotion. "Prospects" of this +variety, according to approved mining experience, are sometimes +entitled to appraisement of great prospective value when neighboring +mines have demonstrated deep-seated enrichment. But there was no such +excuse in this case, because the deepest hole in the ground in the +entire camp was less than 200 feet at the time the Montgomery-Shoshone +was promoted by Mr. Schwab, and there was not a proved mine in or near +the camp. +</p> + +<p class="break"> </p> + +<p> +I was present in Reno about three years ago when Mr. Schwab passed +through the divorce city en route to California. At that time +Montgomery-Shoshone had already cracked in price to around $3 a share, +and stories were being published in Nevada that Mr. Schwab had been +snubbed by members of an exclusive Pittsburg club for recommending +Montgomery-Shoshone for investment. Mr. Schwab, in hurriedly discussing +the matter at the railroad station, was quoted to the effect that the +property had been grossly misrepresented to him. This statement was +widely published in Nevada. Thereupon, Don Gillies, Mr. Schwab's +engineer in Nevada, who, with Malcolm Macdonald, was believed to be Mr. +Schwab's mining adviser, telegraphed Mr. Schwab and asked point-blank +whether he referred to him. Mr. Schwab answered that he did not. This +denial was also given wide publicity. There was only one reasonable +corollary, then, and that was that Mr. Schwab referred to Mr. +Macdonald. +</p> + +<p> +In fine, it appears that Mr. Schwab may have actually purchased the +Montgomery-Shoshone on the sole representations of the vendor, the +interested party, and may have actually promoted the property on the +strength of the unverified representations of the vendor. It might be +that the vendor did not misrepresent at all; he may have been too +enthusiastic only, and communicated his enthusiasm to Mr. Schwab. +</p> + +<p> +Possibly Mr. Schwab relied on newspaper accounts, and promoted the +property on the strength of them. A letter from Mr. Schwab, which +appears farther on, lends some color to this idea. +</p> + +<p> +Even before this time Mr. Schwab had been in the mining game at +Tonopah. His Tonopah venture was the Tonopah Extension. The control of +the Tonopah Extension Mining Company was bought by John McKane, later a +member of the English House of Commons, from Thomas Lockhart at 15 +cents per share. The capitalization was 1,000,000 shares. John McKane +interested Robert C. Hall, a member of the Pittsburg Stock Exchange, in +the proposition. He, in turn, made a deal with Mr. Schwab. The stock +was then sky-rocketed to above $17 a share on the San Francisco and +Pittsburg stock exchanges and the New York Curb. Afterward the price +was allowed to recede to around 65 cents per share. During the past +half-year it has maintained an average quotation of $2.00 per share. +</p> + +<p> +Although the market price of the shares at the time Mr. Schwab was +believed to own the control was allowed to be advanced to a valuation +for the mine of $17,000,000, the company has since failed to pay as +much as $1,000,000 in dividends, and a quite recent appraisement by +Henry Krumb, a noted engineer, of the net value of the ore in sight in +the mine did not place it at so much as $1,000,000. The accuracy of +this report is disputed, on the ground that the ore-exposures at the +time did not permit of fair sampling. This allows for a discrepancy, +but hardly of $16,000,000. +</p> + +<p> +After Tonopah Extension declined from around $17 a share to below $1.00 +a share, it was alleged by Tonopah stockholders that Mr. Schwab and his +associates had unloaded at the top. Mr. Schwab replied that he owned +just as much stock after the market collapse as he did when he went +into the enterprise. This was met with an allegation by some +stockholders that while Mr. Schwab could probably prove that his +interest was as large at the later period as it had been at the outset, +it did not mean that Mr. Schwab and his <em>confrères</em> had not +unloaded at the top and bought back at the bottom. +</p> + +<p> +The following letter from Mr. Schwab to Sam C. Dunham, formerly U.S. +Census Commissioner to Alaska, afterward editor of the Tonopah +<cite>Miner</cite>, and later mining editor of the <cite>Mining Financial +News</cite> of New York when I was managing editor, denies personal guilt, +although it leaves the reader free to believe that if Mr. Schwab +personally did not unload his stock at high prices, his associates +might have done so. +</p> + +<div class="blockquote"> +<p> +CHARLES M. SCHWAB<br> +111 <span class="smc">BROADWAY<br> +NEW YORK</span> +</p> + +<p class="ralign"> +November 1, 1907. +</p> + +<p> +Mr. <span class="sc">Sam C. Dunham</span>,<br> +Editor <cite>The Tonopah Miner</cite>,<br> +Tonopah, Nevada, +</p> + +<p> +<span class="sc">My Dear Mr. Dunham</span>: +</p> + +<p> +My attention has been called to your issue of Saturday, October 26, +1907. To such criticisms as that issue contained of me, I generally +do not reply, as it is useless and only leads to further +discussion. But your paper heretofore has been so uniformly kind to +me, so fair in every respect, and as I have always regarded you as +a friend, our relations having been so pleasant, it makes me feel +that I would like to make a short reply to the criticisms +mentioned, as showing the consistency of my position. +</p> + +<p> +The only thing I criticised about Nevada was the inaccuracy of +statements emanating from Nevada. You seem to attack me because of +this statement, and the strength of my position is fully confirmed +by your article because little, if anything, stated therein is true +or accurate. +</p> + +<p> +I will take up your statements one by one. You say I bought from +John McKane $25,000 worth of stock of the Tonopah Extension Mining +Company at 15 cents per share. This is absolutely untrue. +</p> + +<p> +You say I bought 100,000 shares of Extension stock from Robert C. +Hall at $6 per share, and paid for this stock with paper mill +stock. No single part of that statement is correct. I never gave +Mr. Hall any paper mill stock, nor did I buy 100,000 shares from +him. The amount purchased from him was 60,000 shares. The price +which you state I paid him for the stock is not correct, and, as I +stated, I gave no paper mill stock in exchange. +</p> + +<p> +You say further that at the last annual meeting of Tonopah +Extension stockholders, held in Pittsburg last May, it developed +that I had disposed of all the stock I purchased from Mr. Hall and +over two-thirds of my original holdings of 166,000 shares. This is +absolutely untrue. I am holding to-day exactly the amount I held +after all purchases were made by me, and from the beginning, +aggregating some 285,000 shares, and I think if you take the +trouble to look up the records you will find my statement in this +connection to be true. When I originally bought Extension there was +also some stock in my name belonging to others, which I +subsequently transferred to them, leaving my own holdings of +285,000 shares where they now remain, intact, in my personal +possession. +</p> + +<p> +Going on down the article, you say that I purchased control of +Shoshone and Polaris for less than $2 per share. This statement of +yours is inaccurate. You say I sold a large block of Shoshone stock +at $20 per share. This is also without any truth whatever. The fact +is that 3,000 shares were sold at this figure, $20, and these 3,000 +shares came from the treasury of the company, all of which you will +find a matter of record. +</p> + +<p> +It is true that I have loaned the company nearly $500,000 to build +the new mill, and I shall be glad to have any other stockholder in +the company assume his pro rata share of this amount. +</p> + +<p> +You wonder why I criticise statements from Nevada. +</p> + +<p> +Respectfully yours, +</p> + +<p class="sig"> +(<em>Signed</em>) C. M. Schwab +</p> +</div> + +<p> +The general impression in Nevada, as I have gathered it, is that Mr. +Schwab's mining enterprises have been great disappointments to him, but +that he did not lose any very large sum of money, and that the public +did. His enemies go so far as to allege that he, his brother, and his +brother-in-law, Dr. M. R. Ward, made millions out of the public. +</p> + +<p> +I have an opinion, and I may be allowed to express it. Mr. Schwab, at +the time he became a promoter of Nevada mines, was an expert +steelmaker. He knew little or nothing about silver, gold and copper +mines. The fact that friends in Philadelphia, who knew as little about +the game as he did, had made a fortune in Tonopah (on the advice of a +man who did know) should not have influenced him. Because the Mizpah +mine at Tonopah, promoted by Oscar A. Turner as the Tonopah Mining +Company, had made good in a phenomenal way, Pennsylvania stockholders +had rolled up fabulous profits in the venture. Under this hypnotism Mr. +Schwab "fell" for Tonopah Extension. +</p> + +<p> +Later, when Tonopah Extension showed a market enhancement of more than +$16,000,000, Mr. Schwab was in an ideal frame of mind to succumb to +Montgomery-Shoshone. +</p> + +<p> +And when Montgomery-Shoshone in the Bullfrog boom showed a market +enhancement of $8,000,000, it did not take much argument to get him +into Greenwater, another "bloomer," which is described further on. +</p> + +<p> +Market profits were evidently alluring to Mr. Schwab. He failed to +realize that his own great name was in large measure responsible for +the rise in price of his securities. +</p> + +<p> +Sam C. Dunham has informed me that Mr. Schwab told him he refunded +to his personal friends in Pittsburg, who subscribed for +Montgomery-Shoshone stock on his recommendation, between $2,000,000 and +$3,000,000. This ought to be convincing that Mr. Schwab was guiltless +of any intent to profit at the expense of others. +</p> + +<p class="break"> </p> + +<p> +Mr. Schwab's lack of caution, however, is instructive to the losing +speculator. It furnishes a startling example of the danger in banking +alone on an honored name for the success of an enterprise, and it also +drives home the truth of the adage, "Every shoemaker should stick to +his last." +</p> + +<p> +Incidentally, Mr. Schwab's mining career points another moral. It is +this: Don't think, Mr. Speculator, because a promoter represents the +chances of profit-making in a mining enterprise to be enormous, and you +later find his expectations are not realized, that the promoter is +<em>ipso facto</em> a crook. Big financiers are apt to make mistakes and +so are little ones. Undoubtedly grave misrepresentations are made every +day, and insidious methods are used to beguile you into forming a +higher opinion regarding the merit of various securities than is +warranted by the facts. But mine promoters are only human, and honest +ones not infrequently are carried away by their own enthusiasm and +themselves lose their all in the same venture in which they induce you +to participate. +</p> + + +<h3> +WHY THE BOTTOM FELL OUT +</h3> + +<p> +When Montgomery-Shoshone was enjoying its market hey-day the Bullfrog +Gold Bar Mining Company was promoted at around 15 cents a share on the +usual million-share capitalization. A year later the price jumped to +$2.65 on the San Francisco Stock Exchange, and the stock was widely +distributed among investors. Recently the company was in the sheriff's +hands. The biggest losers in this venture were Alabama people, who had +great confidence in the promoters. +</p> + +<p> +Other Bullfrog derelicts in which the public lost vast sums of money +were Gibraltar, Bullfrog Steinway, Shoshone National Bank, Bullfrog +Homestake, Bullfrog Extension, Denver Rush Extension, Mayflower, Four +Aces, Golden Scepter, Montgomery Mountain, Original Bullfrog, etc., +etc. +</p> + +<p> +Mining-stock brokers of the cities went into ecstasies over Bullfrog +during the height of the boom in that camp. Philadelphia mining-stock +brokers fed Tramps Consolidated of Bullfrog to their clients. Pittsburg +brokers recommended Montgomery-Shoshone. Butte brokers placed large +blocks of Amethyst. Gold Bar was distributed by brokers of the South. +New York brokers were behind Gibraltar, Four Aces, Denver Rush, +Montgomery Mountain, Eclipse, Golden Scepter, National Bank and a score +of others. +</p> + +<p> +Practically every dollar of the millions invested in Bullfrog stocks +has been lost. +</p> + +<p> +The cause of the failure of the Bullfrog district to make good was not +the absence of gold-bearing rock, for there is much of it in the +district, but it has been found that the per ton values are too low to +make the mines a commercial success. Bullfrog is situated on the desert +and has no timber and but very little water. Promoters and investors +did not realize this until mills were constructed. Then it was too +late. If the camp were situated on the timbered shores of the Hudson +River, the stocks of many of the mines of the district would probably +be in great demand at above par. +</p> + +<p> +Probably the most remarkable fact regarding Bullfrog is that its +securities were more strongly recommended by Eastern brokers than the +Goldfield issues and became more fashionable at this early period in +Goldfield's history. Eastern brokers then had little confidence in +Goldfield; and at the very time when the stocks of Goldfield +representing inside properties, which later made good in an +extraordinary way, were being offered, they advised their customers not +to buy. The general cry then was that it was a fly-by-night offshoot of +the first great Tonopah boom, and the idea prevailed in the East, +because of the ascending influence of George Wingfield, then principal +owner of Tonopah's leading gambling hell, that Goldfield was a haven +for gambler's and wildcatters. +</p> + +<p> +It was during the early days of the Bullfrog boom that my friend W. J. +Arkell's career as a mining promoter came to a sudden end. It will be +remembered that when he left Goldfield to go to Tonopah to make the +Tonopah Home deal his cash capital was $35. He closed the transaction +for the option on the million shares of Tonopah Home's capitalization +at a price around five cents a share. Then our "partnership," of three +days' duration, came to an end. Arkell journeyed back to San Francisco +and there declared me out. +</p> + +<p> +Arkell was a prominent figure for a while as a San Francisco +mining-stock promoter. He listed Tonopah Home on the San Francisco +Stock Exchange. Then he started in to sky rocket the price. The rise +continued until the stock sold at 38 cents, an advance of about 700 per +cent, in a few months. +</p> + +<p> +Then the psychological moment for Arkell arrived. +</p> + +<p> +It leaked out that he had been financing his stock-market campaign by +buying reams of his own stock on one-third margin and at the same time +selling it, in like quantity, for all cash through other brokers. This +was equivalent to borrowing 66 2-3 per cent. of the market value. The +brokers and banks did the carrying. When Arkell's tactics were +discovered, indiscriminate short-selling by market sharp-shooters +ensued. Arkell's own hypothecated stock was used to make deliveries. +</p> + +<p> +In order to hold his ground and to get the floating supply of the stock +off the market, Arkell engineered a consolidation. The Tonopah Home +Consolidated was incorporated, and holders of Tonopah Home stock were +invited to exchange their original certificates for shares in the +consolidated company. +</p> + +<p> +Just then somebody threw a brick. The names of United States Senator +George S. Nixon and Hon. T. L. Oddie, later Governor of Nevada, had +been published as directors of the new company, and when these +gentlemen saw the half-page display advertisements in which their names +were used, and were informed that Arkell appeared to be on the ragged +edge, they telegraphed to the San Francisco Stock Exchange denying +connection. +</p> + +<p> +Tonopah Home broke wildly on the announcement in the Exchange to +something like 3 cents a share. Then it dropped to nothing. Arkell's +methods were too "raw," and I knew the smash had to come, sooner or +later. +</p> + +<p> +'Twas late in October, 1905. Bullfrog was still in its hey-day. +Goldfield's initial boom seemed to be flickering. Work was going on day +and night in the mines, but for want of fresh discoveries the camp was +being deserted by some of the late-comers. +</p> + +<p> +Out-of-town newspaper correspondents came upon the scene, and stories +and pictures of the camp, labeled "A Busted Mining-Camp Boom," etc., +soon appeared in the Los Angeles and San Francisco newspapers. +Goldfield mine-owners were accused of beguiling the public. Promoters +were gibbeted as common bunco men. Peculiarly enough, Bullfrog, younger +sister of Goldfield, which has since proved to be such a graveyard of +mining hopes, was immune. There men of substance were in control, the +writers said, while Goldfield was portrayed as a stamping ground for +gamblers and "wild-catters." The stories had their effect even in +Goldfield. Leading men of the camp began looking about for new fields +to conquer. The majority of Goldfield mine-owners had not "fallen" for +Bullfrog, but the success of the Bullfrog stock company promotions in +the East inspirited them. +</p> + +<p> +The great mining-camp boom of Manhattan, 80 miles north of Goldfield, +which followed, owes much of its success to these fortuitous +circumstances. I was one of the first to get the Manhattan fever. +</p> + +<p> +W. F. ("Billy") Bond, a Goldfield broker-promoter whose ear was always +glued to the ground, showed me a specimen of ore literally plastered +with free gold. He said it came from Manhattan and that Manhattan was +another Cripple Creek. It was only the night before that I had lost a +good many thousand dollars "bucking the tiger." Faro was the pastime of +practically everybody in Goldfield in those days, and I played for want +of some other means of recreation and lost heavily. +</p> + +<p> +I was as broke as the day I entered the camp. I bought blankets, a suit +of canvas clothes lined with sheep-skin, and a folding iron cot, all on +credit. I packed the outfit off to Tonopah. There I climbed aboard an +old, rickety stage-coach of the regulation Far-Western type, and +started for Manhattan. We rode over a snow-clad desert, up mountains +and down canyons—a perilous journey that I would not care to +duplicate. The $10 I had in my pocket, after paying my fare, was +borrowed money. When I arrived that night at Manhattan, situated in a +canyon at an altitude of 7,000 feet, I set up my cot on the snow, +wrapped myself in my blankets and slept in the open. There were only +three huts and less than a score of tents in the camp. +</p> + +<p> +The next morning I strayed through the diggings. Sacks of ore in which +gold was visible to the naked eye were piled high on every side. The +Stray Dog, the Jumping Jack and the Dexter were the three principal +producers. They honeycombed one another. I questioned some of the +prospectors as to the names of the single claims adjoining the Stray +Dog, Jumping Jack and Dexter. They informed me that there was one group +of claims adjoining that could be bought for $5,000. With $10 in my +pocket I proceeded to purchase it. I gave a check for $100, signed a +contract to pay the balance of $5,000 in 30 days or forfeit the $100, +and immediately started back to Goldfield to induce the president of +the bank to honor my check on presentation. He did. +</p> + +<p> +When I returned to Goldfield I carried with me many specimens of +high-grade ore. They were placed on display in a jewelry store. There +was great excitement, and before night a stampede from Goldfield to +Manhattan ensued which in magnitude surpassed the first Goldfield rush. +</p> + +<p> +A few days later I returned to Manhattan and sold my option for $20,000 +cash. While I was there I met C. H. Elliott. Mr. Eliott had "cleaned +up" in Bullfrog. He told me that he had formed a corporation +partnership in Goldfield with L. L. Patrick, one of the owners of the +great Combination mine—which was later sold to the Goldfield +Consolidated for $4,000,000—and Sol. Camp, a mining engineer from +Colorado. The name of the concern was Patrick, Elliott & Camp, Inc. It +was organized to promote mining companies. Mr. Patrick is now president +of the First National Bank of Goldfield. +</p> + +<p> +Mr. Elliott asked me to stay in camp for another day until he could +pick up a good property. He made a deal with some cowboys for a large +acreage embracing the April Fool group of claims, scene of the original +gold discovery. Twenty leases on this property were in operation, and +the surface showings were promising. If the ore "went down," the mine +would prove to be a bonanza. Mr. Elliott incorporated a company known +as the Seyler-Humphrey to own and operate the ground. +</p> + +<p> +We returned to Goldfield. My publicity bureau telegraphed the news of +the Manhattan discoveries to a long chain of newspapers East and West. +Then I put out a big line of "display" advertisements in the big +cities, offering for sale stock of the Seyler-Humphrey. The entire +issue of 1,000,000 shares of Seyler-Humphrey was oversubscribed at 25 +cents a share within two weeks. This was the result of $15,000 worth of +advertising, and the profits of the firm were $100,000. In quick +succession Mr. Elliott promoted the Manhattan Combination and the +Manhattan Buffalo. Within six weeks the firm's promotion profits +amounted to approximately $250,000. +</p> + + +<h3> +HOW ABOUT THE PUBLIC'S CHANCES? +</h3> + +<p> +I asked Mr. Elliott one evening, shortly after Patrick, Elliott & Camp +earned their first $250,000 from their three Manhattan promotions, +whether he did not think the public was entitled to subscribe for this +stock at a lower price and at a smaller profit to his corporation. +</p> + +<p> +I recall that he said: "The article we sell is something that somebody +wants and is willing to pay for. What we have sold them is worth what +we have charged. The fact that we are on the ground and have endured +hardships entitles us to a good profit, provided the gold showings on +the surface of the properties are not exaggerated. The sale of the +stocks has been accelerated by your gift of presentation through +advertisements. Big department stores and advertising specialists in +the cities pay from $15,000 to $30,000 a year for that kind of talent, +and we on the desert also have a right to avail ourselves of it." +</p> + +<p> +"But suppose the properties don't make good?" I queried. +</p> + +<p> +He answered: "It is not a case of excessive optimism for one to expect +that Manhattan properties will make into mines, in the presence of such +wonderful surface showings; and so long as we are not knowingly guilty +of deception, no harm is done. If the Manhattan stocks we have promoted +make good, $5 will be a reasonable price for them, and if they don't +make good, one cent will be too high for them. So why question the +ethics of charging 25 cents per share for Seyler-Humphrey when we might +have sold it for 15 cents and still have made money; or of charging 15 +cents for Manhattan Buffalo when we could have sold it at a profit for +10 cents? The public knows it is gambling. If people want to buy stocks +where they won't lose all of their investment under any circumstances, +they know they can buy Union Pacific, Pennsylvania Railroad or New York +Central. The profits there, however, are limited, just like the losses. +In the case of mining stocks, representing prospects under actual +development, the public can lose or gain tremendously." +</p> + +<p> +Mr. Elliott, who confessed to me that he often played the horse-races +when in San Francisco, then wrote out a list of stocks and prices, +representing what he said was a "book" on stocks, comparable to a +gambler's book on the horse-races, reading substantially as follows: +</p> + +<table summary="Stocks and prices"> +<tr> +<th>Stock</th> +<th>Price</th> +<th>Odds</th> +</tr> + +<tr> +<td>Union Pacific</td> +<td class="right">$165.00</td> +<td class="right">6 to 5</td> +</tr> + +<tr> +<td>Reading</td> +<td class="right">155.00</td> +<td class="right">8 to 5</td> +</tr> + +<tr> +<td>Missouri Pacific</td> +<td class="right">56.00</td> +<td class="right">2 to 1</td> +</tr> + +<tr> +<td>Erie</td> +<td class="right">28.00</td> +<td class="right">3 to 1</td> +</tr> + +<tr> +<td>Seyler-Humphrey</td> +<td class="right">.25</td> +<td class="right">20 to 1</td> +</tr> + +<tr> +<td>Manhattan Buffalo</td> +<td class="right">.15</td> +<td class="right">30 to 1</td> +</tr> + +<tr> +<td>Manhattan Combination</td> +<td class="right">.10</td> +<td class="right">50 to 1</td> +</tr> +</table> + +<p> +"There," said Mr. Elliott, "you have the different prices on railroad +and mining securities with their chances of winning for the speculator +marked against them. When a man goes to a horse-race and plays the +favorite, he does exactly what the man does who gives his broker an +order to buy Union Pacific for him at current quotations. It is about 6 +to 5 against the investment making a profit over current quotations on +any given day, although the investor will hardly gain 6 for his 5 if +the stock enjoys its highest probable advance. It is about 20 to 1 +against the man buying Seyler-Humphrey making money, but he will gain +20 for his one if the mine proves to be a bonanza. However, the rail is +an investment and the mining a speculation." +</p> + +<p> +"Do you mean to say that the odds against a man making money on Union +Pacific on any given day are only 6 to 5 when he buys the stock <em>on +margin</em>?" +</p> + +<p> +"Not on your life!" he said. "A margin trader on the New York Stock +Exchange, unless he has sufficient capital behind him to hold out +against 'inside' manipulation, which has for its purpose the 'shaking +out' of the speculator, has not got <em>any</em> chance! He is bound to +lose his money in the end. I am talking about people who buy stocks, +pay for them in full and get possession of their certificates and 'sit +tight' with them." +</p> + +<p> +Mr. Elliott was a plunger and lost large sums in the gambling-houses of +Goldfield and Tonopah. He lost $20,000 in a night's play in the Tonopah +Club, then owned by George Wingfield and associates. When asked to +settle he tendered a check for $5,000 and a certificate for 100,000 +shares of Goldfield Laguna Mining Company stock, then selling at 15 +cents. This was accepted. Within a year Laguna sold freely at $2 a +share. +</p> + +<p> +This incident illustrates how the foundations were laid for some of the +big fortunes which were amassed in the Goldfield mining boom. When +George Wingfield came to Tonopah in 1901 he brought with him $150, +borrowed from George S. Nixon, then president of a national bank at +Winnemucca, Nevada, and later United States Senator. Mr. Wingfield's +fortune is now conservatively estimated at between $5,000,000 and +$6,000,000. +</p> + +<p class="break"> </p> + +<p> +Success having been won by the Patrick Elliott & Camp promotions, I was +considering whether or not much of the money-making that was being done +by the promoters around Goldfield was not due to my own peculiar +ability to reach the public, and I even meditated on my fitness to +become a promoter on my own account. The best properties in Manhattan, +by common consent, were the Stray Dog, the Jumping Jack and the Dexter. +These were sure-enough producers of the yellow metal. They were +shippers and were held in high esteem by mining men. I found it +impossible to purchase the Dexter because the company was already +promoted and the stock widely distributed at around $1 a share. George +Wingfield was then and is still interested in the Dexter. The Jumping +Jack was unincorporated. The stock of the Stray Dog was practically +intact in the hands of the owners. The price asked for the Jumping Jack +was $85,000. Stray Dog was held at $500,000. +</p> + + +<h3> +JUMPING JACK MANHATTAN +</h3> + +<p> +I was again in funds as the result of my profits in the Manhattan boom, +and it was again my wont, for want of any other pastime, to play faro +at night. I found myself gossiped about with men like January Jones, +Zeb Kendall, C. H. Elliott, Al. Myers and others who rolled in money +one day and were broke the next. +</p> + +<p> +The second largest gambling-house in Goldfield was owned by "Larry" +Sullivan and Peter Grant, both from Portland, Oregon. Sullivan claimed +that he was attracted to Goldfield by the stories which appeared in the +Sunday magazine section of a Coast newspaper, the copy for which had +been carefully and methodically written in the back room of our +Goldfield news bureau. Sullivan and Grant were making money, and plenty +of it. I patronized the Sullivan house, of occasion, and Sullivan +usually presided over the games when I was there. One evening I cashed +in $2,500 of winnings. The money was piled on the table in $20 +gold-pieces by the dealer. As I was about to place it in a sack to +store away in the safe of the house until the morrow, Sullivan began to +josh me like this: +</p> + +<p> +"Say, young feller, why don't you cut me in on some of your mining +deals? I'm game!" +</p> + +<p> +"Are you? Well, stack up $2,500 against that money, and I'll see if you +are." +</p> + +<p> +He went to the safe and lugged to the table a big canvas sack +containing $20 gold-pieces. Stacking the money on the table in piles of +$400 each, he matched my stake. +</p> + +<p> +"Well?" said he. +</p> + +<p> +"Put that money in a sack," said I, "and go and get that big coonskin +coat of yours, take a night ride by automobile to Tonopah, and in the +morning go by stage to Manhattan. When you get there look up the owner +of the Jumping Jack mine. I have met him. He is a member of the Ancient +Order of Hibernians. An Irishman can buy that property from him much +cheaper than anybody else. You go and buy it." +</p> + +<p> +"What will I pay?" asked Larry. +</p> + +<p> +"He wants $85,000, but get it as cheap as you can," I replied. +</p> + +<p> +"What? With this $5,000?" +</p> + +<p> +"Yes," said I. "Pay him the $5,000 down and sign a contract to pay the +balance in 60 or 90 days; but fetch him back to Goldfield, and have him +bring the deeds." +</p> + +<p> +A few days later Sullivan returned to Goldfield, aglow with excitement. +Climbing out of the stage-coach, he pulled me into his private office. +</p> + +<p> +"Say," he said, "I've got that guy with me and he's got the deeds. I +bought the Jumping Jack for $45,000. He'll do anything you want him to +do." +</p> + +<p> +"Good!" I said. +</p> + +<p> +The owner was introduced to me, and I turned him over to my lawyer, the +late Senator Pyne. Mr. Pyne drew up a paper by which the transferred +title of the property to the Jumping Jack Manhattan Mining Company, +capitalized for 1,000,000 shares, 300,000 shares of which were placed +in the treasury for mining purposes, and 700,000, representing +ownership stock, put in escrow, to be delivered to Sullivan and myself +on the payment of 6½ cents a share. A board of directors was +selected. +</p> + +<p class="break"> </p> + +<p> +At this juncture Sullivan, who knew as much about the mining promotion +and mining-brokerage business as an ostrich knows about ocean tides, +inquired what my next move would be. Sullivan seemed to be bewildered, +yet full of faith. My situation was this: I had conceived a +rip-snorting promotion campaign for the best property that had yet been +offered the public from Manhattan, but I had no cash to present it. +Turning to Sullivan I said: +</p> + +<p> +"Do you know the Goldfield manager of the Western Union Telegraph +Company?" +</p> + +<p> +"Yes, I know him well." +</p> + +<p> +"Call him up by 'phone or send word to him that you will guarantee +payment of any telegrams I file here to-night or during the next three +days; I want to send some wires," said I. +</p> + +<p> +"I'll do it," said Sullivan, and within a few minutes I was advised +that Sullivan's credit was unquestioned. +</p> + +<p> +I returned to the news bureau and there drafted a 300-word telegram, +setting forth the merits of the Jumping Jack Manhattan property and +offering short-time options on big blocks of the stock. The message was +sent to practically all of the well-known brokerage houses in the +country which handled mining stocks. The bill for telegraph tolls was +$1,200. When Sullivan learned of its size he nearly collapsed. +</p> + +<p> +"How far do you intend to go?" he gasped. +</p> + +<p> +"Well," said I, "how can you lose? Your friend, Frank Golden, president +of the Nye & Ormsby County Bank, has accepted the presidency of the +company at our request, and the other officers we have secured are all +representative citizens of this community, and, besides, the Nye & +Ormsby County Bank has agreed to receive subscriptions. Can you beat +that for a layout? Never in my experience in this camp, with all the +promotions I have advertised, has the public had a dish quite so +palatable offered to it—a producing mine, in the first place; a +high-class directorate headed by a bank president, in the second place; +and a real bank as selling agent, in the third and last place. And it +will go like wildfire!" +</p> + +<p> +I labored all that night in my advertising agency on some +strongly-worded advertising copy recommending to the public the +purchase of stock in Jumping Jack Manhattan. In the morning I induced +Sullivan to advance $10,000 to pay the advertising bills. The copy was +dispatched by first mail to the important daily newspapers of the +country, with instructions to publish on the day following receipt of +copy. +</p> + +<p> +Within six days all of the advertising had appeared. The effect was +magical. The display advertisements assisted the brokers in the various +cities, who had asked for reservations of the stock, to dispose of +their allotments in a few days. Within ten days after the initial +offering of the promotion by telegraph to the Eastern brokers, Sullivan +showed me telegraphic orders for 1,280,000 shares of Jumping Jack +Manhattan stock at 25 cents a share, an oversubscription of 280,000 +shares. Before the stock certificate books were printed and delivered +from the local printing office, we were, in fact, oversold. +</p> + +<p> +That week and the next, Sullivan gave me <em>carte blanche</em> to +speculate in local mining stocks with partnership money, and within a +fortnight we had made another small fortune from Manhattan securities. +These were advancing in price on the San Francisco Stock Exchange by +leaps and bounds. +</p> + +<p class="break"> </p> + +<p> +I recall one overnight winning that we made, amounting to about +$12,000, which came so easy I felt almost ashamed to take the money. +Manhattan Seyler-Humphrey stock, promoted by Patrick, Elliott & Camp at +25 cents per share, was now listed on the Goldfield and San Francisco +stock exchanges. It was in fair demand at 30 cents. +</p> + +<p> +A dispatch reached Goldfield from New York, purporting to be signed by +John W. Gates, reading as follows: +</p> + +<p> +"At what price will you give me an option good 48 hours on 200,000 +shares of Manhattan Seyler-Humphrey? Answer to Hotel Willard, +Washington, to-night." +</p> + +<p> +This was to Patrick, Elliott & Camp. Within half an hour a half-dozen +similar messages reached other Goldfield brokers. +</p> + +<p> +I happened to be in the office of Patrick, Elliott & Camp when the +first telegram was received, and I lost no time in going out on the +street and annexing all the Goldfield offerings of the stock at current +quotations. At first Lou Bleakmore, manager for Patrick, Elliott & +Camp, "smelled a rat," but when he learned that I was buying the stock +he became convinced that I believed John W. Gates really wanted some +Seyler-Humphrey, and he shot buying orders for his own firm into San +Francisco. +</p> + +<p> +Personally I considered the message a snare. Somebody in the East, I +guessed, had bitten off a block of Seyler-Humphrey at around 25 cents +when it was promoted a few weeks prior and had made up his mind that he +would turn a trick. The Goldfield brokers having received telegrams, I +assumed that the same message had been sent to brokers in San +Francisco, where the stock was also listed. It seemed to me that an +advance would certainly be recorded on the following day. Sure enough, +the next morning the stock advanced to 38 cents a share, and the market +boiled. At this figure, and a little higher, I unloaded in the +neighborhood of 100,000 shares in Goldfield and San Francisco. A good +deal of this stock had been picked up by me the night before. But I +recall that one block of 10,000 shares had been allotted to me weeks +before at the brokers' price of 20 cents, and another block of 10,000 +shares had been given me as a bonus for my publicity measures. +</p> + +<p> +After turning over to the treasury of the Jumping Jack Manhattan Mining +Company the amount netted from the sale of treasury stock, and paying +off the amount still due on the original purchase price, Sullivan and +I, within three weeks of my little dare, had cleaned up a net profit of +$250,000. +</p> + +<p> +"Do you want a cut?" I asked Sullivan when our joint profits reached +the quarter-million mark. +</p> + +<p> +"No, I'm game. Stay with it," he returned. +</p> + +<p> +Next day the L. M. Sullivan Trust Company, destined to make and lose +millions in the great Goldfield boom that followed and to mold for me +an exciting career as a promoter, was formed with a paid-up capital of +$250,000. Sullivan was made president and I vice-president and general +manager. +</p> + +<hr class="note"> +<dl> +<dt class="notelabel"><a name="note1"> </a><a +href="#noteref1"><small>[1]</small></a></dt> +<dd class="notetext">On the death of Mr. Nixon in +Washington, D.C., in June, 1912, Mr. Wingfield was appointed his +Successor as U.S. Senator by Governor Oddie. Mr. Wingfield's Goldfield +newspaper felicitated its owner and pronounced the appointment to be +logical and deserved. Mr. Wingfield, however, after hearing from +Washington as to the manner in which the news of his appointment was +received by members of the Senate, notified Governor Oddie three weeks +later that he must decline the honor. He gave other reasons. +</dd></dl> + + + + +<h2> +<a name="III"> </a> +CHAPTER III +<br><br> +<span class="smallsc">The Brewing of a Saturnalia of Speculation</span> +</h2> + + +<p> +Mr. Sullivan's gambling-house affiliation was not considered a drawback +to the trust company. George Wingfield, vice-president and heaviest +stockholder of the leading bank in Goldfield, was a gambler and Mr. +Wingfield also owned extensive interests in the mines. His mines were +making good, too. Owners of the gambling places now stood as much for +financial solidity in Goldfield as did savings-bank directors in the +East. +</p> + +<p> +As for myself, I was unafraid. I vowed I would henceforth prove an +exception to the mining-camp rule and quit all forms of gambling. My +new position demanded this. And I found it easy to obey the +self-imposed inhibition. Soon the stock-market operations of the trust +company gave my speculative instinct all the vent it could possibly +have craved under any circumstances. +</p> + +<p> +A few days later the sobering sense which impelled me to resolve that I +must absent myself from gaming tables evolved into a stern ambition to +accomplish big things for the trust company. I went about my business +like a man who sees dazzling before him a golden scepter and who is +imbued with the idea that if he exerts the power he can grasp the +prize. It had been agreed that the trust company would specialize in +the promotion of mining companies, and I determined that the trust +company should conduct its business as a trust company ought. +</p> + +<p> +John Douglas Campbell, known on the desert as plain "Jack" Campbell, +was engaged by the trust company as its mining adviser and mine +manager. We agreed to pay him a salary of $20,000 a year, with a bonus +of stock in every new mining company we promoted, a stipend which was +later found to be equivalent to $50,000 a year. +</p> + +<p> +Mr. Campbell had been identified with Tonopah and Goldfield mining +interests for three years, and was favorably known. For eight years +before coming to Tonopah he was employed as a mining superintendent in +Colorado by Sam Newhouse, the multi-millionaire mine operator of Utah. +In Colorado Mr. Campbell's reputation had been good. On coming to +Tonopah he was employed by John McKane, then associated with Charles M. +Schwab. Later he was placed in charge of the Kernick and +Fuller-McDonald leases on the Jumbo mine of Goldfield from which, +during a year's time, $1,000,000 in gold was taken out. After that Mr. +Campbell took hold of the Quartzite lease at Diamondfield, near +Goldfield, and he produced $200,000 in a few months from that holding. +He followed this up by a record production from the famous Reilly lease +on the Florence mine of Goldfield, amounting to $650,000 in two months. +It was within thirty days of the date of expiry of the Reilly lease +that Mr. Campbell was induced to take charge of the mining department +of the trust company. +</p> + +<p class="break"> </p> + +<p> +Mr. Campbell's advent as our mine manager was immediately reflected in +the stock market by the advance of Jumping Jack Manhattan Mining +Company shares, which were now regularly listed on the San Francisco +Stock & Exchange Board, to 40 cents per share, up 15 points from the +promotion price. The sharp rise wrought an undoubted sensation in +stock-market circles. Brokers in the cities who had sold Jumping Jack +to their customers clamored for a new Sullivan promotion. Any new +mining venture for which the trust company would stand sponsor was +assured of heavy subscription and a broad public market. +</p> + + +<h3> +TRYING IT ON THE STRAY DOG +</h3> + +<p> +The Stray Dog Manhattan mine was furnishing daily sensations in the way +of frequent strikes of fabulously rich ore. I urged that, no matter how +small the profit, the Sullivan Trust Company should begin its corporate +career with the promotion of a property as good as the Stray Dog. The +Stray Dog was for sale—at a price. One interest, of 350,000 shares, +owned by Vermilyea, Edmonds & Stanley, the law firm of highest standing +in Goldfield, could be acquired at 45 cents a share, and another +interest, of 350,000 shares, owned by prospectors who had located the +ground, could be had at 20 cents a share, all or none. The remainder of +the stock was in the treasury of the company. The total demanded for +700,000 shares of ownership stock was $227,500, all cash. A likely +property adjoining the Stray Dog, known as the Indian Camp, could be +purchased for $50,000 in its entirety. We knew that as soon as it +should become known that we had bought the Stray Dog, the value of +Indian Camp ground would double, and we therefore decided to annex the +Indian Camp at the same time we took over the Stray Dog. +</p> + +<p> +The proposed outlay amounted to more money than we had, and I looked +about for assistance. Henry Peery, a Salt Lake mining man of substance, +had been negotiating for the Stray Dog in the interest of Utah bankers. +We agreed that Mr. Peery should be allowed to participate on the basis +of a one-third interest for him, and a two-thirds interest for the +trust company. Besides supplying his quota of the cash needed to swing +the deal, Mr. Peery agreed to furnish a president for the company, who, +he said, interested himself very frequently in mining enterprises. This +was Henry McCornick, the Salt Lake banker, son of the head of the firm +of McCornick & Company, reputed to be the richest private bankers west +of the Mississippi River. The deal was made. +</p> + +<p> +We immediately proceeded to promote the Stray Dog Manhattan Mining +Company at 45 cents per share, the average cost to us of the stock +being 32½ cents. It was impossible for any huge profit to accrue in +Stray Dog on any such margin as 12½ cents per share between our cost +price and the selling price, because the expense of promotion appeared +bound almost to equal this. We figured that any promotion profits must +come out of the Indian Camp. The Indian Camp was capitalized for +1,000,000 shares, 650,000 of which were paid over to the trust company +and to Mr. Peery for the property. The remaining 350,000 shares were +placed in the treasury of the company to be sold for purposes of mine +development. The average per share cost to the trust company of its +ownership stock was a fraction less than 8 cents. We decided that as +soon as the Stray Dog was promoted we would offer Indian Camp shares on +a basis of 20 cents per share net to the brokers and 25 cents to the +public, and looked forward, if successful, to gaining about $75,000 net +on both ventures. +</p> + +<p class="break"> </p> + +<p> +Immediately on taking over the control of Stray Dog and Indian Camp the +trust company purchased treasury stock in each of these companies, and +put a large force of men to work to open up the properties. Within +thirty days of the incorporation of the trust company Gold Hill in +Manhattan, on which were located the Stray Dog, Jumping Jack and Indian +Camp, swarmed with miners. The orders given to Engineer "Jack" Campbell +were to put a man to work wherever he could employ one, and to be +unsparing in expense so long as he could obtain results. Towering +gallows-frames and 25-horse-power gasoline engines were installed and +other necessary mining equipment ordered shipped to the properties. +Blacksmith shops, bunk-houses and storehouses were erected on the +ground. Day and night shifts of miners were employed. In order to +guarantee the constant presence on the properties of the engineer in +charge, the Sullivan Trust Company built for the engineer's use a +$6,000 dwelling house on Indian Camp ground. +</p> + +<p> +Having convinced the natives that we were in dead earnest about our +mine-making intentions, we busied ourselves offering Stray Dog stock +for subscription at 45 cents per share. It was well known around the +camp that we had paid 45 cents per share for one block of 350,000 +shares, and mining-camp followers were among the first to subscribe for +the stock. Then an effort was made to dispose of quantities of it to +the Eastern public by advertising and through mining-stock brokers. +</p> + +<p> +That advertising campaign was approached with considerable caution. In +the first place, the subscription price of Stray Dog, 45 cents, was 80 +per cent. higher than that of any other advertised promotion which had +yet been made from either the Goldfield or Manhattan camps; and in the +second place, the conduct of a mining-stock promotion campaign by a +Trust company appeared to me to justify more than ordinary care. There +were other factors that entered for the first time in Goldfield, too. +</p> + +<p> +The initial successes of the big display advertising campaigns directed +from Goldfield appeared to have been due to the fact that the American +public had greeted mining-stock speculation as filling a long-felt +want, namely, a channel for speculation in which they could indulge +their gambling spirit with comparatively limited resources—resources +that were insufficient to give them a "look-in" on the big exchanges +where the high-priced rails and industrials are traded in. +</p> + + +<h3> +ADVERTISING FOR THINKERS +</h3> + +<p> +Having "tried on the dog" my methods of advertising for nearly two +years, that is to say, having conducted an advertising agency for mine +promoters, and learned the business with their money, I had passed +through the experimental stage and now marshalled a cardinal principal +or two that I decided must guide me in the operations in which I had +become more directly interested. +</p> + +<p> +I resolved never to allow an advertisement to go out of the office that +was unconvincing to a thinker. If my argument convinces the man of +affairs, I determined, it will certainly win over the man of no +affairs. +</p> + +<p> +Dogmatically expressed, the idea was this: +</p> + +<p> +Never appeal to the intelligence of fools, no matter how easily they +may part with their money. Turn your batteries on the thinking ones and +convince them, and the unthinking will to follow. +</p> + +<p> +That principle was applied to the <em>argument</em> of the advertisement. +</p> + +<p> +The headlines were constructed on an entirely different principle, +namely, to be positive to an extreme. +</p> + +<p> +The Bible was my exemplar. It says, "It is" or "It was," "Thou shalt" +or "Thou shalt not," and the Bible rarely explains or tells why. +</p> + +<p> +The strength of a headline lies in its positiveness. +</p> + +<p> +The logic which directed that the flaring headline of my big display +advertising copy embrace a very positive statement, and that the +<em>argument</em> which followed in small type be convincing to the +thinker, was based on a recognition of the fact, that, while boldness +of statement invariably attracts attention, analysis is the final +resort of the thinker before becoming convinced. +</p> + +<p> +More circumspection was used also in the process of selecting media for +the advertising. Newspapers that did not publish in their news-columns +mining-stock quotations of issues traded in on the New York Curb, the +Boston Stock Exchange, the Boston Curb, the Salt Lake Stock Exchange or +the San Francisco Stock Exchange were taboo, on the theory that by this +time trading in mining stocks had grown sufficiently popular to command +a regular following, and that it was easier to appeal to those who had +some experience in mining-stock speculations than to those who had +never before ventured. +</p> + +<p> +Subsequent advertising campaigns were always conducted from this +viewpoint. I did not set the ocean on fire with my Stray Dog promotion, +the advertising campaign of which was conducted on these lines, but +this was due to circumstances which I explain further on. Later, when +the Sullivan Trust Company grew and prospered, and afterward when I +reached the East and learned more and more of the inside mechanism of +the big Wall Street promotion game in rails and industrials as well as +mining stocks, I found that my publicity principles were comparable to +those accepted by the Street generally. +</p> + +<p> +<em>The mighty powers of Wall Street recognize the fact that it is not +in the nature of things that fools should have much money, and +thinkers, not fools, are the quarry of the successful modern-day +promoter, high or low, honest or dishonest.</em> +</p> + +<p> +<em>A little knowledge is a dangerous thing, and the man who thinks he +knows it all because he has accumulated much money in his own pet +business enterprise is a typical personage on whom the successful +modern-day multi-millionaire Wall Street financier trains his +batteries.</em> +</p> + +<p> +<em>The honest promoter aims at both the thinker who thinks he knows but +doesn't, and the thinker who really does know. He is compelled to +appeal to both classes because the membership of the first outnumbers +that of the second in the proportion of about 1,000 to 1.</em> +</p> + +<p> +<em>In fine, for every dollar of "wise" money which is thrown into the +vortex of speculation</em>, $1,000 is "unwise," or considered so. +</p> + +<p> +The initial Stray Dog and Indian Camp promotion campaign was only half +successful at the outset. About 650,000 shares of Stray Dog and 350,000 +shares of Indian Camp had been disposed of when the Manhattan boom +began to lose its intensity. Promotions had been made a little too +rapidly for public digestion. There were more miners at work than ever +in the Manhattan camp, but the demand for securities was not keeping +pace with the supply. Manhattan's initial boom appeared to be +flattening out just as Goldfield's first boom had. +</p> + +<p> +We met with a setback from another direction. Henry McCornick's banking +connections in Salt Lake objected to the use of his name as president +of the Stray Dog. At the very height of our advertising campaign Mr. +McCornick resigned. We elected our engineer, "Jack" Campbell, +president, but damage was done. +</p> + + +<h3> +YES, "BUSINESS IS BUSINESS" +</h3> + +<p> +The offices of the trust company were furnished on an elaborate scale, +resembling the interior of a banking institution of a large city. The +offices became the headquarters of Eastern mining-stock brokers +whenever they arrived in camp. +</p> + +<p> +One morning J. C. Weir, a New York mining-stock broker, whose firm held +an option from the trust company on 100,000 shares of Stray Dog stock, +was ensconced in one of the two luxuriously furnished rooms used as +executive offices. Mr. Weir's firm was one of our selling agents in New +York. He was the dean of mining-stock brokers in New York City. In +those early days the telephone service of Goldfield was not yet +perfected, and it was only necessary for a person, in order to overhear +any talk over the telephone in our offices, to lift the receiver from +the nearest hook and listen. It was reported to me that Mr. Weir had +been availing himself of this method of learning things at first hand. +</p> + +<p> +"Say, Rice," said Mr. Sullivan one morning, "Weir hears your messages +every time you are called on the 'phone. He takes advantage of you. I +wish you would let me fix him." +</p> + +<p> +"All right; what do you want to do?" I answered. +</p> + +<p> +"Say," said Mr. Sullivan, "Campbell, our engineer, is in Manhattan. +I'll call him up from the public station and tell him to 'phone you +some red-hot news about mine developments on Stray Dog, and I'll see to +it that Weir is in his office at the time you get the message. If Weir +don't steal the news and grab a big block of Stray Dog on the strength +of it, I'm a poor guesser." +</p> + +<p> +All of our options to brokers were to expire on the 15th of March and +this was the 13th. +</p> + +<p> +At four o'clock in the afternoon I was in my room. Mr. Weir was at the +desk in the room opposite. The 'phone bell rang. +</p> + +<p> +"Hello," I said, "who is this?" +</p> + +<p> +"Campbell, at Manhattan," was the response. +</p> + +<p> +"What's the news, Jack?" I asked. +</p> + +<p> +"We've just struck six feet of $2,000 ore! It's a whale! Never saw a +mine as big as this one in my life! Don't sell any more Stray Dog under +$5 a share!" shouted Mr. Campbell. +</p> + +<p> +"Bully, Jack," I said, "but keep that information to yourself. Don't +tell your mother, and don't let any more miners go down the shaft. +Close it up until I am able to buy back some of the stock I sold so +cheap." +</p> + +<p> +Fifteen minutes later Mr. Sullivan and I met Mr. Weir leaving the room. +</p> + +<p> +"Weir," said I, "your option on Stray Dog expires on the 15th at noon. +So far, your New York office has ordered only 85,000 shares of the +100,000 that were allotted to you. We have decided to close +subscriptions on the moment and wish you would wire your New York +office not to sell any more." +</p> + +<p> +"You are wrong," said Mr. Weir; "why, when I left New York we had +oversold our entire allotment! If the office has not notified you of +this, it has been a slip. We will, in fact, need at least 25,000 shares +more." +</p> + +<p> +"You can't have them," said I. +</p> + +<p> +"Not in a thousand years!" put in Mr. Sullivan. +</p> + +<p> +Mr. Weir sent a bunch of code messages to New York. All the next day +Mr. Sullivan spent with Mr. Weir. He allowed Mr. Weir to cajole him +into letting him have the entire block of stock. Finally, it was agreed +between Mr. Weir and Mr. Sullivan that Mr. Sullivan would give him the +additional stock whether I consented or not. Surreptitiously, according +to Mr. Weir's idea, Mr. Sullivan was yielding to him, without my +knowledge and against my wishes. +</p> + +<p> +Next day the Sullivan Trust Company shipped to Mr. Weir's firm in New +York 25,000 shares of Stray Dog attached to draft at 45 cents a share. +The draft was paid. The avenging angel kept hot on Mr. Weir's trail, +for right on the heels of the New York broker's Stray Dog purchase came +a calamity which almost obliterated the market values of Nevada mining +stocks and particularly those of the shares of Manhattan mining +companies. San Francisco was destroyed by earthquake and fire. Not less +than half of the capital invested in Manhattan stocks had come out of +the city of San Francisco. The earthquake was fatal to Manhattan. +</p> + +<p> +The San Francisco Stock Exchange, which was the principal market for +Manhattan mining shares, was compelled to discontinue business for over +two months. Brokers and transfer companies lost their records, and the +Coast's property and money loss was so appalling that no more money was +forthcoming from that direction for mining enterprises. Every bank in +Nevada closed down, just as every California bank did, the Governors of +both States declaring a series of legal holidays to enable the +financial institutions to gain time. Nevada banks, as a rule, had +cleared through San Francisco banks, and practically all of Nevada's +cash was tied up by the catastrophe. +</p> + +<p> +The Sullivan Trust Company faced a crisis. I had decided it was good +business to lend support to Jumping Jack in the stock market when the +Manhattan boom began to relax from its first tension, and had +accumulated several hundred thousand shares at an average of 35 cents. +The Trust company had only $8,000 in gold in its vaults on the day of +the 'quake. Moneys deposited in bank were not available. Of the $8,000 +in gold coin, $6,500 was paid two days after the earthquake to the +Wells-Fargo Express Company for an automobile which was in transit at +the time, and for which Wells-Fargo demanded the coin. It was +impossible to hypothecate mining securities of any description in +Nevada or San Francisco. With the Sullivan Trust Company's funds tied +up in closed-up banks, and with an unsalable line of securities in its +vaults, it was "up against it." +</p> + +<p> +For a period it looked as if we must go to the wall. For two months we +eked out a bare subsistence by the direct sale of Manhattan securities +at reduced prices to the Eastern brokers. This purchasing power came +largely from brokers who were "short" of stocks to the public on +commitments made at a much higher range of prices and needed the actual +certificates for deliveries. +</p> + +<p> +It took the Nevada banks and the San Francisco Stock Exchange more than +sixty days to rehabilitate themselves. No sooner did the San Francisco +Stock Exchange open for business than it became possible for the +Sullivan Trust Company to borrow some much needed cash on Manhattan +securities, of which it had a plethora. Through members of the San +Francisco Stock Exchange, it obtained in this way in the neighborhood +of $100,000. Goldfield banks supplied another $100,000 a little later +by the same process. Then the clouds rolled by. +</p> + + +<h3> +FORTUNES THAT WERE MISSED +</h3> + +<p> +Soon the Mohawk of Goldfield began to give unerring indications of +being the wonderful treasure-house it has since proved to be. Hayes and +Monnette, who owned a lease on a small section of the property, had +struck high-grade ore and were producing at the rate of $3,000 per day. +A few weeks later it was reported that the output had increased to +$5,000 a day. +</p> + +<p> +The Mohawk being situated only a stone's throw from the Combination +mine, the idea that the Mohawk might turn out to be another Combination +was common in Goldfield. Hayes and Monnette were startled—almost +frightened—at their success. Yielding for the moment to the warning of +friends, who urged upon them the possibility of the ore soon pinching +out, Hayes and Monnette called at the offices of the Trust Company and +offered to sell their lease, which had six months to run, for $200,000 +cash and $400,000 to be taken out of the net proceeds of the ore. My +gambling instinct was aroused. +</p> + +<p> +"I will take it," I said. +</p> + +<p> +I sent over to the State Bank & Trust Company, and had a check +certified for the $200,000. I was about to close the deal when Mr. +Sullivan and "Jack" Campbell protested. +</p> + +<p> +"I ought to have fifteen days to examine the mine," urged Mr. Campbell. +</p> + +<p> +"It is too big a chance to take," declared Mr. Sullivan. +</p> + +<p> +When appealed to, Hayes and Monnette said that to allow a fifteen-day +examination would mean practically to shut down the property for that +period and would result in a positive loss to them because of the +limited period of their lease. The extent of the loss, if the deal fell +through, was too large to contemplate, and they refused. +</p> + +<p> +Day by day, as Mr. Campbell and Mr. Sullivan dilly-dallied, the output +of the lease increased, and when, a fortnight later, all three of us +were unanimously in favor of the proposition, Hayes and Monnette flatly +refused to sell. Within half a year that lease on the Mohawk produced +in the neighborhood of $6,000,000 worth of ore gross, and netted the +leasers about $4,500,000. The Sullivan Trust Company certainly +"overlooked a bet" there. +</p> + +<p> +During this period I spent an evening with Henry Peery and W. H. +("Daddy") Clark. Mr. Clark, like Mr. Peery, hailed from Salt Lake. Mr. +Clark had successfully promoted the Bullfrog Gibraltar. Seated around a +table in the Palm Restaurant, the conversation turned to new camps. +</p> + +<p> +"Rice," said Mr. Clark, "I expect to be able to put you in on a +townsite deal in a couple of weeks that will make you some money if you +undertake to give the camp some publicity." +</p> + +<p> +"Good," said I. +</p> + +<p> +"I am having some assays run," he said, "of some samples which were +brought into camp last night by a couple of prospectors, and if they +turn out to be what the prospectors claim, or anything near it, we'll +need your services to put a new camp on the map." +</p> + +<p> +That night Mr. Peery learned from the assayer that the lowest assay of +16 samples was $86, and the highest $475, per ton. Next morning Mr. +Peery informed me that he had remained all night with Mr. Clark to +learn where the ore came from. Mr. Peery said that Mr. Clark had told +him, in the wee sma' hours, that the place was Fairview Peak, fifty +miles east of Fallon. +</p> + +<p> +"Rice," said Mr. Peery, "let's beat him to it. He's going to trek it +across the desert by mule team with a camp outfit to-morrow, and it +will take him a week to get there." +</p> + +<p> +"Billy" Taylor, who was interested with Mr. Peery in a Bullfrog +enterprise, joined the party, and we each gave Mr. Peery a check for +$500, forming a pool of $1,500 to send a man to Fairview to buy +properties there. Mr. Peery wired the Bank of the Republic at Salt Lake +to pay Ben Luce $1,500, and instructed Mr. Luce by wire to take the +money, go to Fairview and do business. +</p> + +<p> +It was nearly two weeks before we heard of either Mr. Clark or Mr. +Luce. Mr. Clark returned to camp and said he had purchased from a group +of itinerant prospectors the Nevada Hills property, scene of the big +find, for $5,000, and that it was a "world-beater." +</p> + +<p> +"Did you meet any outsiders there?" queried Mr. Peery. +</p> + +<p> +"Yes," said Mr. Clark, "I met a man named Luce who almost got ahead of +me. In fact, he did buy the property before I got there, but he had no +money, and they would not take his check for $500, which was the +deposit required. I had the gold with me, and that settled it." +</p> + +<p> +A few days afterward, Mr. Luce came to Goldfield. +</p> + +<p> +"I didn't get the big one," he said, "but I bought the Eagle's Nest, +near by, for $7,000, of which $500 was demanded to be paid down, and +there is ore in it and it looks good to me. I had no money with me when +I arrived in Fairview. They refused my check for the Nevada Hills, but +the Eagle's Nest boys took it for their first payment of $500." +</p> + +<p> +Mr. Luce was not at home when Mr. Peery's despatch was delivered in +Salt Lake. When it reached him the bank was closed. In order to catch +the first train he was compelled to leave the money behind. He arrived +in Fairview minus the $1,500, and thereby lost the Nevada Hills for Mr. +Peery, Mr. Taylor and the Sullivan Trust Company. +</p> + +<p> +Mr. Clark and his partners incorporated the Nevada Hills for 1,000,000 +shares of the par value of $5 each and accepted subscriptions at $1 per +share. +</p> + +<p> +Within a few months the Nevada Hills paid $375,000 in dividends out of +ore, and soon thereafter, at the height of the Goldfield boom, it was +reported that the owners of the control refused an offer of $6,000,000 +for the property. The mine has turned out to be a bonanza. The stock of +the company sold recently on the New York Curb and San Francisco Stock +Exchange at a valuation for the mine of $3,000,000, and it is believed +by well-posted mining men to be worth that figure. George Wingfield, +president of the Goldfield Consolidated who followed the Sullivan Trust +Company into Fairview and bought the Fairview Eagle, which is +sandwiched in between the Nevada Hills and the Eagle's Nest, is now +president of the Nevada Hills. Treasury stock of the Fairview Eagle was +sold in Goldfield at 40 cents per share. Recently the Nevada Hills and +Fairview Eagle companies were merged. +</p> + +<p> +"Jack" Campbell reported favorably on the Eagle's Nest, and we decided +to organize and promote a company to own and develop the property. +</p> + +<p> +The Sullivan Trust Company bought Mr. Taylor's interest in the Eagle's +Nest for $8,000, Mr. Luce's for $8,000 (he had been awarded a quarter +interest for his work), and Mr. Peery's for $30,000. It made the +property the basis for the promotion of the Eagle's Nest Fairview +Mining Company, capitalized for 1,000,000 shares of the par value of $5 +each. Governor John Sparks accepted our invitation to become president +of the company. The entire capitalization was sold to the public +through Eastern and Western stock brokers within thirty days at a +subscription price of 35 cents per share. After paying for the +property, our net profits were in the neighborhood of $150,000. +</p> + +<p> +The Eagle's Nest deal enabled the trust company to repay most of the +money it had borrowed after the San Francisco earthquake and put the +company on Easy Street again. +</p> + + +<h3> +THE TALE OF BULLFROG RUSH +</h3> + +<p> +Following the Eagle's Nest promotion, the Sullivan Trust Company became +sponsor for Bullfrog Rush. I had met Dr. J. Grant Lyman, owner of the +property, on the lawn of one of the cottages of the United States Hotel +in Saratoga a few years before, where he raced a string of horses and +mixed with good people, and I knew of nothing that was to his +discredit. Dr. Lyman bought the Bullfrog Rush property for $150,000. I +was present when he paid $100,000 of this money in cash at John S. Cook +& Company's bank in Goldfield. The Bullfrog Rush property was of large +acreage, enjoyed splendid surface showings, and was situated contiguous +to the Tramps Consolidated, which was then selling around $3 a share. +It looked like a fine prospect. +</p> + +<p> +Dr. Lyman incorporated the company for 1,000,000 shares of the par +value of $1 each. The services of the Sullivan Trust Company were +employed to finance the enterprise for mine development. The Trust +company obtained an option on the treasury stock of the company at 35 +cents per share, and proceeded to dispose of it through Eastern brokers +and direct to the public by advertising, at 45 cents per share to +brokers and 50 cents per share to investors. We sold 200,000 shares, +realizing $90,000 in less than thirty days, retained $20,000 for +commission and expenses, and turned into the treasury of the Bullfrog +Rush company $70,000, all of which was placed at the disposal of the +company for mine development. +</p> + +<p> +Half a dozen tunnels were run and several shafts were sunk. Down to the +400-foot level the mine appeared to be of much promise. It was then +learned that the shaft at the 400-foot point had encountered a bed of +lime. It appeared that all the properties on Bonanza Mountain, where +the Bullfrog Rush was situated, including the Tramps Consolidated, +which was then selling in the market at a valuation of $3,000,000, were +bound to turn out to be rank mining failures. The entire hill, +according to our engineer, was a "slide," and below the 400-point ore +could not possibly exist. +</p> + +<p> +We thereupon notified Dr. Lyman that we would discontinue the sale of +the stock until such time as the property gave better indications of +making a mine. +</p> + +<p> +A few weeks later Dr. Lyman entered my private office unannounced. At +this period Jumping Jack, Stray Dog, Indian Camp, and Eagle's Nest were +all selling on the San Francisco Stock Exchange at an average of 35 per +cent. above promotion prices. The L. M. Sullivan Trust Company was +"making good" to investors. Bullfrog Rush had not yet been listed, and +we were afraid to give it a market quotation. +</p> + +<p> +"I have formed here in Goldfield the Union Securities Company," Dr. +Lyman said, as he sat down close to my desk, "and I am going into the +promotion business myself. I don't believe a word of the reports you +have that the Bullfrog Rush is a failure. I am going on with the +promotion." +</p> + +<p> +I protested. "We shall not permit it," I said. "Governor Sparks, who is +the best friend the Sullivan Trust Company has, accepted the presidency +of the Bullfrog Rush on our assurance that the property was a good one. +John S. Cook, the leading banker of this town, accepted the +treasurership on the same representations. Mr. Sullivan, president of +this trust company, is vice-president of the Rush. We are 'in bad' +enough as the matter already stands. Don't dare go on with the +promotion at this time." +</p> + +<p> +Dr. Lyman left the office without uttering a word. +</p> + +<p class="break"> </p> + +<p> +Two days later I received a dispatch from Governor Sparks saying that a +full-page advertisement of the Union Securities Company had appeared in +the <cite>Nevada State Journal</cite> at Reno, offering Bullfrog Rush stock +for subscription. The Governor protested vigorously against the sale of +the stock. We had previously informed him as to the new conditions +which prevailed at the mine. +</p> + +<p> +I sent Peter Grant, one of Mr. Sullivan's partners in the Palace, to +Dr. Lyman to protest. The answer came back that the <cite>Nevada State +Journal</cite> advertisement was about to be reproduced in all the +newspapers of big circulation throughout the East, and that the orders +for the advertisements would not be canceled. Half an hour later Dr. +Lyman entered the office with Mr. Grant. Mr. Grant looked nettled. Dr. +Lyman glowered. +</p> + +<p> +I bade Dr. Lyman take a chair. +</p> + +<p> +"If you move a finger to stop me," he said, as he sat himself down +before me, "I'll expose every act of yours since you were born and show +up who the boss of this trust company is!" +</p> + +<p> +Dr. Lyman was tall as a poplar and muscled like a Samson. He was fresh +from the East, red-cheeked and groomed like a Chesterfield. I was +cadaverous, desert-worn, office-fagged, and undersized by comparison. +In a glove fight, Dr. Lyman could probably have finished me in half a +round. But the disparity did not occur to me. The sense of injustice +made me forget everything except Dr. Lyman's blackmailing threat. I +jumped to my feet. Dr. Lyman backed up to the glass door. I aimed a +blow at him. He backed away to dodge it. In a second he had collided +with the big plate-glass pane, which fell with a crash. In another +instant he recovered his feet, turned on his heel and ran. His face was +covered with scratches, the result of his encounter with the broken +plate glass. Several clerks who followed him, thinking he had committed +some violent act, reported that he didn't stop running until he reached +the end of a street 600 feet away. +</p> + +<p class="break"> </p> + +<p> +"Oh," he gasped, "I never want to see such a look in a man's eyes +again. I thought I saw him reach for a gun." +</p> + +<p> +Such an idea was farthest from my mind, although I was very angry. +Conscience had made a coward of the doctor. +</p> + +<p> +I was quick to decide upon a course of action. +</p> + +<p> +The position of the trust company was this: With the exception of +Bullfrog Rush, we had a string of stock-market winners to our credit +with the public. If we allowed Dr. Lyman to go ahead with his promotion +of Bullfrog Rush, we should, unless we abandoned our rule to protect +our stocks in the market, be compelled some day to buy back all of the +stock he sold. The truth about the mine was bound to come out, and we +stood before the public as its sponsors. +</p> + +<p> +I decided that the trust company should refund the money paid in by +stockholders of Bullfrog Rush and prevent Dr. Lyman from selling more +stock. +</p> + +<p> +To the brokers, through whom we had sold much of the stock to the +public, we telegraphed that we would refund the exact amount paid us by +the brokers on delivery back to us of the certificates. We also wired +to Governor Sparks and asked his permission to insert an advertisement +in the newspapers over his signature, announcing that the property had +proved to be a mining failure and advising the public not to buy any +more shares. This pleased the Governor immensely, for he promptly wired +back his O.K. with congratulations over the stand we took. +</p> + +<p> +That night a broadside warning to the public, bearing the signature of +Governor John Sparks, and a separate advertisement of the Sullivan +Trust Company, offering to refund the money paid for Bullfrog Rush +shares, were telegraphed to all the leading newspapers of the East. +Next day both of these announcements appeared side by side with the +half-page and full-page advertisements of Dr. Lyman's Union Securities +Company of Goldfield offering Bullfrog Rush for public subscription. +The newspapers, peculiarly enough, performed this stunt without a +quiver. +</p> + +<p> +The public didn't buy any more Bullfrog shares. +</p> + +<p> +The Bullfrog Rush incident cost the Sullivan Trust Company a little +less than $90,000, which was refunded to stockholders, and the +additional sum that was expended for advertising our denouncement of +the enterprise. Dr. Lyman was stripped of his entire investment in the +property. The newspapers lost many thousands of dollars, representing +Dr. Lyman's unpaid advertising bills. A number of mining-stock brokers +also forfeited some money; they were compelled to refund their +commissions. +</p> + +<p> +J. C. Weir, the New York mining-stock broker, who does business under +the firm name of Weir Brothers & Company, had sold in the neighborhood +of 100,000 shares of Bullfrog Rush to his clients, and he took violent +exception to our decision not to refund an amount in excess of the net +price paid to us. He held that his firm ought not to be compelled to +disgorge its profits. We stood pat and argued that he ought to be proud +to share with us the glory of "making good" in such an unusual way to +stockholders. It was the first time in the history of Western mining +promotions that a thing like this had ever been done, and we pointed +out to Mr. Weir that it would gain reputation both for himself and the +trust company. For a period Mr. Weir carried on an epistolary warfare +with the trust company. For nearly two months he refused to yield. +Finally, we received a letter from Mr. Weir saying that since we +refused to come to his terms he would accept ours, and that he had +drawn on us for $4,500, with one lot of 10,000 shares of Bullfrog Rush +stock attached. On receipt of the letter I gave instructions to the +cashier promptly to honor the draft. +</p> + +<p> +An hour later the cashier reported that the draft had been presented +and that an examination of the stock certificates showed that not a +single one of them had been sold by the trust company through Mr. +Weir's firm, and, in fact, had never been disposed of by the trust +company to anybody. A hurried examination of the stock-certificate +books of the Bullfrog Rush Company, which were in the hands of the +company's secretary in Goldfield, a clerk of Dr. Lyman, revealed the +fact that a large number of blank certificates had been torn out of the +certificate books without any entry appearing on the stubs. +</p> + +<p> +The certificates returned to us by Mr. Weir bore dates of several +months prior, and our immediate assumption was that Dr. Lyman, at the +very moment when we were marketing the treasury stock under a binding +contract which forbade him or any one else to dispose of any Bullfrog +Rush stock under any circumstances, was clandestinely getting rid of +these shares. Mr. Weir, it appeared, had neglected to segregate Dr. +Lyman's certificates from those shipped him by the trust company. +Another hypothesis was that those certificates had never been sold at +all, but had merely been received from Dr. Lyman to be reforwarded to +us in order to claim a refund for what we had never been paid for. +</p> + +<p> +Of course, we returned the draft unpaid. But that didn't end the +incident. My partner, Mr. Sullivan, took it upon himself to wire his +sentiments to Weir Brothers & Company, as follows: "You are so crooked +that if you swallowed a ten-penny nail and vomited, it would come out a +corkscrew." That was "Larry's" homely way of expressing his opinion. +</p> + +<p> +Goldfield's year of wind and dust had brightened into the glow of +Summer. The still breath of August was diffused through the thin mild +air of the high altitude. This thin air, which nearly two years before +had prompted a camp wit to comment on the birth of my news bureau to +the effect that "the high elevation was ideal for the concoction of the +visionary stuff that dreams are made of," appeared unprophetic. There +was plenty of concrete evidence of the yellow metal to be seen. +Production from the mines was increasing daily and money from +speculators was pouring into the camp from every direction. +</p> + +<p> +A mining-stock boom of gigantic proportions was brewing. Mohawk of +Goldfield, which was incorporated for 1,000,000 shares of the par value +of $1 each, and which in the early days went begging at 10 cents a +share, was now selling around $2 a share on the San Francisco Stock +Exchange, the Goldfield Stock Exchange and the New York Curb. Other +Goldfields had advanced in proportion. Combination Fraction was up from +25 cents to $1.15. Silver Pick, which was promoted at 15 cents a share, +was selling at 50 cents. Jumbo Extension advanced from 15 to 60. Red +Top, which was offered in large blocks at 8 cents per share two years +before, was selling at $1. Jumbo advanced from 25 cents to $1.25. +Atlanta moved up from 12 to 40. Fifty others, representing prospects, +enjoyed proportionate advances. +</p> + +<p> +The Sullivan stocks were right in the swim. Jumping Jack was in hot +demand on the San Francisco Stock Exchange and New York Curb at 45 +cents, Stray Dog at 70 cents, Indian Camp at 80 cents, and Eagle's Nest +at 50 cents. Subscribers to Indian Camp could cash in at a profit of +more than 200 per cent. +</p> + +<p> +The country gave indications of going "Goldfield crazy." My Goldfield +publicity bureau was working overtime. James Hopper, the noted fiction +writer and magazinist, ably assisted by Harry Hedrick and other +competent mining reporters, was "on the job" and doing yeoman service. +The news-columns of the daily papers of the country teemed with stories +of the Goldfield excitement. +</p> + +<p> +People began to flock into the camp in droves. The town was a scene of +bustle and life. Motley groups assembled at every corner and discussed +the great production being made from the Mohawk and the terrific market +advances being chronicled by mining stocks representing all sorts and +descriptions of Goldfield properties. Whenever Hayes and Monnette, +owners of the Mohawk lease, appeared on the streets, they were followed +by a mixed throng of the riffraff of the camp, who hailed them, +open-mouthed, as wonders. +</p> + +<p> +The madness of speculation in mining shares in the camp itself was +beginning to exceed in its intensity the exciting play at the gaming +tables. There was a contagion of excitement even in the open spaces of +the street. +</p> + +<p> +At each meeting of the Goldfield Stock Exchange the boardroom was +crowded. The sessions were tempestuous. Every step and every hallway +leading to the room was jammed with men and women over whose faces all +lights and shades of expression flitted. The bidding for mining issues +was frantic. Profits mounted high. Everybody seemed to be buying and no +one appeared to be willing to sell except at a substantial rise over +the last quotations. Castle-building and fumes of fancy usurped reason. +</p> + +<p> +Bank deposits were increasing by leaps and bounds. The camp was rapidly +becoming drunk with the joy of fortune-making. +</p> + +<p> +Manhattan now shone mostly in the reflected glory of Goldfield, but +Manhattan stocks were booming. This enabled the Sullivan Trust Company +to dispose of nearly all of its Manhattan securities which had been +carried over after the San Francisco catastrophe and to pile up a great +reserve of cash. +</p> + +<p> +A big demand was developing for shares in Fairview companies. Nevada +Hills of Fairview was selling on the stock exchanges and curbs at $3 +per share, or a valuation of $3,000,000 for the mine. Only a few months +before it had fallen into Goldfield and Salt Lake hands for $5,000. +Fairview Eagle's Nest, for which subscriptions had been accepted at 35 +cents per share by the Sullivan Trust Company, was selling at 70 cents +on the San Francisco Stock Exchange. +</p> + +<p> +The Sullivan Trust Company announced the offering of 1,000,000 shares, +embracing the entire capitalization of the Fairview Hailstone Mining +Company, at 25 cents. The stock was purchased by us at 8 cents. We sold +out in a week. San Francisco and Salt Lake were the principal buyers, +and it was unnecessary even to insert an advertisement offering the +stock. The brokers fell over one another to underwrite the offering by +telegraph. +</p> + + +<h3> +PRIZE FIGHTS AND MINING PROMOTION +</h3> + +<p> +For a fortnight there was a lull in news of sensatorial gold +discoveries, but the approaching Gans-Nelson fight, which was arranged +to be held in Goldfield on Labor Day, September 3, furnished sufficient +exciting reading matter for the newspapers throughout the land to keep +the Goldfield news pot boiling. The Sullivan Trust Company had +guaranteed the promoters of the fight against loss to the extent of +$10,000, and other camp interests put up $50,000 more. Gans, the +fighter, was without funds to put up his forfeit and make the match, +and the Sullivan Trust Company had also advanced the money for that +purpose. Mr. Sullivan became Gans' manager. When Gans arrived in town +Mr. Sullivan interviewed him to this effect: +</p> + +<p> +"Gans, if you lose this fight they'll kill you here in Goldfield; +they'll think you laid down. I and my friends are going to bet a ton of +money on you, and you must win." +</p> + +<p> +Gans promised he would do his best. +</p> + +<p> +"Tex" Rickard and his friends wagered on Nelson. The cashier of the +Sullivan Trust Company was instructed to cover all the money that any +one wanted to bet at odds of 10 to 8 and 10 to 7 on Gans, we taking the +long end. A sign was hung in the window reading: "A large sum of money +has been placed with us to wager on Gans. Nelson money promptly covered +inside." Mr. Sullivan was in his glory. Prize-fighting suited his +tastes better than high finance, and he was as busy as a one-armed +paper-hanger with the itch. +</p> + +<p> +An argument arose about who should referee the fight. "Tex" Rickard +nominated George Siler, of Chicago, and Battling Nelson promptly +O.K.'d the selection. Mr. Sullivan openly objected. He thought it good +strategy. He sent for the newspaper men and gave out an interview in +which he declared that Mr. Siler was prejudiced against Gans because he +was a negro, and he did not believe Mr. Siler would give Gans a square +deal. +</p> + +<p> +"Rice," whispered Sullivan after the newspaper men left the office, "I +am four-flushing about that race-prejudice yarn, but it won't do any +harm. Siler needs the job. He's broke and I'll make him eat out of my +hand before I'll agree to let him referee the fight. They've already +invited Siler to come here, and I won't be able to get another referee, +but I'll beat them at their own game. When Siler gets here I'll thrash +matters out with him and agree to his selection, but first I want him +to know who's boss." +</p> + +<p> +Mr. Siler arrived. An hour later he was closeted with Mr. Sullivan in +one of the back rooms of the trust company offices. The dialogue which +ensued was substantially as follows: +</p> + +<p> +<em>Mr. Siler.</em> You've got me dead wrong, Sullivan. I want to referee +this fight, and I want you to withdraw your objections. +</p> + +<p> +<em>Mr. Sullivan.</em> Well, I've heard from sources which I can't tell +you anything about that you don't like Gans, and I can't stand for you. +</p> + +<p> +<em>Mr. Siler.</em> I need this fight, and I've come all the way from +Chicago in the expectation of refereeing it. I couldn't give Gans the +worst of it if I wanted to. He is a clean fighter and I would not have +an excuse. +</p> + +<p> +<em>Mr. Sullivan.</em> Gans is a clean fighter, but Nelson isn't; he uses +dirty tactics and he is a fouler for fair. +</p> + +<p> +<em>Mr. Siler.</em> If he does any fouling in this fight I'll make him +quit or declare him out. +</p> + +<p> +<em>Mr. Sullivan.</em> What guarantee have I got that you won't give Gans +the worst of it? +</p> + +<p> +<em>Mr. Siler.</em> Well, I'll tell you, Sullivan, if you withdraw your +objections I'll guarantee you that I'll be this fair. If Nelson uses +foul tactics, or if he don't, I'll show my fairness to Gans by giving +him the benefit of every doubt. Now, will that satisfy you? +</p> + +<p> +<em>Mr. Sullivan.</em> Yes, it'll satisfy me, but, remember, if you don't +keep your word you'll have just as much chance of getting out of this +town alive as Gans will have if he lays down! You understand? +</p> + +<p> +<em>Mr. Siler.</em> Yes. +</p> + +<p class="break"> </p> + +<p> +On the afternoon of the fight the Sullivan Trust Company cast accounts +and found that it had wagered $45,000 on Gans against a total of +$32,500 put up by the followers of Nelson. +</p> + +<p> +Mr. Sullivan, after talking it over with me, had accepted the honorary +position of announcer at the ringside. Though not of aristocratic mien, +"Larry" was of fine physique, with a bold, bluff countenance, and I +felt confident that his cordial manner would appeal to that Far Western +assemblage. +</p> + +<p> +Just before the prize-fighters entered the ring, "Larry" jumped into +the arena. Standing above the mass of moving heads and holding up both +hands, he hailed the great crowd thus: +</p> + +<p> +"Gentlemen, we are assembled in this grand <em>areno</em> to witness a +square fight. This fight is held under the auspices of 'Tex' Rickard, a +man of great <em>accumulations</em>——" +</p> + +<p> +"Larry" did not get much farther. The audience laughed, and then jeered +and hooted until it became hoarse. His words were drowned in the +tempest of derision. I was informed by friends who were close to the +ringside that he went on in the same rambling way for a few minutes +more, but I can't testify to that fact from my own knowledge because +"acclumuations" and "areno" overcame me and I stopped up my ears. +</p> + +<p> +The fight progressed for twenty rounds or more, when I began to doubt +the ability of Gans to win. Mr. Sullivan had a commissioner at the +ringside, who, up to this time, had been betting anybody and everybody +all the 10 to 6 that was wanted against Nelson. I hailed Mr. Sullivan +at the ringside. +</p> + +<p> +"This doesn't look like the cinch for Gans you said it would be," I +whispered. +</p> + +<p> +"Wait a minute," Mr. Sullivan replied, "I'll go to Gans' corner as soon +as this round is over and find out what's doing with him." +</p> + +<p> +Mr. Sullivan went over to Gans' corner and came back. +</p> + +<p> +"Gans says he can't win this fight, but he won't lose. He's a good +ring-general and he'll pull us out. Don't bet any more money. I'm going +to stay close to the ringside. Watch close." +</p> + +<p> +It was apparent during the next ten rounds that Gans was availing +himself of every opportunity to impress upon the audience that Nelson +was inclined to use dirty fighting tactics, and soon Nelson was being +hooted for foul fighting. Gans, on the other hand, appeared to be +fighting fair and like a gentleman. Soon it was evident that Gans had +won the sympathy and favor of the audience. +</p> + +<p> +The fight had continued through the fortieth round, when Mr. Sullivan +again repaired to Gans' corner and held another animated whispered +conversation with him. +</p> + +<p> +In the forty-second round Gans of a sudden went down, rolled over and, +holding his hand under his belt, let out a yell of anguish that +indicated to the excited multitude that Nelson had fouled him +frightfully. +</p> + +<p> +In another instant Mr. Sullivan had clambered into the ring. Confusion +reigned. The audience was on its feet. Pushing his fist into the +referee's face, Mr. Sullivan cried: "Now, Siler, you saw that foul, +didn't you? It's a foul, isn't it? Gans wins, doesn't he?" +</p> + +<p> +All of this happened quick as a flash. Mr. Siler, pale as a ghost, +whispered something inaudibly. +</p> + +<p> +Mr. Sullivan, turning to the assemblage and raising both arms to the +skies, yelled: +</p> + +<p> +"Gentlemen, the referee declares Gans the winner on a foul!" +</p> + +<p> +The audience acclaimed his decision with salvos of applause. There did +not appear to be a man in the crowd who doubted a foul had been +committed, although Nelson at once protested his innocence. +</p> + +<p> +Next day Mr. Sullivan told me that in or near the twenty-fourth round +Gans had broken his wrist and knew he could not win the fight by a +knockout. He also said that Gans went down in the forty-second round in +order to save the day. +</p> + +<p> +"<em>I</em> won that fight," said Mr. Sullivan. "I told Gans while he was +in his corner after the fortieth round that if he lost he would be +laying down on his friends, that he had the audience with him, and that +it was time to take advantage of Nelson's foul tactics." +</p> + +<p> +This was my first experience in prize-fighting, and my last. My +sympathies were, however, with the winner. Gans' tactics throughout up +to the last round were gentlemanly and those of Nelson unfair. Even the +partisans of Nelson who had wagered on him agreed after the fight that +the battle put up by the negro up to the forty-second round was a white +man's fight and he was entitled to win. +</p> + +<p> +Nelson had been guilty of foul tactics in almost every round, but the +probabilities are that Gans was not disabled by a foul blow in the +forty-second round and that he took advantage of the sentiment in his +favor, which had been created by his manly battle up to that time, to +go down at a psychological moment. +</p> + +<p> +I saw Mr. Siler after the contest, and he appeared pleased that his +decision was so well received, but he assured me that if he was invited +to referee another bout in any mining camp he would decline the job. +</p> + +<p class="break"> </p> + +<p> +The Sullivan Trust Company, of course, won a big bet on the result, but +it lost a bigger one as an outcome of the battle on the very next day. +The impression created by Announcer Sullivan's attempt to reach lofty +flights of eloquence in his speech to the fight-audience was bad for +the trust company, and it required the use of over $100,000 on the day +following to meet the flood of selling orders in Sullivan stocks which +poured into the San Francisco Stock Exchange. +</p> + + +<h3> +THE YEAR OF BIG FIGURES +</h3> + +<p> +I soon recouped these stock-market losses. At about four o'clock one +afternoon, a few days afterward, a miner who had been at work during +the day on the Loftus-Sweeney lease of the Combination Fraction, called +at the office of the trust company and asked me to buy 1,000 shares of +Combination Fraction stock for him. He divulged to me that just as he +was coming off shift he had learned that a prodigious strike of +high-grade ore had been made at depth. Combination Fraction had closed +that afternoon on the San Francisco Stock Exchange with sales at $1.15. +I went out on the street and proceeded to buy all the Combination +Fraction in sight. In half an hour I had corralled about 60,000 shares +at an average of $1.30. An hour later the owners of the lease obtained +the information on which I was working, and by eight o'clock that +night, when the Goldfield Stock Exchange began its evening session, the +price had jumped to $1.85. Within a week thereafter the price +sky-rocketed to $3.75, and at this figure I took profits of nearly +$150,000. Had I held on a little longer I could have doubled that +profit, for Combination Fraction a few weeks later sold at higher than +$6. +</p> + +<p> +The Combination Fraction strike was followed by a number of others, and +the boom gathered force. By October, Goldfield Silver Pick had advanced +to $1 per share, up 600 per cent. Goldfield Red Top was selling at $2, +Jumbo at $2, and Mohawk at $5, showing profits of from 2,000 to 5,000 +per cent. Others had gained proportionately. In fact, there were over +twenty Goldfield securities listed on the exchange that showed the +public a stock-market profit of anywhere from 100 per cent. to 5,000 +per cent. +</p> + +<p> +Mining machinery of every description was being shipped into camp, and +for half a mile around the Combination mine the landscape of assembled +gallows-frames resembled a great producing oil field. There were signs +of mining activity everywhere. For four miles east of the Combination +mine and six miles south every inch of ground had been located. Claims +situated miles away from the productive area were changing hands hourly +at high figures. +</p> + +<p> +The Sullivan stocks kept pace in the markets with the other booming +securities, and it was plain that the trust company was riding on a +tidal wave of success. Our profits exceeded $1,500,000 at this period, +and we were just eight months old. +</p> + +<p> +In a single fortnight the Sullivan Trust Company promoted the Lou +Dillon Goldfield Mining Company at 25 cents per share, a valuation of +$250,000 for the property, which cost $50,000; and the Silver Pick +Extension, which cost $25,000, at the same figure, netting several +hundred thousand dollars' profit on these two transactions. Options to +purchase the Lou Dillon and Silver Pick Extension, which were situated +within 500 feet of the Combination mine, had been in possession of the +Sullivan Trust Company for months, and had increased in value to such +an extent that on the day the subscriptions were opened in Goldfield +for Lou Dillon at 25 cents per share, a prospector named Phoenix, who +had received $50,000 from the Sullivan Trust Company for the entire +property, subscribed for 100,000 shares, or a tenth interest in the +enterprise, paying $25,000 therefor. +</p> + +<p> +It was the rule of the Sullivan Trust Company to open subscriptions in +Goldfield on the day its advertising copy left the camp by mail for the +East. Newspaper publishers were always instructed to publish the +advertisements, which were generally of the full-page variety, on the +day following receipt. In the case of Lou Dillon it became necessary to +telegraph all newspapers east of Chicago not to publish the +advertisement because of oversubscription before the copy reached them, +and in the case of Silver Pick Extension the orders to publish the +advertisements were canceled by telegraph before the mail carrying the +copy reached Kansas City. San Francisco, Los Angeles and Salt Lake +subscribed for 50 per cent. of the entire offering of Lou Dillon and +Silver Pick Extension, and Goldfield for 25 per cent. As a matter of +fact, had we desired, we could have sold the entire offerings in +Goldfield, Tonopah and Reno without inserting any advertisements, so +great was the excitement in the State itself. +</p> + +<p> +At this period the combined monthly payrolls of the mining companies +promoted by the Sullivan Trust Company totaled in excess of $50,000, +and excellent progress was being made in opening up the properties. +</p> + +<p class="break"> </p> + +<p> +It was early Autumn in Goldfield, warm, dry and dusty, and never a +cloud in the sky. I was at my desk eighteen hours a day, and liked my +job. Things were coming our way. +</p> + +<p> +The Sullivan Trust Company was in politics. Mr. Sullivan was popular +with the miners, and Governor Sparks was a large asset of the trust +company because he had been allowing the use of his name as president +of all the mining companies promoted by it. Nevertheless, when the +State election approached, the Governor had no money for campaign +expenses. He telegraphed the trust company from Carson: +</p> + +<p> +"I will not stand for renomination." +</p> + +<p> +We replied: "You are certain to be elected, and you will be renominated +by acclamation if you accept." +</p> + +<p> +"I won't run unless you guarantee my election," he telegraphed. +</p> + +<p> +We answered: "We guarantee." +</p> + +<p> +The Governor was renominated by the Democrats. The Republicans placed +in nomination J. F. Mitchell, a mining engineer and mine owner, who was +very popular among mine operators. +</p> + +<p> +There were thousands of miners domiciled in Goldfield. The Western +Federation of Miners dominated. +</p> + +<p> +"Sullivan," I said, "isn't it a certainty that the miners will vote the +Democratic ticket because Mitchell has been put forward by the mine +owners? Is it necessary to spend any money with the Western +Federation?" +</p> + +<p> +"Not a dollar!" replied Mr. Sullivan. "There's a meeting of the +executive committee to-morrow. I'm going to be around when they meet. +Without spending a cent I'll bring home the bacon. Watch me!" +</p> + +<p> +Sullivan reported to me the next day that he had succeeded in his +mission. +</p> + +<p> +"I didn't attend the meeting," he said, "but I did see the main +'squeeze.' He told me that a contribution to the Miner's Hospital would +be gratefully accepted, but that even that was not necessary, and that +Sparks would win in a walk." +</p> + +<p> +The only campaign money advanced by the Sullivan Trust Company was +given to Mr. Sullivan to go to Reno. He asked for $1,000, and he used +it in conducting open house on the first floor of the Golden Hotel, +meeting people and greeting them. Reno appeared to be a Republican +stronghold, and Mr. Sullivan, by baiting the Catholics against the +Protestants, succeeded in holding down the Republican majority to an +extent that was wofully insufficient to overcome the Democratic +majority rolled up in Goldfield with the aid of the miners. Governor +Sparks was reëlected by a handsome majority. Had the occasion demanded +it, we would have "tapped a barrel." But it was not necessary. +</p> + + +<h3> +THE STORY OF GOLDFIELD CONSOLIDATED +</h3> + +<p> +Rumors were rife in Goldfield of a merger of mammoth proportions which +was said to be on the tapis. Great as were the gold discoveries in +camp, they did not justify the terrific advances being chronicled in +the stock-market, and it was apparent that something extraordinary must +be hatching to justify the market's action. +</p> + +<p> +George Wingfield, who had enjoyed a meteoric career, rising within five +years from a faro dealer in Tonopah to the ownership of control in the +Mohawk and many other mining companies and to part ownership of the +leading Goldfield bank, John S. Cook & Company, which was then credited +with having $7,000,000 on deposit, was said to be engineering the deal. +The names of the properties were not given, nor the figures. It +occurred to me that in any merger that was made the Jumbo and Red Top, +because of their central location, must be included. I sought out +Charles D. Taylor, who with his brother, H. L. Taylor, and Capt. J. B. +Menardi, owned the control of these properties. He asked $2.50 per +share for his stock and that of his partners—all or none. Mr. Taylor +had walked into the camp as a prospector. Most of his nights were spent +at the gaming tables, and he was reported to be an easy mark for the +professionals. His losses were constant and heavy. I put Mr. Sullivan +on his trail. Mr. Sullivan reported to me that Mr. Wingfield was +hobnobbing with Mr. Taylor. +</p> + +<p> +"Get an option on these properties from Taylor and be quick," I told +Mr. Sullivan. +</p> + +<p class="break"> </p> + +<p> +Next morning I met Mr. Sullivan. He held in his hands 20,000 shares of +Jumbo, selling at $1.75 per share on the Goldfield Stock Exchange. +</p> + +<p> +"I won it in a poker game last night with Taylor and Wingfield," he +said. "I have an oral option on the property good for three days at +$2.50, but if you leave it to me, I'll win these properties from him +playing cards." +</p> + +<p> +I did not see Mr. Sullivan again for a week. Next I heard of him he had +"fallen off the water-wagon" and was reported to be celebrating the +event in Tonopah. While Mr. Sullivan was "kidding" himself about his +poker-playing ability, Mr. Wingfield had come to terms with Mr. Taylor +and had bought the control of Jumbo and Red Top at an average price of +$2.10 per share. That explained Mr. Sullivan's lapse. However, I blamed +myself. Mr. Sullivan was no match for Mr. Wingfield. In any game from +stud-poker to marketing mining stock Mr. Wingfield can outwit, +outmaneuver and outgeneral a hundred like "Larry." +</p> + +<p> +Both companies had been capitalized for 1,000,000 shares. The sale +required that a fortune be paid over. Mr. Wingfield paid a small sum +down, and Mr. Taylor placed the stock of both of these companies in +escrow in the John S. Cook & Company bank, the balance to be paid a +month later. +</p> + +<p> +The purchase of control of the Jumbo and Red Top by the firm of +Wingfield and Nixon signalized the beginning of a stock-market campaign +for higher prices that stands unprecedented for audacity and intensity +in the history of mining-stock speculation in this country since the +great boom of the Comstock lode in 1871-1872. +</p> + +<p> +The market for all listed Goldfield stocks was made to boil and sizzle +day in and day out until Jumbo and Red Top had been ballooned from $2 +to $5 per share, Laguna from 40 cents to $2, Goldfield Mining from 50 +cents to $2, and Mohawk from $5 to $20. Within three weeks the advance +in market price of the issued capitalization of this quintet alone +represented the difference between $8,000,000 and $26,500,000. +</p> + +<p> +A few days before top prices were reached, it was officially announced +that the merger of Mohawk, Red Top, Jumbo, Goldfield Mining and Laguna +into the Goldfield Consolidated Mines Company had been made on the +basis of $20 for each outstanding share of Mohawk, $5 for Red Top, $5 +for Jumbo, $2 for Goldfield Mining, and $2 for Laguna. It was also +given out that the promoters, Wingfield and Nixon, had allotted +themselves $2,500,000 in stock of the merged companies as a promoters' +fee. Right on top of this came an announcement that the Combination +mine had been turned into the merger for $4,000,000 in cash and stock, +and it was learned that go-betweens had made a profit of $1,000,000 on +the deal by securing an option on the property for $3,000,000. +</p> + +<p> +In short, a merger was put through of properties and stocks, the issued +capitalization of which was selling in already inflated markets on the +day the merger was conceived for $11,000,000, at a valuation of +$33,000,000, and in addition the promoters received a $2,500,000 bonus. +Had the properties been merged on the basis of their selling prices +three weeks prior, the equivalent value of the 3,500,000 shares of +merger stock would have been a fraction above $3. As it stood, under +the ballooning process, the market value was $10, which was the par. +</p> + +<p> +At the time of the merger these were the conditions that ruled at the +mines: +</p> + +<p> +The Mohawk, appraised at $20,000,000, had produced under lease in the +neighborhood of $8,000,000, of which less than $2,000,000 had found its +way into the treasury of the Mohawk Mining Company, the balance going +to the leasers. The leasers had "high-graded" the property to a +fare-you-well, and less than $1,000,000 worth of high-grade remained in +sight, although it was conceded on every side that the leasers had not +attempted, nor were they able during the period of their leasehold, to +block out systematically and put into sight all of the ore in the mine. +Large, but indefinite, prospective value therefore attached to Mohawk +in addition to the tonnage in sight. +</p> + +<p> +The Laguna, for which $2,000,000 had been paid in stock, did not have a +pound of ore in sight, and had cost Wingfield and Nixon less than +$100,000. +</p> + +<p> +Goldfield Mining, scene of a sensational production during the early +days of the camp, appraised at $2,000,000 more, had fizzled out as a +producer. +</p> + +<p> +Jumbo, taken in for $5,000,000, for a year previous had produced little +or no ore, most of the time being exhausted by the management in +sinking a deep shaft, and it had less than $500,000 in sight. +</p> + +<p> +Red Top, valued at another $5,000,000, had in excess of $2,000,000 +worth of medium grade ore blocked out. +</p> + +<p> +Wingfield and Nixon were also heavily interested in Columbia Mountain, +Sandstorm, Blue Bull, Crackerjack, Red Hills, Oro, Booth, Milltown, +Kendall, May Queen, and other Goldfield stocks. No sooner did the five +stocks forming the merger begin to show such startling market advances +than the ballooning tendency manifested itself in Wingfield and Nixon's +miscellaneous list, and all of them showed phenomenal gains. Soon the +entire list of Goldfield, Tonopah, Manhattan, Bullfrog, and other +Nevada mining securities listed on the San Francisco Stock Exchange and +traded in on the exchanges and curbs of the country, felt the force of +the terrific rises, and sympathetically they skyrocketed to unheard-of +levels. +</p> + +<p> +To convey an idea as to how far the prices of these stocks were moved +up beyond their intrinsic worth, as a result of the ballooning process +of the merger, I give some comparisons. +</p> + +<p> +Columbia Mountain sold during the boom at above $1.50; it is now +selling at 5 cents. Blue Bull, Crackerjack, Oro, Booth, Red Hills, +Milltown, Kendall, Conqueror, Hibernia, Ethel, Kewanas, Sandstorm and +May Queen sold at an average of 75 cents during the boom; they are now +selling at an average of less than 5 cents. A hundred other Goldfield +securities, which were in eager demand at the zenith of the spectacular +movement at prices ranging from 50 cents to $2.50 can now be purchased +at from 1 to 5 cents per share, while many others that were hopefully +bought by an over-wrought public at all sorts of figures are now not +quoted at all. +</p> + + +<h3> +AT THE HEIGHT OF THE FRENZY +</h3> + +<p> +The difference between the market price of listed Nevada stocks on +November 15, 1906, and that of to-day is in excess of $200,000,000. A +fair estimate of the public's real-money loss in the listed division is +$150,000,000. +</p> + +<p> +Nor was this all of the damage that was done. When excitement in +Goldfield's listed stocks reached a frenzy, wild-catters operating from +the cities got into harness, and within three months in the +neighborhood of 2,000 companies, owning in most instances properties +situated miles from the proved zone in Goldfield, or in unproved camps +near Goldfield, were foisted on the public for $150,000,000 more. +</p> + +<p> +The fact that Mohawk, which in the early days of Goldfield could have +been purchased at 10 cents, had advanced to $20 and had shown +purchasers a profit of 20,000 per cent.; that Laguna had advanced in +less than two years from 15 cents to $2; that Jumbo and Red Top, +selling at $5, could have been purchased a year or two before at around +10 cents; that Goldfield Mining, which had in the early days been +peddled around the camp at 15 cents, had moved up to $2, etc., gave the +wild-catters an argument that was convincing to gulls in every town and +hamlet in the Union. And the harvest was immense. Not one of the 2,000 +wild-cats has made good, and every dollar so invested has been lost. +</p> + +<p> +It will be noted from the reckoning as given that about as much money +was lost in the listed stocks of the camps as in the unlisted "cats and +dogs." +</p> + +<p> +As a matter of fact, veteran mining-stock buyers, in camp and out of +the camp, lost as much hard cash as did the unsophisticated. San +Francisco, which owes its opulence of years gone by to successful +mining endeavor, was probably hit as hard as any other city in the +Union. San Francisco thought it knew the game, and it confined its +operations to the stocks listed on the exchange where the Comstocks are +traded in. But San Francisco did not know the inside of the merger deal +as it is now known to every schoolboy in Nevada. +</p> + +<p> +The operation on the inside was this. Wingfield and Nixon owned the +John S. Cook & Company bank in Goldfield, and they owned the control of +nearly a score of mining companies which were of little account as well +as having acquired the control of the biggest mine in camp. During the +height of the boom, which they engineered to swing the merger, they +disposed of millions of shares of an indiscriminate lot of companies, +and used the many millions of proceeds to take over Jumbo, Red Top and +their outstanding contracts in Mohawk and other integrals of the +merger. They likewise were able during the ballooning process to +dispose of much Mohawk at from $15 to $20, much Jumbo at from $4 to $5, +much Red Top at from $4 to $5, that cost them very considerably less +than this, and in this way were enabled to finance their deal to a +finish. +</p> + +<p> +I have just pointed out that in order to accomplish the merger it was +necessary that the market in all Goldfield securities, in which the +promoters were interested, be stimulated in order to enable unloading +by the insiders before some of the very large payments became due. This +being accomplished, and the payments having been made, the promoters +sought to establish a market for merger shares at or around par. In +order to accomplish this the Goldfield bank, in which the promoters +were heavily interested, stimulated speculation and managed to spread a +feeling of security by announcing its willingness to loan from 60 to 80 +per cent. par on merger shares. +</p> + +<p> +All Goldfield fell for this, and the camp went broke as a result. +</p> + +<p> +Within eighteen months thereafter Goldfield Consolidated sold down to +$3.50 in the markets, and margin-traders and borrowers who had put up +the stock as collateral to purchase more were butchered. Loans were +foreclosed by the bank as rapidly as margins were exhausted. The +carnage was awful. +</p> + +<p> +It must be evident that Wingfield and Nixon, both of whom became +multimillionaires as the result of their mining-stock operations in +Goldfield, were directly and indirectly important factors in the loss +by the public of $300,000,000, as set forth above. It is admitted that +less than $7,000,000 worth of ore had been developed as a reserve at +the time $35,000,000 worth of stock in the merger was issued and a +market manufactured to dispose of the stock at this fictitious +price-level. It is not of particular interest that Goldfield +Consolidated, by reason of sensationally rich mine developments at +depth, has since given promise of returning to stockholders an amount +almost equal to par for their shares, and that it now appears that +those who were able to weather the intervening declines may in the end +be out only the interest on their money. +</p> + +<div class="blockquote"> +<p> +<em>This fact stands out: Although Goldfield Consolidated owned at +the outset a bonanza gold mine, stockholders had just two chances. +They could break even or lose—break even on their investment if +the mine made good in a sensational way, which was a big gamble at +the time, or lose if the mine didn't. They could not win.</em> +</p> +</div> + +<p> +Mr. Nixon was a United States Senator from Nevada. He was also +president of the Nixon National Bank of Reno, Nevada. He held both of +these positions at the time the merger was made, and it was largely +because of Mr. Nixon's political and financial position that the daring +ballooning market operations, which were staged as a curtain-raiser for +the merger, proved so successful. +</p> + +<p> +In the <cite>Nevada Mining News</cite> of May 25, 1907, circulation 28,000, +an interview appeared with United States Senator Nixon of Nevada, +vouched for as follows: +</p> + +<div class="blockquote"> +<p> +The manuscript of the interview was submitted to, and approved by, +the Senator. Unchanged by one jot or tittle, it is printed just as +it came from his hands. Even now the Senator holds a carbon of the +original manuscript and may brand us with it if we have broken the +faith we pledged. +</p> +</div> + +<p> +I quote from the Senator's interview, as it appeared in that issue of +the <cite>Nevada Mining News</cite>: +</p> + +<div class="blockquote"> +<p> +"What do you estimate the ultimate earnings of Goldfield +Consolidated will be?" was asked. +</p> + +<p> +"Consolidated will be a bigger producer, I should say, three or +four years from now than it will be one year from now," Senator +Nixon replied, "and I believe I am conservative when I say that +the property will be eventually earning $1,000,000 net monthly." +</p> + +<p> +"<em>Then, as an investment, the stock is easily a $20 stock?</em>" +</p> + +<p> +"<em>That is a minimum estimate of its future value, I should +say</em>," <em>was the response.</em> +</p> +</div> + +<p> +As to that interview: +</p> + +<p> +Mr. Nixon said that within three or four years (the time limit is up), +$20 would be a minimum price for the shares. They touched $10 only once +since then, or one-half of his estimate. Shortly after the interview +was given they sold down as low as $3.50. Recently the market quotation +was $4. +</p> + +<p> +He said, further, that the mines would ultimately earn at the rate of +$1,000,000 a month. This statement also has fallen far short of +fulfillment. +</p> + +<p> +Soon after George S. Nixon, as president of the Goldfield Consolidated +Company, gave out this interview for public consumption he, according +to his own later admissions, disposed of all of his holdings, and at an +average price, it is believed, of less than $8 a share. +</p> + +<p> +This is only a superficial rendering of the big event in Goldfield's +history, but it is sufficient to furnish an example of the effect of +Get-Rich-Quick influences that radiate from high places and separate +the public from millions upon millions, without being called to +account. +</p> + +<p> +The dear American public has been falling for this kind of insidious +brand of Get-Rich-Quick dope for years. It is being gulled into losing +millions through its fetish worship of promoters with millions, who are +really the Get-Rich-Quicks of the day that are very dangerous. +</p> + +<p> +Greenwater, a rich man's camp, in which the public sank $30,000,000 +during three months that marked the zenith of the Goldfield boom, is +another case in point where a confiding investing public followed a +deceiving light and was led to ruthless slaughter. +</p> + + + + +<h2> +<a name="IV"> </a> +CHAPTER IV +<br><br> +<span class="smallsc">The Greenwater Fiasco</span> +</h2> + + +<p> +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. +</p> + +<p> +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. +</p> + +<p> +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. +</p> + +<p> +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. +</p> + +<p> +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. +</p> + +<p> +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. +</p> + +<p> +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. +</p> + +<p> +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. +</p> + + +<h3> +GETTING INTO THE GAME +</h3> + +<p> +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. +</p> + +<p> +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. +</p> + +<p> +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. +</p> + +<p> +"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. +</p> + +<p class="break"> </p> + +<p> +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. +</p> + +<p> +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.) +</p> + +<p> +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. +</p> + +<p> +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. +</p> + +<p> +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. +</p> + +<p> +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. +</p> + + +<h3> +ALL THE COPPER IN THE WORLD +</h3> + +<p> +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." +</p> + +<p> +"Taking the lowest percentage of ore reported by the company," says +Horace Stevens in the <cite>Copper Handbook</cite> 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." +</p> + +<p> +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." +</p> + +<p> +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. +</p> + +<p> +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. +</p> + +<p> +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. +</p> + +<p> +Did I fall for Greenwater? Yes, and at the eleventh hour. +</p> + +<p> +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. +</p> + +<p> +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. +</p> + +<p> +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. +</p> + + +<h3> +THE COLLAPSE OF GREENWATER +</h3> + +<p> +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. +</p> + +<p> +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: +</p> + +<div class="blockquote"> +<p> +Stop offering Greenwater Central. Make no more payments on the +property. Do not use my name any further. There is nothing here. +</p> +</div> + +<p> +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. +</p> + +<p> +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. +</p> + +<p> +I make a conservative statement when I say that the American public +sank fully $30,000,000 in Greenwater in less than four months. +</p> + +<p> +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. +</p> + +<p> +What of the camp? +</p> + +<p> +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 <em>the monumental +mining-stock swindle of the century</em>. Every dollar invested by the +public is lost. The dry, hot winds of the sand-swept desert now chant +the requiem. +</p> + +<p> +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. +</p> + +<p> +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. +</p> + + +<h3> +THE SHAME AND THE BLAME +</h3> + +<p> +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. +</p> + +<p> +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. +</p> + +<p> +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. +</p> + + + + +<h2> +<a name="V"> </a> +CHAPTER V +<br><br> +<span class="smallsc">On the Eve of the Great Goldfield Smash</span> +</h2> + + +<p> +It was early in November, 1906. Indian Summer held Goldfield in its +soft embrace. Nature wore that golden livery which one always +associates with the idea of abundance. The mines of the district were +being gutted of their treasures at the rate of $1,000,000 a month. +Under the high pressure of the short-term leasing system new high +records of production were being made. The population was 15,000. Bank +deposits totaled $15,000,000. Real estate on Main Street commanded +$1,000 a front foot. The streets were full of people. Every one had +money. +</p> + +<p> +In years gone by men had died of thirst on that very spot. Three years +before there were no mines and the population numbered only a +corporal's guard. The transformation was complete. Within three years +the dreams of the lusty trail-blazers, who had braved the perils of the +desert to locate the district, had become a towering reality. The camp, +which two years before was dubbed by financial writers of the press as +a "raw prospect" and a "haven for wildcatters and gamblers," had +developed bonanza proportions. The early boast of Goldfield's press +bureau, that Goldfield would prove to be the greatest gold camp in the +United States, was an accomplished fact. +</p> + +<p> +Listed Goldfield mining issues showed an enhancement in the markets of +nearly $150,000,000. Stocks of neighboring camps had increased in +market value $50,000,000 more. The camp rode complacently on the crest +of the big boom, than which history chronicles no greater since the +famous old days of Mackay, Fair, Flood and O'Brien on the Comstock. +</p> + +<p> +There was no premonition that a climax must be reached in climbing +values at some period, and that a collapse might be near. +</p> + +<p> +Goldfield Consolidated shares were selling on the exchanges at above +par, $10, or at a market valuation of more than $36,000,000 for the +issued capitalization of the company. You could have bought all of the +properties of this company for less than $150,000 when the camp was +first located. A score of leases were operating the Consolidated's +properties. The leases were soon to expire. Much market capital was +made of the fact that the company would presently "come into its own." +</p> + +<p> +More than 175 stocks of Goldfield and near-by camps were listed on the +exchanges and curbs. All of these were selling at sensational prices +and enjoyed a swimming market. The successful merging by Wingfield and +Nixon of the principal producing properties of Goldfield at a +$36,000,000 valuation, more than four times the value of the known +ore-reserves, stimulated the whole list. +</p> + +<p> +Columbia Mountain, promoted by the mergerers of Goldfield Consolidated, +but excluded from the merger because not contiguous to the other +integrals and because it had no ore, had been ballooned to $1.35 per +share on a million-share capitalization, and stood firm in the market +regardless of the fact that it was still only an unpromising +"prospect." The issued stock of a dozen other companies in control of +the promoters of the merger was selling at an aggregate value of many +millions more. The most despised "pup" in this particular group was +Milltown, of not even prospective value; yet it easily commanded a +per-share price that gave the "property" a market valuation of +$400,000. +</p> + +<p> +Silver Pick, capitalized for 1,000,000 shares of the par value of $1 +each, had scored an uninterrupted advance from 15 to $2.65 a share +without a pound of ore being found on the property. The market price +did not waver. +</p> + +<p> +Kewanas, another million-share company, was in big demand at $2.25 per +share, a valuation of $2,250,000 for the property and an advance of +2,250 per cent. over the promotion price. Kewanas's gain was also made +despite the fact that mine developments had failed to open up pay ore +in commercial quantities. Eight months earlier the entire acreage had +been offered to me for $35,000 and I had refused to buy. +</p> + +<p> +Goldfield Daisy, promoted by Frank Horton, a faro dealer in George +Wingfield's Tonopah gambling joint, had been ballooned from 15 cents to +$6 a share on a capitalization of 1,500,000 shares. It had never earned +a dollar for stockholders, but was actually selling in the open market +at a valuation of $9,000,000. The price showed no sign of weakening. +</p> + +<p> +Combination Fraction, owning a few acres of ground, which was promoted +at 20 cents a share on a capitalization of 1,000,000 shares, had risen +rapidly, because of ore discoveries and contiguity to the Mohawk, to +$8.50 a share. Stockholders gave no sign of a tendency to unload. +</p> + +<p> +Great Bend, situated in the Diamondfield section of the Goldfield +district, four miles from the productive zone, had been carried up from +10 cents a share to $2.50 without a mine being opened up, establishing +a market valuation for the property of $2,500,000. +</p> + +<p> +These are but a few of the more striking instances of price +appreciations. All of these stocks, excepting Goldfield Consolidated, +are now selling for a few pennies per share each, the average not being +so much as ten cents. There were over a hundred other Goldfield stocks +that also enjoyed spectacular market careers, on which it is now +impossible to get any quotation at all. +</p> + + +<h3> +THE RISE OF WINGFIELD AND NIXON +</h3> + +<p> +ANY one in Goldfield who was willing to admit that stocks were selling +too high at the time was decried as a "knocker." You could borrow +freely on all listed Goldfield stocks at John S. Cook & Company's bank, +owned by the promoters of the Goldfield Consolidated, and the men of +the camp for that reason felt that there must be concrete value behind +nearly all of them. Brokers in Eastern cities reported that few of +their customers were willing to take profits even at the prices to +which stocks had been skyrocketed. Most mining-stock brokers of the +cities had "knocked" the stocks of the camp in the early days before +the advance. At this stage, when prices had reached undreamed-of +levels, the brokers did not advise their customers that values had been +worked up far beyond intrinsic worth. Indeed, they actually waxed +enthusiastic in their recommendations to buy. Every one was a bull. +</p> + +<p> +Sessions of the Goldfield Stock Exchange reflected the extent of the +craze. Outside of the exchange the stridulous, whooping, screeching, +detonating voices of the brokers that kept carrying the market up at +each session could be heard half a block away. Later, did you find your +way into the crowded board-room, the half-crazed manner in which +note-books, arms, fists, index fingers, hats and heads tossed and +swayed approached in frenzy a scene of violence to which madness might +at once be the consummation and the curse. +</p> + +<p> +George Wingfield and his partner, George S. Nixon, were the heroes of +the hour. Less than five years before, Mr. Wingfield had come into +Tonopah with a stake of $150, supplied by Mr. Nixon, whose home was in +Winnemucca, Nevada. Mr. Wingfield had formerly been an impecunious +cowboy gambler. Born in the backwoods of Arkansas, and later of Oregon, +he hailed from Golconda, Nevada. Mr. Nixon, at the time he staked Mr. +Wingfield and until his election as a United States Senator in 1904, +was known as the "State Agent" of the Southern Pacific Company for +Nevada, having succeeded on the job the notorious "Black" Wallace, who +for many years handled the "yellow-dog" fund for the Huntington régime +when franchises were hard to get and legislatures had to be bought. Mr. +Nixon was also president of a bank in Winnemucca, which was a way +station on the Southern Pacific Railroad. +</p> + +<p> +Mr. Wingfield had signalized his money-getting prowess by running Mr. +Nixon's $150 into $1,000,000 as principal owner of the Tonopah Club, +the biggest gambling house in Tonopah, and later "parleying" the money +for himself and partner into ownership of control of the merged +$36,000,000 Goldfield Consolidated, which was their corporate creation. +</p> + +<p> +Mr. Wingfield was said to be behind the market. He was looked upon as +boss of the mining partnership, and Mr. Nixon as a circumstance. Mr. +Wingfield was a conspicuous figure at nearly all the sessions of the +Goldfield Stock Exchange, of which he was a member. In the early +evenings, when informal sessions were held on the curb, he could also +be seen in the thick of the tumult. He was on the job at all hours. +</p> + +<p class="break"> </p> + +<p> +At that time Mr. Wingfield was about thirty years old. Of stinted, +meager frame, his was the extreme pallor that denoted ill health, years +of hardship, or vicious habits. His eyes were watery, his look +vacillating. Uncouth, cold of manner, and taciturn of disposition, he +was the last man whom an observer would readily imagine to be the +possessor of abilities of a superior order. In and around the camp he +was noted for secretiveness. He was rated a cool, calculating, selfish, +surething gambler-man-of-affairs—the kind who uses the backstairs, +never trusts anybody, is willing to wait a long time to accomplish a +set purpose, keeps his mouth closed, and does not allow trifling +scruples to stand in the way of final encompassment. Among stud-poker +players who patronized gaming tables in Tonopah, Goldfield and +Bullfrog, he was famed for a half-cunning expression of countenance +which deceived his opponents into believing he was bluffing when he +wasn't. In card games he was usually a consistent winner. +</p> + +<p> +His partner, George S. Nixon, looked the part of the dapper little +Winnemucca bank manager and confidential State Agent of the Southern +Pacific that he was before becoming Senator. He was considerably below +middle weight, and above middle girth at that part of his anatomy which +a political enemy once described as seat of his thoughts and the +tabernacle of his aspirations. His steel-gray eyes were absolutely +without expression. Newly-rich, his money and his Southern Pacific +connections had gained him a toga, but he did not carry himself like a +man upon whom the honors had been thrust. Around Goldfield he strutted +with the pride and gravity of a Spanish grandee. +</p> + +<p> +The pair were in control of the mine, bank and market situation. +Brokers, bank men and officers of mining companies waited upon them and +did their bidding. At night, in the Montezuma Club, where leading +citizens were wont to congregate, Mr. Wingfield would on occasion +ostentatiously offer to wager that Goldfield Consolidated "would sell +at $15 before $9," etc. Men with money who had flocked to the camp from +every direction listened in rapt attention. At a later hour they +secretly wired the news to their friends in the East. Next morning the +market would reflect more public buying and still higher prices. +Goldfield itself was blindly following the lead of the twain. It was +indeed easier for these men to mark prices up than to put them down. +</p> + + +<h3> +THE WINNINGS OF A TENDERFOOT +</h3> + +<p> +What about me? Where did I stand and what was my position at this +conjuncture? Did I have foresight? Did I realize that stocks were +selling at much higher prices than were warranted by intrinsic worth +and speculative value? Was not the fact that the mergerers and waterers +of Goldfield Consolidated were in command of the mine, market and bank +situation sufficient to make me suspect that possibly the cards might +be stacked and that maybe cards were being dealt from the bottom of the +deck? Was I, in fact, wise to the exact situation and did I realize a +smash was bound to ensue? 'Tis a pity hindsight were not foresight, for +only in that event could I laurel-wreath myself. +</p> + +<p> +I had been on the ground for more than two years. In reality I was +still a tenderfoot. My experiences had been unique—all on the +constructive side. I had mastered the first rudiments of the game, but +only the first. Intrinsic value didn't figure as the only item in my +conception of the worth of a Goldfield mining issue. The millionaires +of the camp were not miners by profession and their judgment of the +value of any mining property would not have influenced a Guggenheim, a +Ryan or a Rothschild to extend so much as $4 on the development of any +piece of likely mineral ground. Goldfield was a poor man's camp. And it +was making good despite the croakings of school-trained engineers who +had turned the district down in the early days, as they did Tonopah. +</p> + +<p> +At this period I was living frugally. I never touched a card. I worked +at my desk on an average of sixteen hours a day, including Sunday, and +I never relaxed. Although I had arrived in the camp broke, had I been +offered $2,000,000 for my half interest in the L. M. Sullivan Trust +Company I think I should have refused it. +</p> + +<p> +I liked my job. The leaven of my environment appealed directly to my +perceptions. I was saturated with the traditions of Western "mining +luck" and also with the optimism of my sturdy neighbors. These men had +stood their ground in the early period of the camp's days of "trial and +tribulation." They had triumphed like their forebears on the Comstock, +just as did the hardy pioneers of Leadville and Cripple Creek and as +their brethren of Tonopah did. Their influence over me was unbounded. I +relished the work, anyhow. As a matter of fact, I had little use for +money except for the purposes of business. <em>And never a suggestion +came to me that it was time for a "clean up."</em> +</p> + +<p> +The L. M. Sullivan Trust Company, of which I was vice-president and +general manager, was doing remarkably well. The stocks of the mining +companies that were organized and promoted by the trust company were +listed on the San Francisco Stock Exchange and New York Curb and showed +a market appreciation of $3,000,000 above the promotion prices. Indian +Camp, promoted at 25 cents, was selling freely at $1.30. Jumping Jack, +for which subscriptions were originally accepted at 25 cents, was in +hot demand at 62 cents. Stray Dog, sold to the public originally at 45 +cents, was active around 85 cents. Lou Dillon, put out less than a +month before at 25 cents, had worked its way up to 64 cents. Silver +Pick Extension, which was oversubscribed at 25 cents and commanded 35 +cents two hours after we announced that subscriptions were closed, was +selling on the exchanges and curbs of the country at 49 cents. Eagle's +Nest Fairview, which original subscribers got into at 35 cents, was +very much wanted at 65 cents. Fairview Hailstone, floated at 25 cents, +was in constant demand at 40 cents. +</p> + +<p> +Governor John Sparks was now president of all of these companies. +</p> + +<p class="break"> </p> + +<p> +You could have sold big blocks of the Sullivan stocks at these +profit-making prices on any of the mining exchanges and curb markets of +the country without reducing the price a cent, so constant was the +public demand and so broad was the market. With the exception of +Bullfrog Rush, for which the Sullivan Trust Company had refunded the +money to subscribers when the mine under development proved to be a +"lemon," every promotion of the trust company showed investors a +handsome stock-market profit. In the aggregate the promotion price of +the seven Sullivan mining companies figured $2,000,000 for the entire +capitalization. The market price of these was now $5,000,000, or an +average gain of 150 per cent. +</p> + +<p> +It was a record to be proud of, and I <em>was</em> proud of it, not alone +because I was vice-president and general manager of the trust company, +but also because a firm of expert accountants, recommended by the +American National Bank of San Francisco to examine the books of the +trust company, had reported that our assets were $3,000,000 in excess +of liabilities, all of which had been gathered in about ten months' +time. About $1,000,000 of this represented promotion profits. The +remainder was earned by the appreciation in price of mining securities +carried or accumulated through the boom. +</p> + +<p> +It was the common boast of the camp that George Wingfield had +"parleyed" or "pyramided" $1,000,000 which represented the profits of +his gambling place in Tonopah, into ownership of control along with his +partner Nixon, of the $36,000,000 Goldfield Consolidated. As heretofore +related, I had experienced a lot of hard luck in missing by a hair's +breadth, ownership of the Hayes-Monnette lease on the Mohawk and the +Nevada Hills mine, which would have increased our profits $8,000,000 +more, but I felicitated myself that I had done very well by pyramiding +$2,500 into a half interest in a flourishing $3,000,000 trust company. +I was vain enough to believe that my achievement was as unique as that +of Mr. Wingfield, because he had had the influence of a United States +Senator and the money deposited in a chain of newly established banks +in Goldfield, Tonopah and other points to aid him in his operations. +Against this I had not only been compelled to rely on my own resources, +but was actually required to combat the work of black-mailers who from +time to time attempted to levy tribute. On my failure to "come through" +(I never did) they rarely hesitated to take a malevolent smash in print +at the Sullivan Trust Company, because in years gone by its active head +happened to have had a very youthful Past, even though they knew that +Past was no longer his and he had passed it like milestones on the way. +</p> + + +<h3> +I AM LANDED HIGH AND DRY +</h3> + +<p> +The Nevada State election took place in November. The Democratic +ticket, headed by "Honest" John Sparks for Governor and Denver S. +Dickerson for Lieutenant-Governor, was victorious. The Republican +ticket, headed by J. F. Mitchell, a mining promoter and engineer, +backed by United States Senator Nixon, the Republican political boss, +suffered humiliating defeat. +</p> + +<p> +Denver S. Dickerson was the candidate of the labor unions. During a +former labor war in Cripple Creek Mr. Dickerson had been confined in +the "bull-pen" when the Government intervened to quell the labor riots +there. Goldfield miners to a man very naturally voted for him. Governor +Sparks had accepted the renomination at the urgent request of the L. M. +Sullivan Trust Company, and his victory, as well as the complexion of +the ticket, was credited largely to the activities in politics of the +trust company. +</p> + +<p> +The trust company, while not a banking institution in the sense that it +accepted deposits of cash from citizens of the town, having confined +its operations to the financing of mining enterprises, loomed large on +the political and business horizon because of its increasing financial +and political power. The trust company carried all of its moneys in +banks that were not affiliated with the Wingfield-Nixon confederacy and +worked at cross-purposes with it in this particular, too. +</p> + +<p> +The Wingfield-Nixon crowd had pyramided a gambling house in Tonopah and +a little one-horse bank in Winnemucca into ownership of control of the +$36,000,000 Goldfield Consolidated; into ownership of John S. Cook & +Company's bank in Goldfield, which was credited with deposits +aggregating $8,000,000; into a new bank in Tonopah, known as the +Tonopah Banking Corporation, and into a newly formed bank in Reno, +called the Nixon National. In politics it had succeeded in seating Mr. +Nixon in the United States Senate, placing at his command the Federal +patronage which goes with that exalted office. +</p> + +<p> +The confederacy was reaching out. +</p> + +<p> +In Goldfield it had overcome such strong banking opposition as the Nye +& Ormsby County Bank and the State Bank & Trust Company, both of which +were in business before John S. Cook & Company were dreamed of. It had +accomplished this by loaning large sums of money to Goldfield brokers +and other citizens on mining stocks of the camp at a time when this +class of securities was not so readily accepted by the other banks as +good collateral. In Tonopah the newly-established Nixon bank, known as +the Tonopah Banking Corporation, was making gradual headway against +both the Nye & Ormsby and the State Bank & Trust Company, which still +carried about 75 per cent. of the business of that camp. In Reno the +Nixon National found it hard to compete with such old institutions as +the Bank of Nevada, the Washoe County Bank and the Farmers & Merchants +National, but rumors were already in the air that the Nixon bank was +soon to buy out and consolidate with the powerful Bank of Nevada. +</p> + +<p> +In Goldfield the power of the confederacy was strongest in all lines +except politics. There it already had its grasp on the throat of the +mining and financial business of the camp, and through the out-of-town +draft collection department of its bank held its finger on the pulse of +the mining-share markets. Its sore spot was politics. +</p> + +<p> +Wingfield and Nixon's market operations were clouded in mystery. No one +knew exactly where they stood. Brokers in Goldfield and San Francisco, +who had compared notes, were convinced that the two had unloaded many +millions of shares of the smaller companies not included in the merger, +and had raked in not less than $10,000,000 during the boom as the +result of this selling. The disposal of huge blocks of stock by +Wingfield and Nixon, however, was not interpreted as meaning that +stocks were selling too high. The general idea prevailed that the +proceeds were used to enable the confederacy to finance its stock +purchases in the integral companies that were turned over in the making +of the merger and to finance its new chain of banks. +</p> + +<p class="break"> </p> + +<p> +About the middle of November the market for Goldfield securities took a +turn for the bad. Prices gave indication of having reached a stopping +place. Goldfield promoters began to complain that they were compelled +to lend strong support to the market because of selling from many +quarters that could not be explained. There was much market pressure. +In a few days the market became unsteady, then soft, then wobbly again. +In camp Wingfield and Nixon were reported still bullish. +</p> + +<p> +The securities of the Sullivan Trust Company were under attack in all +markets. Salt Lake and San Francisco were reported to be spilling +stock. Great blocks were being thrown over. +</p> + +<p> +I gave support in a jiffy. +</p> + +<p> +There was no surcease. +</p> + +<p> +<em>Within ten days I was forced to throw all of a million dollars +behind the market to hold it.</em> +</p> + +<p> +This didn't faze me. I was getting stock certificates for the money, +and I believed they were worth the price. +</p> + +<p> +But I was puzzled to determine what it was all about. +</p> + + +<h3> +THE BEGINNING OF THE RAID +</h3> + +<p> +Soon it was reported to me that Senator Nixon was advising people at +all points who held Sullivan stocks, or knew of anybody who held them, +to unload. From San Francisco came word that a clique of brokers was +operating for the decline. +</p> + +<p> +On the following Monday the market on the San Francisco Stock Exchange +opened strong and buoyant, and it looked for a moment as if the selling +movement had collapsed. I felt relieved. +</p> + +<p> +My 'phone bell rang. A stock broker of Tonopah called me on the long +distance. +</p> + +<p> +"Offer you 10,000 Lou Dillon at 48," he said. "Do you want them?" +</p> + +<p> +Lou Dillon was a Sullivan stock that had been promoted at 25; 48 was +now a point under the market, however. +</p> + +<p> +"We'll take 'em," I said. "What's the matter?" +</p> + +<p> +"Rumored up here that your books are under inspection by the +Post-office Department. You have had five new men on your books for the +past few weeks, and some one has spread a story here that Nixon has +sicked the Government on to you." +</p> + +<p> +I denied it, of course. The five men in question were the experts who +had been sent up from San Francisco by the firm of accountants +recommended to us by the American National Bank, and they were there at +our own behest. The story was a raw canard. +</p> + +<p> +Throughout the day the Sullivan Trust Company was called upon to stand +behind the San Francisco market and take in nearly all of the big +blocks of Sullivan stocks owned in the camps of Tonopah and Manhattan. +Before our denials could reach the sellers the damage had been done. +And it took $250,000 a day for four days to hold the market against +this fresh onslaught. +</p> + +<p> +Color had been lent to the wild rumors about a Postal investigation by +the fact that an attack had been made on me in the columns of the +<cite>Denver Mining Record</cite> a year before. Rumor said the dose was +going to be repeated. In the early days of the camp, when I was at the +head of the Goldfield-Tonopah Advertising Agency, I had represented the +<cite>Denver Mining Record</cite> in Goldfield. As its agent I had secured +advertising contracts for it which netted my agency in the neighborhood +of $10,000 a year in commissions. The owners of the newspaper conceived +the idea that I was making too much money on a commission basis and +sent Wing B. Allen, formerly of Salt Lake, to the scene to take my +place. Mr. Allen worked for smaller pay. He wanted me to divide my +commission on standing business, and I refused. The publishers took Mr. +Allen's part. As a result I withdrew all the advertising from the +columns of the <cite>Denver Mining Record</cite> for which my agency had been +responsible, and the <cite>Denver Mining Record</cite> was never able to +regain the lost ground. +</p> + +<p> +A short time before the raid on our stocks began Mr. Allen had been +arrested in Goldfield on a warrant sworn out by L. M. Sullivan, tried +before Judge Bell on the charge of extortion and bound over to the +Grand Jury. At the hearing before Judge Bell the Sullivan Trust Company +submitted evidence that Mr. Allen had threatened, if we did not give +his paper a slice of the promotion advertising of the Sullivan Trust +Company, that the <cite>Denver Mining Record</cite> would commence to attack +me personally in its columns, and, because of my early Past, would do +the trust company serious damage. +</p> + +<p> +At the hearing despatches were submitted which were filed at the +Goldfield office of the Western Union Telegraph Company by Mr. Allen, +in which he had informed his paper that it had better proceed with the +attack, because neither Mr. Sullivan nor myself gave indication of +yielding. At the hearing, under oath and in a crowded courtroom, I +openly denounced Mr. Allen and his newspaper as blackmailers of the +very vilest type, and so did Mr. Sullivan. Judge Bell, on the +submission by the Western Union of Mr. Allen's despatches to his paper, +promptly held him for the Grand Jury. +</p> + +<p> +On the advice of former Governor Thomas, of Colorado, to whom the +Sullivan Trust Company paid a retainer as counsel, and who later became +chief counsel for the Goldfield Consolidated, I employed Christopher C. +Clay of Denver to commence suit against the owners of the <cite>Denver +Mining Record</cite>. As a result I secured from them a settlement by +which they agreed not to mention my name again in their paper. I was +harassed at the time, or I would not have compromised. The stuff +printed by the <cite>Denver Mining Record</cite>, which has been rehashed by +every blackmailer who ever attempted to levy on me, was about +two-tenths true and eight-tenths false. It was a literal copy of an +anonymous publication put out by a set of blackmailers who had tried to +circulate it years before in New York when I was head of the Maxim & +Gay Company. I had spent thousands of dollars to run down the +authorship then, but without avail. The lawyers had succeeded in +seizing thousands of copies of the publication, and had made an arrest, +but they failed to prove authorship of the screed and ownership of the +paper, and the culprits therefore were not punished. In Denver when Mr. +Clay applied for criminal warrants, he was asked first to furnish proof +of authorship, which was impossible for us, the articles having been +unsigned. +</p> + + +<h3> +SOME PERTINENT PERSONALITIES +</h3> + +<p> +The same stuff has recently appeared without signature in a Goldfield +paper which originally came into possession of George Wingfield through +foreclosure proceedings, and in a Reno evening paper which is +controlled by Senator Nixon, who owns a large slice of the paper's +mortgage. It has also appeared in other papers "friendly" to Wingfield +and Nixon. Tens of thousands of copies of the Goldfield publication +containing the anonymous libel have been sent broadcast. +</p> + +<p> +Other newspapers have reproduced the libelous stuff, some innocently +and some for sordid reasons, but of this more later. My career is +fraught with instances of recourse by enemies to blackmail and +attempted blackmail. If I should undertake to tabulate the cases where +men and interests, ranging from impecunious newspaper reporters to +financial-newspaper publishers and mining-stock brokers and market +operators who, from the background, publish market letters or furnish +the capital for mining publications, have attempted to levy tribute or +to club me into submission by the use of so vile a weapon, I should be +compelled to write a big book on the subject. +</p> + +<p> +And right here I should like to place myself on record to the effect +that seemingly the principal shortcoming that has marked my +mining-financial career has been that I had a youthful Past—a Past +which during the last decade has never been taken into serious +consideration by men who have held close business relations with me, +but which, of course, is a thorn in the sides of men and interests +whose bidding I have failed to obey. +</p> + +<p> +I defy any man to cite a single instance where I was guilty of +crookedness in a mining transaction or a business transaction of any +kind in my entire career as a promoter. I have been fearless—too much +so. I have been a rabid enthusiast. I have tried to build. I have given +quarter, but have never taken any. I have been honest. Were I really +dishonest, I could have prevented every publication of an attack of +consequence on me by lending myself in advance to the base purposes of +my traducers, and I would have millions now for having compromised with +them. It is heaven's own truth that in nine cases out of ten, when I +have been attacked in print, the motive of the attacking party has been +base and the facts have been so distorted or misrepresented that the +fabric was a lie. Nor has the cruelty of the operation stayed any one's +hand. +</p> + +<p class="break"> </p> + +<p> +At the very moment in Goldfield when I knew that the <cite>Denver Mining +Record</cite> would not assault the Sullivan Trust Company again because +of the settlement of the libel suit by my lawyers out of court, fresh +rumors were spread that the <cite>Denver Mining Record</cite> was getting +ready for another attack and that tens of thousands of copies of that +newspaper were to be circulated. But you can't stop a rumor by the +declaration of the truth, and the Sullivan Trust Company decided that +it would be unwise to make a denial in print, for by so doing it would +communicate to all stockholders the news that the Sullivan stocks were +actually under attack and thus cause more "frightened selling." +</p> + +<p> +Sight drafts from brokers in New York, Chicago, Salt Lake and San +Francisco, drawn on the Sullivan Trust Company, with large bundles of +Sullivan stocks attached, were pouring into our office through the +local banks for presentation. John S. Cook & Company made a specialty +of this department of banking, and most of the drafts on us were +cleared through the Wingfield-Nixon bank. It was reported to me that +Senator Nixon was openly discussing the enormous volume of stocks +coming in on us and was questioning our ability to stem the tide. As a +strategic measure, the Sullivan Trust Company decided to "cross" sales +on the San Francisco Stock Exchange so that it might ship out of the +camp, through the banks, large blocks of stock with draft attached +against San Francisco brokers and thus convey to the minds of local +bankers that we were selling large blocks of stock as well as buying +them. The volume of the "cross" trades caused some talk in San +Francisco, and was magnified by brokers operating for the decline. +</p> + + +<h3> +THE TIME WHEN MONEY TALKS +</h3> + +<p> +Some of our brokers in San Francisco now demanded an independent bank +guaranty that the drafts on us would be honored. We asked for a line of +credit at the State Bank & Trust Company. It was promptly given. As +fast as the brokers asked for a guaranty, the State Bank & Trust +Company telegraphed them formally that it would honor our paper to the +extent of $20,000 or $30,000 in every case. To protect the bank and in +order to be able to borrow a large sum of money, should we need it in +the event of another selling movement starting in, we deposited stocks +of a market value of $1,500,000 with the State Bank & Trust Company, +which signed a paper that this collateral was to stand against loans +for any amount which the State Bank & Trust Company might make to us on +open account. +</p> + +<p> +A few days later we borrowed from the bank $300,000 in cash, and it was +agreed that should we need $300,000 more on the same collateral, it +would be promptly placed at our disposal. We did not yet need the +money, but I realized the desirability of assembling cash in an +exigency such as that. Nor was this an unusual proceeding. There was a +time during the Manhattan boom when the overdraft of the Sullivan Trust +Company in the Nye & Ormsby County Bank was $695,000. The bank held +against this overdraft Sullivan stocks at the promotion price. Nearly +all of these stocks at that early period were as yet unlisted. +</p> + +<p> +The idea of withdrawing support and letting the market go to smash did +not occur to me at all. As already stated, I believed the stocks were +worth the money. But that was not the chief reason for my stubborn +market position. I took great pride in the fact that every listed stock +of the Sullivan Trust Company showed a big profit to stockholders. I +considered the greatest asset of the trust company to be, not its +money, but its prestige, and I entertained big ideas as to a future I +had mapped out for the corporation. I did not suspect that an organized +campaign was on to destroy us and that the dominant interests of the +camp were reaching out for everything in sight. Nor did I have any use +for money for hoarding purposes. The only thing that seriously nettled +me was the fact that the Sullivan Trust Company had been compelled to +turn borrower. +</p> + +<p> +Before the first selling movement started in, our assets were +$3,000,000 more than our liabilities. But this $3,000,000 was not all +cash. In fact, it was represented in part by stocks which we had +purchased in the market with the idea that they were good stocks to own +and would show the trust company a big profit, as they had. We could +have cleaned up $3,000,000 in cash, but we had not done so. Now, within +a month, all of our available cash had been put into fresh lines of our +own securities, we had been compelled to sell other lines out, and the +corporation was a borrower. I was stubborn—too stubborn for a man who +boasted of so little experience in such a big game. It was a pet belief +of mine that obstacles create character. I was in the heat of a battle +and fighting my way against tremendous odds. I rather liked the +sensation. +</p> + +<p> +Another dominant trait which, deep down, has in recent years been the +keynote of my actions is the fact that my philosophy teaches me that +you can't down the truth, that a lie can't live, and that <em>justice +will be finally done</em>. Had I always put the accent on the "finally" +and mixed with my philosophy a little "dope" to the effect that while +justice is always <em>finally</em> triumphant, injustice is often +victorious <em>for a while</em>, I might have fared better. +</p> + +<p> +In a previous chapter I stated that "Wall Street deals for suckers" and +that "thinkers who think they know, but don't" are the suckers for +which Wall Street casts its net. I also stated that Wall Street +promoters realized that "a little knowledge is a dangerous thing" and +that this "little knowledge" leads astray this particular kind of +sucker. In "falling" in Goldfield for the philosophy that "justice is +always triumphant in the end," by swallowing it whole, and in making no +allowance for the fact that justice is sometimes tardy, even though it +does prevail in the end, I here decorate myself with a medal as a +top-notcher in the <em>sucker</em> class—in the academic sense—which I +have described, and which is the usual sense in which I use the term +"sucker." +</p> + +<p> +Again the selling ceased, and it looked as if the Sullivan Trust +Company would be compelled to wait only for a general turn in the +market to relieve itself of money-pressure by disposing of some of the +large blocks of stock it had accumulated during the periods of heavy +liquidation. +</p> + + +<h3> +CLOUDS IN THE WESTERN SKY +</h3> + +<p> +A new black cloud showed itself on the horizon. A labor war was +threatened in Goldfield. It was very apparent, from the conduct of +George Wingfield, that he was baiting the miners, and it appeared to be +the general opinion of the people of Goldfield that he was trying to +precipitate trouble. The miners had asked for higher wages. The +Sullivan Trust Company, which was operating seven properties with a +monthly pay-roll of $50,000, was the first to express a willingness to +grant the terms. Wingfield and Nixon refused. The miners asked for +arbitration. It was refused. The mines were then shut down for a few +days and the terms of the leases were extended. +</p> + +<p> +Heavy selling in all Goldfield stocks took place during the shut-down. +Rumors could now be heard on every side that Wingfield and Nixon were +dumping overboard big blocks of stock. Could it be possible that they +themselves were scuttling the ship that had given them such glorious +passage? +</p> + +<p> +Again the Sullivan Trust Company was called upon to stand behind the +market. +</p> + +<p> +Soon a cry of distress was heard in the camp from investors and stock +brokers who had overloaded themselves with securities and who were in +debt to the banks to the extent of millions, with stock of the camp put +up as collateral. Inquiry revealed the fact that all Goldfield and +Tonopah banks were overloaded. This condition had been brought about by +the liberal terms which had been granted by the Wingfield-Nixon banks +during the "ballooning" of Goldfield Consolidated, when the +confederacy, according to common belief, was unloading millions of +dollars' worth of stocks in the small companies and was using the +proceeds to finance their purchase of the stock of several of the +integrals that formed the big merger. +</p> + +<p> +I began to get next to myself and to "smell a rat." I had never had so +much as an argument with either Mr. Wingfield or Mr. Nixon, had never +been engaged in any business transactions with them, and the campaign +against the trust company, which I felt sure had been conceived at the +outset in the interests of the Republican political machine, I now +suspected was part of a general scheme to get hold of anything and +everything that was valuable in the camp. By smashing the Sullivan +Trust Company they could hurt the Democratic party of the State, with +which we were affiliated, and for which it was currently believed we +were supplying the sinews of war. By smashing us they might also +cripple the bank with which we were doing business, and which in both +Goldfield and Tonopah, particularly Tonopah, was a formidable +competitor of their banking interests. And thus they might also +facilitate a decline in the market which would shake out of their +holdings borrowers at their banks. +</p> + +<p> +I figured it out this way: Wingfield and Nixon knew that we had +foolishly attempted to support the market for our stocks, that other +promoters in Goldfield had done likewise, and that investors and +brokers in Goldfield had borrowed heavily from all of the banks. John +S. Cook & Company were calling for more collateral from their +customers, and real estate was being added to the pledges of mining +securities. What more easy, even though diabolical, than to "bear" the +market, shake out the stockholders in various important mines of the +camp, take their stocks away from them by foreclosure, and get +possession again, at bankrupt-sale prices, of the millions of dollars' +worth of securities which they had unloaded during the boom? +</p> + +<p> +If this was the scheme of Wingfield and Nixon, what transpired could +not have been patterned more perfectly. +</p> + +<p> +Mr. Wingfield walked the streets day and night, armed to the teeth, and +openly dared any of the miners to "get him." He threatened another +shut-down, a reduction of wages, the installation of change-rooms at +the mines and other dire things, all seemingly calculated to rouse the +ire of the mine-workers. +</p> + +<p> +The miners fell for the bait, became belligerent and nasty and did +things with which the community was not in sympathy. Day by day the +situation became more critical. +</p> + +<p> +During one of the shut-downs which ensued, Senator Nixon revealed his +hand by convening a meeting of the executive committees of the two +Goldfield stock exchanges. He insisted that the exchanges close, +arguing that the prices of stocks should be allowed to recede in +sympathy with the labor troubles. No thought was his for the men of the +camp who were committed to the long side of the market at boom prices +and who had worked day and night to create the boom which had thrown +into the laps of Wingfield and Nixon riches far beyond the dreams of +avarice. The brokers refused to close the exchanges. +</p> + +<p class="break"> </p> + +<p> +Goldfielders were slow to grasp the real import of what was +transpiring. Things were very much unsettled. Optimism would rule +to-day on apparently inspired rumors that the differences between the +mine owners and the miners were about to be patched up. The next day +gloom would pervade the camp because of the unfavorable action by the +union on the peace plans. Nightly conferences were held. It was +impossible to get an accurate line on the situation. Crowds gathered +about Miners' Union Hall, where the meetings were held, and everyone +sought something tangible on which to base his market operations. The +officers of the union were in and out of the market, taking advantage +of their official positions to anticipate every favorable or +unfavorable development. +</p> + +<p> +It was a critically sensitive market situation. The drift, however, was +unmistakably downward. Values began to melt like snow in a Spring thaw. +</p> + +<p> +Through it all the Sullivan Trust Company stood valiantly behind its +securities in all markets where they were traded in—to the limit. I +was bull-headed. I had never before been through a mining-camp boom of +such proportions, and I failed to recognize that a reaction must ensue, +whether it was forced by Wingfield and Nixon or not. Tens of thousands +of shares of Sullivan stocks were thrown at our brokers on the San +Francisco Stock Exchange and New York Curb from day to day, and we took +them all in, refusing to allow the market to yield to the pressure. +</p> + + +<h3> +FROM CREDIT TO CRASH +</h3> + +<p> +To convey an idea as to the standing of the L. M. Sullivan Trust +Company during this crucial period, I cite an instance. Logan & Bryan, +members of the New York Stock Exchange, Chicago Stock Exchange, Chicago +Board of Trade, New Orleans Cotton Exchange and all other important +exchanges, who conduct a leased-wire system from coast to coast at a +cost of $300,000 per annum, and who have over 100 correspondents in +nearly as many cities, all of high standing as stock brokers, made a +tentative offer to the Sullivan Trust Company early in December to +connect their wire system with our office in Goldfield and to give us +the exclusive wire connection for Nevada at an annual rental of +$100,000. This offer would not have been made if the credit of the +Sullivan Trust Company had not been maintained at high notch, or if I, +personally, had not convinced men of substance that I was strictly on +the level, "Past" or no "Past." +</p> + +<p> +Ben Bryan, the active member of this firm, was in Goldfield at the +time. He asked as to our finances. There was present Cashier J. L. +Lindsey of the State Bank & Trust Company. +</p> + +<p> +"How much would your bank loan the Sullivan Trust Company on its +unindorsed paper and at a moment's notice?" I asked Mr. Lindsey. +</p> + +<p> +"A quarter of a million or more," answered Mr. Lindsey. +</p> + +<p> +This apparently satisfied Mr. Bryan. +</p> + +<p> +Our rating in Bradstreet's and Dun's was "AA1." A private statement +issued by Bradstreet was to the effect that while our rating was only +$1,000,000 and we claimed a capital and surplus of only $1,000,000 at +the time the rating was given, it was believed in Goldfield that we +were worth much more, and that we had actually understated our +resources because we considered it bad policy to divulge the great +profits in the promotion business. +</p> + +<p> +By December 15 the condition of the Sullivan Trust Company had become +about as follows: +</p> + +<p> +Our $3,000,000 surplus had been reduced to $2,000,000 and all of this +$2,000,000, plus the loss, was represented by our own bought-back +stocks. We had no money, except about $50,000, remaining of the +$300,000 borrowed from the State Bank & Trust Company. We were +committed in excess of this $50,000 to brokers for stocks in transit, +but by the "crossing" process we were able to maintain a chain that +kept intact our reduced cash balance. We figured that a fresh loan of +$300,000, additional to the $300,000 already obtained from the State +Bank & Trust Company, would enable us to take up all of our paper and +to discontinue the "cross" trades. We promptly arranged for the loan, +which Cashier Lindsey of the State Bank & Trust Company informed us +would be immediately credited to our account whenever we required the +money. Interest charges were at the rate of 1 per cent. a month in the +camp at that time, and for that reason I did not ask that we be at once +credited with the amount. I sent over to the State Bank & Trust Company +another big batch of stocks, to be held as collateral against the +promised loan, and got a receipt for it stating that it was accepted as +collateral on our "open loan" account. +</p> + +<p> +The market in Sullivan stocks had now steadied itself and it appeared +that it would be impossible for any further selling of consequence to +take place. We had bought back in the open market fully 50 per cent. of +all the stocks promoted by the trust company. Distribution of the +stocks of our early promotions had originally taken place in such a +broad way that it now appeared as if selling must necessarily become +scattered. We felt somewhat crippled, but in no danger, and were "still +in the ring." +</p> + + +<h3> +DOWN WITH THE SULLIVAN TRUST COMPANY +</h3> + +<p> +By this time I was "all in" physically. I had a cyst, of fifteen years' +growth, on the back of my head. It had become infected. I was +threatened with blood-poisoning. I suffered much pain. I had been on +the desert for nearly three years, without leaving it for a day. My +associates insisted that I go to Los Angeles immediately for treatment +and a rest. Believing that the trust company was secure, I made +preparations to go. Before leaving I busied myself with the preparation +of a dozen full-page reading-matter advertisements on Sullivan +properties, which the Salt Lake <cite>Tribune</cite> and Salt Lake +<cite>Herald</cite> had contracted to publish in their New Year's Day +editions. These are an annual feature of those newspapers. I decided to +"make" Salt Lake on my return trip from Los Angeles and be there on New +Year's Day with our mailing-list, to superintend the mailing of the +papers to all stockholders in Sullivan properties. On account of the +great value which we attached to the mailing-list, I would not trust +anybody but myself with the job. I spent Christmas in Los Angeles and +arrived in Salt Lake on New Year's Day, ready for work. +</p> + +<p> +I was busy in the Salt Lake <cite>Herald</cite> office next day when affable +Peter Grant, a partner of Mr. Sullivan, with whom Mr. Sullivan had at +the outset divided his interest in the Sullivan Trust Company, walked +in. I asked Mr. Grant, who had remained at the helm with Mr. Sullivan +while I was away from Goldfield, about business. He assured me that the +loan from the State Bank & Trust Company would not only be forthcoming, +as needed, but that Cashier Lindsey had informed him that we could have +$500,000 instead of $300,000 additional, if we actually had to have it, +and that the bank would back us to the extent of a million in all, if +necessary. +</p> + +<p> +On calling next morning at the office of James A. Pollock & Company, +our Salt Lake correspondents, I was astounded to learn that rumors had +been telegraphed to them from San Francisco that our paper was being +held up in Goldfield. +</p> + +<p> +"That's nonsense!" said Mr. Grant. "Why, Lindsey has given me his word, +and there can't be a question about it." +</p> + +<p> +"Maybe he has 'laid down' on us," I said, "and that would be ——!" +</p> + +<p> +"Nonsense!" said Mr. Grant. "I'll telegraph him that in addition to +honoring our Goldfield paper with the money we have borrowed from him, +he must wire $150,000 to our credit in San Francisco, and you and I can +jump on the train to-day and go to San Francisco and support the market +right on the ground. If those rumors have spread around San Francisco a +lot of short-selling will take place and the market will need support." +</p> + +<p> +I agreed. +</p> + +<p> +So confident were Mr. Grant, James A. Pollock & Company, and I that +everything was right with us that we gave and they accepted a big +supporting order to be used on the San Francisco Stock Exchange during +the succeeding day while Mr. Grant and I should be on the train to the +Coast city. +</p> + +<p> +We arrived in San Francisco late at night. A number of brokers met us +and conveyed the news that the State Bank & Trust Company had "laid +down" on us. In the meantime despatches to us from the cashier of the +Sullivan Trust Company had piled up at the hotel. He explained the +situation, which was this: +</p> + +<p> +All the trains carrying drafts in the mail to Goldfield had been +stalled by snowstorms two days before New Year's. The next day was +Sunday. Monday was New Year's Day, a legal holiday. Thus five days' +mail had accumulated, and on Tuesday the delayed drafts were presented, +all in a bunch. +</p> + +<p> +L. M. Sullivan, president of the trust company, who was supposed to be +on deck at Goldfield, was in Tonopah, where he was reported to be in +imminent danger of arrest on the charge that during a New Year's brawl +he had nearly brained a chauffeur with a butt-end of a revolver. +</p> + +<p> +The bank people became alarmed. +</p> + +<p> +In requisitioning the $300,000 we had stated that we would call for it +piecemeal, as had been our custom in the past. The five days' mail had +piled up drafts totaling nearly the entire amount. I was absent from +Goldfield. Mr. Grant was away, and so was Mr. Sullivan. Employees were +running the business. Cashier Lindsey concluded that we were +"overboard." On top of it all, Donald Mackenzie, the heaviest depositor +of the State Bank & Trust Company, had that very morning drawn out a +large sum, said to aggregate $400,000, and had it transferred to San +Francisco. Our wires from Goldfield stated he had been frightened by +rumors that the Sullivan Trust Company was in trouble and that the +State Bank & Trust Company would be involved. +</p> + +<p> +That settled it. The enterprise that I had built up from such a meager +beginning into a $3,000,000 trust company crumbled in a heap and left +us stranded on the financial shoals of an over-boomed mining camp. +</p> + + +<h3> +SOME HINDSIGHT THAT CAME TOO LATE +</h3> + +<p> +I attribute the destruction of the Sullivan Trust Company to six +factors, namely, (1) politics; (2) blackmail; (3) lack of wide +distribution of our later promotions, we having sold most of these +stocks in large blocks during the exciting boom days through brokers to +speculators instead of disposing of them in small lots direct to +investors; (4) my lack of knowledge of markets and inexperience in +market manipulation; (5) my own stubborn pride and optimism, and (6) +the failure of the State Bank & Trust Company to keep its pledge of +assistance. +</p> + +<p> +It is conceded in Nevada by all honest men that, without exception, all +of the properties promoted by the L. M. Sullivan Trust Company had +merit, and that money was lavishly provided for mine development as +long as the trust company was in existence. The properties were +selected with great care. They were very much higher in quality than +the average. Those at Manhattan are yielding treasure to this very day, +and may make good yet in a handsome way from a mining standpoint. Those +at Fairview bid fair to duplicate the performance. Had I kept out of +politics, been a good market general, and taken cognizance of the fact +that the law of supply and demand is as inexorable in mining-stock +markets as in every other line of human endeavor, I could have saved +myself and associates from financial ruin. +</p> + +<p> +It would have been the better part of valor to have emulated Bob +Acres—back up and "live to fight another day." Instead, I attempted +the impossible in my endeavor to stem the tide of liquidation, and +exhausted our resources to the last dollar in buying back the Sullivan +stocks at advanced figures over the promotion prices. I didn't know +then, as I know now, that the accepted practice of the successful +market operators is to go with the crowd—to help along an advance when +the public is buying, and, with equal facility, to further a decline +when everybody wants to sell. It was my first experience, and, like so +many beginners, I was overconfident, lacking in judgment, and fatally +ignorant of the finer points of the game. +</p> + +<p> +The complete collapse of the financial structure I had labored so hard +to construct came as an overwhelming blow to the camp and marked the +beginning of the end of the great Goldfield mining-stock craze. +</p> + +<p> +Our enemies had overshot the mark. Public confidence was irreparably +shattered by the smash of the trust company, and it would have been +better for Goldfield and Nevada had Wingfield and Nixon possessed +sufficient foresight to go to our rescue instead of facilitating our +destruction. Money that had poured into the camp without cessation +month after month for mine development started to flow the other way. +</p> + +<p> +Less than a year later, when Wall Street's financial cataclysm put a +quietus on market activities of every sort, the great fortunes of +Wingfield and Nixon themselves hung in the balance, and had it not been +for a quick transaction by which the United States Mint at San +Francisco forwarded by express to Reno and Goldfield $500,000 in gold, +the failure of Wingfield and Nixon and their chain of banks might have +happened as a fitting climax to the scheme of aggrandizement which they +had fostered. +</p> + +<p> +It was rumored at the time that this money had either been obtained +from the Government as a deposit for the Nixon National Bank in Reno or +was obtained at great sacrifice from Wall Street bankers, and that only +by virtue of Mr. Nixon's position as Chairman of the Committee on +National Banks of the United States Senate was he able to get the +Sub-Treasury in New York to instruct the Mint at San Francisco to +supply the gold at this crucial period when fiat money was current in +the East. Whether it was a Government deposit or not, Senator Nixon got +it—and he needed it. +</p> + +<p> +Even to this day Wingfield and Nixon are engaged in an effort to shift +the responsibility to me for the destruction of the great mining camp +of Goldfield, which to-day marks the graveyard of a million blighted +hopes. +</p> + +<p> +On the eve of the Wall Street panic of 1907, every bank in Goldfield +and Tonopah that had existed through the mining boom with the exception +of those of Wingfield and Nixon, went to the wall, and every Goldfield +broker, with one or two exceptions, went broke. The business interests +of the camp suffered the same experience. Wingfield and Nixon succeeded +in annexing the remnants of the Goldfield banking business, along with +the control of nearly all of the Goldfield properties for which they +had been seemingly gunning. Wingfield and Nixon are, in fact, to-day in +control of the political as well as the banking and precious-metal +mining industry of the State. They have triumphed, but Goldfield, +except for the big mine and one or two others of little consequence +which they do not own, has been throttled and is dying the death. Had +Wingfield and Nixon played a broad gauged game, the camp would +undoubtedly still be on the map and, instead of having only two or +three mines, might now boast of thirty. +</p> + +<p class="break"> </p> + +<p> +As quickly as possible I convened a meeting of the creditors of the +Sullivan Trust Company, all of whom happened to be either Western +brokers or banks. The market had gone to smash and our liabilities were +$1,200,000. The assets, calculated at the low market price of the +securities that was reached after the embarrassment was publicly +announced, were still in excess of the liabilities. The creditors +agreed in jig time that if we would turn over all of the securities +they would accept 80 per cent. of the net proceeds as full payment of +our obligation and return the other 20 per cent. to the trust company. +</p> + +<p> +Thomas B. Rickey, president of the State Bank & Trust Company, was +appointed manager of the pool, and was also elected president of the +Sullivan Trust Company, which exists in moribund state to this day. Mr. +Rickey had even a higher opinion of the value of the securities than we +had, and he refused to sell any of them at the prices which then +prevailed. He held on. During the bankers' panic of 1907 the State Bank +& Trust Company failed for about $3,000,000. The Sullivan mines were +compelled to shut down. Mr. Rickey still held on. Manhattan, the mining +camp, struck the toboggan. The boom in Goldfield securities collapsed +at the same moment. The Sullivan stocks shriveled, like the rest of the +list, to almost nothing. +</p> + +<p> +As far as I can learn, neither the bank or broker-creditors nor any of +the members of the Sullivan Trust Company have ever received a dollar +as a result of the settlement. Had the securities been disposed of +immediately after the embarrassment, the trust company would have paid +dollar for dollar. Those of the public who did not sell their holdings +in the Sullivan companies when we were supporting the market to the +extent of more than $3,000,000, lost most of their investment. Those +who did sell—most of them—made money. The market value of these +securities, at the height of the boom, was in excess of $5,000,000. The +price paid for them by the public, as already stated, was in the +neighborhood of $2,000,000. +</p> + +<p> +After settling with the creditors of the Sullivan Trust Company on the +basis just outlined, I departed from Goldfield as broke as when I +arrived there three years before. The only money I or my partners had +drawn from the business during the life of the trust company was about +$5,000, just sufficient to pay living expenses. My expenses to New +York, where I went to have my head operated on—are you +surprised?—were supplied by the proceeds of the sale of my seat on one +of the Goldfield stock exchanges, from which I netted $400. I landed +back in the big city with $200 in my pocket, the exact sum with which I +had left town three years before. +</p> + +<p> +My reward for three years of untiring work on the desert was a big fund +of Experience. Believe me, I thought it would hold me for a while! But +it didn't. +</p> + + + + +<h2> +<a name="VI"> </a> +CHAPTER VI +<br><br> +<span class="smallsc">Nipissing and Goldfield Con</span> +</h2> + + +<p> +The embarrassment of the L. M. Sullivan Trust Company, was disastrous +to Goldfield, The decline and fall of the camp dated from that very +hour. +</p> + +<p> +The <cite>Goldfield News</cite>, of nation-wide circulation in those days and +up to then unshackled, sought to stem the tide. It published a +double-leaded editorial, in full-face type, setting forth that the +Sullivan Trust Company had gone down with its flag nailed to the +masthead of a declining market and had lost its last dollar supporting +its own stocks. +</p> + +<p> +The camp took courage. Soon it became evident that the initial smash in +stock-market values was not sufficient to convince the natives that the +death-knell of the market for its long line of mining securities had +been sounded. +</p> + +<p> +The population of Goldfield was 15,000. Its life could not be snuffed +out in a day. Great was the depreciation in the market price of +Goldfield mining issues, but not to an extent as yet that indicated the +almost complete annihilation of values which followed. Final +destruction for the general list, with some scattering exceptions, came +only after a "starving-out" siege on the part of investors, who refused +to commit themselves farther and gradually resorted to liquidation. +</p> + +<p> +Listed Goldfield securities, nearly 200 in number, and valued in the +markets at above $150,000,000 during the boom, had within two months +shown a falling off of $60,000,000 in market value, but the list on the +average was still quoted higher than the promotion prices. +</p> + +<p> +On January 18, 1907, fifteen days after the newspapers throughout the +land carried front-page stories of the failure of the Sullivan Trust +Company, the stocks promoted by the trust company were still in demand +in all mining-share markets of the country at an average price not +below that at which original subscriptions were accepted from the +public. +</p> + +<p> +Jumping Jack, promoted at 25 cents, was quoted at 30 cents bid. Stray +Dog Manhattan, promoted at 45 cents, was in demand at 49 cents. Lou +Dillon, promoted at 25 cents, was still wanted at 26. Indian Camp, sold +originally to the public at 25, was quoted at 85 bid. Silver Pick +Extension, promoted at 25, was 21 bid, a loss of 4 cents from the +promotion price. Eagle's Nest Fairview was quoted at 25, off 10 cents +from the promotion figure. These prices represented terrific losses +from the "highs" that had been reached during the height of the +Goldfield boom, yet the average market price was still above the +subscription price of the shares at which the public was first allowed +to participate. A remarkable part of this demonstration was that for +twenty days no inside support had been lent to these stocks. The +Sullivan Trust Company being in trouble, the markets had been left to +the mercy of short-sellers and market sharp-shooters generally. +</p> + +<p> +Having settled the trust company's liabilities of $1,200,000 by tying +up in trust all of its securities and the other assets, of which the +creditors agreed to accept in full quittance 80 per cent. of the +proceeds and to turn back to the trust company 20 per cent., I returned +to New York during the last week in January. I was again out of a +job—and broke. +</p> + +<p> +I visited the officers of mining-stock brokers in Wall Street and Broad +Street. Wherever I went a hearty handclasp was extended. Not one of the +Eastern stock brokers was involved to the extent of a single dollar in +the Sullivan Trust Company failure. +</p> + +<p> +The brokers were convinced that the embarrassment was honest. The trust +company's credit had always been good. Had the failure been meditated, +I could have involved Eastern brokers for at least $1,000,000. Because +I didn't, New York brokers were not slow to express their good feeling. +A number of them offered to extend a helping hand did I wish to embark +on a new enterprise. +</p> + +<p class="break"> </p> + +<p> +Peculiarly enough—or shall I say, naturally—after tossing off the +trust company's millions, of which half were mine, in a vain endeavor +to support the market for its stocks, I was as full of spirit as the +month of May. I had been broke before, and the sensation was not new to +me. Withal, I had profited. A new fund of experience was mine. Even +though I had not gathered shekels as a result of my hard work in +Goldfield, I had learned something—I had acquired the rudiments of a +great business. +</p> + +<p> +Goldfield had been the mining emporium—the security factory. New York +was the recognized market center. Market handling had been my weak +spot. I now had a chance to witness the performance of some +past-masters in the art of market manipulation, and I tried to make the +best of the opportunity. +</p> + +<p> +I watched intently the daily sessions of the New York Curb. I was in +and out of brokerage offices hourly. Nothing that transpired escaped +me. +</p> + +<p> +Within a month I heard enough and saw enough to convince me that, +daring as were the operations of the mergerers and waterers of +Goldfield Consolidated, in that they ballooned the price of their +security at its inception some $29,000,000 (400 per cent.) above the +accepted intrinsic worth and were able to get the public in at top +prices, their activities were but amateurish when compared with the +stock-market campaign in Nipissing, which was now transpiring on the +New York Curb. +</p> + +<p> +In the Nipissing campaign tens of millions of the public's money went +glimmering, several great promoters' fortunes were reared as by magic, +some big names and big reputations were tarnished, and dollars in +$1,000,000 blocks were juggled like glass balls under the touch of +sleight-of-hand performers. +</p> + + +<h3> +AN ORGY IN MARKET MANIPULATION +</h3> + +<p> +This market melodrama was well staged. It had a sensational start-off, +and action was at high tension every minute. The performance had +covered a period of seven months when I arrived in New York, and was +reaching its climax. It was a wild orgy in market-manipulation and +money-fleecing that had no parallel in history from the early Comstock +days up to and including Greenwater. As a mining-stock boom it was a +dizzy, bewildering success—full of red fire and explosions to the last +curtain climax. +</p> + +<p> +W. B. Thompson, Montana mine promoter and money-getter; Captain Joseph +R. Delamar, famed as a daring adventurer on land and sea, and recently +a highly successful financier, mine-owner, stock-market operator and +art collector; John Hays Hammond, mining engineer, promoter, politician +and ambitious society leader; A. Chester Beatty, millionaire mining +engineer, and the seven Guggenheim brothers, were in the all-star cast. +Mr. Thompson, by reason of the fact that he was market manager, was +most under the spotlight, although at times he was obscured by the +others. +</p> + +<p> +Mr. Thompson was a product of Butte, Montana. Early in the game he had +learned the Wall Street lesson that "stocks are made to sell." Born and +reared in Butte without the aid of a silver spoon, he had never been +"in the money" before coming East. The great pay-streak in the East +apparently looked better to him than the pay-streaks that some of his +Butte neighbors had missed in their deep-mine operations. He was an +ideal man for the Nipissing job, as subsequent events in his career +thoroughly confirm. Of a school that believes money in hand to be worth +more than mining certificates in the box, Mr. Thompson's route from +Montana to Broad Street was via Boston, where he made his first visible +stake by marketing stock in the Shannon group of mines. +</p> + +<p> +When the Cobalt excitement was in its infancy Mr. Thompson took a run +up to the camp. The Nipissing mine was about the best thing in sight. +It was producing real silver. The company was owned by a little club +consisting of E. P. Earle, specialist in rare metals, Captain Delamar, +millionaire soldier of fortune, E. C. Converse, banker and steel +magnate, Ambrose Monnell, R. M. Thompson, Joseph Wharton, since +deceased, of Philadelphia, and Duncan Coulson, a rich Canadian lawyer. +Considerable silver was being produced. The veins, however, were +exceedingly narrow, not more than a few inches wide. It was impossible +to block out ore to an extent that would warrant any opinion as to the +real measure of the mine's riches. The gentlemen owners were not averse +to giving Mr. Thompson an option on 100,000 shares of treasury stock of +the 1,200,000 five-dollar shares ($6,000,000), at $2 a share, when he +made the proposition, and another 100,000 shares at $2.50. Later, they +sold him a call on 50,000 or 100,000 shares around $7. All of this +happened in the Summer of 1906, six months before I reached New York +and at a time when the country was giving indication of going +mining-stock crazy, Nevada stocks having advanced on the New York Curb +in the Goldfield boom hundreds per cent. +</p> + +<p class="break"> </p> + +<p> +After the Goldfield boom had gained terrific headway, during the Fall +of 1906, when Mohawk was climbing from 10 cents per share toward the +$20 mark, which it reached during the climax, the Cobalt mining-stock +excitement spread like wildfire. A sudden demand sprang up for +Nipissing shares. Mr. Thompson, about this time, connected himself with +the old established and conservative banking house of C. Shumacher & +Company on Wall Street. The affiliation was calculated to give the +promoter of Nipissing stock much standing. The move served well its +purpose. The public grabbed at the shares. The price jumped to $4.50 in +a jiffy. Mr. Thompson began to let go of stock after the $4 point was +reached. He was making a killing, but fed out his optional stock very +cautiously at the rate of about 5,000 shares daily, each day at an +advance. By the time the price reached $7 Mr. Thompson got suspicious. +There was something about the play he could not understand. He had not +found it necessary to do much "laundry" work on the Curb market. Every +time he offered stock it was lapped up silently and completely. Every +time his brokers opened their mouths to sell the certificates they were +gobbled. +</p> + +<p> +Mr. Thompson stopped putting out any more stock and streaked it up to +Cobalt to see what was going on. He had a hard time laying hold of the +inside facts, but learned enough to satisfy himself that rich ore had +been encountered at depth. He discovered on his return to New York that +Captain Delamar had been buying that cheap stock through S. H. P. Pell +& Company and was even then the heaviest individual holder, a position +contested only once during the whole campaign, and that by a rank +outsider operating through Eugene Meyer, Jr., whose name has never been +publicly mentioned as having anything to do with the gamble. This +"unknown" was a quiet, mild-spoken, college-bred gentleman. He pulled +down $1,500,000 in Nipissing—and kept it. +</p> + +<p> +Upon the return of Mr. Thompson from Cobalt the promoters warmed up to +their job. The manipulation which had been begun in a comparatively +modest way now showed the spirit of the gambler who plays "the ceiling +for the limit." New market-boosting accessories were called into use. +They did their work. The game waxed hotter and hotter. +</p> + + +<h3> +THE GUGGENHEIMS ENTER NIPISSING +</h3> + +<p> +Boom! Boom! Boom! went Nipissing. By the time the price crossed $20 the +gamblers and speculators of two continents were on fire with +excitement. Presently it became noised about that the Guggenheim family +had taken an option on 400,000 shares of Nipissing stock at $25 a +share, making the investment $10,000,000, and putting a valuation of +$32,000,000 on the property. Furthermore, it was announced that the +deal had been made on the report and advice of John Hays Hammond, the +international mining engineer, crony of Cecil Rhodes and famed as the +head of the profession. As a part and parcel of the remarkable story, +it was authoritatively stated that the Guggenheims had paid $2,500,000 +cash for the option. W. B. Thompson was said to have negotiated the +transaction. +</p> + +<p> +Confirmation of the deal set the gamblers crazy. There could be no risk +in following such leadership as the Guggenheims', endorsed by the +eminent Hammond. The market boiled up to $30 and then majestically +boomed to $33.25. Transactions in this single issue totaled hundreds of +thousands of shares a day. Waiters, bar-keepers, tailors, seamstresses +and tenderloin beauties competed with bankers, merchants, professionals +on the regular exchanges, and even ministers of the Gospel, for the +privilege of buying Nipissing shares on a valuation of more than +$40,000,000 for the mine. +</p> + +<p> +On the way up the original bunch of insiders floated out of their +holdings. Most of them had cashed in under $20. Some of them stayed +out; others went back, and, like the moth, got burned. W. B. Thompson, +it is said, parted with the bulk of his 250,000 to 300,000 shares at +from $24.50 up, cleaning up for personal account between $4,500,000 and +$5,000,000, according to the estimates of close friends then in his +confidence. Never was there a cleaner case of "finding" money for Mr. +Thompson. The manipulative campaign, of which he was made manager, was +a giant success. The only ability or skill needed, after the Guggenheim +deal was made—brilliant deal from a market standpoint!—was the sense +to hold on to his optioned stock until his associates, the Guggenheim +following, and the public made a rich, ripe and juicy market for it. +</p> + +<p> +Mr. Thompson subsequently participated in Cumberland-Ely, El Reyo, +Inspiration, La Rose, Utah Copper, Mason Valley, and other mining +promotions, and is now rated at $10,000,000 to $12,000,000. He is +generally prominent at the nutritious or selling end when a good market +exists and is now head of a New York Stock Exchange brokerage and +mining promotion firm which publishes its own newspaper. +</p> + +<p> +But what happened to Nipissing? Plenty, and then some, happened. As +noted, the stock mounted by flying leaps to $33.25, stayed well above +$30 for quite a while, and began slowly to recede. Complacent in the +consciousness that they had the biggest silver mine in the world, the +Guggenheims allowed all of their friends to share in their good +fortune. +</p> + +<p> +Of a sudden, stock from mysterious sources began to press on the +market. It came in great quantity and without let-up. Suspicion was +aroused in the Guggenheim camp. They despatched A. Chester Beatty, one +of their very best expert engineers, and a former protege of John Hays +Hammond, to Cobalt to smell out the trouble. The text of his report was +never printed. It didn't have to be. The facts beat it in. +</p> + +<p> +Much of the showy mineral, on which glowing reports as to the fabulous +value of the property had been based, contained little or no silver. It +was <em>smaltite</em>, an ore of the metal cobalt, closely resembling +many of the silver ores. +</p> + +<p> +The story was given out that Mr. Beatty had reported adversely on +account of the unfavorable showing made by mine developments carried +out subsequent to Mr. Hammond's report. The miners had run into +non-productive calcite a few hundred feet down, it was said. +</p> + +<p> +As a matter of fact, because of the limited amount of all underground +development in the interim, there could have been no condition +observable in the property as a whole when Mr. Beatty made his +examination that was not equally apparent when Mr. Hammond made his +report. +</p> + +<p> +The talent jumped to the conclusion that the mine was a "deader." +</p> + +<p> +Many millions in silver bullion have been taken from the property since +then, and it is still a great producer, but this is another and more +prosaic story. This deals with the stock-gambling feature of the +record. +</p> + +<p> +Scenes of the wildest disorder were witnessed on the Curb in those days +of 1907 soon after my return from Goldfield. The Guggenheims "laid +down" on their option, getting out as best they could. According to +published reports, they charged to profit and loss the $2,500,000 +originally put up, besides paying the $1,500,000 to $2,000,000 in +losses of personal friends for whose misfortune they felt personally +responsible. Be that as it may, the Guggenheims emerged from the +campaign with damage to their market reputation and standing from which +they have never fully recovered. Previous to their acquaintance with +the Cobalt bonanza, they had a blindly idolatrous following that would +have invested hundreds of millions on a tip from them. They have never +regained the position in this respect they then held. +</p> + + +<h3> +NIPISSING ON THE TOBOGGAN +</h3> + +<p> +The price of Nipissing tobogganed from $33 to under $6 with terrific +speed. W. B. Thompson and his associates, who had unloaded their +holdings on the way up, were reported to have taken advantage of the +Beatty report and to have sold the market short on the way down, making +another "clean-up" of millions. The stock hit a few hard spots on the +descent, but when the wreckage was cleared away and the dead and +wounded assembled, there wasn't hospital or morgue space to accommodate +half of them. The final carnage and mutilation was shocking beyond +description. +</p> + +<p> +<em>The public had once more been landed with the goods. It had eaten up +Nipissing stock on a $43,000,000 valuation which broke to $7,000,000 or +$8,000,000 within the space of a few days. This $35,000,000 slaughter +represents only a fraction of the actual losses, for fabulous amounts +were sacrificed in marginal accounts. The daily aggregate of open +accounts in Nipissing during the months of keenest excitement probably +averaged not less than five times the total capitalization. Actual +losses were therefore far larger than would appear from a merely +superficial calculation. The public contributed $75,000,000 to +$100,000,000 to its Nipissing experience fund.</em> +</p> + +<p> +There has always been more or less mystery as to just what John Hays +Hammond said orally to the Guggenheims to lead them into the crowning +humiliation of their business career. It did not appear in his written +and published report, for in that document is to be found a neat little +hedge to the effect that "if" conditions as revealed to him were +maintained, the values would be, etc., etc. That little "if" was the +Hammond saving clause, although it did not save that $1,000,000-a-year +job of his, about which some of his admirers have liked to talk in +joyous chorus, nor did it save the public from massacre. +</p> + +<p class="break"> </p> + +<p> +Another Nipissing mystery is the sustained professional and personal +cordiality still existing between the eminent John Hays Hammond and the +scarcely less eminent A. Chester Beatty. For a little while after Mr. +Beatty had to turn down his chief their relations appeared to have been +strained. But this was not for long. Mr. Beatty also severed +connections with the Guggenheim pay-roll, and the two great engineers +were soon again, and are now, on the best of terms. +</p> + +<p> +On rainy days when the tickers drone along and there is no exciting +news, evil-minded derelicts of the memorable Nipissing campaign are +prone to figure how much a man might have made in the market with a +foreknowledge of the two adverse reports and to figure on the sporting +chances for a "double cross" that such a situation would hold. +</p> + +<p> +Scandal mongers, too, who have watched closely the friendship which +exists between W. B. Thompson and John Hays Hammond often ask unkindly +what has cemented the bond between the two. Recently, when the Rocky +Mountain Club needed a new club-house, Messrs. Hammond and Thompson +subscribed an equal amount—a goodly sum it was—to build it. +</p> + +<p> +They are seen much together in public and seem to have many tastes in +common. Mr. Thompson, whose strangely fortunate campaign in Nipissing +on the New York Curb was helped to a triumphant promotion climax by the +Hammond report to the Guggenheims, bears Mr. Hammond no ill-will for +that—and who would blame him for the kindly feeling? +</p> + + +<h3> +WHO GOT THE $75,000,000? +</h3> + +<p> +But what of the public? It played $75,000,000 to $100,000,000 into the +game, and has never yet learned who got it. Who did get it? Some of the +details of the grand separation scheme have been set forth in the +foregoing, but nothing like enough to satisfy the curiosity of the +public who footed the bill, paid the freight, contributed sucker-toll +for the whole prodigious sum. +</p> + +<p> +Did the author of the report on the strength of which tens of millions +were plunged on Nipissing by an army of deluded investors and +speculators ever suffer in fortune by the mischance or misshot, or +whatever name you may give the "come-on" document? Not that you could +notice. True, he gave up his alleged $1,000,000 job with the +Guggenheims. But is he not a heavy contributor to the Republican +national campaign fund, a close personal friend of the Administration, +and did he not represent this great Government as Special Ambassador at +the Coronation of England's King? Was he not talked of as running mate +for Mr. Taft, and did he not organize the National League of Republican +Clubs two years ago? He is tremendously rich and round-shouldered under +a mountain-high burden of honors. +</p> + +<p> +Every mother's son of the old Nipissing crowd is at this very hour up +and at it in regions where the public's money flows. Many of them still +have a grip on the property. It was a good old cow to milk. E. P. +Earle, who was president of Nipissing in 1906, headed the company four +years later. Captain Delamar slipped down and away (he's now in on the +extravagantly touted Porcupine Dome Mines Company), and so did E. C. +Converse, whose time is all taken up managing the Stock Exchange +banknote engraving monopoly and a couple of banks and trust companies. +W. B. Thompson, who came into the Nipissing directory in 1907, still +sticks in spite of the awful experience of 1906-07. +</p> + +<p> +Has an outraged Government ever raised hue and cry against these +eminent captains of industry? Not yet, nor soon. +</p> + +<p> +What difference is there between the respectable multi-millionaire +bankers putting across a losing promotion and the little fellow? Both +may be equally honest or equally crooked, yet in equity both are +entitled to the same treatment and the same consideration. Their +operations differ only in degree. The aim of each is to get the +public's money. And the big fellow is more dangerous by a hundred +thousand degrees. +</p> + +<p> +Where does real tangible evidence of a conspiracy to defraud in +Nipissing exist? Does <em>any</em> exist? Now I venture to say that you +could put on the scent any young man who is a graduate of the public +schools, and within thirty days he would obtain enough evidence to +prove to any jury in the land that the manipulators of that stock used +improper measures to get the public's money. +</p> + +<p> +A scrutiny of the files of the newspapers during the progress of the +malodorous Nipissing campaign reveals many strange happenings. It +shows, among other things, most remarkable willingness on the part of +financial writers for the press of that day to say every possible good +word for the manipulators and to feed the public appetite for +sensational gossip concerning the gamble. +</p> + +<p> +How this was done is easily understood by those familiar with Wall +Street publicity. It was an open secret on the Street at that time that +many writers for the press were subjected to strongest temptations to +lend their hand to the game of publicity. The columns of the daily +newspapers carry in themselves evidence to show that the attempts were +not always in vain. +</p> + +<p class="break"> </p> + +<p> +One little story will illustrate the methods employed. The business +manager of a widely known and reputable daily financial publication was +stopped one day by a man active in Nipissing and told he had been put +into 500 shares of the Nipissing stock at the market price when the +stock was still selling under $10 and at the time when it was being +groomed for the terrific rise which followed and which did not +culminate until $33 had been passed. The newspaper man was not above +making a turn in the Street, but he objected to taking it that way. He +politely turned down the proposition, saying that he did not wish any +part of it. +</p> + +<p> +The tempter then went to him on another tack, agreeing to carry the +stock for him, so that he would have no risk whatever, at the same time +remarking that, in turn for the favor, generous recognition in the news +columns of the publication, in support of the Curb campaign, would be +expected. Again the newspaper man declined, this time with unmistakable +emphasis. He intimated cannily that while he might be taken on he might +not be told when to get off, adding that he might be discharged if he +fell for anything of that sort. +</p> + +<p> +When the market price toppled from $33 back to around $6 this man's +newspaper did not carry any front-page story denouncing the outrage +upon the public. +</p> + +<p> +I do not know that the manipulators of Nipissing "got to" his +employers, but I do know of some newspapers in New York which pose +before the public as embodying the very highest type of newspaper +morality and which have at their head, either as part owners or as +editors, men who were taken in hand by Wall Street magnates at a period +when they were dependent for their daily livelihood on their weekly +wage, and were lifted into the millionaire division by being put into +"good things." Do you suppose newspapers presided over by those men are +going to say a word against the enterprises of their benefactors? +Conversely, if their benefactors happen to be bothered by any man whose +business purposes run contrary to theirs, how far, do you think, these +gentlemen of the press would go in their own news columns to poison the +public mind against the enterprise of their patron's enemy? +</p> + +<p> +When I witnessed the climax of W. B. Thompson's marvelously successful +campaign in Nipissing on the New York Curb, I was fresh from Goldfield. +My recollection is that my chief thought at that time, with the +Goldfield Consolidated swindle fresh in my mind, was simply that the +Western multi-millionaire highbinder promoter didn't class with his +Eastern prototype. Indeed, the two appeared to be of different species, +as different as the humble but noisy coyote from the Abyssinian +man-eating tiger. +</p> + +<p> +The late Spring of 1907 found me back in Nevada. I selected Reno as a +central point for residence and decided to locate there. Eastern stock +markets appeared to be beyond my ken. It seemed quite apparent that the +Western game, as compared with the Eastern, was one of marbles as +against millions. In New York's financial mart I felt like a minnow in +a sea of bass. Without millions for capital, Nevada appealed to me as a +more likely field of usefulness. I believed in Nevada's mineral +resources. Having seen Goldfield evolve from a tented station on the +desert with a hundred people into a city of 15,000 inhabitants; from a +district with a few gold "prospects" into a series of mines producing +the yellow metal at the rate of nearly $1,000,000 a month, I was +enthused with the idea that there were other goldfields yet unexplored +in the battle-born State and that opportunity was bound to come to me +if I pitched my tent on the ground. +</p> + + +<h3> +THE WONDER MINING-CAMP STAMPEDE +</h3> + +<p> +I was back in Nevada just a week when a stampede into a new mining camp +called Wonder took place. I was quick to join in the rush. The +Philadelphia crowd who owned control of the big Tonopah mine had +annexed a property there which they named the Nevada Wonder. It boasted +of a big tonnage of low-grade silver-gold ore. +</p> + +<p> +On arrival at Wonder, I found my former Goldfield partner, L. M. +Sullivan, on the ground. He entreated me to allow him to cut in on any +deal I made. A bargain was struck. He agreed to advance all the money +and I was to receive half of the profits for my work. The corporation +of Sullivan & Rice was formed. We purchased the Rich Gulch group of +claims, a likely piece of ground with a well defined ledge, and +incorporated the Rich Gulch Wonder Mining Company. A company with the +usual million-share capitalization was formed to operate the property. +A high-class directorate was secured. T. F. Dunnaway, vice-president +and general manager of the Nevada, California & Oregon Railroad, +accepted the presidency. Hon. John Sparks, Governor of Nevada, became +first vice-president. U. S. Webb, Attorney General of California, +accepted the second vice-presidency. D. B. Boyd, for twenty-five years +successively Treasurer of Washoe County, Nevada, was made treasurer. +</p> + +<p> +The first advertised offering of treasury stock of the Rich Gulch +Wonder carried the names of forty leading mining-stock brokers, +situated in various cities stretching from New York to Honolulu, who +had signified over their signatures their willingness to undertake the +sale of treasury stock at 25 cents per share on a basis of 20 per cent. +commission. The first thousand shares of treasury stock at 25 cents was +sold to Superintendent McDaniel of the Nevada Wonder mine. This +convinced us that we had a good "prospect." +</p> + +<p> +I had my doubts about the successful promotion of any Nevada mining +company at this period, because of the terrific slump which was +transpiring in Goldfield issues and also because of the smack in the +face that mining-stock investors had just received in Nipissing. It was +my idea that if the Rich Gulch Wonder made any money for us the cashing +would have to be delayed until mills were erected and the property +became a producer. I was willing to go ahead on that basis. +</p> + +<p> +The sale of treasury stock was slow, but sufficient was disposed of to +warrant the expense for mine development of at least $2,000 a month for +six months, and that appeared far enough to provide for in advance. +</p> + +<p class="break"> </p> + +<p> +Pending the making good of this proposition in a financial way, I +determined I would help finance a newspaper publication at Reno which +would give to mining-stock speculators an unbiased statement of mining +and market conditions as they existed. In the mining camps it was +considered tantamount to financial suicide for the home publication to +reflect on the merits of any locally owned property. Strictures were +looked upon as "knocks," and "knockers" are taboo in mining camps. +Moreover, mining-camp papers could hardly make both ends meet at the +time without support from inside interests, and unprejudiced statements +of fact that were detrimental to a local property could hardly be +expected. +</p> + +<p> +Merrill A. Teague was made editor of the new publication, which was +called the <cite>Nevada Mining News</cite>. Mr. Teague had just blown into +Reno from Goldfield where he had been connected with the Nevada Mines +News Bureau, a daily market sheet. Before coming to Nevada he had +served in an editorial capacity on the <cite>Baltimore American</cite> and +the <cite>Philadelphia North American</cite>. Mr. Teague is the possessor of +a facile pen. At $50 a week, which was his stipend at the beginning, I +was convinced that the <cite>Nevada Mining News</cite> had a cheap editor. +When news was scarce he could write more about nothing than any man I +ever met before. Incidentally, he could go further without finding a +stopping place in a crusade than any man I had ever bumped up against. +That was his drawback. However, compared with the work of other +newspaper men then employed in Nevada, his stuff was in a class by +itself and was commercially very valuable. +</p> + + +<h3> +TEAGUE ATTACKS SENATOR NIXON +</h3> + +<p> +Mr. Teague was on the job just a week when he cut loose with an attack +on United States Senator George S. Nixon of Nevada in a front-page +story headed "Goldfield in the Grasp of Wall Street Sharks." The +article declared that Senator Nixon, needing $1,000,000 to conclude the +merger plans of the Goldfield Consolidated, had got it through B. M. +(Berney) Baruch of the New York Stock Exchange, factotum of Thomas F. +Ryan, at terrible cost. The loan was made at a time when Goldfield +Consolidated was selling around $10 per share. In consideration for the +loan, Senator Nixon, acting for the company, gave Mr. Baruch an option +on 1,000,000 shares of treasury stock of the Goldfield Consolidated at +$7.75 per share. At the time Mr. Teague commenced his onslaught +Goldfield Consolidated shares had slumped from $10 to $7.50. Mr. Teague +alleged that the market on the stock was being juggled and speculators +were being milked. Mr. Baruch, he asserted, had sold the stock down to +$7.50 per share on the strength of his option, and was now tempted to +break the market, sell the stock short and cover all at much lower +prices. +</p> + +<p> +Within two weeks after the publication of Mr. Teague's exposé of the +terms of the outstanding option to Mr. Baruch, Goldfield Consolidated +shares dropped to under $6. The story evidently had its effect. +</p> + +<p> +The issue of the paper which chronicled the break to $6 contained an +editorial headed "Nixon in the Rôle of Brutus." It demanded of Senator +Nixon that he stand behind the stock and support the market, and also +called upon him to declare the payment of dividends which he had +promised to stockholders in his annual report dated two months prior. +</p> + +<p> +People in Nevada began asking, "Who is Teague?" Mr. Teague caused the +publisher of the <cite>Nevada Mining News</cite>, who was Hugh Montgomery, +formerly business manager of the <cite>Chicago Tribune</cite>, to explain +over his signature that Mr. Teague had been the political editor of the +<cite>Baltimore American</cite>, later an editorial writer for the +<cite>Philadelphia North American</cite>, and that while on the +<cite>Philadelphia North American</cite> he had crusaded against +get-rich-quick swindlers who had headquarters in Philadelphia, with the +result that the Storey Cotton Company, the Provident Investment Bureau, +the Haight & Freese Company and other bucketshop concerns were put out +of business. On evidence furnished by him, it was stated, Mr. Teague +secured the conviction by the United States Government of Stanley +Frances and Frank C. Marrin as chief conspirators in the $400,000 +Storey cotton swindle. Finally, the article said, Mr. Teague was +engaged by a far-famed magazine to expose bucketshop iniquities in the +United States. This series of articles had appeared in 1906. +</p> + +<p> +The biographical sketch seemed to satisfy readers that they were +getting their "dope" straight on Goldfield Consolidated. My name at +this time did not appear in connection with the publication except as +part of the aggregation of Sullivan & Rice who advertised therein, but +I was openly accused by Messrs. Nixon and Wingfield of dictating the +policy of the paper. This was a half-truth. My sympathies were with the +stockholders of Goldfield Consolidated—that's all. +</p> + +<p> +The story is told in Nevada that when Senator Nixon received the check +for $1,000,000 from Berney Baruch, after having executed notes of the +Goldfield Consolidated, signed by himself as president and endorsed by +him as an individual, he took luncheon at the Waldorf-Astoria in New +York. When the waiter presented the bill the Senator ostentatiously +tendered the $1,000,000 check in payment. The waiter put it all over +the Senator by politely stating that if he wished to pay his dinner +check out of the proceeds, Proprietor Boldt would undoubtedly attend to +the matter for him. The Senator was forced to tell the waiter he was +"only joking." +</p> + +<p> +The <cite>Nevada Mining News</cite> appeared to be catching on and was now +printing 28,000 copies weekly. Sample copies were sent in every +direction with the idea of acquainting investors with its existence. +</p> + +<p> +A day after the issue appeared containing the editorial in which +Senator Nixon was accused of playing the rôle of Brutus, I was stopped +on the street by the editor of the <cite>Reno Gazette</cite>, a newspaper +which is loyally attached to the Senator and his friends. +</p> + +<p> +"The Senator wants to see you, Rice. Better go over to the bank right +away. If you know what's good for you, you'll do it," the +<cite>Gazette</cite> man said. +</p> + +<p> +"I will, like ——!" I replied. "My office is up in the Clay Peters +Building, and if the Senator has anything to say to me he can give me a +call. I am not one of his sycophants, and I am not going." +</p> + +<p> +I didn't go. +</p> + +<p> +An hour afterward the editor of the <cite>Gazette</cite> met me again. +"Senator Nixon wants to see you at his office right away," he said +bluntly. +</p> + +<p> +"About what?" I inquired. +</p> + +<p> +"About articles which have appeared in the <cite>Nevada Mining News</cite>," +he answered. +</p> + +<p> +"Very well," I replied, "I'll send the editor over." +</p> + +<p> +Turning to Mr. Teague, I said, "I have no business with Senator Nixon, +and if he has anything to communicate regarding the newspaper you, the +editor, are the man for him to say it to." +</p> + +<p> +Mr. Teague went over to the Nixon National Bank and entered the +directors' room. My stenographer accompanied him as far as the door and +took a seat outside, in the banking room. +</p> + +<p> +As Mr. Teague entered, Senator Nixon jumped to his feet. He looked +black as thunder. He quivered with rage. +</p> + +<p> +"Why don't Rice come over here himself, eh? He daren't! I've got his +record from boyhood jacketed in these drawers. While I have not read +it, I know the story, and I am going to have it published in a bunch of +newspapers so the world can know who is holding me up to public scorn!" +the Senator spluttered. +</p> + +<p> +In relating what transpired Mr. Teague later informed me that the +Senator's wrathful indignation appealed to him as so grotesquely comic +he felt like laughing, but he thought it a poor newspaper stunt to +incense him further at a moment when it looked as if, by appeasing him, +he could tempt him into volubility. Soon Mr. Teague had the Senator at +ease, pouring forth a long interview, full of acrimony and affectation, +which Mr. Teague promised to publish in the <cite>Nevada Mining News</cite>. +</p> + +<p> +Mr. Teague reported to me that the Senator construed his pacifying +attitude as meaning that I would undoubtedly "listen to reason" and +that his threat would most certainly accomplish its purpose. +</p> + + +<h3> +"CALLING FOR A SHOW-DOWN" +</h3> + +<p> +When Mr. Teague finished narrating to me what had transpired I was +beside myself. Presently I gave him these instructions: "Write out the +interview with the Senator. Have two carbon copies made. When finished, +take the three copies over to the Senator and have him read them and +put his O.K. on them. After you have done that, give the Senator one +copy, give the printer a copy, and put the other copy in the safe. As +soon as the copy of the interview is in the printer's hands, sit down +and write an editorial. Head it 'A United States Senator with a +Blackmailing Mind.' Publish my record in full. Tell of everything of +any consequence I ever did, good or bad. Parallel my record with the +Senator's record. Tell the people of Nevada all the facts about the +Senator's threat. Say to them nobody can blackmail me, and ask them to +choose between us." +</p> + +<p> +On May 25, 1907, the editorial, headed "Nixon a Senator with a +Blackmailing Mind," appeared. It was a passionate denouncement, +calculated to stir the blood. Also there appeared Senator Nixon's +interview in full. +</p> + +<p> +In the interview the Senator had made an effort to disentangle himself +from a seemingly inextricable network in which he was enmeshed, and the +paper contained still another editorial lambasting him in amplitude for +trying to practise on the credulity of the newspaper's readers. The +editor accused him of equivocation, artful dodging, false coloring, +exaggeration, suppression of truth, cupidity and knavery. +</p> + +<p> +The arraignment wrought an undoubted sensation. +</p> + +<p> +The effect on the Nevada public was unmistakable. It reminded me more +of the motionless and breathless attitude of an audience at the +third-act climax of a four-act drama, than anything else. The Senator +was not seen on the streets of Reno for two months afterwards. For a +fortnight afterward he didn't even call at the offices of the bank. +When he did finally resume his visits to the bank he came in his +automobile. He was whisked to the door of the building, immediately +secreted himself in the directors' room and was not get-at-able. +</p> + +<p> +Leading citizens, including the directors of a number of banks in Reno, +made clandestine calls at my office, shook my hand, felicitated me over +the stand I took, and went away. Even George Wingfield, the Senator's +partner, it was reported (and I afterward corroborated this from the +lips of George Wingfield himself), backed me up in the stand I had +taken. The general sentiment in the State appeared to be that the +threat was a lowdown trick, and that of the two I had the less to be +ashamed of. +</p> + +<p> +When the Senator read the article headed "Nixon a Senator with a +Blackmailing Mind" it is said he telegraphed to former Governor Thomas +of Colorado, his counsel, and asked him to come to Reno. +</p> + +<p> +"If I don't say something in answer to this awful attack, I'll choke!" +cried the Senator as he nervously walked the floor. +</p> + +<p> +"Did you sign that interview which they published?" asked Governor +Thomas. +</p> + +<p> +"Yes," said the Senator. +</p> + +<p> +"Well, then, if you say anything at all now, <em>they'll</em> choke +<em>you</em>," answered Governor Thomas. +</p> + +<p> +During the course of our attacks on Senator Nixon in the <cite>Nevada +Mining News</cite> which followed at various intervals, the newspaper +accused him of making promises of early dividends to Goldfield +Consolidated stockholders which he knew he could not keep; of having +been the State Agent in Nevada of the Southern Pacific Company at $150 +per month during the Huntington régime when legislatures were bought; +of having bilked the investing public out of millions in Goldfield; of +having carved his fortune, that made possible the acquisition by him +and his partner of control of the Goldfield Consolidated, out of a +gambling house in Tonopah; of having gathered his first mining property +and mining-stock interests in Goldfield from prospectors who lost money +and surrendered their mining claims and stock certificates to the +gambling house in lieu of the cash; and of being generally a financial +and political freebooter of the most despicable sort. And the Senator +never sued for libel nor proceeded in the courts in any way whatsoever +to obtain a retraction. +</p> + + +<h3> +MANIPULATING GOLDFIELD CON +</h3> + +<p> +About a week after the publication of the editorial headed "Nixon a +Senator with a Blackmailing Mind," when Goldfield Consolidated stock +had slumped to around $7, the <cite>Nevada Mining News</cite> in big +bold-faced type urged its readers to place their buying orders for +Goldfield Consolidated at $4 a share, saying that New York mining-stock +brokers advised their clients that the stock would almost certainly go +down to that figure because of the Senator's mistakes in the financial +management of the company. That edition contained another editorial on +Senator Nixon, headed "Branding a Bilker." It accused him of saying in +his annual report a few months previous that payments of dividends on a +regular basis would commence within a short time, and contrasted this +statement with the signed interview published in the <cite>Nevada Mining +News</cite>, in which he said dividends would be paid "whenever the +trustees thought it wise to do so <em>and not before</em>." +</p> + +<p> +Within a day thereafter the stock "busted" wide open to +$5<span class="smaller">1/8</span> bid, $5¼ asked, and the whole Goldfield list +smashed farther in sympathy. By June 8th Goldfield Consolidated had +crashed to $4.50. +</p> + +<p> +On the dip from $7.50 to $4.50 an opportunity had been offered to +Berney Baruch and his associates to buy back in the open market all of +the stock they might have sold on the way down from $10 to $7.75, which +was the option price. Then the stock was promptly manipulated back to +$7. On the way back to $7, the outstanding short interest (of other +traders who had accompanied the decline with their selling orders) was +forced to cover. +</p> + +<p> +To help along the covering by outsiders up to the $7 point a report was +circulated by lieutenants of Senator Nixon in Reno that a dividend +would be declared before the end of June, and almost simultaneously the +general manager of the mining company in Goldfield put forth a similar +tip. As the market began to recover toward the $7 point, Senator Nixon +went to San Francisco and was seen often at the sessions on the floor +of the San Francisco Stock and Exchange Board. On the day before the +bulge to $7 he was quoted in a San Francisco newspaper as saying that +Goldfield Consolidated was such a good thing he would not take $20 per +share for his stock. +</p> + +<p> +When the stock hit $7 and the shorts were being squeezed the hardest, +Senator Nixon was quoted as saying in still another interview that a +dividend was not far away. This interview was carried over the +telegraph wires to all market centers by the Associated Press. At the +same time a story was printed in the New York <cite>Times</cite> saying that +it was reported on the Street that J. Pierpont Morgan, acting for the +Baruch-Ryan crowd, had taken over the control of the Goldfield +Consolidated. The shorts were successfully driven to cover. Then the +price eased off again in a day from $7 to $6<span class="smaller">1/8</span>. +</p> + +<p> +A month later Mr. Teague became editor in chief of the <cite>Nevada State +Journal</cite> and severed his connection with the <cite>Nevada Mining +News</cite>. I succeeded Mr. Teague as editor and my name appeared at the +head of the editorial columns. At about the same time the Sullivan & +Rice enterprise was abandoned. I discovered that most of the money Mr. +Sullivan had put into the corporation had been borrowed by him from a +member of my own family with whom he had hypothecated most of his stock +in the company. A rumpus ensued which ended in the shutting up of the +shop. +</p> + +<p> +By August Goldfield Consolidated had been manipulated back to $8.37½ +a share. Mr. Baruch's option could certainly prove of little value to +him unless the stock sold higher at periods than $7.50. But he now +evidently found it a hard job to hold the stock above $7.50. By +September it had receded again to $7.40. At this period it was reported +in Reno that George Wingfield, sick of his partner's bad bargain, was +beginning to assert himself and demanded that the Baruch option be +cancelled at whatever cost. +</p> + +<p> +The erratic price movement of the stock was causing the loss of public +confidence. The manipulation appeared to be raw. Without any important +transpiration except the news of the Baruch option and the varying +statements put out by Senator Nixon from time to time regarding the +plans of the company, which was now awaiting the erection of a huge +mill before going on a regular producing basis, the stock had dropped +from $10 to $4.50, recovered to $7 and eased off to $6<span class="smaller">1/8</span>, rallied to +above $8, and was again tumbling. +</p> + +<p> +The option to Mr. Baruch was conceded to be practically a flat failure +from a company standpoint, only 20,000 shares of stock having been +purchased by Mr. Baruch from the treasury of the company in nine +months. The impression prevailed that Mr. Baruch was milking the market +and held the option principally as a club to accomplish his market +designs. Moreover, nearly every broker, investor and speculator +residing in Goldfield by this time had gone broke because of the +vagaries of this stock in the market, and the losses in bad loans and +unsecured overdrafts incurred by John S. Cook & Company's bank, +controlled by Messrs. Nixon and Wingfield, was said to total nearly +$2,000,000 as a result of the almost general smash in market values. +The entire Goldfield list, with the exception of Goldfield +Consolidated, was now selling at 25 cents on the dollar compared with +boom prices of less than a year before, and it was a rather ordinary +"piker" sort of broker or speculator in Goldfield who at this time +could not boast of being in "soak" to John S. Cook & Company's bank +anywhere from $15,000 to $100,000. +</p> + +<p class="break"> </p> + +<p> +On September 23 the Goldfield Consolidated directorate met at +Goldfield. After the meeting it was officially announced that the +option held by Mr. Baruch on 1,000,000 shares at $7.75 had been +canceled and that Mr. Baruch had been given sufficient of the optional +stock to liquidate the $1,000,000 obligation of the company, leaving +the company free of debt and with a cash reserve of nearly $2,000,000. +It was stated that Mr. Baruch had originally been given the option for +services in securing the loan of $1,000,000 from J. Kennedy Todd & +Company of New York for 13 months with interest at the rate of 6 per +cent., and that the price of $7.75 was an "average" one, indicating +that Mr. Baruch held an option on stock at varying figures on a scale +up from a considerably lower price than $7.75, which he might have +exercised in whole or in part. +</p> + +<p> +It was also disclosed that a large block of Goldfield Consolidated +stock had been put up as collateral for the note. Because the officials +of the company declared by resolution that the "unused certificates +shall be canceled" it was generally believed that the entire 1,000,000 +shares under option to Mr. Baruch had been put up as security. +</p> + +<p> +The official statement of the company said that the option had been +turned back to the company "on a satisfactory basis." No figures were +given out. Dispatches from San Francisco to the <cite>Nevada Mining +News</cite>, which I promptly published, alleged that Mr. Baruch was given +200,000 or more shares of Goldfield Consolidated in settlement of the +loan to the corporation of $1,000,000 and for the surrender of his +option on 1,000,000 shares at an average price of $7.75. +</p> + +<p> +<em>The 200,000 shares of stock was taken out of the collateral at the +rate of $5 per share on a day when Goldfield Consolidated was selling +around $7.50, after the stock had been manipulated to a fare-ye-well +and against a market price of $10 for the stock on the day the option +was given.</em> +</p> + +<p> +No denial was ever published. My opinion, based on private +investigation and on analysis of the company's reports, is that Mr. +Baruch fared even better than as outlined above. +</p> + +<p> +The giving of the option had made it dangerous for anybody except Mr. +Baruch to attempt to hold the stock above $7.75 per share after the +option had been given, and the company in addition was now mulcted for +the difference between the low price per share at which settlement was +made with Mr. Baruch and the price at which the stock could have been +sold had it been quietly disposed of on the market during the period of +nine months which had preceded the date of cancellation. As a matter of +fact, there was no necessity at all for settling the loan with stock, +the company having in its treasury more than sufficient to repay the +loan, and the money was not due. The real purpose, apparently, was to +shroud in darkness the exact amount given to Mr. Baruch to release the +company from the option and to keep Messrs. Nixon and Wingfield's +Goldfield bank, which was the depositary of the mining company, in +funds. +</p> + +<p> +Instead of quieting the stockholders the surrender of the option again +thrust into the limelight the entire transaction and proved to be an +exacerbation. +</p> + +<p> +The immediate effect was that Goldfield Consolidated began to slump +again, and in a few days sold down to $6.50. From this point it kept on +tobogganing during a period of weeks down to the $3.50 point—a +depreciation in market price for the capitalization of the company, +within a year of its promotion at $10 a share, of $23,400,000—before +rallying once. +</p> + + +<h3> +ENTER, NAT. C. GOODWIN & CO. +</h3> + +<p> +A mining partnership between Nat. C. Goodwin, the actor, and Dan +Edwards had been formed at Reno a little before this time. Dan Edwards +was a hustling young mining man who had engaged in the business of +"turning" properties to promoters. In August, when Goldfield +Consolidated was selling around $7.50, Mr. Edwards had asked me to give +him a good market tip. I told him to sell Goldfield Consolidated short. +</p> + +<p> +When it hit $6.50 around October 1st he saluted me thus, "Got to hand +it to you. I have been trying to make my new firm stick, but it don't +seem to work. I guess I don't know how to handle the situation in times +like this. How would you like to join us?" +</p> + +<p> +"How much capital have you got?" I asked. +</p> + +<p> +"Five thousand of Nat's money," he answered. +</p> + +<p> +"Get another man with $5,000," I said, "and I'll talk to you." +</p> + +<p> +A young Easterner engaged in mining, named Warren A. Miller, was +stopping at the Riverside Hotel. Within an hour Mr. Edwards had him +lined up. A week later Nat. C. Goodwin & Company was incorporated with +Nat. C. Goodwin president, Mr. Miller vice-president and general +manager, and Dan Edwards secretary. The new corporation engaged to give +me a salary for showing it how and an interest for other substantial +considerations. +</p> + +<p> +Within a fortnight the corporation of Nat. C. Goodwin & Company was +making money, not as promoters, however, but as demoters. Instead of at +first promoting a mining company and earning its profits on the +constructive side of the market, it turned the tables and made money on +the destructive side—of Goldfield Consolidated. +</p> + +<p class="break"> </p> + +<p> +During the first half of 1907 I had felt the country's speculative +pulse from day to day with the promotion literature of the Sullivan & +Rice corporation. Although its new mining company, the Rich Gulch +Wonder, had boasted of a very high-class directorate and the property +was conceded to have merit, the public refused to enthuse. Instead of +subscribing for large blocks, scattering purchases had been made, and +money in dribs and drabs had been grudgingly paid over. The Wonder +mining camp boom had "died abornin'." Investors seemed to have had +enough of mining-stock speculation for a while. +</p> + +<p> +Prices of listed Nevada issues were crumpling like seersuckers in the +rain. By this time the awful mess that had been made of Goldfield +affairs through the mistakes of Messrs. Nixon and Wingfield had +resulted in a depreciation in market value of more than $100,000,000 in +listed Nevada issues. This in itself was sufficient to kill a world of +buying sentiment. +</p> + +<p> +You have to be a rainbow-chaser by nature to be a successful promoter, +but even I, despite my chronic optimism, began to feel the influence of +what was transpiring. I made a flip-flop and turned bear on the whole +market. +</p> + +<p> +On October 17th the Heinze failure occurred in New York. Five days +later the embarrassment of the Knickerbocker Trust Company was +announced. I glued my ears to the ground. +</p> + +<p> +Nat. C. Goodwin & Company "shorted" the mining-stock market so far as +its limited capital would permit. On the day Mr. Heinze went overboard +the company was already short 2,000 shares of Goldfield Consolidated at +around $6. On hearing that the Knickerbocker Trust Company was in +trouble it promptly shorted 2,000 shares more at a lower figure. +</p> + +<p> +On the afternoon when the news reached Reno of the Knickerbocker Trust +Company's embarrassment I received a private telegram from Chicago +stating that the paper of the State Bank & Trust Company of Goldfield, +Tonopah and Carson City had gone to protest in San Francisco. This set +my blood tingling. I knew that meant a general Nevada "bust." +</p> + +<p> +Next morning Nat. C. Goodwin & Company shorted 2,000 shares more of +Goldfield Consolidated at about $5<span class="smaller">1/8</span>. +Later in the day the failure of the State Bank & Trust Company was +announced. A run followed on the Nye & Ormsby County Bank and its +branches in Reno, Carson City, Tonopah, Goldfield, and Manhattan, and in +two hours that institution, too, closed its doors. +</p> + +<p> +Goldfield Consolidated promptly broke to $4 a share. Around this point +Nat. C. Goodwin & Company covered its short sales, at discretion. +</p> + +<p> +All of the Nixon banks in Nevada experienced runs as a result of the +failure of the two Nevada banking institutions. So did the other banks. +</p> + +<p> +Governor Sparks was appealed to by Nevada bank officials between two +suns to come to the rescue. Without hesitation he declared a series of +legal holidays to enable the banks of the State which were still +standing on their feet to catch their breath. These banks finally threw +open their doors, but when they did, those of Reno met depositors' +withdrawals with asset money instead of legal tender. The only bank in +Reno which had refused to take advantage of the enforced legal holidays +was the Scheeline Banking & Trust Company. And when asset money was +finally resorted to as a makeshift, M. Scheeline, the president, was +made custodian of the bonds which were put up by the associated Reno +banks to secure payment. This restored confidence. +</p> + +<p> +It was believed in Nevada at the time of the failure of the mining-camp +banks, the State Bank & Trust Company and the Nye & Ormsby County, that +the Nixon institution in Goldfield would have found it hard to weather +the storm but for the fact that the Goldfield bank was believed to have +upward of $2,000,000 of the Goldfield Consolidated Mines Company's +money on deposit. +</p> + +<p> +When the State Bank & Trust Company went to the wall Senator Nixon, in +an interview published in his Reno newspaper, charged the failure of +the State Bank & Trust Company to me. He alleged that the State Bank & +Trust Company lost $375,000 by the failure of the Sullivan Trust +Company ten months before, and that I had broken the bank. The +liabilities of the bank were $3,000,000, and its Sullivan Trust Company +loss was only "a drop in the bucket." The Senator didn't fool anybody, +not even himself. His effort was an ill-concealed attempt to prepossess +the public against me, and was received by Nevada people as such. +</p> + +<p> +Senator Nixon indulged in some more "interview" with a view to stemming +the tide of liquidation in Goldfield Consolidated. Notwithstanding the +fact that the company had only recently resorted to the sale of +treasury stock for money-raising purposes, he asserted that a quarterly +dividend, payable January 25th, would probably be declared. Beyond a +question this statement was made for market purposes at a time when the +Senator was sweating money-blood. +</p> + +<p> +The stock promptly tobogganed farther on the strength of the dividend +forecast. The Senator's interviews had now become a standing joke in +the community. Speculators and brokers had learned the wisdom of +"coppering" anything the Senator said. +</p> + + +<h3> +THE STORY OF THE GOLDFIELD LABOR "RIOTS" +</h3> + +<p> +A large force of miners was discharged from the Goldfield Consolidated +properties. The action of the company in laying off its men at such a +distressful period was denounced. It was alleged that Senator Nixon's +Goldfield bank could not afford to pay out the money on deposit to the +credit of the company because it was required for bank purposes. The +money was apparently being hoarded during the money stringency to help +the bank out of a tight place. After-events appeared fully to confirm +this theory. +</p> + +<p> +Right in the teeth of the panic, during the depressed and troublous +days of the latter part of November;—when current finance was deeply +affected; when Goldfield Consolidated was selling below the $4 point +and the entire Nevada share list had suffered an average depreciation +of about 85 per cent. from the "highs" reached during the Goldfield +boom of the year before; when the State of Nevada was racked from end +to end by the serious losses incurred by citizens through the failure +of the Nye & Ormsby County's and the State Bank & Trust Company's chain +of banks, totaling nearly $6,000,000, and it appeared that the credit +of the State had already been shattered almost beyond repair—a fresh +blow was administered. +</p> + +<p> +Government troops were reported to be en route to Goldfield from San +Francisco "to preserve the law." It had been represented to the +President of the United States that Goldfield was in a state of +anarchy. Goldfield wasn't. As a matter of fact, the situation in +Goldfield with the miners, from the standpoint of law and order, was +never good, but it was as good then as it had been in eighteen months. +True, there had been some lawlessness, but no riot, and the sheriff of +the county had made no call whatsoever on the Governor for any aid. +</p> + +<p> +During the first days of the panic Nixon and Wingfield's Goldfield +bank, John S. Cook & Company, had tendered the miners the bank's +unsecured scrip in lieu of money for the payment of wages. The miners +refused acceptance. They were willing to take time-checks of two, three +or four months, bearing the mining company's signature, but balked at +the idea of becoming creditors of the bank. +</p> + +<p> +It has been stated to me by a number of Goldfield brokers who were +present in the camp at the time that the miners had even decided to +concede this point, when an outsider secured by intrigue and money +sufficient voting power at a meeting of the executive committee of the +Miners' Union to pass a resolution objecting to the bank's scrip. The +refusal to accept the bank's scrip was at once made an excuse by the +Goldfield Mine Owners' Association, which was dominated by George +Wingfield, to determine upon a lockout and simultaneously to demand +Federal intervention. +</p> + +<p> +If Messrs. Nixon and Wingfield's bank needed money, as the tender of +unsecured scrip indicated all too plainly, the complete shutdown which +left with the bank as available resources approximately $2,000,000 in +the account of the Goldfield Consolidated Mines Company, was a perfect +stop-gap; and the need of the presence of troops was a fine +coincidental excuse for the shutdown. Incidentally, it would rid +Goldfield of the Miners' Union, which voted to a man against Senator +Nixon's Republican candidates for office, and would permit the +importation of foreign labor, an expedient which was afterward +successfully resorted to. +</p> + +<p> +Senator Nixon brought pressure to bear at Washington. He invoked the +good offices of Uncle Sam and urged that Federal troops be sent to the +State. He was assisted by Congressman Bartlett in laying the matter +before the departments. The wires between Goldfield, Reno, Carson City +and Washington were kept hot with an interchange of views. President +Roosevelt finally informed the Senator he could not send the soldiers +unless the Governor of Nevada wired that a state of anarchy actually +existed which the State itself was powerless to put down. +</p> + +<p> +Governor Sparks, honest as the day was long and unsuspecting of any +trickery or jobbery, listened to a Goldfield committee and permitted a +dispatch to be sent to Washington over his signature representing that +such conditions existed. +</p> + +<p> +Thereupon Brigadier-General Funston, at the head of two thousand +troops, was ordered to Goldfield. The State being without any militia +and the representations made by Governor Sparks in his dispatches being +strong on the point that a state of anarchy actually existed in +Goldfield, the President finally succumbed. +</p> + +<p> +The maneuver was as swift as it was unexpected. Nevada people at first +could not understand what it was all about. Dispatches from Goldfield +to Reno said the town was quiet. The nearest approach to an overt act +of recent occurrence that had been chronicled was the alleged theft a +few days before of a box or two of dynamite, about 300 feet of fuse and +a quantity of caps that were said to have been clandestinely removed +from the Booth mine in Goldfield. The theft, if theft there was, was +charged to the miners, but proof was lacking. +</p> + +<p> +On the arrival of the troops in Goldfield the Goldfield Consolidated +announced a new wage scale, reducing the miners' wages from $5 to $4 +and in some cases from $5 to $3.50. This was a new move, calculated to +rouse the ire of the wage workers and to prolong the lockout. Messrs. +Nixon and Wingfield's bank in Goldfield announced at the same time that +it would thereafter discharge all of the pay-rolls of the company in +gold. But there were no pay-rolls of any consequence then, the mines +being shut down. +</p> + +<p class="break"> </p> + +<p> +General Funston on his arrival in Goldfield interviewed mine operators, +union miners and citizens generally with a view to determining the +necessity for maintaining Government troops there. He discovered that +the Administration had been buncoed. The General wired the President +his opinion. President Roosevelt quickly dispatched a commission to +Goldfield to conduct a public inquiry. This commission consisted of +Charles B. Neal, Labor Commissioner; Herbert Knox Smith, Commissioner +of Corporations, and Lawrence O. Murray, Assistant Secretary of the +Department of Commerce and Labor. They heard testimony day and night +for a week. +</p> + +<p> +They reported to President Roosevelt that there was no occasion for the +presence of troops in Goldfield and that the statements telegraphed to +President Roosevelt by Governor Sparks, indicating the existence of a +state of anarchy, were without justification. The report was given to +the Associated Press and received wide publicity. The President also +issued a broadside backing up the findings, which was telegraphed far +and wide. +</p> + +<p> +Eastern editorial writers poured out torrents of abuse on Governor +Sparks. Senator Nixon went unscathed. +</p> + + +<h3> +THE DEATH OF GOVERNOR SPARKS +</h3> + +<p> +Feeling under a weight of obligation to Governor Sparks, who had headed +nearly all of the Sullivan Trust Company promotions as president, I +tried editorially in the <cite>Nevada Mining News</cite> to justify the +Governor's action. But it was a wee voice drowned in an ocean of +adverse opinion and was entirely without echo. It didn't even soothe +the Governor. +</p> + +<p> +The Governor, honest, simple old man, broken in purse, in health and in +spirit, grieved over the President's denouncement, took to bed, and +died of a broken heart. +</p> + +<p> +At his imposing funeral pageant in Reno, which was attended by +thousands of mourners, who had come from all parts of the State to pay +homage to the grand old man and who followed the hearse to the +cemetery, Senator Nixon and his partner, George Wingfield, were +conspicuous by their absence. +</p> + +<p> +Even at the moment when the grave closed over his remains the troops +were leaving Goldfield. +</p> + +<p> +"It's the 'Dead March,'" said one of the bereaved. +</p> + +<p> +The bringing of Federal troops to Goldfield accomplished its purpose. +The Miners' Union was destroyed and sufficient time was gained to +enable the financial atmosphere to clarify. By the time the troops +departed, Goldfield Consolidated had rallied to $5 per share. The panic +was over. Money was comparatively easy again. +</p> + +<p> +I ask the reader's indulgence for having devoted so much space to the +facts bearing on the appearance in Nevada of United States troops at a +time when there was no valid occasion for their presence. I feel that +it is an important chapter of my experiences and is fraught with +interest to the general reader, because it illustrates how easy it is +to direct the powerful machinery of our great Government so as to carry +out the machinations of evil-minded men. +</p> + +<p> +You might think, after this demonstration of the lengths to which +Senator Nixon went to accomplish a set purpose, and after witnessing +the success which attended his efforts, that a poverty-stricken +individual like myself, who had had the hardihood to conduct a +newspaper campaign in the Senator's own home town against his financial +and political activities, would judge it the better part of valor to +emigrate from the State. Well, I didn't. I stayed right on the spot. +That I would hear from Washington later I had no doubt, but I stuck, +just the same, until my business interests called me away. +</p> + +<p> +I wasn't wrong in my deductions. Within a few months thereafter there +came a visit to my office in Reno by a postal inspector, who was +apparently "sicked on to the job," and but for the quick intercession +by telegraph of United States Senator Francis B. Newlands of Nevada +with the Postmaster General at Washington, I am certain that potent +influences even at that early day would successfully have "started +something." But of this more at another time, I am ahead of my story. +</p> + + + + +<h2> +<a name="VII"> </a> +CHAPTER VII +<br><br> +<span class="smallsc">Rawhide</span> +</h2> + + +<p> +Because Rawhide, the new Nevada gold camp, was born during the +financial crisis of 1907, I couldn't see any future ahead of it from +the promoter's coign of vantage—not "through a pair of +field-glasses." It requires capital to develop likely-looking gold +"prospects" into dividend-paying mines, and I could not imagine where +the money was going to come from. Eastern securities markets were in +the doldrums. Time money commanded a big premium. Prices for all +descriptions of mining stocks had flattened out to almost nothing. +Investors were at their wits' end to protect commitments already made. +Financiers everywhere were depressed. A revulsion of sentiment toward +speculation had set in, seemingly for keeps. Only a hair-brained +enthusiast of the wild-eyed order could hope at such a time possibly to +succeed in the marketing of new mining issues. +</p> + +<p> +A financial panic has no terrors, however, for gold-seekers. The lure +of gold is irresistible. Money stringency serves only to strengthen the +natural incentive. By the first week in January, 1908, fully 2,000 +people were reported to be in Rawhide. At the end of January the +population had grown to 3,000. +</p> + +<p> +The camp easily held the center of the mining stage in Nevada. +</p> + +<p> +Many of the Rawhide pioneers hailed from Tonopah and Goldfield. Without +exception the opinion of these veterans appeared to be that the surface +showings of the new district excelled those of either of the older +camps. Never before in the history of mining in the West had there been +discovered a quartz deposit so seemingly rich in the yellow metal at or +near the surface which at the same time embraced so large an area of +auriferous mineralization. Goldfield, at the same early age, had been a +mere collection of prospectors' tents, while Rawhide was a thriving, +bustling, populous camp with more than a hundred leasing outfits +conducting systematic mining operations. +</p> + +<p> +News was brought to Reno of a phenomenal strike made on Grutt Hill in +Rawhide. Specimen rock taken from a seam of ore assayed $300,000 to the +ton. The Kearns lease on Balloon Hill reported 15 feet of shipping ore +on the 65-foot level which assayed from $300 to $500 to the ton. +</p> + +<p> +There was full verification of this. Also regular shipments were being +made to the Goldfield reduction works. +</p> + +<p> +Samples of rock were received in town that were studded with free gold. +I was thrilled. Statements made by camp "boosters" that a part of +Balloon Hill was "gold with a little rock in it," were not +exaggerations, judging from the specimens that were placed in my +possession. +</p> + +<p> +My apathy began to melt away. Against my earlier judgment, I now began +to change my attitude. +</p> + +<p> +The camp looked like "the real thing," panic or no panic. +</p> + +<p> +Why should not the American public, even in these tough financial +times, enthuse about a gold camp with possibilities for money-making +such as are offered here, I asked myself. Don't drowning men grasp at +straws? Is it not the habit of horse-race players when they lose five +races in succession to make a plunge bet on the sixth with a view to +getting out even? This panic had impoverished hundreds of thousands. +What more natural than that those who were hit hard should now fall +over one another to get in on the good things of Rawhide? If the camp +makes good, I reasoned, in the same measure that Goldfield did, early +investors will roll up millions in profits. +</p> + +<p> +I visited the camp. What I saw electrified me. Soon I was under the +magic spell. +</p> + + +<h3> +REAL GOLD AT RAWHIDE +</h3> + +<p> +Half a day's tramp over the hills seemed sufficient to convince anybody +that the best of the practical miners of Nevada had put the stamp of +their approval on the district. Most of the hundred or more operating +leases of Rawhide were owned by these hard-rock miners. More than half +a dozen surface openings on Grutt Hill showed the presence of masses of +gold-studded quartz. At the intersection of Rawhide's two principal +thoroughfares a round of shots in a bold quartz outcrop revealed +gold-silver ore that assayed $2,700 a ton. A gold beribboned dyke of +quartz-rhyolite struck boldly through Grutt Hill's towering peak. I +walked along its strike and knocked off, with an ordinary prospector's +pick, samples worth $2 to $5 a pound. +</p> + +<p> +Across Stingaree Gulch to the south Balloon Hill's rugged hog-back +formed a connection link between Grutt and Consolidated hills. The +Kearns Nos. 1 and 2 leases on Balloon Hill were scenes of strikes of +such extraordinary richness that they alone would have started a +stampede in Alaska. The Murray lease on Consolidated Hill was rated as +a veritable bonanza. There I saw quartz that was fully one-third gold. +</p> + +<p> +Along the southern slope of Hooligan Hill several sets of leasers were +mining ore so rich that guards were maintained through the night to +prevent loss from theft. At the Alexander lease on Hooligan Hill the +miners were crushing the richer quartz from their shaft and washing out +gold to the value of $20 a pan. +</p> + +<p> +These were the three principal centers of activity, but they by no +means embraced the productive area of the district. Tall, skeleton-like +gallows-frames dotted the landscape for miles in every direction. The +soughing of gasoline engines suggested the breathing of some spectral +Titan in the throes of Herculean effort. I was forcefully impressed, +too, with the class of miners at work. +</p> + +<p> +It seemed to me there was no longer any room for cavil as to the +fortune-making possibilities of investors who put their money into the +camp. Less than a half year old, Rawhide loomed up as the most active +mining region I had ever seen at anything like the same age. +</p> + +<p> +It required nearly three years for Goldfield to make as good a showing, +I reasoned. +</p> + +<p> +During my earlier efforts at press-agenting Southern Nevada's mining +camps I had to conjure in my mind's eye what the reality would be if +half the hopes of camp enthusiasts were fulfilled. Here was apparently +a fulfillment rather than a promise. At the threshold of the first +stage of its development era Rawhide could boast of more actual +producers and nearly as many operating properties as Goldfield could +claim at the age of three years. +</p> + +<p> +I recalled that Cripple Creek had been panic-born but had lived through +the acute period of 1893-96 to take rank with the greatest gold camps +of the world. +</p> + +<p> +I was more than convinced. Effervescent enthusiasm succeeded my earlier +skepticism. History is about to repeat the record of Cripple Creek, I +concluded. +</p> + + +<h3> +THE RAWHIDE COALITION MINES COMPANY +</h3> + +<p> +Grutt Hill, Hooligan Hill, a part of Balloon Hill, and the intervening +ground, forming a compact group of eight claims, 160 acres, were owned +by a partnership of eight prospectors. The area formed the heart and +backbone of the whole mining district. +</p> + +<p> +I soon "tied up" this property for Nat. C. Goodwin & Company of Reno, +with whom I was identified. A company, with 3,000,000 shares of the par +value of $1 a share, was incorporated to take title. It was styled the +Rawhide Coalition Mines Company. +</p> + +<p> +Of its entire capitalization, 750,000 shares were turned into the +treasury of the Rawhide Coalition Mines Company. Nat C. Goodwin & +Company became agents for the sale of treasury stock, and were given an +option by the company on 250,000 shares, to net the treasury $57,500 +for purposes of administration and mine development. The Goodwin +company also purchased 1,850,000 shares of the 2,250,000 shares of +ownership stock, amounting to $443,500 more, or at the rate of 23.3 +cents per share plus a commission of $12,500 to be paid to a +go-between. +</p> + +<p> +The ownership stock that was retained by the original owners, and the +residue of treasury stock, amounting in all to 900,000 shares, were +placed in pool. +</p> + +<p> +When I made this deal the cash in bank of Nat. C. Goodwin & Company +amounted to about $15,000. It was up to me to finance the undertaking. +I did. +</p> + +<p> +The contract I made called for only $10,000 in cash and the balance on +time payments. Nat C. Goodwin & Company didn't borrow money from any +bank or individual, nor did anybody identified with the concern tax his +personal resources to the extent of a single dollar to go through with +the deal. The money was raised, first for the Coalition's treasury and +later for the vendors, by appealing directly to the speculative +instinct of the American investing public. The public, too, paid the +expense that was incurred in reaching them. It did this by paying Nat +C. Goodwin & Company an advance in price on Coalition stock purchases, +over and above the cost price. +</p> + +<p> +Nat. C. Goodwin & Company had agreed to net a fraction more than 23 +cents per share to both the treasury and the vendors without any +deductions whatsoever. All of the advertising expense and other outlays +of promotion, it was stipulated, must be borne by Nat. C. Goodwin & +Company and none by the mining corporation. +</p> + +<p> +What was the system? How was it done? +</p> + + +<h3> +A RACE OF GAMBLERS +</h3> + +<p> +Prior to the birth of Rawhide I had for seven years catered to the +speculative (gambling) instinct of the American public, chiefly in +building mining camps and financing mining enterprises. I now realized +that in order to make a success of the undertaking before me, namely, +to put the new camp of Rawhide on the investment map, I must again +appeal loudly to the country's gambling instinct. +</p> + +<p> +Maybe you think, dear reader, that a man who caters to the gambling +instinct of his fellow men, be his intentions honest or dishonest, is a +highly immoral person. Is he? +</p> + +<p> +Do you know that the gambling instinct is responsible for the wonderful +growth of the mining industry in the United States? Would you believe +that without the gambling instinct the development of the great natural +resources of this country would be almost impossible? +</p> + +<p> +With rare exceptions every successful mining enterprise in the United +States has been financed in the past by appealing directly to the +gambling instinct. In the decade antedating this year considerably more +than a billion dollars was raised and invested in this way. +</p> + +<p> +Conservative investors who are satisfied with from three to six per +cent. on their money do not buy mines or mining stocks. Speculators +(gamblers) who are willing to risk part of their fortune in the hope of +gaining fivefold or more in a year or a few years—these are the kind +who invest in mines and mining stocks. +</p> + +<p> +There are legions of these. Not less than 500,000 men and women in the +United States, according to the best statistical information +obtainable, are stockholders of mining companies. +</p> + +<p> +In fact, the gambling instinct finds employment in the mining industry +long before a property has reached the stage where it can be classed as +even a prospect worthy of exploration. The prospector who follows his +burro into the mountain fastnesses or across the desert wastes often +gambles his very life against the success of his search; those who +grub-stake him gamble their money. +</p> + +<p> +The gambling instinct seems bound to continue to play an important rôle +in the mining industry for all time, or until either the +fortune-hunting instincts of man are eradicated or all the treasures of +the world shall have been mined. +</p> + +<p> +Now, if the practice of catering to the gambling instinct is baneful, +I'm a malefactor. So, too, would then be such lofty-pinnacled +financiers as Messrs. Rothschild, Rockefeller, Morgan, the Guggenheims +and others. My own thought is that it is <em>custom</em> and the times +which are responsible for the maintenance of the great game, and not +individuals. +</p> + +<p> +The truth is, we are a race of gamblers and <em>we allow the captains of +industry to deal the game for us</em>. +</p> + +<p class="break"> </p> + +<p> +Next to money and political power, publicity is recognized by all +"doers" as the most powerful lever to accomplish big things. Not +infrequently publicity will accomplish what neither money nor political +power can. Generally, publicity can be secured and controlled by either +money or political power. +</p> + +<p> +When Rawhide was born I had neither money nor political power. The camp +needed publicity. I had nothing to secure publicity with but my wit. I +promptly requisitioned what wit I had, and used all of it. +</p> + +<p> +There is an important difference between owning a series of excellent +gold-mine prospects, which have tremendous speculative possibilities, +and the public recognizing them to be such. It is one thing for a +manufacturer to be himself assured that his article is a better product +for the money than that of his competitor. It is another thing for the +consumer to be convinced. Therein lies the value of organized +publicity. +</p> + +<p> +To focus the attention of the great American investing public on the +camp of Rawhide was the proposition before me. How was this to be +accomplished? Display advertising in the newspapers is costly and +requires large capital; the purchase of reading notices in publications +which accept that class of business, even more so. +</p> + +<p> +One major fact stood out from my early experience as a publicity agent +in Goldfield. Few news editors have the heart to consign good copy to +the waste-paper basket, particularly if it contains nothing which might +cause a come-back. +</p> + +<p> +I resolved to "press-agent" the camp. +</p> + + + + +<h2> +<a name="VIII"> </a> +CHAPTER VIII +<br><br> +<span class="smallsc">The Press Agent and the Public's Money</span> +</h2> + + +<p> +Probably the most scientifically press-agented camp in Nevada had been +Bullfrog. Bullfrog was born two years after Goldfield. The Goldfield +publicity bureau by this time had greatly improved its art and its +efficiency. +</p> + +<p> +When the Bullfrog boom was still young the late United States Senator +Stewart, an octogenarian and out of a job, traveled from Washington, at +the expiration of his term, to the Bullfrog camp. There he hung out his +shingle as a practising lawyer. Immediately the press bureau secured a +cabinet photo of the venerable lawmaker and composed a story about his +fresh start in life on the desert. The yarn appealed so strongly to +Sunday editors of the great city dailies throughout the country that +Bullfrog secured for nothing scores of pages of priceless advertising +in the news columns. +</p> + +<p> +The Senator built a home, the story said, on a spot where, less than a +year before, desert wayfarers had died of thirst and coyotes roamed. +The interior of the house on the desert was minutely described. +Olive-colored chintz curtains protected the bearded patriarch, while at +work in his study, from the burning rays of the sun. Old Florentine +cabinets, costly Byzantine vases, and matchless specimens of Sèvres, +filled his living-rooms. Silk Persian rugs an inch thick decked the +floors. Venetian-framed miniature paintings of former Presidents of the +United States and champions of liberty of bygone days graced the walls. +Costly bronzes and marble statuettes were strewn about in profusion. +Visitors could not help deducing that the Senator thought nothing too +good for his desert habitat. <em>The name of Bullfrog exuded from every +paragraph of the story; also the name of a mine at the approach to +which this desert mansion was reared and in the exploitation of which +the press-agent had a selfish interest.</em> +</p> + +<p> +The remarkable part of this tale, which was printed with pictures of +the Senator in one metropolitan newspaper of great circulation and +prestige to the extent of a full page on a Sunday and was syndicated by +it to a score of others, was that the only truth contained in it +happened to be the fact that the Senator had decided to make Bullfrog +his home with a view to working up a law practise. But it was a good +story from the Bullfrog press-agent's standpoint and from that of the +Sunday editor, and even the Senator did not blink at it. He recognized +it as camp "publicity" of the highest efficiency, as did other +residents of Bullfrog. +</p> + +<p class="break"> </p> + +<p> +During the Manhattan boom, which followed that of Bullfrog, the +publicity bureau became more ambitious. It made a drive at the news +columns of the metropolitan press on week days, and succeeded. +</p> + +<p> +At that time the Sullivan Trust Company of Goldfield was promoting the +Jumping Jack-Manhattan mining Company. James Hopper, the gifted +magazinist, wrote a story in which the names "Jumping Jack" and +"Sullivan Trust Company" appeared in almost every other line. It was +forwarded by mail to a great daily newspaper of New York and promptly +published as news. The yarn told how the man in charge of the gasoline +engine at the mouth of the Jumping Jack shaft had gone stark mad while +at work and how but for the quick intervention of the president of the +Sullivan Trust Company, who happened to be on the ground, a tragedy +might well have been the result. +</p> + +<p> +The miner, the story said, stepped into the bucket at the head of the +shaft and asked the man in the engine-house to lower him to a depth of +300 feet. Quick as a flash the bucket was let down. When the 200-foot +point was reached there was a sudden stop. With a rattle and a roar the +bucket was jerked back to within 50 feet of the surface. Thereupon it +was again lowered and quickly raised again, and the operation +constantly repeated until the poor miner became unconscious and fell in +a jangled mass to the bottom of the bucket. +</p> + +<p> +Hearing the miner's early cries, Mr. Sullivan had gone to the rescue. +He knocked senseless the man in the engine-house and pinioned him. Then +he brought up the bucket containing the almost inanimate form of the +miner. +</p> + +<p> +Turning to the demon in charge of the engine, who had now recovered +consciousness, Mr. Sullivan cried, +</p> + +<p> +"How dare you do a thing like this?" +</p> + +<p> +The man responded, "His name is Jack, ain't it?" +</p> + +<p> +"Well, what of it?" roared Mr. Sullivan. +</p> + +<p> +"Oh, I was just <em>jumping the jack</em>!" chuckled the "madman." +</p> + +<p> +This nursery tale was conspicuously printed in a high-class New York +newspaper's columns as real news. Undoubtedly the reason why the +editors allowed it to pass was that it was believed to be true, but +above all was cleverly written. +</p> + +<p class="break"> </p> + +<p> +I was too busy during the early part of the Rawhide boom to do any +writing of consequence or even to suggest particular subjects for +stories. It seemed to me that the exciting events of every-day +occurrence during the progress of the mad rush would furnish the +correspondents with enough matter to keep the news-pot constantly +boiling. I assembled around me the shining lights of the Reno newspaper +fraternity and put them on the pay-roll. +</p> + +<p> +For weeks an average of at least one column of exciting Rawhide +stampede news was published on the front pages of the big Coast +dailies. The publicity campaign went merrily on. I kept close watch on +the character of the news that was being sent out and was pleased in +contemplating the fact that very little false coloring, if any, was +resorted to. A boisterous mining-camp stampede, second only in +intensity to the Klondike excitement of eleven years before, was in +progress, and there was plenty of live news to chronicle almost every +day. +</p> + +<p> +After returning from one of my trips to Rawhide I became alarmed on +reading on the front page of the leading San Francisco newspapers a +harrowing two-column story about the manner in which Ed. Hoffman, mine +superintendent of the Rawhide Coalition, had been waylaid the day +before on a dark desert road and robbed of $10,000 in gold which he was +carrying to the mines for the purpose of discharging the pay-roll. +</p> + +<p> +I had just left Mr. Hoffman in Rawhide and he had not been waylaid. +</p> + +<p> +I sent for the man who was responsible for the story. +</p> + +<p> +"Say, Jim," I said, "you're crazy. There is a come-back to that yarn +that will cost you your job as correspondent for your San Francisco +paper. It is rough work. Cut it out!" +</p> + +<p> +"Gee whillikins!" he replied. "How can I? Here's an order for a +two-column follow-up and I have already filed it." +</p> + +<p> +"What did you say in your second story?" I inquired. +</p> + +<p> +"Well, I told how a posse, armed to the teeth, were chasing the robbers +and explained that they're within three miles of Walker Lake in hot +pursuit." +</p> + +<p> +"You're a madman!" I protested. "Kill those robbers and be quick; do it +to-night so that you choke off the demand for more copy, or you're a +goner!" +</p> + +<p> +Next day the correspondent wired to his string of newspapers that the +posse had chased the robbers into Walker Lake, where they were drowned. +</p> + +<p> +At the point in Walker Lake where the correspondent said the robbers +had found a watery grave it was known to some Reno people that for +three miles in both directions the lake was shallow and that the +deepest water in that vicinity was less than four feet. This caused +some snickering in Reno. Still there was no come-back. The newspapers +never learned of the deception. The correspondent had been canny enough +in sending the story to keep the local correspondents of all other +out-of-town newspapers thoroughly informed. They had sent out +practically the same story, and therefore did not give the snap away. +</p> + +<p> +In the early days of the Rawhide boom a rumor reached the camp that +Death Valley "Scotty," the illustrious personage who had been +press-agented from one end of the land to the other as the owner of a +secret Golconda, was about to start a stampede into some new diggings. +The news bureau decided to kill off opposition. Newspapers of the land +were queried as follows: +</p> + +<div class="blockquote"> +<p> +"Scotty's lair discovered in Death Valley. It is a cache containing +a number of empty Wells-Fargo money-chests. Scotty has apparently +been looting the loot of old-time stage robbers. How many words?" +</p> +</div> + +<p> +The newspapers just ate this one up. Column upon column was telegraphed +from Nevada. The source of Scotty's wealth being cleared up to the +satisfaction of readers of the "yellow," Scotty's value as a mine +promoter became seriously impaired. +</p> + +<p class="break"> </p> + +<p> +When I chided the Reno correspondent for sending out the fake story +regarding the robbery of Rawhide Coalition's mine manager, I recall +that he argued he had made a blunder in one direction only. He said he +should have seen to it that the mine manager was actually robbed! That, +he said, would have eliminated the danger of a come-back. +</p> + +<p> +Years ago in New York the public was startled by reading of an actress +taking her bath in pure milk. A few weeks later newspaper readers were +convulsed by stories of another star in the theatrical firmament +performing her morning ablutions in a tub of champagne. +</p> + +<p> +"If you don't believe it," said the lady press-agent to a lady +newspaper reporter who was sent to cover the story, "I will give you a +chance to see the lady in the act." +</p> + +<p> +This was done and, of course, the newspapers were convinced that it was +no idle press-agent's dream. Of course, neither of these women had been +in the habit of bathing in milk or in champagne. A tub of milk costs +less than $10 and a tub of champagne less than $200, but you could not +have bought this kind of publicity for these performers at anything +like such absurdly low figures if you used the display advertising +columns of the newspapers. Nor would the advertising have been nearly +so effective. The absurd milk story scored a "knockout" with newspaper +readers and earned a great fortune for the actress. +</p> + + +<h3> +PUBLICITY VIA ELINOR GLYN +</h3> + +<p> +At this early stage in Rawhide's history the reigning literary +sensation of two continents was "Three Weeks." Nothing, reasoned the +correspondents, would attract more attention to the camp than having +Mrs. Elinor Glyn at Rawhide, particularly if she would conduct herself +while there in a manner that might challenge the criticism of church +members. +</p> + +<p> +Sam Newhouse, the multimillionaire mining operator of Utah, famous on +two continents as a charming host, especially when celebrities are his +guests, was stopping at the Fairmont Hotel in San Francisco. Mrs. Glyn +was in San Francisco at the same time. Mr. Newhouse and Ray Baker, a +Reno Beau Brummel, clubman, chum of M. H. De Young, owner and editor +of the San Francisco <cite>Chronicle</cite>, and scion of a house that +represents the aristocracy of Nevada, were showing Coast hospitality to +the distinguished authoress. +</p> + +<p> +A message was sent to Mr. Baker reading substantially as follows: +"Please suggest to Mr. Newhouse and Mrs. Glyn the advisability of +visiting Rawhide. The lady can get much local color for a new book. If +you bag the game, you will be a hero." +</p> + +<p> +Ray was on to his job. Within three days Mrs. Glyn, under escort of +Messrs. Newhouse and Baker, arrived in Rawhide after a thirty-eight-hour +journey by railroad and auto from San Francisco. +</p> + +<p> +The party having arrived in camp at dusk, it was suggested that they go +to a gambling-house and see a real game of stud poker as played on the +desert. +</p> + +<p> +They entered a room. Six players were seated around a table. The men +were coatless and grimy. Their unshaven mugs, rough as nutmeg-graters, +were twisted into strange grimaces. All of them appeared the worse for +liquor. Before each man was piled a mound of ivory chips of various +hues, and alongside rested a six-shooter. From the rear trousers' +pocket of every player another gun protruded. Each man wore a belt +filled with cartridges. Although an impromptu sort of game, it was well +staged. +</p> + +<p> +A man with bloodshot eyes shuffled and riffled the cards. Then he dealt +a hand to each. +</p> + +<p> +"Bet you $10,000," loudly declared the first player. +</p> + +<p> +"Call that and go you $15,000 better," shouted the second as he pushed +a stack of yellows toward the center. +</p> + +<p> +"Raise you!" cried two others, almost in unison. +</p> + +<p> +Before the jack-pot was played out $300,000 (in chips) had found its +way to the center of the table and four men were standing up in their +seats in a frenzy of bravado with the muzzles of their guns viciously +pointed at one another. There was enough of the lurking devil in the +eyes of the belligerents to give the onlookers a nervous shiver. +</p> + +<p> +When the gun-play started, Mrs. Glyn and Messrs. Newhouse and Baker +took to the "tall and uncut." +</p> + +<p> +As the door closed and the vanishing forms of the visitors could be +seen disappearing around the opposite street corner, all of the men in +the room pointed their guns heavenward and shot at the ceiling, which +was of canvas. The sharp report of the revolver-shots rang through the +air. This was followed by hollow groans, calculated to freeze the blood +of the retreating party, and by a scraping and scuffling sound that +conveyed to the imagination a violent struggle between several persons. +</p> + +<p> +Fifteen minutes later two stretchers, carrying the "dead," were taken +to the undertaker's shop. Mrs. Glyn and Mr. Newhouse, with drooped +chins, stood by and witnessed the dismal spectacle. +</p> + +<p> +Of course, the "murder" of these two gamblers, during the progress of a +card-game for sensationally high stakes and in the presence of the +authoress of "Three Weeks," made fine front-page newspaper copy. +Rawhide suggested itself in every paragraph of the stories as a +mining-center that was large enough to attract the attention of a +multimillionaire mine magnate of the caliber of Sam Newhouse and of an +authoress of such world-wide repute as Elinor Glyn. The camp got yards +of free publicity that was calculated to convince the public it was no +flash in the pan, which was exactly what was wanted. +</p> + +<p> +The next night Elinor Glyn, having recovered from the shock of the +exciting poker-game, was escorted through Stingaree Gulch. The lane was +lined on both sides with dance-halls and brothels for a distance of two +thousand feet. Mrs. Glyn "sight-saw" all of these. +</p> + +<p> +Rawhide scribes saw a chance here for some fine writing: +</p> + +<p> +The wasted cheeks and wasted forms of frail humanity, as seen last +night in the jaundiced light that was reflected by the crimson-shaded +lamps and curtains of Stingaree Gulch, visibly affected the gifted +English authoress. They carried to Mrs. Glyn an affirmative answer to +the question, so often propounded recently, whether it is against +public morality to make a heroine in "Three Weeks" of a pleasure-palled +victim of the upper set. It was made plain to Mrs. Glyn that her +heroine differed from the Stingaree Gulch kind only in that her cheeks +were less faded than her character. +</p> + +<p> +That's the kind of Laura Jean Libby comment on Mrs. Glyn's tour of +Stingaree Gulch that one of the Rawhide correspondents wired to a +"yellow," with a view to pleasing the editor and to insuring positive +acceptance of his copy. +</p> + +<p> +Later in the night a fire-alarm was rung in. The local fire-department +responded in Wild-Western fashion. The conflagration, which was started +for Mrs. Glyn's sole benefit, advanced with the rapidity of a tidal +wave. It brought to the scene a mixed throng of the riffraff of the +camp. The tumult of voices rose loud and clear. The fire embraced all +of the deserted shacks and waste lumber at the foothills of one of the +mines. The liberal use of kerosene and a favoring wind caused a fierce +blaze. It spouted showers of sparks into the darkness and gleamed like +a beacon to desert wayfarers. The fierce yells of the firemen rang far +and wide. Of a sudden a wild-haired individual thrust himself out of +the crowd and sprang through the door of a blazing shack. He +disappeared within the flames. Three feet past the door was a secret +passage leading to shelter in the tunnel of an adjoining mine. Mrs. +Glyn, of course, did not know this. She acclaimed the act as one of +daring heroism. +</p> + +<p> +Water in the camp was scarce, so there was a resort to barreled beer +and dynamite. Soon the flames of the devouring fire were extinguished. +Again the newspapers throughout the land contained stories, which were +telegraphed from the spot, regarding the remarkable experiences of the +much-discussed authoress of "Three Weeks" in the new, great, gold camp +of Rawhide. The press agent was in his glory. +</p> + + +<h3> +"AL" MILLER'S SIEGE +</h3> + +<p> +Elinor Glyn's experiences in Rawhide were by no means the most +interesting that newspaper readers of the United States were privileged +to read during the course of the press-agenting of the camp. +</p> + +<p> +"Al" Miller was one of the first experienced mining operators to get +into Rawhide. He landed in camp in the early part of 1907. After a +thorough inspection of the mine showings throughout the district, he +hit upon the Hooligan Hill section of the Rawhide Coalition property as +a likely-looking spot to develop pay ore. Mr. Miller had been mining +for a great many years and had been identified with some important +mining projects in Colorado. When he applied for a lease on that +section of the Coalition property embracing a good part of Hooligan +Hill it was granted to him without parley. +</p> + +<p> +Mr. Miller financed his project right in the camp of Rawhide. He +interested five other mining men. A syndicate was formed. Each of these +six took an equal interest. All agreed to subscribe to a treasury fund +to meet the expense of development. +</p> + +<p> +A shaft was started on a very rich stringer of gold ore. When it had +reached a depth of about 40 feet the Miller lease was regarded as one +of the big "comers" of the camp. In fact, a good grade of ore was +exposed on all sides and in the bottom of a 4½×7½ foot shaft. +Specimens assayed as high as $2,000 a ton. +</p> + +<p> +At this stage of the enterprise an operating company was formed. Those +who had formed the original syndicate divided the ownership stock among +themselves. Mr. Miller was given full charge and allowed a salary for +his services. Day after day you could see him on the job, sharpening +steel, turning a windlass to hoist the muck from the bottom of the +shaft after each round of shots had been fired, and making a full hand +as mine-manager, blacksmith, mucker and shift-boss. +</p> + +<p> +One day I was sitting in my office at Reno when I received a telephone +message that there was a big fight on over the control of the Miller +lease. Mr. Miller and a big Swede who was working for him had +barricaded themselves at the mine. They threatened death to any one who +approached. We had, for a day or two, been hungering and thirsting for +some live news of the camp. My journalistic instinct got busy. I +queried our Rawhide correspondent. He advised that the situation really +looked serious and that a genuine scrap threatened. Mr. Miller had +installed a good-sized arsenal at the mine and laid in about three +days' provisions. He declared that he was prepared to hold out for an +indefinite period. +</p> + +<p> +I wired our correspondent at Rawhide instructions to file a story up to +1,000 or 1,500 words. Naturally excitement ran high in the camp. Soon +hundreds of people gathered at points of vantage along the crest of +Hooligan Hill and surrounding uplifts. Every one was expectantly +awaiting interesting developments. To the casual onlooker it seemed as +though possibly a score or more who stood ready to storm the mine might +become involved. In fact, no one could tell how soon hostilities would +break loose. +</p> + +<p> +Using the telegrams I had received from camp, one of my men dictated a +story containing the facts and sent it over to the Reno correspondent +of the Associated Press. It was put on the wire without a moment's +hesitation. +</p> + +<p> +Mr. Miller had formed a rampart about the collar of the shaft. Sacked +ore was piled up to a height of about five feet. The gold-laden stuff +surrounded the shaft on all sides but one, the exception being to the +northwest. There Hooligan Hill slanted upward at an angle of less than +twenty degrees from vertical. It was from this approach that Mr. Miller +was forced to guard constantly against attack. He found it necessary, +according to our dispatches, to keep a constant vigil in order to +preclude the possibility of a surprise. He and his Swede companion +alternated in keeping the lookout. Occasionally the fitful soughing of +the gasoline engine exhausts from the mining plants on Balloon Hill and +Grutt Hill were interspersed by the sharp report of a six-shooter as +the besieged parties either actually or mythically observed a +threatened approach of the enemy. +</p> + +<p> +Although the principals cast in this little mimic war were limited to +perhaps less than a score, every incident or detail was provided to +make up a very threatening and keenly interesting situation, with +several lives hanging in the balance. There is no doubt that Mr. Miller +at least, and perhaps his Swede companion, would have resisted any +attempt to take "Fort Miller," as we styled it, even to sacrificing his +life, for he was known as a man of action who had been in numerous +critical situations without showing the slightest exercise of the +primal instinct. The fact that Rawhide was saved from an episode that +might have measured up to the tragic importance of a pitched battle and +caused the loss of a number of lives was undoubtedly due to the patient +willingness of Mr. Miller's partners and their supporters to satisfy +themselves with a siege and to starve out the two men in possession of +the mine rather than undertake to rout them. +</p> + +<p> +The story went like wildfire and we were besieged for others and for a +follow-up on the original story. For three days we kept the yarn alive +and the wires burdened with details of the siege and unsuccessful +storming of Camp Miller, Hooligan Hill, Nevada. +</p> + +<p> +I venture to say that Mr. Hearst, with his well-known facility for +serving up hot stuff to a sensation-loving following, never surpassed +in this particular the stories that were scattered broadcast over the +United States foundered upon this interesting episode in the mining +development of Rawhide. +</p> + +<p> +The story promised to be good for at least a week when we were somewhat +surprised to hear that Mr. Miller had capitulated. It seems that in +storing his fort with provender he had supplied only one gallon of +whisky and when this ran low, on the second or third day, he attempted, +single-handed, a foraging expedition in search of a further supply of +John Barleycorn. During his absence his Swede companion hoisted a flag +of truce, and when Miller returned to the scene of action he found his +mine in the possession of his enemies. +</p> + +<p class="break"> </p> + +<p> +Charles G. Gates, son of John W. Gates, the noted stock-market plunger, +visited Rawhide twice. He spent his time by day inspecting the numerous +mine workings, of which there were not less than seventy-five in full +blast. At night he was a frequent winner at the gaming-tables. His +advent in Rawhide was telegraphed far and wide and contributed to +excite the general interest. +</p> + +<p> +A young woman of dazzling beauty and fine presence was discovered in +camp unchaperoned. She had been attracted to the scene by stories of +fortunes made in a night. Under a grilling process of questioning by a +few leading citizens she divulged the fact that she had run away from +her home in Utah to seek single-handed her fortune on the desert. In +roguish manner she expressed the opinion that if allowed to go her own +way she would soon succeed in her mission. But she would not divulge +the manner in which she proposed to operate. She confessed she had no +money. There was a serene but settled expression of melancholy in her +eyes that captivated everybody who saw her. +</p> + +<p> +Many roving adventurers of the better class in the district who had +listened to the call of the wild yet would have felt as much at home in +the salon of a Fifth Avenue millionaire as in the boom-camp, pronounced +her beauty to be in a class by itself. There was no law in the camp +which would warrant the girl's deportation, yet action appeared +warranted. Within a few moments $500 was subscribed as a purse to +furnish the girl a passage out of camp and for a fresh start in life. +The late Riley Grannan, race-track plunger, Nat. C. Goodwin, the noted +player, and three others subscribed $100 each. She refused to accept +the present. Next day she disappeared. +</p> + +<p> +There was a corking human interest story here. Newspapers far and wide +published the tale. Two years later this girl's photograph was sent +without her knowledge to the judges of a famous beauty contest in a Far +Western State. The judges were on the point of voting her the prize +without question when investigation of her antecedents revealed her +Rawhide escapade. The award was given to another. +</p> + +<p> +When the camp was four months old and water still commanded from $3 to +$4 a barrel, the standard price for a bath being $5, a banquet costing +$50 a plate was served to one hundred soldiers of fortune who had been +drawn to the spot from nearly every clime. The banqueters to a man +played a good knife and fork. The spirit of <em>camaraderie</em> +permeated the feast. There was much libation, much postprandial +speechifying, much unbridled joyousness. <em>Bon mots</em> flew from lip +to lip. Song and jest were exchanged. The air rang with hilarity. Nat. +C. Goodwin warmed up to a witty, odd, racy vein of across-the-table +conversation. Then he made a felicitous speech. Others followed him in +similar vein. Luxuriant and unrestrained imagination and slashiness of +wit marked most of the talks. The festivities ended in a revel. +</p> + +<p> +The correspondents burned up the wires on the subject of that banquet. +In the memory of the most ancient prospector no scene like this had +ever been enacted in a desert mining camp when it was so young and at a +time when the country was just emerging from a panic that seemed for a +while to warp its whole financial fabric. +</p> + + +<h3> +THE FUNERAL ORATION FOR RILEY GRANNAN +</h3> + +<p> +In April, 1908, Riley Grannan, the noted race-track plunger, died of +pneumonia in Rawhide, where he was conducting a gambling house. He was +ill only a few days and his life went out like the snuff of a candle. +When all the gold in Rawhide's towering hills shall have been reduced +to bullion and not even a post is left to guide the desert-wayfarer to +the spot where was witnessed the greatest stampede in Western mining +history, posterity will remember Rawhide for the funeral oration that +was pronounced over the bier of Mr. Grannan by H. W. Knickerbocker, +wearer of the cloth and mine-promoter. +</p> + +<p> +The oration delivered by Mr. Knickerbocker on this occasion was a +remarkable example of sustained eloquence. Pouring out utterances of +exquisite thought and brilliant language in utter disregard of the +length of his sentences and without using so much as a pencil +memorandum, Mr. Knickerbocker with a delicacy of expression pure as +poetry urged upon his auditors that the deceased "dead game sport" had +not lived his life in vain. Soon the crowd, who listened with rapt +attention, was in the melting mood. As Mr. Knickerbocker progressed +with his discourse his periods were punctuated with convulsive bursts +of sorrow. +</p> + +<p> +Rawhide correspondents reorganized the full value of the occasion from +the press-agent's standpoint. Mr. Grannan had been a world-famous +plunger on the turf, and the correspondents burned the midnight oil in +an effort to do their subject justice. +</p> + +<p> +Some other lights and shadows of Rawhide press-agenting are contained +in the following dispatch, which appeared in a San Francisco newspaper +in the early period of the boom: +</p> + +<div class="blockquote"> +<p> +<span class="sc">Goldfield</span>, February 19.—W. H. Scott of the Goldfield +brokerage house of Scott & Amann, who returned from Rawhide this +morning, expresses the opinion that within a year that camp will be +the largest gold-producer in the State. "When a man is broke in +Rawhide," said Mr. Scott, "he can always eat. All he has to do is +to go to some lease and pan out breakfast money. There is rich ore +on every dump, and every man is made welcome." +</p> +</div> + +<p> +H. W. Knickerbocker sent this one to a Reno newspaper: +</p> + +<div class="blockquote"> +<p> +Gold, Gold, Gold! The wise men of old sought an alchemy whereby +they could transmute the base metals into gold. It was a fruitless +quest then; it is a needless quest now. Rawhide has been +discovered! No flowers bloom upon her rock-ribbed bosom. No +dimpling streams kiss her soil into verdure, to flash in laminated +silver 'neath the sunbeam's touch. No flowers nor food, no beauty +nor utility on the surface; but from her desert-covered heart +Rawhide is pouring a stream of yellow gold out upon the world which +is translatable, not simply into food and houses and comfort, but +also into pictures and poetry and music and all those things that +minister in an objective way to the development of a full-orbed +manhood. +</p> +</div> + +<p> +Joseph S. Jordan, the well-known Nevada mining editor, filed this +dispatch to the newspapers of his string on the Coast: +</p> + +<div class="blockquote"> +<p> +Right through what is now the main street of Rawhide, in the days +of '49, the makers of California passed on their way to the new +Eldorado. They had many hardships through which to pass before +reaching the gold which was their lure, and thousands that went +through the hills of Rawhide never reached their goal. They were +massacred by the Indians, or fell victims to the thirst and heat of +the desert, and for many years the way across the plains was marked +by the whitening bones of the pathfinders. And here all the while +lay the treasures of Captain Kidd, the ransoms of crowns. +</p> +</div> + +<p> +Harry Hedrick, the veteran journalist of Far Western mining camps, sent +his newspaper this: +</p> + +<div class="blockquote"> +<p> +To stand on twenty different claims in one day, as I have done; to +take the virgin rock from the ledge, to reduce it to pulp and then +to watch a string of the saint-seducing dross encircle the pan; to +peer over the shoulder of the assayer while he takes the precious +button from the crucible—these are the convincing things about +this newest and greatest of gold camps. It is not a novelty to have +assays run into the thousands. In fact, it is commonplace. To +report strikes of a few hundred dollars to the ton seems like an +anticlimax. +</p> +</div> + +<p> +There were scores of actual happenings in Rawhide that make it possible +for me to say in reviewing the vigorous publicity campaign which marked +its first year's phenomenal growth, that ninety per cent. of the +correspondence, including the special dispatches sent from the camp and +from Reno, which was published in newspapers of the United States, was +not only based on fact but was literally true in so far as any +newspaper reporter can be depended upon accurately to describe events. +</p> + +<p class="break"> </p> + +<p> +Ask any high-class newspaper owner or editor to express his sentiments +regarding the "faking" which formed about ten per cent. of the Rawhide +press work described herein and he will tell you that such work is a +reproach to journalism. Maybe it is, but we are living in times when +such work on the part of press-agents is the rule and not the +exception. The publicity-agent who can successfully perform this way is +generally able to command an annual stipend as big as that of the +President of the United States. There was nothing criminal about the +performance in Rawhide, because there was no intentional +misrepresentation regarding the character or quality of any mine in the +Rawhide camp. Correspondents were repeatedly warned to be extremely +careful not to overstep the bounds in this regard. +</p> + +<p> +Confessedly there are grades of "faking" which no press-agent would +care to stoop to. +</p> + +<p> +Somewhere in De Quincey's "Confessions of an Opium Eater" he describes +one of his pipe-dreams as perfect moonshine, and, like the sculptured +imagery of the pendulous lamp in "Christabel," <em>all carved from the +carver's brain</em>. Rawhide and Reno correspondents were guilty of very +little work which De Quincey's description would exactly fit. There was +a basis for nearly everything they wrote about, even the alleged +discovery of Death Valley Scotty's secret storehouse of wealth, that +story having been in circulation in Nevada, although not theretofore +published, for upward of eighteen months. Unsubstantial, baseless, +ungrounded fiction had been resorted to, it is true, during the +Manhattan boom, in a single story about the madman in charge of the +hoist on the Jumping Jack, but this was an exception to the rule and +the story was harmless. +</p> + + +<h3> +AMONG THE "BIG FELLOWS" +</h3> + +<p> +If you don't think the character of the press-agent's work during the +Rawhide boom was comparatively high class and harmless, dear reader, +you really have another "think" coming. At a time when Goldfield +Consolidated was wobbling in price on the New York Curb and the market +needed support, just prior to the smash in the market price of the +stock from $7 to around $3.50, the New York <cite>Times</cite> printed in a +conspicuous position on its financial page a news story to the effect +that J. P. Morgan & Company were about to take over the control of that +company. That's an example of a <em>harmful</em> "fake," the coarse kind +that Wall Street occasionally uses to catch suckers. +</p> + +<p> +Here is another: +</p> + +<p> +Thompson, Towle & Company, members of the New York Stock Exchange, +issue a weekly newspaper called the <cite>News Letter</cite>. Much of its +space is given over to a review of the copper situation, at the mines +and in the share markets. W. B. Thompson, head of the firm, he of +Nipissing market manipulation fame, is interested to the extent of +millions in Inspiration, Utah Copper, Nevada Consolidated, Mason Valley +and other copper-mining companies. On January 25, 1911, when both the +copper metal and copper share markets were sick, and both the price of +the metal and the shares were on the eve of a decline, which +temporarily ensued, the <cite>News Letter</cite>, in an article headed +"Copper," said: +</p> + +<div class="blockquote"> +<p> +Every outcrop in the country has been examined and it is not known +where one can look for new properties. +</p> +</div> + +<p> +The readers of the <cite>News Letter</cite> were asked to believe that no +more copper mines would be discovered in this country and that, because +of this and other conditions which it mentioned, the supply of the +metal must soon be exhausted and the price of the metal and of copper +securities must advance. +</p> + +<p> +The statement in the <cite>News Letter</cite> that every outcrop in the +country has been examined and that it is not known where one can look +for new properties—well, if the whole population of North America +agreed in a body to accept the job of prospecting the Rocky Mountains +and Sierra Nevada Mountains alone they could hardly perform the job in +a lifetime. +</p> + +<p> +The use of the automobile has undoubtedly been responsible in the past +few years for an impetus to the discovery of mines which is calculated +to double the mineral product of this country in the next two decades, +and who shall say what the flying-machine will accomplish in this +regard? Further, new smelting processes and improved reduction +facilities generally are daily reducing the cost of treatment of ores +and are making commercially valuable low-grade ore-bodies heretofore +passed up as worthless. +</p> + +<p> +The best opinion of mining men in this country is that our mineral +resources have not yet been "skimmed" and that the mining ground of the +Western country has not yet been well "scratched." +</p> + +<p> +Therefore, the statement made in a newspaper which is supposedly +devoted to the interests of investors, that it need not be expected +that more copper mines are going to be discovered, is a snare +calculated to trap the unwary. +</p> + +<p> +The foregoing is an example of a very harmful but comparatively crude +fake, employed by some promoters in Wall Street of the multimillionaire +class when their stocks need market support. +</p> + +<p> +Here is a specimen of the <em>insidious</em> brand of get-rich-quick +fake. On March 7, 1911, the New York <cite>Sun</cite> printed in the second +column of its front page the following dispatch: +</p> + +<div class="blockquote"> +<p> +<span class="sc">Tacoma</span>, Wash., March 6.—F. Augustus Heinze has struck it +rich again; this time it's a fortune in the Porcupine gold fields +in Canada. +</p> + +<p> +Charles E. Herron, a Nome mining man, who has just returned from +the new gold fields, is authority for the statement that Heinze is +"inside the big money." He has bought the Foster group of claims, +adjoining the celebrated Dome mine, from which it is estimated that +$25,000,000 will be gleaned this year and for the development of +which a railroad is now under construction. +</p> + +<p> +The Porcupine gold field, according to Herron, is one of the +wonders of the age. One prospector has stripped the vein for a +distance of fifty feet and polished it in places, so that gold is +visible all along. His trench is three feet deep and he asks +$200,000 cash for it as it stands. +</p> + +<p> +A party of Alaskans offered the owner of this claim $50,000 a shot +for all the ore that could be blown out with two sticks of +dynamite, but he refused. +</p> +</div> + +<p> +Press-work like the foregoing is more than likely to separate the +public wrongfully from its money. +</p> + +<p> +The item serves as an excellent example of one of "the impalpable and +cunningly devised tricks that fool the wisest and which landed you" +that I promised, at the beginning of "My Adventures with Your Money," +to lay bare. I said in my foreword: +</p> + +<div class="blockquote"> +<p> +Are you aware that in catering to your instinct to gamble, methods +to get you to part with your money are so artfully and deftly +applied by the highest powers that they deceive you completely? +Could you imagine it to be a fact that in nearly all cases where +you find you are ready to embark on a given speculation, ways and +means that are almost scientific in their insidiousness have been +used upon you? +</p> +</div> + +<p> +The New York <cite>Sun</cite> article says it is estimated that $25,000,000 +will be gleaned this year from the Dome mine in Porcupine. The truth +is, no engineer has ever appraised the ore in sight in the entire mine, +according to any statements yet issued, at anything like half of that +amount gross, and the mine itself can not possibly produce so much as +$100,000 this year. +</p> + +<p> +A mill of 240 tons per diem capacity has been ordered by the management +and it is expected will be in operation by October first, but no +sooner.<a href="#note2" name="noteref2"><small>[2]</small></a> The ore, according to H. P. Davis's <cite>Porcupine Hand +Book</cite>, an accepted authority, "has been stated to average from $10 +to $12 a ton." The lowest estimated cost of mining and milling is $6. A +fair estimate of profits would, therefore, be $5 per ton, not allowing +for any expenses of mine-exploration in other directions on the +property or other incidental outlay, which will undoubtedly amount to +$1 per ton on the production. The production of 240 tons of ore per day +at $4 per ton net profit would mean net returns of $28,800 per month. +If the mill runs throughout October, November and December of this the +company will "glean" $86,400 during 1911, and not $25,000,000, as the +New York <cite>Sun</cite> article suggests.<a href="#note3" name="noteref3"><small>[3]</small></a> +</p> + +<p> +How great an exaggeration the New York <cite>Sun's</cite> $25,000,000 +estimate is may be gathered from the statement that to glean +$25,000,000 in one year from any mine where the ore assays $11 on an +average, and the cost of mining, milling and new development is $7, the +gross value of the tonnage in the mine that is milled during the one +year must be at least $53,571,000. Further, to reduce such a quantity +of that quality of ore to bullion in a single year would require the +erection of mills of 17,260 tons per day capacity. As mentioned, the +actual per diem capacity of the mill now under construction is 240 +tons.<a href="#note4" name="noteref4"><small>[4]</small></a> +</p> + +<p> +Undoubtedly the Dome mining company flotation will soon be made and the +public will be "allowed" to subscribe for the shares or buy them on the +New York Curb at a figure agreeable to the promoters. This seems +certain, for otherwise why this raw press-work?<a href="#note5" name="noteref5"><small>[5]</small></a> +</p> + +<p> +The article says that a number of Alaskans offered money at the rate of +$50,000 a shot for all the ore that could be blown out with two sticks +of dynamite, but were refused. There never was a statement made by any +wild-catter now behind prison bars in any literature I ever saw that +could approach this one in flagrant misrepresentation of facts. All the +ore that could be displaced in one shot with two sticks of dynamite +would not exceed four tons. In order to repay the investor it would be +necessary, therefore, that this ore average better than $12,500 per +ton. The New York <cite>Sun's</cite> story says that notwithstanding this +offer the owner was willing to sell the whole property for $200,000. +Imagine this: There are four tons of rock on the property worth $12,500 +per ton, for a distance of 50 feet the gold shimmers on the surface, +and there are hundreds of thousands of tons of rock in the same kind of +formation on the same property, but still the owner is willing to +dispose of all of it for $200,000! The statement is preposterous and +outrageous. It is the kind described by De Quincey as "all carved from +the carver's brain." +</p> + + +<h3> +THE REVERSE ENGLISH +</h3> + +<p> +Now, about the "reverse English" in this line of press-work. Similar +ways and means, dear reader, that are just as scientific in their +insidiousness have been used upon you to poison your mind +<em>against</em> the value of mining investments of competing promoters, +when it has been found to the interest of powerful men to bring this +about. +</p> + +<p> +When the offices of B. H. Scheftels & Company, with which I was +identified, were raided in seven cities by Special Agent Scarborough +(since permitted to resign) of the Department of Justice of the United +States Government, in September, 1910, two of the men who had been +active in bringing about the raid assembled in the parlor of the Astor +House the newspaper men assigned to cover the story by New York and +Brooklyn newspapers. There they gave out the information that Ely +Central, which I had advised the purchase of at from 50 cents per share +up to $4 and down again, was actually under option to me and my +associates in large blocks at 5 cents. As a matter of fact, the average +price paid over for this option stock in real hard money by my people +was in excess of 90 cents per share, without adding a penny to the cost +for expenses of mining engineers, publicity or anything else. My people +had also partly paid for a block bought at private sale at the rate of +$3 a share, besides buying tens of thousands of shares in the open +market at $4 and higher. The New York <cite>Times</cite> and the New York +<cite>Sun</cite>, two newspapers which make capital of the rectitude of both +their news and advertising columns, published this statement, along +with forty others that were just as false, if not more so. So did the +New York <cite>American</cite> and the other Hearst newspapers of the United +States. +</p> + +<p> +The New York <cite>Times</cite> story related how I had personally cleaned up +in fifteen months not less than $3,000,000 as the result of my market +operations. As a matter of fact, I and my associates had impoverished +ourselves trying to support the stock in the open market against the +concerted attacks of rival promoters and other powerful interests on +whose financial corns we had tread. Every well-informed person in Wall +Street knows this. +</p> + +<p> +The New York <cite>Times</cite> stated that every man connected with B. H. +Scheftels & Company had tried to obtain membership on the New York Curb +and that all of the requests were turned down. No application was ever +made for membership because, first, the rules of the Curb forbade +corporation memberships, and, second, the Scheftels company already +employed several members on regular salary and more than a dozen +members on a commission basis. +</p> + +<p> +It was also stated that B. H. Scheftels & Company applied to the Boston +Curb for membership and that their application was rejected. This was +also a lie made out of whole cloth. +</p> + +<p> +In three months, the New York <cite>Times</cite> said, no less than 400,000 +letters had been received in reply to circulars sent out by B. H. +Scheftels & Company. This is an average of over 5,000 letters for each +business day during the period of three months. The exaggeration here +was about 5,000 per cent. +</p> + +<p> +All of the properties promoted by the Scheftels company were stated in +the New York <cite>Times</cite> article to be "practically worthless." This +was utter rubbish and so misleading that had I been accused of +pocketpicking the effect could not have been more harmful. +</p> + +<p> +Rawhide Coalition had produced upward of $400,000 in gold bullion, had +probably been "high graded" to the extent of nearly as much more, +according to the judgment of well-posted men on the ground, and not +less than five miles of underground development work had been done on +the property. Development work and production had never ceased for a +day. Besides, when the Rawhide camp was still in its swaddling-clothes, +I had originally purchased the controlling interest for Nat. C. Goodwin +& Company at a valuation of $700,000 for the mine. +</p> + +<p> +The control of Ely Central had been taken over by B. H. Scheftels & +Company and paid for at a valuation well in excess of a million dollars +for the property, and upward of $200,000 had been spent in mine +development during the fourteen months of the Scheftels quasi-control. +Jumbo Extension was a famous producer of Goldfield. Subsequent to the +raid one-twentieth of its acreage was sold to the Goldfield +Consolidated for $195,000. On July 15th of the current year the company +disbursed to stockholders $95,000 in dividends, being 10 per cent. on +the par of the issued capitalization. Bovard Consolidated, which was +promoted at 10 cents a share as a speculation, had turned out to be a +"lemon" after a period of active mine development, the values in the +ore pinching out at depth, but B. H. Scheftels & Company had +immediately informed stockholders to this effect. +</p> + +<p class="break"> </p> + +<p> +The New York <cite>Times</cite> stated that B. H. Scheftels & Company sold +Ely Central stock to the amount of five or six millions in cash and +made a profit of $3,000,000 on the transactions. The books of the +Scheftels company show that the company not only made no money on the +sale of Ely Central but actually lost vast sums. +</p> + +<p> +The New York <cite>Times</cite> said that it had been advertised that a +carload of ore had been shipped from the Ely Central mine as a sample, +but that the Government had not been able to find out to whom this +carload of ore was consigned. The truth was that the consignment had +been made to the best-known smelter company in the United States, that +the ore averaged seven per cent. copper, and that it could not have +been shipped out of camp except over a single railroad which has the +monopoly—an easy transaction to trace. +</p> + +<p> +B. H. Scheftels & Company were accused by the New York <cite>Times</cite> of +clearing up nearly $600,000 in three months on the promotion of the +South Quincy Copper Company. The facts were that, after receiving +$30,000 in subscriptions and returning every subscription on demand +because of the slump in metallic copper, the Scheftels company +abandoned the promotion and never even applied for listing of the stock +in any market. A large sum was lost by the Scheftels company here. +</p> + +<p> +Even in stating the penalty for misuse of the mails, which was the +crime charged by the Government agent who afterwards resigned as a +consequence of conduct objectionable to the Government, the New York +<cite>Times</cite> stated that the punishment was five years in prison, which +was more hop-skip-and-go-merry mistaking. The crime is a misdemeanor +and the maximum penalty for an offense is eighteen months. +</p> + +<p> +I have counted not less than five hundred unfounded and misleading +statements of this kind regarding myself and associates that have been +made in the past year by newspapers and press associations. The shadow +has been taken for the substance. +</p> + +<p> +Now, the Scheftels raid, I shall prove in due time, was the culmination +of as bitterly waged a campaign of misrepresentation and financial +brigandage as has ever been recorded. Chronologically an introduction +of the subject is out of place here. The effect, however, of the +press-agenting which formed a part of the campaign of destruction is +pertinent to the topic under consideration. +</p> + +<p> +The immediate result was that thousands of stockholders in the various +mining companies that had been sponsored by the Scheftels company were +robbed of an aggregate sum amounting into millions, which represented +the ensuing decline in market value of the stocks. +</p> + +<p> +The newspaper campaign of misrepresentation and villification was +essential to the plans and purposes of the men who sicked the +Government on to me. The final destruction of public confidence in the +securities with which I was identified became necessary to justify the +whole proceeding in the public mind. +</p> + +<p> +On the surface of the play it was made to appear that the Government of +the United States had reached out righteously for the suppression of a +dangerous band of criminals. The story in the New York <cite>Times</cite> and +other newspapers on the day after the raid was justification made to +this end. +</p> + +<p> +The fact that tens of thousands of innocent stockholders might lose +their all, as a result of the foul use of powerful maladroit +publicity-machinery, did not stop the conspirators for a moment. I had +a youthful past and, therefore, the newspapers took little chance in +publishing anything without investigation and proof that might be +offered. And they went the limit, particularly those newspapers that +are in the habit of permitting the use of their news columns from time +to time to help along the publicity measures of powerful interests. +</p> + +<p> +Contrasted with the comparatively harmless "faking" that characterized +Rawhide's press-agenting, the raw work of the newspapers just described +is as different as angel-cake from antimony. If you are not yet +convinced, hearken to this: +</p> + + +<h3> +THE POWER OF THE PUBLIC PRINT +</h3> + +<p> +In the <cite>Saturday Evening Post</cite> of December 31, 1910, there +appeared an article headed, "Launching a Corporation. How the Pirates +and Merchantmen of Commerce Set Sail. By Edward Hungerford," from which +I quote, without the omission or change of so much as a comma. +Referring, in my opinion to Ely Central, promoted by myself and +associates, Mr. Hungerford says: +</p> + +<div class="blockquote"> +<p> +Here is a typical case—a mining property recently exploited on the +curb market, the shipyard of many of these pirate craft: a prospect +located not far from one of the bonanza mines of the West was +capitalized by a number of men who, after they had convinced +themselves that it would not pay, dropped it and gave little +thought to the company they had organized. +</p> + +<p> +One day they received through a lawyer an offer of four thousand +dollars for the even million shares of stock they had prepared to +issue at a face value of five dollars a share. They were told that +a wealthy young man was willing to take a four-thousand-dollar +flier on the property, on the outside chance that it might develop +ore. The deal was made. Soon after a well-known man was named as a +part owner of the mine, which "promised" to enrich all those +interested in it. +</p> + +<p> +That was not the first time that the marketable value of a name +that is known had been used to exploit a corporation. Any man of +standing has many such offers. +</p> + +<p> +The shares of stock that had been purchased for four cents each +were peddled on the curb at fifty cents. Then they were advanced to +sixty cents. Soon a "market"—so called—was made and the stock +found a ready sale. Point by point it was advanced until it +actually was eagerly sought by investors, who were not only willing +but eager to pay four dollars a share for it. +</p> +</div> + +<p> +Mr. Hungerford states in the foregoing: "This mine was capitalized by a +number of men who dropped out after they convinced themselves that it +would not pay." The statement is false if it refers to Ely Central, as +I believe it does. The chief owners and organizers attempted to promote +it through a New York Stock Exchange house on the New York Curb at +above $7 per share, or at a valuation of more than $8,000,000 for the +mine, but the bankers' panic of 1907-8 intervened, and for <em>that +reason</em> they quit. The stock sold in 1906 at above $7.50 a share on +the New York Curb, two years before I became identified with it. +</p> + +<p> +Mr. Hungerford says that one day these men <em>received through a lawyer +AN OFFER OF $4,000 FOR A MILLION SHARES OF STOCK, and they sold</em>. +</p> + +<p> +How cruelly false this statement is nobody can feel more than myself. +The average price paid by my associates in hard money for the +controlling interest in the 1,600,000 shares of capitalization, as +already mentioned, was above 90 cents, or considerably more than one +million dollars in all. An additional $600,000 or more was used to +protect the market for the stock, making our cost, without adding a +cent for promotion expenses, about $1.50 per share instead of four +cents—more than $2,000,000 for the property and not $5,000. +</p> + +<p> +Line by line and word for word I could analyze the statement of Mr. +Hungerford and show that 95 per cent. of it is false both in premise +and deduction. But this would be only cumulative on the one point. My +excuse for mentioning the item is to give a striking example of the +startling force and power which attaches to insidious newspaper +publicity of the kind quoted from the New York <cite>Times</cite>. Mr. +Hungerford "fell" for it, and innocently lent himself to the purposes +of the men who sponsored the story by himself passing it on to the +readers of the <cite>Saturday Evening Post</cite>. +</p> + +<p> +The purpose here has been to show the imposition on the American public +which is being practiced every day in the news columns of daily +newspapers and other publications, but I have been able to convey to +the reader only the barest kind of suggestion as to the depths to which +this perception is practiced. Limitations of space prohibit further +encroachment, or I would fain extend my list of examples indefinitely. +</p> + +<p> +We hear much these days about the abuses of journalism. Much of the +criticism is leveled at publishers who lend the use of their columns +for "boosting" that is calculated to help their advertisers. But little +attention is paid to that other evil namely, the use of the news +columns for the purpose of destroying business rivals, political rivals +and enemies generally of men who wield sufficient influence to employ +the method. +</p> + +<p> +This ramification of the subject appeals to me as of at least as much +consequence to citizens as is the one of inspired puffery. I believe +the public is going to hear much more of this feature of newspaper +abuse in the future than it has in the past. The community is waking up +and is manifesting a desire to learn more about the heinous practice. +</p> + + +<h3> +RAWHIDE AGAIN +</h3> + +<p> +To return to Rawhide. As a result of the "scientific" press-agenting +which the camp received, a frenzied stampede ensued. The rush was of +such magnitude that it stands unparalleled in Western mining history. +Not less than 60,000 people journeyed across the desolate, wind-swept +reaches of Nevada's mountainous desert during the excitement. Not less +than 12,000 of these remained on the ground for a period of several +months. +</p> + +<p> +Mining-camp records were broken. The maximum population of Goldfield +during the height of its boom was approximately 15,000, but it had +taken more than three years and the discovery of the world's highest +grade gold mine to attract this number of people. Cripple Creek for two +years after its discovery was little more than a hamlet. Leadville +during its first year was hardly heard of. +</p> + +<p> +The scenes enacted in Rawhide when the boom was at its height beggar +description. Real estate advanced in value in half a year in as great +degree as Goldfield's did in three years. Corner lots on the Main +Street sold as high as $17,000. Ground rent for plots 25×100 feet +commanded $300 a month. During the day as well as at night the +gaming-tables of the pleasure-palaces were banked with players, and the +adventuresome were compelled literally to fight their way through the +serried ranks of onlookers to take a hand in the play. The miners were +flush. Many assay offices, accessories of "high-graders," were turning +out bullion from extraordinarily rich ore easily hypothecated by a +certain element among the men working underground. +</p> + +<p> +The opening of "Tex" Rickard's gambling-resort in Rawhide was +celebrated by an orgy that cut a new notch for functions of this kind +in Southern Nevada. The bar receipts aggregated over $2,000. The games +were reported to have won for Mr. Rickard $25,000 on the first day. +Champagne was the common beverage. Day was merged into night and night +into day. Rouged courtesans of Stingaree Gulch provided the dash of +¯ +On the densely crowded streets fashionably tailored Easterners, +digging-booted prospectors, grimy miners, hustling brokers, promoters, +mine operators and mercantile men, with here and there a scattering of +"tin horns," jostled one another and formed an ever shifting +kaleidoscopic maelstrom of humanity. +</p> + +<p> +In the environing hills could be heard the creak of the windlass, the +clank of the chain, and the buzz and chug of the gasoline hoist, +punctuated at frequent intervals by sharp detonations of exploding +dynamite. +</p> + +<p> +Outgoing ore-laden freighters, hauled by ten-span mule teams, made +almost impassable the roads connecting the camp with near-by points of +ingress. Coming from the opposite direction, heavily laden wagons +carrying lumber and supplies, and automobiles crowded to the guards +with human freight, blocked the roadways. +</p> + +<p> +Rawhide's publicity campaign from a press-agent's standpoint was a +howling success. From the standpoint of the promoter, however, results +were mixed. Nat. C. Goodwin & Company were enabled to make more than a +financial stand-off of their promotion of the Rawhide Coalition Mines +Company, but they did not profit to the extent they might have, had the +times been propitious. +</p> + +<p> +I was not long in discovering that my first deductions, made at the +inception of the Rawhide boom, namely, that the country was in no +financial mood to consider favorably the claims to recognition of a new +mining camp, were right, and that it would have been better had the +birth of Rawhide been delayed for a period or until the country could +catch its financial breath again. Crowds came to Rawhide, but few with +money. Flattering as was the extent of the inrush, it was easy to see +that if the publicity campaign had been suppressed for a while, the +result in harvest would have been immeasurably greater. Had financial +conditions been right, the effort to give the camp "scientific" +publicity would undoubtedly have been crowded with results for "the +inside" of a character that would have meant much larger sums of money +in the bank. +</p> + +<p> +Nat. C. Goodwin & Company recognized, too, that they had been working +at a great disadvantage by attempting to finance a great mining +enterprise at so great a distance from Eastern financial centers as +Reno. We were hardly a match for the Eastern promoter who, because of +the handy location of his offices, was enabled to keep in close +personal contact with his following. +</p> + +<p> +The usual happening in mining took place at Rawhide. The extraordinary +rich surface deposits opened up into vast bodies of medium and +low-grade ore at depth. Rawhide's one requirement appeared to be a +railroad, and a milling plant of 500 or 600 tons a day capacity. It was +decided that I should come East and attempt to finance the company for +deep mine development, mill and railroad construction, and also to go +through with the deal made with the vendors of the controlling +interest. The time period for payments had been extended for Nat. C. +Goodwin & Company, and the option to purchase was now valued by the +Goodwin company at a fortune. +</p> + +<p> +In New York, over the signature of Nat. C. Goodwin the firm for a +while, under my direction, conducted a display advertisement newspaper +campaign in favor of the issue, which was now listed on the New York +Curb. Hayden, Stone & Company, bankers, of Boston and New York, who +have since successfully financed the Ray Consolidated and Chino copper +companies, undertook to send their engineer to Rawhide to make an +examination of the property with a view to financing the company for +railroad and milling equipment amounting to upward of a million +dollars. Under the impetus of this news and the Nat. C. Goodwin +advertising campaign the market price of the shares shot up to $1.46, +or a valuation in excess of four million dollars for the property. +</p> + +<p> +A few weeks later a sharp market break occurred. Some one got the news +before Nat. C. Goodwin & Company did that the million-dollar financing +proposition had been acted upon adversely by the engineer. The company +had done no systematic underground development work. An enormous amount +of work had been done, but it was accomplished under the leasing +system. The leasers, who, because of lack of milling facilities, were +unable to dispose of a profit of ore that assayed less than $40 per +ton, had bent all of their efforts toward bringing to the surface +high-grade shipping ore and had made no effort at all to block out and +put into sight the known great tonnages of medium and low-grade. +Engineers take nothing for granted and this one reported that the +proposition of spending a million dollars should be turned down because +a commensurate tonnage had not been blocked out and put in sight. +</p> + +<p> +To this day the camp has struggled along without adequate milling +facilities, but has been practically self-sustaining. From a physical +standpoint the mines to-day are conceded to be of great promise. The +company is honestly and efficiently managed. The president, from the +day of incorporation to this hour, has been E. W. King, formerly +president of the Montana Society of Mining Engineers, a director of a +number of Montana banks, and recognized as one of the ablest gold-mine +managers of the West. M. Scheeline, president of the Scheeline Banking +& Trust Company of Reno, who ranks as the oldest and most conservative +banker in the State of Nevada, has been treasurer from the outset. +</p> + +<p> +The history of Rawhide is still in the making and its final chapter has +not yet been written by any manner of means. Nor is it within the pale +of possibility that such latent productive potentialities as have been +established at Rawhide can long remain in great part dormant. +</p> + +<p> +In Wall Street Nat. C. Goodwin & Company's deal with the venders of the +control of Rawhide Coalition was later financed to a successful finish. +It was done by appealing to the speculative instinct of that class of +investors who habitually gamble in mining shares. The effort to finance +the mining company itself, to a point where it might take rank with the +great dividend-paying gold mines of the West, was not so successful. +</p> + +<hr class="note"> +<dl> +<dt class="notelabel"><a name="note2"> </a><a +href="#noteref2"><small>[2] +</small></a></dt> +<dd class="notetext">The fire of July will delay installation until a +later date. +</dd></dl> + +<dl> +<dt class="notelabel"><a name="note3"> </a><a +href="#noteref3"><small>[3] +</small></a></dt> +<dd class="notetext">In arriving at these figures I am more than fair. +Recent estimates of the average value of the ores is $8, and I know of +some estimates by very competent mining men that are as low as $4. Some +engineers say justification is lacking for even a $4 estimate. The Dome +is by no means a proved commercial success as yet from the mine +standpoint, although the possessor of much ore, because of the uncertain +average values. +</dd></dl> + +<dl> +<dt class="notelabel"><a name="note4"> </a><a +href="#noteref4"><small>[4] +</small></a></dt> +<dd class="notetext">It has been destroyed by the July fire and must be +replaced. +</dd></dl> + +<dl> +<dt class="notelabel"><a name="note5"> </a><a +href="#noteref5"><small>[5] +</small></a></dt> +<dd class="notetext">The foregoing comment on the Porcupine situation +has been more than justified by developments after the date of this +writing. The first battery of forty stamps in the first stamp mill was +not in operation till April, 1912, more than a year from the date of the +prediction that $25,000,000 would be gleaned in 1911. +</dd></dl> + + + +<h2> +<a name="IX"> </a> +CHAPTER IX +<br><br> +<span class="smallsc">The Wall Street Game</span> +</h2> + + +<p> +A man who thinks he knows what happened to me in Wall Street, and +<em>why it happened</em>, suggests that the New York section of "My +Adventures With Your Money" be prefaced with the following: +</p> + +<div class="blockquote"> +<p> +This is the story of an energetic, self-confident, aggressive, +optimistic, enthusiastic, nervy, fearless, imprudent, +uncompromising, presumptuous <em>fool</em>. +</p> + +<p> +Maybe he was worthy of a following in that he would cast his own +fortunes with those whom he asked to follow him, but withal he was +a dangerous leader because he could not see the rents in his own +armor and lacked caution, prudence and discretion. He could see a +goal ahead and would lead the rush, but always failed to take into +his reckoning one circumstance in his youth that left a blot on his +escutcheon and placed in the hands of unfair opponents an envenomed +weapon ready for use. He failed to see the necessity of making +friends of his competitors and of placating his critics as he +progressed. Indeed, he reckoned these elements not at all. He made +many enemies and few allies. He never compromised. Naturally, he +met with disastrous defeat for himself and the loyal ones who +placed their faith in him. +</p> +</div> + +<p> +I disagree. I was not a fool. I refused to be a knave, and I am not +sorry. I have in mind a man of parts who as a stockholder has been +doing the dirty work of unscrupulous multimillionaire Wall Street +mining promoters for years. Dishonest in his expressed opinions and a +sycophant in his every action, the interest of the Wall Street man of +power is always his as against that of the unprotected investor. I look +upon this man as a vile person. I could not do as he does if my very +existence depended upon such conduct. I would rather be out of business +and broke for the rest of my life than be he. For me to serve the base +purposes of high-class crooks just because they have money and power, +would be for me to barter away my soul and lose my peace of mind. I +would not sell either for all the money in the world. +</p> + +<p> +Honesty is the best policy. The type of man I have described can not +thrive for long. He must evidently suffer total eclipse. The business +of this world is founded and builded upon individual integrity. The +business man who allows himself to be used to carry out the base +purposes of men in high places forfeits the respect of those whom he +serves, is forever afterwards mistrusted by them, and loses caste in +the very set he tries to gain favor with. +</p> + +<p> +I charge that powerful, dishonest interests on Wall Street found it +necessary for selfish reasons that I be put out of business. I declare +that they bided their time until newspaper clamor against so-called +Get-Rich-Quick promoters had been fostered, aroused and stimulated to a +point where citizens became imbued with the idea that all promoters who +use the advertising columns of newspapers are crooks. And I aver that +when the Government used upon me and my associates its rare power of +seizure, search and confiscation, it was with no evidence that any +Government statute had been violated. In this and the concluding +chapter of "My Adventures with Your Money" I state the facts which I +believe prove these statements to the last syllable. +</p> + + +<h3> +GOOD BIG FISH VS. BAD LITTLE FISH +</h3> + +<p> +Ask the casual newspaper reader to define offhand the compound +adjective Get-Rich-Quick and he will tell you it is applied solely to +professional promoters who employ flamboyant advertising methods, +promise great speculative profits, use other devices which are +calculated to separate the public from its money, and are in every +instance dishonest. That is the idea which powerful "interests" have +inculcated in the public mind by subtle, insistent press-agenting. +</p> + +<p> +Time and again during the progress of "My Adventures with Your Money" I +have endeavored to show that the really dangerous Get-Rich-Quick forces +are the men in high places who, by the artful and insidious use of the +news columns of "friendly" publications and others which copy from +them, divorce the public from millions upon millions. +</p> + +<p> +I said in my foreword the following: +</p> + +<div class="blockquote"> +<p> +The more dangerous malefactors are the men in high places who take +a good property, overcapitalize it, appraise its value at many +times what it is worth, use artful methods to beguile the thinking +public into believing the stock is worth par or more, and foist it +on investors at a figure which robs them of great sums of money. +There are more than a million victims of this practice in the +United States. +</p> +</div> + +<p> +No man has right to assume that a promoter who sells stock by means of +display advertising in the newspapers is <em>per se</em> a Get-Rich-Quick +operator. There are honest professional promoters of the display +advertising variety and there are dishonest ones, just as there are +honest promoters of the multimillionaire kind and dishonest ones. +</p> + +<p> +The <em>on-the-level</em>, trumpet-tongued mining promoter, who believes +in newspaper advertising and successfully finances companies by +appealing uproariously to the speculative investing public, performs an +actual service and is entitled to a place among honorable men. Indeed, +he is the hero of the prospector and "poor" mine owner of the West. He +alone stands between these men and grasping monopoly. +</p> + +<p> +Mine men, stockholders, and financiers the country over understand +this, although the Eastern newspaper-reading public has been taught to +believe that this type of promoter must be a Get-Rich-Quick operator. +</p> + +<p class="break"> </p> + +<p> +A broker in Wall Street who speculates in the securities of the New +York Stock Exchange for his own account is considered unsafe. E. H. +Gary, Chairman of the Executive Board of the Steel Trust, stated under +oath at Washington in June that J. P. Morgan never speculates. Ask the +average member of the New York Stock Exchange what chances the +stock-gambler has. If he is frank, he will shrug his shoulders and +reply something like this: +</p> + +<p> +"If the game could be beaten, do you think I would be a broker? +Wouldn't I be a player?" +</p> + +<p> +The aggregate market value of seats on the New York Stock Exchange is +nearly $100,000,000. It costs more than a hundred million dollars more +every year to gather and transact through offices and branch offices +the speculative business which forms the bulk of the transactions of +the members. The "kitty," or "rake-off," is enormous. Who pays it? You +hear of the stockbroker going to Europe in his yacht every Summer. How +many of his trading customers travel that way? +</p> + +<p> +Who pays the freight? Can a game be beaten where so many +multimillionaires are created among those who are on the "inside" and +where so large a percentage of the speculator's money must come out +every year to pay the enormous cost of maintaining a vast system of +stock-brokerage offices, stock exchanges, telegraph and telephone +wires, newspapers, publicity bureaus, yachts, Fifth Avenue palaces, +huge contributions to national and State political campaigns, etc.? +</p> + +<p class="break"> </p> + +<p> +You hear a hue and a cry against bucketshops. There is no Federal +embargo against bucketshopping. Yet somehow or other the machinery of +the Government's Department of Justice is used to crush out this sort +of gambling institution. Now, what is the difference in principle +between gambling on margin on fluctuations of stocks in a bucketshop +and doing the same through a New York Stock Exchange house? +</p> + +<p> +This is the unimportant difference: +</p> + +<p> +The bucketshop-keeper takes the other end of the play, pays you out of +his pocket when the market goes your way and keeps your money when it +goes against you. He never delivers any stocks. +</p> + +<p> +The New York Stock Exchange member is expected to buy your stocks for +you and <em>carry</em> them—some of them do and most of them don't, as +is shown farther on—but in this case also no stocks are delivered to +you. +</p> + +<p> +The transaction is the same in principle as the one in the bucketshop, +so far as the gambling feature is concerned. The only real difference +is that when you gamble on market fluctuations through the bucketshops +no contribution is made to the New York Stock Exchange "kitty." +</p> + + +<h3> +RIGHTEOUS WALL STREET AND THE "SUCKER" PUBLIC +</h3> + +<p> +The New York Stock Exchange member will tell you that the evil of +bucketshopping is that the bucketshopper is tempted when the public is +long on stocks to depress the market by heavy short sales. On the other +hand, the bucketshopper urges upon you that his business is gambling +against fluctuations which he has no hand in making and that the +financial powers of Wall Street resort to the same trick that he is +occasionally accused of. The "interests" know at every hour in the day +approximately how many shares of stocks have been borrowed for delivery +against "short" sales or are being carried on margin for the long +account. They know what the public's short interest or long interest +is, and they, too, have it in their power to shake out the public at +any moment they choose. Worse, it is common knowledge that this +practice is continually resorted to. Stocks are put up and held up on +bad news and marked down and held down on good news or no news at all. +News is withheld and is manufactured to suit occasions. For years the +market has been thimble-rigged to a frazzle. Margin-trading "suckers" +have been milked to a finish. George E. Crater, Jr., writes: +</p> + +<div class="blockquote"> +<p> +Margin trading on the New York Stock Exchange is the most dangerous +and destructive form of gambling known, because, being "legal" +and therefore "respectable," it allures hundreds of thousands of +people who would never think of risking their money at "faro," +"rouge-et-noir," "roulette," or any of the other games of chance. +Statistics show that more people are ruined physically, morally +and financially by stock gambling than by all the other forms of +ordinary gambling combined. Monte Carlo is a Christian philanthropy +compared with "Wall Street." You have quite as good, if not a +better chance to win a fortune at Monte Carlo than you have by +putting up "margins" against Stock Exchange bulling and bearing, +and if you ruin yourself at Monte Carlo the proprietor will at +least refund enough of your money to pay your way home. The man who +"goes broke" on "margins" finds no relief at his service on the +Stock Exchange or among the brokers. There would not be so many +millionaires in this country if there were not so many fools ready +to throw their money away on margins. +</p> +</div> + +<p> +A howl of condemnation is raised against horse-racing. Newspapers, +periodicals, politicians, enthusiasts, crusaders, and charlatans in +every walk of life, are encouraged to make a big noise. Horse-racing, +like bucketshopping, is an avenue for speculation—gambling—and it +keeps much money out of Wall Street. Fakirs, who are the tools of Wall +Street, collect from Wall Street for their services and at the same +time make moral or political capital of their zealousness in crusading +against such Wall Street gambling competition. +</p> + +<p> +The small fry mining promoter, who is not a member of the Stock +Exchange, pays no toll to the big game, is beyond the discipline and +control of the governing body of the New York Stock Exchange and is not +a part of the machinery, sets up a competitive business which caters to +the gambling instinct in the way of fluctuating mining stocks. The +speculating public gets action, likes it, and invests money that might +have been used in margin-trading on the New York Stock Exchange or for +"investment" in the constantly fluctuating low-priced industrials or +higher-priced mining stocks that are sponsored by big interests with +New York Stock Exchange affiliations. +</p> + +<p> +Promptly the machinery of Wall Street is used to crush him. Column upon +column is printed in the magazines and newspapers about +Get-Rich-Quicks. A conviction for crime is obtained of a real +Get-Rich-Quick offender—a little fellow who is guilty, but no more so +than his "licensed" brother higher up, who is doing infinitely greater +damage. The <em>one</em> that a coterie of high-class Wall Street +thimbleriggers are really "after," because he thwarted them in their +swindling operations by exposing them in his newspaper, but against +whom they can not make a case, has a skeleton in his closet. They bring +it forth, dangle it in the air, make the public think he, too, must be +a scoundrel, and he is raided by a Government agent during the uproar; +and they "get away" with it. The "righteous" crusade against +"Get-Rich-Quicks" is press-agented to the limit. The public "falls" for +the "dope." At last the Government has acted to protect investors! +</p> + +<p> +Wouldn't it wilt you? +</p> + +<p> +Were P. T. Barnum to be reincarnated and his hum-bugging mind by some +miracle expanded a million times, it would still be impossible for him +to conceive such a gigantic faking of the American public as it has +been put to in the last few years. +</p> + +<p> +And the public isn't "on." Shrewd schemers on Wall Street keep pulling +the wool over the eyes of the "sucker-public," and not only see no +reason why they should discontinue the practice but find it very +lucrative to continue doing it. +</p> + + +<h3> +THE MARKETING OF MINING STOCK +</h3> + +<p> +As a rule, it takes much money to make a paying mine out of a promising +prospect. Later on in the mine's progress, through the constructive +period, other very large sums are generally required to pay for the +blocking out of an ore reserve and to supply milling facilities for the +reduction of the ores. +</p> + +<p> +The peripatetic mining prospector of our Western mining empire—the +dauntless finder of mines who laughs at hardship and ridicules the +thought of danger, who makes companions of Gila monsters and the desert +rattler, whose only relief from the everlasting silence of the +untrodden reaches of arid wastes is the sex-call of the coyote—has the +choice of just two markets for the sale of his "find." He may either +accept a comparatively small sum from the agent of a powerful mining +syndicate for his prospect or he may receive a fair speculative price +from the professional promoter. +</p> + +<p> +The great mine financiers of this country rarely compete with one +another for the purchase of any mining property. This is particularly +true if one of the others happens to be operating in the district where +the small mine owner's property lies. +</p> + +<p> +As a rule, the original owner, whose entire fortune is perhaps tied up +in the property, then finds himself in the position where he must +either accept the first offer, however small, which is made to him by +one of these dominant interests, or find that market closed to him. +</p> + +<p> +His alternative, as mentioned, is a sale to the independent mine +promoter of comparatively small means, who incorporates a company to +own and develop the property and finances the operation from start to +finish by selling stock in the enterprise to the general public. +</p> + +<p> +The method of this class of professional promoter—the hope of the +small mine owner—in marketing stock, usually involves the liberal use +of the advertising columns of newspapers. He lacks "pull" or power +sufficient to get his stock and mine talked of favorably in financial +literature of the day to a degree that will excite public interest, and +so he must construct his own publicity forces. +</p> + +<p> +Advertising costs money and the public foots the toll. But if the +promoter is honest, this item of cost is not in itself an argument in +favor of stock offerings of the multi-millionaire mine capitalist who +does not patronize the display advertising columns of the newspapers. +Nor does it establish a case against the wares of the promoter who +does. The promotion expenses incurred by the advertising promoter do +not nearly approach in their totality the difference between cost price +and the price at which the magnate promoter usually invites the public +to participate in similar enterprises. +</p> + +<p> +For example: A few years ago a certain man bought a certain mine for +$1,000,000 on time payments. He has been making a market for the stock +of that mine on the New York Curb at an average of above $8 per share, +or more than $8,000,000 for the property. His firm, members of the New +York Stock Exchange, have been advising people in their widely +circulated market literature to buy the stock at this figure. And yet +the property is without a reduction works, will need $2,500,000 to +$3,000,000 in excess of money now in the company's treasury to erect +one, which money must yet be raised somewhere and somehow, and the +producing era of the company can not possibly begin for two years yet +at the very earliest. I could cite many such instances. +</p> + +<p class="break"> </p> + +<p> +When Nat. C. Goodwin & Company of Reno purchased the control of Rawhide +Coalition, during the exciting Rawhide camp boom early in 1908, the +valuation agreed upon for the property was $700,000. This was +considerably more than the original owners could obtain for it at that +time from any big interest. It, too, needed milling facilities. +</p> + +<p> +As a matter of fact, but for the success of mine promoters of the Nat. +C. Goodwin & Company and B. H. Scheftels & Company class, the great +Comstock lode, which produced over $600,000,000 in gold and silver +bullion, would have likely remained undeveloped. The big public demand +in the early 70's for Comstock mining shares of all descriptions was +created by a series of flamboyant flotations and aggressive +stock-market campaigns. If the Con. Virginia mine had not opened up +into a bonanza ore-body at a depth of 1,400 feet, the frenzy of +speculation in Comstock shares might have gone down in history as +another South Sea bubble. +</p> + +<p> +The "brass-band" promoter, be it understood, is therefore not without +honor in the Far West. Deprive the mine prospector of the services of +this style of enterprise projector, with his operating machinery, +namely, facilities for appealing to the speculating-investing public, +and you hit the small Western mine man a solar-plexus blow. Conversely, +every obstacle placed in the way of the mine promoter of loud methods +and moderate means is an added cause for rejoicing on the part of the +Wall Street multi-millionaire mine capitalist. +</p> + +<p> +When B. H. Scheftels & Company, with whom I was identified, were raided +by the United States Government in September, 1910, a wail went up from +the Western mine operator to his Representative in Congress. The best +sentiment of the Far West, as I was able to gather it, favored the idea +that the last hope of the small Western mine owner had been shattered. +During the short period of B. H. Scheftels & Company's activity in New +York it raised directly nearly $2,000,000 for Western mining properties +and indirectly influenced in that direction at least $10,000,000 more. +</p> + +<p> +The raid was a body-blow to the small Western mine owner who needs +capital to develop his properties and has no affiliations with +capitalists. Since the raid I do not know of a mine owner of any of the +great Far Western States who has successfully financed a mining +proposition in the East except by delivering his property in its +entirety into the hands of some big interest, which has taken it over +for a sum insignificant by comparison with what the public may +ultimately be expected to pay for it when the stock is finally marketed +on the curbs and exchanges. +</p> + + +<h3> +I BUCK THE WALL STREET GAME +</h3> + +<p> +After I had conducted the big camp publicity campaign of Rawhide, which +I had done with a view to centering the attention of the American +investing public on the speculative possibilities of the stock of the +Rawhide Coalition Mines Company, and in that way endeavored to finance +the proposition—after I had failed by this method, in the teeth of the +bankers' panic of 1907-8, to dispose of enough stock to finance the +company for deep mine development, mill equipment and the payment to +the original owners of the price for the control agreed upon, I came to +New York, late in October, 1908, bent on trying to succeed in the +encompassment of my original purpose both by direct appeal to the +public through display advertisements in the newspapers and by making a +deal for part of the enterprise with the "big" fellows. +</p> + +<p> +I found Rawhide Coalition stock listed on the Curb, and the market +quiescent. Public interest in the East had been aroused to some degree, +but the market was not absorbing stock. An effort to induce leading +stock brokers to mention the issue favorably in their market letters +failed. Those who were willing to give the stock some publicity exacted +either a "call" on stock at a low price or an out-and-out reduction +below the market quotation for such stock as they disposed of. +</p> + +<p> +Such concessions were not to be thought of. It was the intention of +Nat. C. Goodwin & Company to support a rising market for Rawhide +Coalition. My Goldfield experience with mining-stock brokers convinced +me that few might be expected to protect the shareholders' interest in +such an enterprise. Commission mining-stock brokers of that period, who +put their customers into a stock at, say, 30, were tempted to advise +profit-taking when the price advanced to, say, 50, because by the +operation they made another commission and often earned an additional, +or third, commission by getting their customers out of the stock at a +profit and into another one, levying a commission on each transaction. +</p> + +<p> +Nat. C. Goodwin & Company decided to "try it on" direct with +mining-stock speculators by appealing to them through the advertising +columns of the newspapers, asking them to purchase the stock on the New +York Curb through their own brokers. Also, Hayden, Stone & Company, the +Boston and New York banking firm, were induced to agree to raise +$1,000,000 for the company for railroad and mill purposes, if their +engineer would report favorably. +</p> + +<p> +Provided with money with which to buy advertising space and furnished +with stock certificates to supply the market, Nat. C. Goodwin & Company +inaugurated an active campaign on the New York Curb. +</p> + +<p> +What happened will be found instructive to the reader in several +particulars; among them these: +</p> + +<p> +(1) The free-lance mining promoter does not always "get the money" when +he succeeds in creating a buoyant market for his stock. +</p> + +<p> +(2) Some stock brokers of seemingly high standing would just as soon +"skin" a mining promoter of this order as they would an ordinary +speculator. They play no favorites. +</p> + +<p> +(3) Be a mine promoter ever so honest, without New York Stock Exchange +affiliations his motives are bound to be misconstrued if he makes an +error. The "big" fellows will sick on to him the newspapers or +newspaper men whom they control or influence. Dust will be thrown into +the eyes of the public so they'll buy the big fellow's wares, +principally for sale on the New York Stock Exchange, and may forever be +prejudiced against the little fellow's. +</p> + +<p class="break"> </p> + +<p> +The campaign in Rawhide Coalition made good progress. It was early in +November, 1908. For six weeks I had been supporting the market for the +stock on the New York Curb for Nat. C. Goodwin & Company of Reno. My +office was an apartment in a Fifth Avenue hotel; our brokers were +members of the New York Stock Exchange. For a month we had used, every +day, display advertisements in the financial columns of New York City +daily newspapers, signed by Nat. C. Goodwin, to boom the stock. About +600,000 shares of the stock were in the hands of the public. The +market, which was on the New York Curb, was "real." Speculative buying +had carried the price from 40 cents up to $1 a share. Mine reports were +rosy. Wide distribution of the stock was taking place. +</p> + +<p> +The public evinced deep interest. The Nat. C. Goodwin advertisements +set forth that $2 ought to look reasonable for the stock by Christmas +day. There were reasons. Several very promising mines had been opened +up. An engineer of high rank was examining the property. If his report +should be favorable, a deal was practically assured that would involve +the expenditure of $1,000,000 for deep mine development, a railroad, +and adequate milling facilities. This, in turn, would mean early +dividends for stockholders. Experienced, conservative mining men had +expressed the opinion that the property bore the unmistakable earmarks +of a big producer. +</p> + +<p> +The stock became the feature of the Curb market. It easily occupied the +center of the stage. Not less than 20 brokers could be counted in the +crowd executing orders at almost any hour during the daily session. The +fact that a New York Stock Exchange house was executing the supporting +orders from the "inside" impressed the "talent." Public buying through +other New York Stock Exchange houses further convinced Curb veterans +that the stock was "the goods." Up went the price under the impulse of +public buying. Curb brokers themselves caught the infection. By +December 7th the price soared to $1.40 per share. This was an advance +of 500 per cent. over the "low" for the stock of half a year prior. +</p> + + +<h3> +THE "DOUBLE-CROSSING" OF RAWHIDE COALITION +</h3> + +<p> +At the close of the day's business on December 7th, our brokers, a +single firm, members of the New York Stock Exchange, reported the +purchase of 17,100 shares in the open market at an average price of +about $1.39, and the sale of 1,800 shares at a little above this +average. For the first time in the campaign there appeared to be +selling pressure. We had quit "long" 15,300 shares. The sum of $21,000 +in cash was required to pay for the "long" stock. +</p> + +<p> +On December 8th, the day following, the same firm of brokers reported +that they had purchased 17,800 shares at an average price of $1.37½, +and the sale of 12,800 shares at an average price of $1.40—"long" on +the day 5,000 shares. +</p> + +<p> +On December 9th our purchases through this firm aggregated 16,800 +shares at an average price of $1.40, while our sales totalled only +6,400 shares at a slight advance. +</p> + +<p> +Nat. C. Goodwin & Company were now "long" on the three days' +transactions 30,700 shares and had been called upon to throw $43,000 +behind the market to hold it. This was a comparatively small load to +carry and did not alarm us. We considered the stock worth the money. We +were curious, however, to learn the reason for the selling. +</p> + +<p> +Nat. C. Goodwin & Company had placed most of the outstanding stock +direct from Reno with the investing public at from 25 cents to $1 per +share, and early buyers were reaping a harvest. But this did not appear +to be the explanation for all of the selling. Interest in the stock was +now widespread. There was free public buying and for every actual +profit-taker there appeared to be a new purchaser. Apparently, somebody +was selling the stock "short." +</p> + +<p> +Late that night a member of our brokerage firm which had been executing +our supporting orders, called on me at my apartment. I inquired of him +what protective orders he thought the stock would need the next morning +to guard against professional attack. He replied: +</p> + +<p> +"I think if you will give us a buying order for 5,000 shares at $1.35 +there will be no difficulty." +</p> + +<p> +My understanding was that he wanted to handle the market for me the +next morning and that he would, of course, give me quick notice if +further supporting orders were needed. +</p> + +<p> +The order was given. It was a very ordinary precaution, for there is +hardly a stock on the list that would not be raided by professionals if +supporting orders were not known to be in the market. As Saturday is +only a short two hours' session, I really fell in with the idea. +</p> + +<p> +Retiring late that night, I left a call for 11 <span class="smc">A.M.</span> Next +morning at about 10:45 I was awakened by my valet. He said Nat. C. +Goodwin wanted me on the long distance. Mr. Goodwin was in Cincinnati, +where he was playing a week's engagement. +</p> + +<p> +"Hello," said Mr. Goodwin. "Did they get you? Shall I wire the +Knickerbocker Trust Company to pay you $25,000 to support the market? +Reported here they have you in a hole." +</p> + +<p> +"What's up?" I inquired. +</p> + +<p> +"Why, brokers here say the stock broke to 60 cents on the Curb soon +after the opening," he said. This was news to me. +</p> + +<p> +"I do not need more money," I answered. "I have been asleep. Our +brokers have been on the job. I will see what is doing and let you know +in a little while. Don't worry." And I rang off. +</p> + +<p> +I 'phoned our brokers and they reported that they had bought 5,000 +shares of stock at $1.35 at the opening and had withdrawn support. "Too +much stock was pressing for sale," they said. +</p> + +<p> +"This is hell. You should not have permitted the market to break that +way. Support the stock!" I said. "Buy 7,500 shares at the market!" +</p> + +<p> +In a few moments this firm of brokers reported that they had rallied +the market to $1.16. The recovery was only temporary, however. Another +drive broke the stock to 60 cents. +</p> + +<p class="break"> </p> + +<p> +Our brokers had bought 7,000 shares at from $1 to $1.16 and then +stopped. The member of their firm who had been handling our orders +throughout this campaign said the purchase of this fresh block of stock +exhausted our cash balance on deposit with his firm. They had a number +of drafts out for collection, attached to stocks sold to Western +brokers, that had not yet been credited to us. There was also a big +block of Coalition stock due us from them. This was the stock they had +bought on our supporting orders. They refused, however, to consider +either the drafts or the stocks as a credit. +</p> + +<p> +We had cash on deposit and credit with a number of other brokers. I +promptly telephoned several of them to buy large blocks of the stock at +a limit of 95 cents. This was 35 points above the quotation that was +given me. Not a single share was reported bought on these orders. +</p> + +<p> +I jumped into a taxi and rode to the office of the brokers who had been +handling our orders. +</p> + +<p> +The situation was critical. I realized fully that a sharp break of this +character in the market price of a stock that had been so widely +exploited must prove shocking to investors. I feared that public +confidence would be shattered completely. +</p> + +<p> +"This is an outrage!" I protested. "Buy 5,000 shares at 95!" I tendered +five $1,000-bills as payment in advance. +</p> + +<p> +It was five minutes to twelve when I gave the order. At noon they +reported that they had purchased 2,000 shares, for which I gave them +the money. The market closed 95 bid for a "wagon load." +</p> + +<p> +On the face of things it appeared that the market had rallied from 60 +to 95 on the purchase of 2,000 shares. This was another convincer that +there must somewhere be much that was rotten about the play. +</p> + +<p> +Investigation satisfied me that I had been "double crossed." +</p> + +<p> +The one firm of brokers, members of the New York Stock Exchange, who +had been handling our orders, had acted as our clearing-house, holding +our stocks and our money. They had an advantage, which stock brokers +understand well. Having executed most of our supporting orders, their +agents on the Curb were also in a position accurately to judge the +professional and lay speculation pulse. It was easy for somebody to +"put one over" on us. +</p> + +<p> +Shortly after noon I learned that Hayden, Stone & Company's engineer +had turned down the proposition of advancing $1,000,000 for railroad +and mill construction. A sufficient tonnage of ore had not been blocked +out in the mine. Beyond a question this information was in the +possession of brokers early in the day. +</p> + +<p> +While I slept damage had been done to the market that was irreparable. +By the time the price hit $1 on the way down trading had reached huge +proportions. One clique of Curb brokers were reported to have been +persistent sellers throughout. Their identity made it very plain that +the double-crossing process had been employed to a fare-you-well. +</p> + +<p> +I accused our broker of not protecting our interests—the interests of +stockholders. I raised a howl. He telegraphed another member of his +firm who was away on a hunting-trip, to come back to town. Next night +both of these men, Nat. C. Goodwin and myself met in my apartments +behind closed doors. Their firm agreed to charge to their own account +3,000 of the 5,000 shares reported purchased for us at $1.35. Some +other minor concessions were made. +</p> + +<p> +On the day after the "break" New York newspapers reeked with +sensational flubdub about the causes of the smash in the price of the +stock. In the preceding few months not less than a dozen other +securities had "busted" wide open at various times on the New York Curb +and New York Stock Exchange, but Stock Exchange houses were sponsors +for these and the newspaper kept mum. Never on these occasions was +there a hint in the newspapers that possibly somebody had separated the +public from its money. +</p> + +<p> +Nat. C. Goodwin and I were wrongfully accused of willfully smashing the +market to shake the public out. The New York <cite>Sun</cite> printed an +account of the "break" on the front page, top of last column. It began +in a strain that indicated to confiding readers that chorus girls had +lost their savings through the recommendations of Mr. Goodwin. +</p> + +<p> +The <cite>Sun</cite> printed the list of officers of the Rawhide Coalition +Mines Company and emphasized the fact that I "of Sullivan Trust Company +fame" was second vice-president. +</p> + +<p> +The <cite>Sun</cite> made no mention of the "double cross." Nor did any of +the other newspapers, with the exception of one. +</p> + +<p> +The New York <cite>Tribune</cite> said: +</p> + +<div class="blockquote"> +<p> +A Stock Exchange house which has been putting out orders in the +stock was charged with leading the attack on it yesterday, but +members of the firm said that they had been acting merely as +brokers for customers in the regular order of business. +</p> +</div> + +<p> +Following the newspaper "roasts," which helped further to destroy +public confidence, two brokers on Logan & Bryan's continental wire +system resorted to tactics of a kind to force lower prices. This wire +has over one hundred out-of-town broker connections. A report was sent +over the wire that Nat. C. Goodwin & Company had failed. Another +followed it that the Rawhide Coalition Mines Company was about to go +into the hands of a receiver. The <cite>Nevada Mining News</cite> accused +Nat. Boas of San Francisco and J. C. Weir of New York of exchanging +messages to this effect over the Logan & Bryan wire systems, so that +all correspondents on the wire would have the false reports. Both Boas +and Weir were believed to be "short" of the stock. Both were openly +operating for a further decline. These and similar tactics resulted in +a further easing off in price to 40 cents bid on December 24th, which +was the "low" on the movement. +</p> + +<p> +Two weeks after Christmas the stock rallied to 58 bid, 59 asked, and +the market was firm again. On January 14 the price bulged to 70. At +this point the stock again became the center of attack. By January 20 +the price had eased back to 50. +</p> + +<p> +Thus far the net result of Nat. C. Goodwin & Company's various +campaigns on Rawhide Coalition was the distribution of some 600,000 +shares of stock. The issue had been well exploited. It had a big +following and a broad market. Some excellent judges of mine values had +become stockholders. The company, however, was still unfinanced for a +long period of systematic mine development and mill construction. +</p> + +<p> +We realized very clearly that some arrangement would have to be +perfected to avoid a repetition of the trouble which the New York Stock +Exchange brokerage firm had made us. +</p> + + +<h3> +"INSIDE" MARKET SUPPORT +</h3> + +<p> +The removal to New York of B. H. Scheftels & Company, Chicago stock +brokers, representatives there of Nat C. Goodwin & Company of Reno, and +a merging of brokerage and promotion interests of the two firms took +place. +</p> + +<p> +There was precedent for the move. There are a thousand other +corporation interests in this country that are closely affiliated with +Stock Exchange and other brokerage houses, through one or more of their +directors or owners being partners in the business. As a matter of +fact, it would be difficult to lay your finger on a single big interest +of this kind that has not such a representation. These houses, of +course, make it a rule to recommend the purchase of stocks in which +their principals are interested. Affiliations of this kind are found +essential to successful financing of enterprises. A number of New York +Stock Exchange houses which are headed or controlled by men who are +heavily interested in mining ventures that require financing are +exponents of this method in the mining field. +</p> + +<p> +Most of these have succeeded in promoting projects in which they or +their associates are heavily interested, with the aid of the banking +and brokerage facilities thus afforded. Principally by the use of the +market literature and accompanying market manipulation, these houses +have placed with their customers the securities of their firm members +and associates. They have encompassed this by maintaining a brokerage, +banking and promotion business without parading before the public, +although never denying, the mixed nature of their business. +</p> + +<p> +For the reader to comprehend the necessity for transacting the business +this way, he should understand the underlying principle of financing an +enterprise by the route of the listed stock market. +</p> + +<p> +There are two ways of financing any enterprise with other people's +money. One is by the primitive method of appealing directly to the +public for subscriptions in huckster fashion, taking the money and then +refraining from listing the stock or establishing an open market for +it. You can't finance an enterprise of consequence these days by any +such procedure. It is practically impossible to borrow from banks or +from loan-brokers on any security that has no fixed market value. A +market must be established, for without a market on which to sell, +intelligent investors won't buy. +</p> + +<p> +The method, therefore, in common use, and the only one which has been +found effective by financiers, is to create a demand for the security, +encourage speculation, establish an active market, and dispose of stock +on the market as necessity demands whenever financing is required. This +implies and necessitates that the inside interests must support the +security in the open market. Therefore, it becomes necessary for the +successful marketing of the stock by the promoters, once a demand is +created and public buying is under way, that stockholders shall be kept +in full touch with the latest transpirations on the property and in the +market—be furnished with news concerning their interests so that they +may judge the value of their stockholdings. This process is +particularly essential during the financing period of the company and +the security-digesting period of the public. +</p> + +<p> +In fine, the ultimate purpose in this regard of all the promotion +machinery of Wall Street—the machinery that has been putting out +billions of dollars' worth of securities to investors—is to place +stock where it will "stay put," that is, not come out on the open +market again to embarrass the interests that are behind the enterprise, +and who for a long period are compelled to support the market. +</p> + +<p> +On the question of the ethics of market support by "the inside," a +whole tome could be written. I will not attempt to discuss the subject +at length here. Suffice it to say that in my opinion "inside" support +of a listed security is not base when it is done with a view to +creating a broad market, to stimulate public interest, and to increase +the price to a point within the bounds of intrinsic plus reasonable +speculative worth. Support of the market to the point of stimulation is +moral obliquity, however, when dishonestly performed for the sole +benefit of the "inside" and to the hurt of the stockholder. This sort +of market support is only a shade less reprehensible than manipulation +that has for its purpose the reduction of the market price of a +security to beneath its real value, which, in my opinion, is nearly +always infamous. +</p> + +<p> +I might place myself on record right here to the effect that only once +did I ever "bear" a stock from "the inside," and on that occasion it +was a temporary affair, caused by a desire to secure at a reduced price +a big block of stock that was pressing for sale from a quarter that I +was under no obligation to. Even in that instance I gave the investor +much of the benefit my associates secured by letting him have stock at +the same figure at which "the inside" secured it. Nor have I ever tried +to push the price of a stock to a higher level than that which I +considered warranted by the reasonable speculative and demonstrated +intrinsic value behind the security. +</p> + + + + +<h2> +<a name="X"> </a> +CHAPTER X +<br><br> +<span class="smallsc">Enter, B. H. Scheftels & Company</span> +</h2> + + +<p> +B. H. Scheftels & Company, Incorporated, mining-stock brokers, +successors to B. H. Scheftels & Company, for many years stock brokers +in Chicago, opened its doors on Broad Street, New York, on January 18, +1909. For a long period B. H. Scheftels & Company of Chicago had been +advertised as the Eastern representatives of the corporation of Nat. C. +Goodwin & Company of Reno, of which Mr. Goodwin had been president. It +was now announced that Nat. C. Goodwin had become vice-president of the +new corporation of B. H. Scheftels & Company. Because Mr. Goodwin was +by profession an actor and not a stock broker and because of the +personal abuse he suffered in unfair newspaper criticism which followed +the "break" in the market price of Rawhide Coalition a month before, he +was quite willing to serve as vice-president instead of president. +Besides, he could not spare the time from his profession to attend +closely to the business. +</p> + +<p> +The new corporation of B. H. Scheftels & Company made its bow to the +public by at once featuring in its market literature advice to purchase +stock of the Rawhide Coalition Mines Company. I became publicity +manager for the Scheftels corporation, manager of its promotion +enterprises, and was placed in charge of the protection of the +corporation's interests in all markets where its stocks were traded in. +</p> + +<p> +Soon I was conducting a fresh campaign with investors that became so +hot, so exciting and so big that for nineteen months I labored on an +average sixteen hours a day, including Sundays, without being able to +complete in a single day a day's accumulated business. The business +grew until B. H. Scheftels & Company were actually spending more than +$1,000,000 annually for office and publicity expenses. In the nineteen +months of its existence it bought, sold and delivered approximately +15,000,000 shares of mining stock. The Scheftels corporation broke +every record in this regard that was ever made by a mining-stock +brokerage and promotion house in the history of Wall Street. Throughout +its career it was viciously attacked from many directions, but it held +its own. Through its hold on the mining-stock speculating public, who +were getting fairer treatment than ever before, it survived the +concerted onslaughts of a number of important interests which it had +competed with and antagonized, until one day in September, 1910, on a +warrant sworn to singly by one George Scarborough, since permitted to +resign, clothed with the office and power of a special agent of the +Department of Justice, its offices were raided, its books and papers +seized, its property confiscated, and its officers and employees +arrested. +</p> + +<p class="break"> </p> + +<p> +The annual expense of B. H. Scheftels & Company was $1,000,000 or more. +</p> + +<p> +Follows a tabulated statement of the expense item. The figures are +approximated. The books of the corporation, which are now in the +possession of the Department of Justice of the United States +Government, will probably show that the annual expense was larger. The +books not being readily available, an attempt is made here to be +ultra-conservative in setting down figures: +</p> + +<p class="ctr"> +ANNUAL EXPENSE OF B. H. SCHEFTELS & COMPANY +</p> + +<table summary="Annual expense"> +<tr> +<td>Establishment of main office and six branch offices +(furniture, fixtures, etc.)</td> +<td>$</td> +<td class="r">40,000</td> +</tr> + +<tr> +<td>Office rentals</td> +<td class="r" colspan="2">35,000</td> +</tr> + +<tr> +<td>Private wire system connecting branch offices in +six cities with New York</td> +<td class="r" colspan="2">25,000</td> +</tr> + +<tr> +<td>Telephones</td> +<td class="r" colspan="2">5,000</td> +</tr> + +<tr> +<td>Telegraph tolls</td> +<td class="r" colspan="2">100,000</td> +</tr> + +<tr> +<td>Salaries (all offices)</td> +<td class="r" colspan="2">200,000</td> +</tr> + +<tr> +<td>Daily and Weekly Market Letter (printing and +postage)</td> +<td class="r" colspan="2">100,000</td> +</tr> + +<tr> +<td>General office expense, etc.</td> +<td class="r" colspan="2">100,000</td> +</tr> + +<tr> +<td>Miscellaneous postage</td> +<td class="r" colspan="2">25,000</td> +</tr> + +<tr> +<td>Miscellaneous printing and stationery</td> +<td class="r" colspan="2">25,000</td> +</tr> + +<tr> +<td>Advertising, publicity, etc.</td> +<td class="r" colspan="2">200,000</td> +</tr> + +<tr> +<td>Expert accountants</td> +<td class="r" colspan="2">15,000</td> +</tr> + +<tr> +<td>Commissions and salaries to Curb brokers</td> +<td class="r" colspan="2">50,000</td> +</tr> + +<tr> +<td>Mining examinations, engineers' fees, legal fees, +etc.</td> +<td class="r" colspan="2">50,000</td> +</tr> + +<tr> +<td>Interest charges</td> +<td class="r" colspan="2">30,000</td> +</tr> + +<tr> +<td class="indent">Total</td> +<td>$</td> +<td class="overline">1,000,000</td> +</tr> +</table> + +<p> +Before the Scheftels corporation was in business a month it became +plain that it was "filling a long-felt want." In almost every branch it +was performing some function in a manner more satisfactory to +mining-stock speculators and investors than were its competitors. +</p> + +<p> +Its Market Letter news service, usually 16 pages, was the prime +article. It soon gained a circulation of 34,000 among the highest class +and best informed stockholders of mining companies in the country. It +was also regularly sent to more than 2,500 stock brokers, including +members of the New York Stock Exchange, New York Cotton Exchange, +Boston Stock Exchange, New York Produce Exchange, etc. +</p> + +<p> +Before the Scheftels corporation was five months old the work of its +Market Letter was supplemented by the <cite>Mining Financial News</cite>, a +weekly newspaper which had been published for a long period at Reno as +the <cite>Nevada Mining News</cite>, latterly as the <cite>Mining Financial +News</cite>, and which removed to New York when the Scheftels company +found the mining-stock public was hungry for real live news and the +truth regarding the mining propositions of other States as well as +those of Nevada. The <cite>Mining Financial News</cite> and the Scheftels +Market Letter, which were published three days apart, were supplied +with news from practically the same sources. The newspaper was mailed +to all readers of the Market Letter. +</p> + +<p> +The ablest and most reliable mining correspondents obtainable for money +in Tonopah, Goldfield, Ely, Rawhide, Cobalt, Butte, Globe and other +mining camps, and the most experienced market news-gatherers in the +mining-stock-market centers of Salt Lake, San Francisco, Boston, +Philadelphia, Toronto and New York, were placed on the pay-roll. +Brokers in these and other cities, including Duluth, Seattle and Butte, +supplied more news. +</p> + +<p> +Wherever there was mining or market activity, representation of the +very highest character was sought. News was always wired, no matter +what the cost, whenever it was important to traders in mining shares. +Expense was never spared when the information was considered of value +to the speculator or investor. In the New York offices of the Scheftels +corporation and the <cite>Mining Financial News</cite>, which adjoined each +other, a staff of newspaper men with a mining financial experience of +years was gathered. Little that transpired in the mines or the markets +ever got away from them. Days before the mining newspapers of the West +reached the East the Scheftels Market Letter or the <cite>Mining Financial +News</cite> communicated the news regarding mine developments. They also +contained a daily and weekly stock-market diagnosis and prognosis. +These were based on the news, as gathered by trained forces and aided +from time to time by secret information which filtered into the +offices. This service soon obtained an accuracy theretofore unknown on +the Street. +</p> + +<p> +There is probably not one stock broker in five hundred that would know +a mine underground if he saw one. On the pay-rolls of B. H. Scheftels & +Company and the <cite>Mining Financial News</cite> there were thirty men who +had been literally brought up in the mines and who, when they put their +pen to paper, knew what they were writing about. The Scheftels company +and the newspaper furnished mine and market information of quality to +investors who had before been inundated with misinformation, guesses +and twaddle. It sought to guide mining-stock speculators right. +</p> + +<p> +It was really a delicate job to handle the <cite>Mining Financial News</cite> +in a manner which would not lead stupid people to believe that it was +an entirely independent paper. It was desirable that its independence +be maintained to a degree, so that the full value of the <cite>Mining +Financial News</cite>, as a property, might grow. The intention was some +day, when the <cite>Mining Financial News</cite> found itself on a paying +basis, to sever the Scheftels alliance. +</p> + +<p> +The <cite>Mining Financial News</cite> had always been an entity. It had up +to then been assisted financially at periods by mining promotion +concerns with which I had been identified and was always a quasi +house-organ for this reason. But it invariably preserved a certain +independence in its news columns and at least such partial independence +of ownership as enabled it to stand on its own bottom. +</p> + + +<h3> +MORE TRUTH ON THE "MINING FINANCIAL NEWS" +</h3> + +<p> +WHEN the <cite>Mining Financial News</cite> removed to New York Mr. Scheftels +used much persuasion to get the owners to transfer title to the +Scheftels company. Admittedly, if the Scheftels company could boast +ownership of the newspaper at the head of its editorial page, it would +be a great feather in the Scheftels cap and might lead investors to +think that an organization which could own and publish a first-class, +metropolitan newspaper of the <cite>Mining Financial News</cite> variety must +for that reason alone be worthy of financial credit. +</p> + +<p> +Thompson, Towle & Company, members of the New York Stock Exchange, +print a small sized pattern of such a newspaper, called the <cite>News +Letter</cite>. Hayden, Stone & Company, and Paine, Webber & Company, of +Boston and New York, are said to have much influence with the <cite>Boston +News Bureau</cite>, a newspaper which features news of mines and mining +share markets. The <cite>Boston News Bureau</cite> at times has printed no +display advertisements and at other times has. It is considered by +Boston mining-stock brokers who handle the Michigan and Arizona copper +securities as a necessary complement to their market literature. +<cite>Walker's Copper Letter</cite> and the <cite>Boston Commercial</cite> are +other examples. <cite>Walker's Copper Letter</cite>, which carries no +advertising, for years has said the very nicest things about copper +securities promoted and fathered by important Boston and New York +interests. Needless to state, what <cite>Walker's Copper Letter</cite>, the +<cite>Boston Commercial</cite> and the <cite>Boston News Bureau</cite> say about +the mining propositions of their friends is as a rule based on fact. +The point is that promoters find it necessary that news happenings +regarding the markets, the securities and the mines in which they are +interested be given broad publicity. +</p> + +<p> +It was the idea of the owners of the <cite>Mining Financial News</cite>, of +which B. H. Scheftels, president and 25 per cent. owner of the capital +stock of B. H. Scheftels & Company, was not one, that anybody who would +supply the sinews while the paper was getting on its feet and was +establishing itself, was entitled to all the publicity which the paper +could consistently and honestly give it. With this understanding the +Scheftels company assumed to take all of the income of the <cite>Mining +Financial News</cite> and pay all of the running expenses until such +period as the newspaper might become self-sustaining. +</p> + +<p> +In doing so it performed a stupendous service to the entire mining +industry in that the space devoted to the Scheftels enterprises therein +did not average more than one-eighth of the whole, and it spent dollars +to supply the news of all stocks where other mining financial +publications in its field spent pennies. +</p> + +<p> +To make sure that the public understood the <cite>Mining Financial +News</cite> was the quasi house-organ of the Scheftels company many +precautions were taken. No application was made for admission to the +mails as second-class matter, and the paper was mailed under one and +two-cent postage. The name of Harry Hedrick was lifted to the top of +the page as vice-president of the corporation owning the <cite>Mining +Financial News</cite>, Mr. Hedrick being openly employed by the Scheftels +company as head of its correspondence department. My own name was later +placed at the head of the editorial page as editor, the Scheftels +company making no bones about my position as absolute head of its +publicity department, its promotion enterprises, and of all markets for +the Scheftels promotion stocks. The connection had before been +established even closer than this. I had formerly been advertised as +vice-president of Nat. C. Goodwin & Company of Reno and vice-president +of the Rawhide Coalition Mines Company; and the Scheftels company had +advertised that Nat. C. Goodwin was its own vice-president. +</p> + +<p> +Further, the Scheftels company announced in its market literature that +it had selfish interests in protecting the market for the stock because +of the Nat. C. Goodwin affiliation. Occasionally market articles under +the signature of B. H. Scheftels were published on the front page of +the <cite>Mining Financial News</cite>. Whenever anybody made a request for +the Scheftels Market Letter a copy of the <cite>Mining Financial</cite> News +was quite regularly mailed to him without cost. Articles under the +signature of other officers and employees, formerly of Nat. C. Goodwin +& Company of Reno and later of B. H. Scheftels & Company of New York, +were very frequently printed in the <cite>Mining Financial News</cite>. +</p> + +<p> +Probably the most important reason why the Scheftels company made this +sort of arrangement with the <cite>Mining Financial News</cite> was that it +could do so with only a very small additional outlay. The Scheftels +company found it necessary to employ correspondents in all mining and +market centers, and the same correspondents could work for both +enterprises. Another economic argument was that an enormous saving +could be made in telegraph tolls, all dispatches addressed to the +newspaper being sent at press rates. These dispatches were always +available to the Scheftels corporation and its clientele. +</p> + +<p class="break"> </p> + +<p> +It was the idea of the Scheftels organization that the mining-stock +investing public sorely needed right direction and that any brokerage +house which led it right would soon be unable to transact all the +business that would be offered to it. +</p> + +<p> +And that is just what happened. Before the Scheftels company was six +months old the fifteen men in its accounting department were compelled +to work day and night—time and again throughout the night until 6 +<span class="smc">A.M.</span>—to catch up with their work. +</p> + +<p> +If the Scheftels news service was as nearly perfect as money and brains +could make it, its facilities for the execution of orders on the New +York Curb, the Boston Curb, San Francisco Stock Exchange, Salt Lake +Stock Exchange, Toronto Stock Exchange, and other mining markets were +unsurpassed. Its New York and Boston offices were connected with branch +offices in Philadelphia, Chicago, Detroit, Milwaukee and Providence by +exclusive private wires, and the service to out-of-town offices was +almost instantaneous. +</p> + +<p> +The New York offices were located right in front of the Curb market on +Broad Street on the ground floor of the big <cite>Wall Street Journal</cite> +building, 50 feet by 200 feet deep—occupying about 10,000 square feet +of floor space. The Boston office, occupying two floors, was located +within 100 feet of the Curb market in that city. The public wires of +the telegraph companies gave quick service between San Francisco, Salt +Lake and Toronto, where business was transacted through members of the +mining-stock exchanges of those cities. The private wires of the +Scheftels company were constantly flooded with rapid quotations and +market, mine and company news during every trading hour. In New York +the Curb brokers in the Scheftels employ, some on salary and some on +commission, rarely numbered less than ten and at one period exceeded +twenty. +</p> + +<p> +The correspondence department was presided over for a long period by +two of the best posted mining-market men that could be employed for +money. From this department were usually graduated the managers of +out-of-town offices. In the cashier's cage six men were engaged at an +average salary of above $100 a week, registering stocks, receiving +stocks, paying money and drawing checks. The payroll of the mailing +department, which was operated in conjunction with the <cite>Mining +Financial News</cite>, was comparatively small. Money-saving machinery for +the handling of the large output of market letters and newspapers gave +excellent and economic service. About ten stenographers were regularly +employed in the correspondence department. Occasionally, when a special +effort was being made to interest the public in some security in which +the corporation was particularly concerned, a force of forty additional +typists was pressed into service for short periods. +</p> + + +<h3> +THE SCHEFTELS PRINCIPLES +</h3> + +<p> +When the corporation of B. H. Scheftels & Company opened its doors in +New York it had no affiliations with any other Wall Street interests. +It had no axes to grind except its own. It was practically a +free-lance. It cracked up its own wares, careful always to keep within +the facts, and never minced words about the quality of the goods of its +contemporaries. The principle of both the Scheftels corporation and the +<cite>Mining Financial News</cite> was to be always <em>right</em> in their +market forecasts. The general order to mine and market news-gatherers +and market prognosticators was to <span class="smc">GIVE THE FACTS</span>. +</p> + +<p> +The law laid down was this: If the news is bad and is likely to injure +the interests of our best friends, tell it in the interests of the +investor. If it is good and the backers of the stock affected happen to +be our worst enemies, tell it. No matter on what side of the market you +think B. H. Scheftels & Company is committed in any of its own +speculations, give the customer all the news. Put the cause of the +mining-stock trader in front of you as the one to further always. Never +exaggerate. Eventually, this policy must redound to our credit and +profit. +</p> + +<p> +<em>Eventually, this policy resulted in our ruin. Our truth-telling +policy was directly responsible for the loss of millions to competing +promoters, and they banded together to destroy us.</em> +</p> + +<p> +The publicity, promotion and brokerage activities of the corporation +were of such magnitude, and withal so simple, that they at once +challenged the attention of the Street. Before the Scheftels +corporation was half a year old veterans of the financial game began to +opine that some big interest was behind the concern. Its dashing market +methods, its mighty publicity measures and its unbridled assurance +attracted much notice. From every quarter expert views reached the +Scheftels company that its manner of doing things was convincing on the +point that it knew the business. But the general opinion of the talent +seemed to be that the new corporation was spending too much money and +that it could not win out unless a big boom in mining shares ensued. +</p> + +<p> +The market tactics adopted by the Scheftels company in its promotion +enterprises were as old as the hills. On the New York Stock Exchange +they had been employed in a thousand instances before. The method will +probably survive all time. The corporation sought to distribute the +stocks of which it became sponsor in turn—first Rawhide Coalition, +then Ely Central, later Bovard Consolidated and finally Jumbo +Extension—by the approved Wall Street system of establishing public +interest and inquiry and causing an active market. The aim was to +establish higher prices for the securities, always within the bounds of +intrinsic and reasonable speculative value. All efforts were directed +this way. +</p> + +<p> +Plans like this are, however, sometimes thwarted. Markets get sick. +More stock presses for sale than the "inside" has money to pay for. +Stocks break in price. Then the promoter can't make any money and might +lose a lot of it. Since money-making is his primary object, and stock +distribution secondary, he has got to do some close figuring when +markets are subject to the price-breaking habit. That's where B. H. +Scheftels & Company, through its brokerage business, found, after a +short period, that it held within its grasp the power to insure itself +against declining markets. +</p> + +<p> +Without promotion stocks on hand—obtained by wholesale at lower +figures than values warranted—in which it could profit to the extent +of hundreds of thousands of dollars on a rising market, the +million-dollar annual expense of the Scheftels company would not have +been justified. Once the market sought lower levels and no profit could +be made on the promotions, it meant a discontinuance of the business on +the large scale. +</p> + +<p> +The corporation's insurance was the open market in stocks on the +general list and its brokerage business. +</p> + +<p> +From time to time it openly shorted tens of thousands of shares of +stocks in which it had no promoter's interest whatever, by going out in +the open market and selling them to all bidders against future +delivery, by borrowing them from brokers and selling them for immediate +delivery, and by short sales generally. +</p> + +<p> +Speculators play the market and so did the Scheftels company, but never +against its own stocks. Speculators, however, buy mining shares +outright or on margin because they want to gamble. The Scheftels +company played the market for just the opposite reason. It didn't want +to carry its eggs in one basket and wanted insurance against market +declines to cover promotion losses that must ensue if a general market +slump occurred. +</p> + +<p> +And the Scheftels company did not inaugurate any fake bookkeeping +system or otherwise hide behind any bushes in doing this. +</p> + +<p class="break"> </p> + +<p> +Moreover, the corporation didn't take advantage of anybody. The cards +were not marked. The deck was not stacked. There was no dealing from +the bottom. Market opinion for which the corporation was directly or +indirectly responsible was genuine to the last utterance. No news was +suppressed on any stock. The corporation divulged to its customers and +to the general public every piece of important outside or inside +information regarding any stock on the general list that was in its +possession. At the very moment when it was going short of stocks in +greatest volume its market prognostications were winning for it a +reputation for accuracy never before recorded. +</p> + +<p> +If the stocks which the corporation went short of—stocks on the +general list and amounting to probably 15 per cent., of the volume of +its entire business, the remainder of the transactions being all in +"house" stocks (these "house" stocks it could not be short of because +of its promoter's options on hundreds of thousands of shares)—if the +stocks on the general list thus "shorted" went up in price and the +corporation was compelled to go into the market later and "cover" at a +great loss, it was always in the corporation's heart to sing a pæan of +thanksgiving, for it could well afford to pay the losses sustained by +it in the general list out of the greater profits which would be made +in the "house" stocks, which must, forsooth, share in the general +upswing. +</p> + +<p> +Collateral securities put up by customers as margin for the purchase of +other stocks were credited to the customers' accounts and mixed with +the company's own securities. In every case proper endorsement of +certificates, put up for collateral margin, was required. Every +certificate of stock bears on the reverse side a power of attorney, in +blank. The signature thereto of the person to whom the certificate was +issued makes it negotiable by the broker. It was the rule of the house +always to inform those who brought collateral to the offices for margin +that the stocks would be used and that they would not receive the +identical certificates back again. In a number of cases objection was +made. Acceptance of the stock as collateral margin was then promptly +refused. If there were any scattering exceptions to this rule, it was +contrary to instructions and due to neglect or ignorance. Whenever a +customer closed his account and demanded the return of his collateral, +stocks of the same description and denomination were recalled and +delivery made. +</p> + +<p> +The same rule applied to stocks pledged with the corporation for loans, +it being specifically set forth in the promissory note which the +borrower signed that the privilege of using the stock was granted to +the lender. +</p> + +<p> +This practice is so common and the rule so generally understood by +mining-stock traders that objection was rarely made by customers. +</p> + +<p> +To test the general custom, a friend at my suggestion not long ago sent +certificates of stock to 17 stockbrokers now doing business on Wall +Street. Three of these were members of the New York Stock Exchange and +14 were members of the New York Curb, Boston Curb, or of a mining +exchange. A letter substantially as follows was sent to each of the 17: +</p> + +<div class="blockquote"> +<p> +Enclosed please find <span class="keeptogether">......</span> shares of +<span class="keeptogether">......</span> stock to be used as collateral +margin for the purchase of an additional block of <span +class="keeptogether">......</span> shares. Please buy at the market and +report promptly. +</p> +</div> + +<p> +The 17 orders were executed by the 17 individual houses. A month later +when the stock ordered purchased had advanced in the market, the +following letter was sent to each of the 17: +</p> + +<div class="blockquote"> +<p> +Please sell the <span class="keeptogether">......</span> shares of <span +class="keeptogether">......</span> stock which you purchased for me a +month ago at the market and return to me the certificate of stock which +I sent you as collateral with check for my profits. +</p> +</div> + +<p> +It took nearly two months for all of the 17 to make delivery. When they +did, not one of them returned the same certificate that had been put up +as collateral. +</p> + +<p> +Don't be shocked, dear reader, at this disclosure. It is the +<em>custom</em>. +</p> + +<p> +And don't, please, think mining-stock brokers are alone given to the +general practice. If you order the purchase of a block of stock on cash +margin from any New York Stock Exchange house or send a certificate of +stock as collateral in lieu of cash to one of them for the purchase of +more stock, you will receive a confirmation slip of the trade which +will generally read something like this: +</p> + +<div class="blockquote"> +<p> +We reserve the right to mix this stock in our general loans, etc. +</p> +</div> + +<p> +That is, the right is reserved, and actually exercised, of immediately +transferring ownership of the certificates to the broker. +</p> + +<p> +Unless a certificate stands in a customer's name and is unendorsed by +him, he has no control over it. According to law, a broker has a right +to hypothecate or loan securities or commodities pledged with him, for +the purpose of raising the moneys necessary to make up the purchase +price, and such stocks have no earmarks. In other words, the customer +is not entitled to specific shares of stock, so that stocks bought with +one customer's money may be delivered to another customer. +</p> + +<p> +As for the Scheftels company laying itself open to the charge of +bucketshopping in "shorting" stocks, such a possibility was never +dreamed of. The penal law of the State of New York, sections 390 to +394, inclusive, is the only criminal statute covering market operations +commonly known as bucketing and bucketshops. In each section and +subdivision it is provided that where both parties intend that there +shall be no actual purchase or sale, but that settlement shall be made +on quotations, a crime has been committed, the language of the statute +being, "wherein <em>both parties</em> thereto intend, etc.," or "where +<em>both parties</em> do not intend, etc." The Scheftels company was +never a party to any such arrangement. And it always made it a practice +to make delivery of stocks ordered purchased within a reasonable period +after the customer had paid the amount due in full. +</p> + +<p> +Now, neither myself nor the Scheftels corporation is responsible for +brokerage conditions as they exist, nor for the laws as written. Custom +and practice are responsible. The purpose here is to communicate the +exact nature of the business methods of the Street as I found them and +to lay particular stress on those that are open to criticism. +</p> + + +<h3> +THE SCHEFTELS COMPANY AGAINST MARGIN TRADING +</h3> + +<p> +The Scheftels company did not encourage margin trading by its +customers. In fact, it railed against the practice. Time and again the +<cite>Mining Financial News</cite>, editorially, denounced the business of +margin trading. The Weekly Market Letter of the corporation sounded the +same note. On several occasions, in large display advertisements +published in the newspapers, the Scheftels company decried the practice +and urged the public to discontinue trading of this character. +</p> + +<p> +There were selfish reasons for this. In the marketing of its promotions +the Scheftels company found that not more than 20 per cent. of the +public's orders for these stocks given to other brokers were being +executed, or, if executed, that the stocks were at once sold back on +the market, the brokers or their allies "standing" on the trade. +</p> + +<p> +Had the Scheftels company been able to destroy the practice by its +campaign of publicity, it would undoubtedly have been able, during the +nineteen months of its existence, successfully to promote three or four +times as many mining companies as it did, and its profits would have +been fourfold. +</p> + +<p> +It, however, appealed to the public in vain. Loud, frequent calls to +margin traders to pay up their debit balances and demand delivery of +their certificates, which would compel every broker to go out in the +market and buy the stocks he was short to customers, failed miserably. +</p> + +<p> +The lesson of this experience was that the speculating public did not +"give a rap" whether their brokers were short of stocks to them or not. +All they wanted, apparently, was to be assured that when they were +ready to close their accounts, their stocks, their profits or their +credit balances would be forthcoming. +</p> + +<p> +What is the evil of short selling of the kind described herein? The +only evil that I could ever discover was that the market is denied the +support which the actual carrying of the stock is calculated to afford. +This hardship weighs heaviest on the promoter. There appears to be no +cure. Even if a broker does buy the stock and does not himself sell it +out again, there is no law that denies him the right to borrow on it or +loan it to somebody else. And it is to the interest of the broker, +because he gets the use of the money, to loan the stock always. Stocks +are rarely borrowed by anybody except to make deliveries on short +sales. +</p> + +<p> +What about the broker who doesn't execute his order at all but "stands" +on the trade from the beginning and sells the stock "short" to his own +customer, delaying actual purchase until delivery is demanded? This +practice is even less damaging to the customer than the one of actually +executing the buying order for the customer at the time the order is +given and then selling the stock right back on the market again for the +account of the broker or his pal—the usual practice when the object of +going short is sought. When a broker buys stocks in the market he must +bid for them, and actual purchase generally means a higher cost price +to the customer than that at standing quotations. +</p> + +<p class="break"> </p> + +<p> +The rule of the Street is to charge the customer interest on all debit +balances. When a broker lends to a "short" seller a stock which he is +carrying for his customer, he is paid the full market value, as +security for its return. In that case the broker ceases to incur +interest charges for the customer, and is actually able, in addition, +to lend out at interest the cash marginal deposit put up by the +customer. +</p> + +<p> +Maybe you think, dear reader, that a broker who charges his customer +interest at the rate of six per cent. per annum on money which he has +ceased to advance is crooked. Very well. If that be so, then all +members of the New York Stock Exchange must be labelled "crooks." Here +is how it works, even among the highest class and most conservative +members of that great securities emporium: +</p> + +<p> +John Jones orders the purchase by his broker of 1,000 shares of Steel +on margin. He pays down 10 per cent. of the purchase price. Mr. Jones +receives a statement at the end of the month charging him with interest +at the rate of six per cent. per annum, or more if the call-money +market is higher, on the 90 per cent. of the purchase price advanced by +the house. +</p> + +<p> +On the same day that the order of John Jones is received, William Smith +orders the same house to sell short 1,000 shares of Steel at the +market. This order is also promptly filled. Thereupon the broker uses +the 1,000 shares of Steel, which he bought for the account of John +Jones to make delivery through the Clearing House for the account of +William Smith. Sometimes a fictitious William Smith is created, known +as "Account No. 1," "A. & S. Account," "E. Account," etc. This is +usually done when a broker wants to hide from his bookkeepers that he +or an associate is taking the other end of the customer's trade. +</p> + +<p> +The broker is out no money, yet he charges Mr. Jones the regular rate +of interest on his debit balance. As a matter of fact, too, the stock +bought for Mr. Jones is never even delivered to his broker. The +Clearing House, because of the "short" sale, steps in and delivers it +to the broker to whom it is due "on balance." +</p> + +<p> +Custom and practice cover a multitude of remarkable transactions—don't +they? +</p> + +<p> +You have the framework of the Scheftels structure and of its Wall +Street environment outlined in this chapter. Some of the narrative is +undoubtedly "dry-as-dust," but its recital has appeared to be necessary +to enable the lay reader properly to interpret the chronology of +stirring events which forms the concluding installment. +</p> + +<p> +In the foregoing I have endeavored to lay bare many practices that are +common to Wall Street. Wherever I have laid them at the door of B. H. +Scheftels & Company, I have given that corporation much the worst of +it, because in the recital I have omitted to mention a multitude of +happenings that were creditable to an extreme to the Scheftels company. +Most of these had to do with the experiences of the Scheftels company +as publicity agents and promoters. Its wide-open publicity and +promotion policy called forth the ire of influential Wall Street +pirates and caused the "pressure" at Washington which resulted in the +Federal raid of the Scheftels offices. +</p> + +<p> +I have reserved this dramatic series of events for my last chapter. +</p> + + + + +<h2> +<a name="XI"> </a> +CHAPTER XI +<br><br> +<span class="smallsc">A Fight to the Death</span> +</h2> + + +<p> +In professional quarters the Scheftels corporation was regarded as an +interloper from the day it set foot in the financial district. +</p> + +<p> +Its first offense was to reduce its commission rates. This move set the +whole Curb against the enterprise. But as the play progressed it proved +to have been unimportant in comparison to the unspeakable crime of +telling the truth about other people's mining propositions that were +candidates for public money. The Scheftels corporation had laid it down +as a set rule that an established reputation for accuracy of statement +was a great asset for any promoter or broker to have. To gain such +prestige the principle was followed in the nation-wide publicity which +emanated from the house that, no matter whom the truth hurt or favored, +it must be told always, when publishing information regarding the value +of any listed or unlisted security. Space in the Scheftels Market +Letter or the news columns of the <cite>Mining Financial News</cite> was +unpurchasable. +</p> + +<p> +The enforcement of this rule was a wide departure from prevailing +methods. But that didn't make us hesitate. Having felt the speculative +pulse for years, I knew its throb. The public, after losing billions of +dollars, were becoming "educated." The rank and file of mining +promoters—high and low—in Wall Street still believed that "one is +born every minute and none dies." But I and my associates didn't. An +uneducated public had been unmercifully "trimmed" in scores of +enterprises backed by great and respected names. Speculators were +ravenous for the truth. We decided to give it to them. We gave it to +them straight. +</p> + +<p> +This publicity system brought about the ruin of the Scheftels +corporation through the powerful enemies it made. The policy was right +all the same. Persisted in, nothing was or is better calculated to +strengthen the demand for all descriptions of meritorious securities. +The Scheftels corporation was the pioneer in the exploitation of this +principle as a fundamental and underlying basis of brokerage and +promotion. In pioneering this policy, however, the Scheftels company +was sacrificed to the prejudices and wrath of the old school of +promoters. +</p> + + +<h3> +THE FIRING OF THE FIRST GUNS +</h3> + +<p> +Before the Scheftels corporation was on the Street three months it +almost came a cropper. On the strength of excellent mine news it +purchased nearly 300,000 shares of Rawhide Coalition in the open +market, up to 71 cents per share. A determined drive was made against +the stock by mining-stock brokerage firms which had sold it short. +Bales of borrowed stock were thrown on the market by the crowd +operating for the decline. The Scheftels company took it all in. +Letters and telegrams were sent broadcast by market enemies urging +stockholders to sell. A powerful clique had been losing big sums on the +rise. +</p> + +<p> +The Scheftels company published advertisements calling upon margin +traders to demand delivery of their certificates. This expedient proved +of small utility. The brokers continued to hold off deliveries to +customers and sold and delivered to us all the stocks that they could +borrow or lay hands on. The continued selling finally made inroads on +the Scheftels corporation's cash-reserve to a point that forced it one +day to stand aside and leave the market to the sharpshooters. That day, +in a few hours, approximately half a million shares of Rawhide +Coalition changed hands out of a capitalization of 3,000,000 shares. +The corporation's loans were called. This forced it to throw large +blocks of stock on the market. A sharp break ensued. That was just what +was wanted by the interests which were gunning for us. They covered +their short sales at great profit. +</p> + +<p> +In the midst of the mêlée the Scheftels company tendered a Stock +Exchange house of great prominence, which had loaned it for the account +of a Salt Lake firm of brokers $12,500 on 50,000 shares of Rawhide +Coalition, the money to take up the loan. A representative of the Stock +Exchange house sheepishly stated that his firm had loaned part of the +pledged stock to out-of-town brokers. He asked for time. Under threat +of dire consequences the Stock Exchange firm bought stock back from us +in the open market that afternoon to supply the deficiency, and then +made delivery of this stock back to us in lieu of that which they had +parted with. It had been specifically stipulated by the Scheftels +company when the loan was made that the certificates must be held +intact and that the stock must not be loaned out or sold while the +money loan was in force. +</p> + +<p> +This experience was repeated frequently during the Scheftels career on +the Curb. It cost B. H. Scheftels & Company more than one million +dollars, during the nineteen months of its existence, in giving loyal +market support, in times of "professional" attack, to the stocks it had +fathered or promoted and felt moral responsibility for. +</p> + +<p> +Time and again the Scheftels company found among stocks delivered to +it, against purchases made in the open market, the identical +certificates it had pledged with loan-brokers as collateral for loans, +and which had been hypothecated by it with the specific proviso that +the certificates were not to be used. It opened our eyes to one of the +most commonplace practices, not only on the Curb, but also on the Stock +Exchange. Hardly a failure occurs on any of the Exchanges or on the +Curb that does not reveal customers' certificates, which were +originally pledged with the understanding that they were not to be +"used," in the strong-boxes of others. +</p> + +<p> +The first grievous offense of the publicity forces of the Scheftels +corporation against Wall Street's "Oh-let-us-alone" promotion combine +was a wallop in April and May, 1909, through the Scheftels market +literature, at Nevada-Utah. +</p> + +<p> +The combination which owned control took with bad grace the strictures +on the property. We heard an awful underground roar. At that time the +price of Nevada-Utah stock was around $3. The Scheftels Market Letter +said that there was probably not 30 cents of share value behind the +property. The price immediately began to crumble. It has been +tobogganing ever since. The stock at the beginning of September of this +year was quoted at 37½ to 50 cents. +</p> + +<p> +Such a thing as printing facts which would enlighten stockholders and +the public as to the actual value and condition had not before been +heard of when such enlightenment ran contrary to the plans of strongly +entrenched promoters on the Street. +</p> + +<p> +The campaign against Nevada-Utah, therefore, directed widespread +attention to B. H. Scheftels & Company and the <cite>Mining Financial +News</cite>. +</p> + +<p> +Following the Nevada-Utah disclosure, the Daily Market Letter and the +Weekly Market Letter of the Scheftels corporation and the <cite>Mining +Financial News</cite> took a good, strong, husky "fall" out of the La Rose +Mines Company, capitalized for $7,500,000. The La Rose owns one of the +greatest producing mines in the Cobalt silver camp. A market scheme was +in progress, with La Rose as the medium, and W. B. Thompson, of +Nipissing fame, as a chief manipulator. We called a halt to the game +when the price reached a "high" of $8.50, and saved the public a huge +sum of money. Under our campaigning the stock declined to $4, a +decrease of $6,750,000 in the market value of the capitalization. This +made W. B. Thompson and his associates the implacable enemies of the +Scheftels company and myself. We didn't worry much. We were catering to +the public. Indeed, we were pleased with our work. +</p> + +<p> +Following this incident, the Scheftels Market Letter and the <cite>Mining +Financial News</cite> took a smash at a mining-stock deal in which W. B. +Thompson and the Guggenheims were jointly interested. It was the now +notorious Cumberland-Ely-Nevada Consolidated merger. Later the merger +was enlarged and took in the Utah Copper Company, or rather the Utah +Copper Company took in the others, and the Scheftels propaganda found +another opportunity to do a great service for the stockholders of +Nevada Consolidated. +</p> + +<p> +Our attack hurt the Guggenheim reputation among investors all over the +country and contributed to reduce their influence over the large +stockholding body—more than 6,000 men and women—of Nevada +Consolidated. Though finally successful, the Guggenheims were sore from +the lashing and exposures to which they had been subjected. As for the +Scheftels company and the <cite>Mining Financial News</cite>, they had still +further established the honesty and value of their publicity service. +</p> + +<p> +A market scheme to balloon the price of Ray Central Copper Company +shares to several times their value was a precious enterprise against +which we trained our publicity guns and fired several effective +broadsides. The effort of the promoters to connect with the public +purse here would not have been half so sensational if men of lesser +prominence were identified with the operation. In our "bear" publicity +on this one we minced no words. In doing so we again hit another +powerful interest—the Lewisohns. +</p> + +<p class="break"> </p> + +<p> +Later the exposure by the <cite>Mining Financial News</cite> and the +Scheftels Market Letter of market manipulations of the +Lewisohn-controlled Kerr Lake still further "endeared" the members of +these two organizations to that powerful faction, and more closely +cemented the ties of fellowship between the ruling powers. +</p> + +<p> +Keystone Copper, another Lewisohn "baby," was put through its courses +on the Curb while Kerr Lake was being played in a stellar rôle. The +deal in Keystone was an unobtrusive little thing, but awful good as far +as it went from the one-sided point of view. I turned the searchlight +of publicity on Keystone. +</p> + +<p> +The Scheftels Market Letter and <cite>Mining Financial News</cite> +disclosures in the interests of speculators and investors regarding +Nevada-Utah, La Rose, Cumberland-Ely, Nevada Consolidated, Utah Copper, +Ray Central, and Kerr Lake were sensational enough, but they by no +means included all of the work in this line. During 1909 this publicity +literature took in practically every important mining company whose +shares were traded in on the New York Curb. The unpleasant truths these +forces were obliged to tell from time to time touched the delicate +sensibilities of many leading lights on the Street. These had grown +accustomed to an unvarying diet of sweets. +</p> + +<p> +It would seem that their appetite for saccharine provender would have +become cloyed and that a change would be a grateful relief. It was not. +The truth was distasteful. It interfered with the noble industry of +mining the public and it cut down the profits of that end of the game. +In keeping up the record of day-by-day market and mine developments +these publicity agents punctured many a rainbow-tinted balloon. Very +frequently they gave to the public its first definite and intelligent +idea of real value behind promotions and in properties. Where market +prices represented an overplus of hopes and expectations the truth was +told. The aim was to take mining speculation out of the clouds and +plant its feet firmly on earth. +</p> + +<p> +In this laudable effort we ran counter to the plans of the mighty. We +also violated the vulgar unwritten rule of some of the Wall Street +fraternity—"never educate a sucker." Our publicity work caused a +readjustment of judgment and market values, besides those already +mentioned, on such stocks as First National, Butte & New York, Trinity +Copper, Micmac, Ohio Copper, United Copper, Davis-Daly, +Montgomery-Shoshone, Goldfield Consolidated, Combination Fraction, +British Columbia, Granby, Cobalt Central, Chicago Subway, and sixty to +eighty others. +</p> + +<p> +The live wires of our publicity service blistered the flesh of the +Guggenheims, the Thompsons and the Lewisohns, and perturbed their +widely diffused affiliations, connections and allies, including John +Hays Hammond, J. Parke Channing, and E. P. Earle; also Charles M. +Schwab, E. C. Converse, B. M. Baruch, United States Senator George S. +Nixon, George Wingfield, Hooley, Learned & Company, many other New York +Stock Exchange houses, a group of powerful corporation law firms, a +noted crowd of influential politicians, Curb stockbrokers who had grown +fat executing manipulative orders for the "inside," bankers who carried +on deposit the cash balances of the mining companies, and even J. P. +Morgan & Company, who were partners of the Guggenheims in their Alaska +ventures and were for a time said to be meditating a merger of the +copper companies of the country with those controlled by the +Guggenheims as a nucleus. +</p> + + +<h3> +THE STORY OF ELY CENTRAL +</h3> + +<p> +By keeping speculators out of stocks that were selling at inflated +prices, the Scheftels corporation and the <cite>Mining Financial News</cite> +became endeared to a great popular moneyed element. The public was +saved huge sums of money. +</p> + +<p> +This, however, only carried out the negative end of a grand idea. The +affirmative demanded that the Scheftels corporation must put its +followers into a stock or stocks where they could actually make money. +</p> + +<p> +The Scheftels corporation was on the eager lookout for a genuinely +high-classed copper-mining proposition. It found what it was looking +for in Ely Central, a property that is sandwiched in between the very +best ground of the Nevada Consolidated, is bordered by the Giroux and +occupies a strategic position in the great Nevada copper camp of Ely, +birthplace of what is probably the greatest lowest-cost porphyry copper +mine of America. +</p> + +<p> +By invading the Ely territory as promoter and annexing Ely Central, the +Scheftels corporation committed what was probably, to the interests +among whom our publicity work had wrought greatest havoc, an +unpardonable crime. We butted into the very heart of the game, and +became a disturbing factor in their mining operations. +</p> + +<p> +The Ely Central property consists of more than 490 acres. Years before, +in the early days of the camp, it had been passed over by the +geologists and promoters who selected the ground for the Nevada +Consolidated, Giroux and Cumberland-Ely, because it was covered by a +non-mineralized formation called rhyolite. As development work +progressed and the enormous value of the surrounding mines was +disclosed, it dawned on their owners that they might have made a +mistake and that it would be just as well to obtain possession of the +Ely Central property. +</p> + +<p> +The ground was especially valuable to the Nevada Consolidated, if for +no other reason, as mere acreage to connect up and make compact the +properties owned by them. The second demonstration of their bad +judgment was the fact that, having planned to mine the Copper Flat +ore-body by the steam-shovel method, they overlooked the value of the +Ely Central property as affording them the only practical means of +access to the lower levels of that pit for operation by the steam +shovels. +</p> + +<p> +Investigation had disclosed to me that the evidence which had been +adduced by mine developments on neighboring properties was all in favor +of copper ore underlying the Ely Central area. The rhyolite, which +covered Ely Central, was a "flow," covering the ore, and not a "dyke," +coming up from below and cutting it off. +</p> + +<p> +Why was the property idle? Inquiry revealed that the Ely Central Copper +Company was $89,000 in debt, and that a pre-panic effort to finance the +corporation for deep mine development had failed. The panic of 1907-8 +had crimped the promoters and they could not go ahead. +</p> + +<p> +The Scheftels corporation entered into negotiations with the Pheby +brothers and O. A. Turner, who held the control, for all the stock of +the Ely Central company that was owned by them. During the progress of +negotiations, early in July, 1909, I heard that the Guggenheims and W. +B. Thompson were very much put out to learn that the Scheftels company +was about to finance the company. They had belittled the value of the +property, as would-be buyers are prone to do the world over. +</p> + +<p> +Before I entered upon the scene the Pheby brothers had found themselves +objects of persistent and mysterious attacks. Their credit was assailed +in every quarter and they found themselves ambushed and bushwhacked in +every move they made. They were forced into a position where it was +believed they would accept anything that might be offered them for +their interest in Ely Central. As fate would have it, the Scheftels +company entered the race at this psychological moment. +</p> + +<p> +Summed up, the Scheftels company actually contracted for 1,280,571 +shares out of 1,600,000, which represented the increased capitalization +for a total sum of $1,158,916, or at an average price of 90½ cents +per share. The time allowed for the payment of all the money was nine +months, stipulated payments being agreed upon at regular intervals in +between. The immediate effect of the arrangement was this: A dormant +property, in debt and lying fallow, was metamorphosed into a going +concern with good prospects of soon becoming a proved great copper +mine, with an assured income to defray the expenses of deep mine +development on a large scale, and a market career ahead of it that +might be expected to match any that had preceded it in the Ely district +from the standpoint of public interest. +</p> + +<p class="break"> </p> + +<p> +During the progress of the negotiations the stock sold up to $1 per +share. The selling for Philadelphia account of a large block of stock +in the open market dropped the price back, of a sudden, to 50 cents. +The Scheftels company bought stock on this break and urged its +customers to do likewise. On the day the deal was concluded the market +had rallied to 75 cents. Fully six weeks before the deal was arranged +the Scheftels Market Letter and the <cite>Mining Financial News</cite> had +begun to urge the purchase of the stock. The Scheftels organization was +not hoggish. The establishment was willing that the public should get +in on the cellar floor. There were nearly 300,000 shares outstanding, +which the Scheftels corporation had not corralled in its contract. +</p> + +<p> +Readers of the Market Letter and the <cite>Mining Financial News</cite> fell +over one another to get in on the good thing. Therein they were wise. +By early September the price had advanced in the market to $1. The +Scheftels publicity was strong in favor of the stock. But it had not +yet put on full steam. It was waiting for an engineer's report to make +doubly sure it was right. +</p> + +<p> +Col. Wm. A. Farish, a mining engineer of many years' experience and a +man with a high reputation throughout the whole of the Western mining +country, had been sent by the Scheftels company to make a report on the +Ely Central. Years before Colonel Farish had reported on the Nevada +Consolidated properties and outlined the very methods now being used +for recovering its ores. But Colonel Farish had been ahead of his time, +and the capitalists in whose interest he was acting were not prepared +for such a radical step in advance of the then-existing methods, nor to +believe that copper ores of such low grade could be mined at a profit, +especially 140 miles from the nearest railroad. Times and conditions +changed, and the 140 miles were spanned by a well-equipped rail +connection. +</p> + +<p> +Colonel Farish's opinion verified our fondest expectations. The report +set forth that the mine possibilities of Ely Central were nearly as +great as those of the Nevada Consolidated itself. On the basis of this +report, which was made in September, the project acquired a new +significance. Development operations were undertaken to prove up the +ground in an endeavor to demonstrate the existence of the 33,000,000 +tons of commercial porphyry ore which Colonel Farish indicated in his +report would likely be found within the boundaries of the southern part +of the Ely Central property. +</p> + +<p> +The prospect fairly took the Scheftels organization off its feet. We +were dazzled. We saw ourselves at the head of a mine worth $25,000,000 +to $40,000,000. No time was lost in organizing a campaign to finance +the whole deal. Having no syndicated multi-millionaires to back it up, +the Scheftels corporation went to the public for the money, the same as +hundreds of other notable and successful promoters had done. The +ensuing publicity campaign to raise capital has been described in +hundreds of columns of newspaper space as one of the most spectacular +ever attempted in Wall Street. +</p> + +<p> +I had absolute faith in the great merits of Ely Central, a faith that +has not been dimmed in the slightest degree by the vicissitudes through +which the company, the Scheftels corporation, and myself personally +have passed. Within thirteen months the Scheftels corporation caused to +be spent for mine development more than $150,000, and on mine and +company administration an additional $75,000. When the Scheftels +company was raided by the Government on September 29, 1910, and a stop +put to further work the expenses at the mine had averaged for the nine +months of that year above $15,000 a month. Work was going on night and +day. Every possible effort was being made to prove-up the property in +short order. Core-drills sent down from the surface had already +revealed the presence of ore at depth, and I am sublimely certain that +another month or two would have put the underground air-drills into +contact with a vast ore-body identical in quality and value with that +lying on either side in Nevada Consolidated acreage. +</p> + +<p> +Ely Central was the New York Curb sensation in 1909-1910. I used the +publicity forces which had been so successful in protecting the public +against the rapacity of multi-millionaire mining-wolves to educate them +up to the speculative possibilities of Ely Central. +</p> + +<p> +Up went the price. Between the first of September and the middle of +October the market advanced to $2 3-8. On October 13th advices reached +us that 30 per cent. copper ore had been struck in the Monarch shaft. +The Monarch is an independent working, far removed from the area that +is sandwiched in between the main ore-bodies of the Nevada +Consolidated. We were highly elated. The prospect looked exceedingly +bright to us, and there was no longer any hesitation in strongly +advising our following to take advantage of an unusually attractive +speculative opening. +</p> + +<p class="break"> </p> + +<p> +The market boomed along in a most satisfactory way. By October 26th the +price reached $3; on November 3d it was $4 a share, and three days +thereafter $4¼ was paid. +</p> + +<p> +The expenses of the Scheftels company on publicity work at this time +amounted to about $1,000 a day. Money for mine development on Ely +Central was being spent as fast as it could be employed. We were trying +to sell enough stock at a profit over the option price to defray the +publicity expenses, keep the mine financed, and meet our payments on +the option, but no more. We were not making any effort to liquidate on +a large scale, a fact which was reflected in the advancing quotations. +</p> + +<p> +When the price of Ely Central hit $4 in the market, the Scheftels +company rated itself as worth from $3,000,000 to $4,000,000. I had +visions of leading the Guggenheims and Lewisohns and Thompsons up the +Great White Way with rings in their noses. Nat. C. Goodwin, who had a +25 per cent. interest in the Scheftels enterprise, enjoyed similar +visions, only his fancy ran to building new theaters for all-star +casts. +</p> + +<p> +While Ely Central stock was going skyward and all the speculating world +was making money in it, our publicity forces were busily driving the +bald facts home regarding La Rose, Cumberland-Ely, Nevada-Utah and +other pets of the mighty. Our batteries never let up for a moment. +These various attacked interests were getting ready to strike back. If +their movements had been directed by an individual general they could +not have worked with more community of interest. One day the sky fell +in on us. The plans had been beautifully laid for our complete ruin. +That we escaped utter annihilation was almost a miracle. +</p> + +<p> +On Wednesday, November 3d, the result of our market operations on the +New York Curb was that we quit long on the day nearly 8,000 shares of +Ely Central at an average price of $4. On the same day our customers +ordered the purchase of nearly twice as much stock as they ordered +sold. This indicated to us that the Curb selling was professional. +There was nothing very remarkable about this performance because +brokers doing business on the Curb very frequently play the market for +a fall. +</p> + +<p> +On Thursday, the day following, the Scheftels company was again +compelled to purchase stock on the Curb in excess of sales to the +extent of 7,600 shares, while on the same day the buy orders of house +customers exceeded their orders to sell at least three to one. The +professional selling was now accompanied by rumors on the Curb which +spread like the smell of fire that trouble of some dire sort was +pending for the Scheftels company. Most of this emanated from an +embittered brokerage quarter and we paid little attention to it. +</p> + +<p> +On the succeeding day, Friday, November 5th, the professional selling +was quieted to a point that compelled the Scheftels company to go long +of only 6,600 shares on the day in its Curb market operations. The +purchase of so small a block of stock excited no suspicion in the +Scheftels camp, although it should have, because Scheftels' customers +on this day purchased more than four times as much stock as they +ordered sold, pointing conclusively to a great public demand and much +shorting by professionals. +</p> + +<p> +Then came the <em>coup de main</em>. +</p> + + +<h3> +THE ASSAULT ON ELY CENTRAL +</h3> + +<p> +The 6th day of November fell on a Saturday. The New York <cite>Sun</cite> of +that morning published under a scare head a vicious attack on the Ely +Central promotion. The attack was based on an article which was +credited in advance to the <cite>Engineering & Mining Journal</cite> and +appeared in the <cite>Sun</cite> ahead of its publication in that weekly. The +<cite>Sun</cite> had been furnished with advance proofs. The Ely Central +project was stamped as a rank swindle. Everybody identified with it was +raked over and I, particularly, was pictured as an unprincipled and +dangerous character, entirely unworthy of confidence and at the moment +engaged in plucking the public of hundreds of thousands. It was stated +that the Ely Central property had been explored in the early days of +the Ely camp and found of no value whatsoever from a mining standpoint. +The Scheftels corporation was accused of setting out in a cold-blooded +way to swindle investors on a bunco proposition. +</p> + +<p> +I was in my apartment at the Hotel Marie Antoinette at 9 <span class="smc">A.M.</span> +when I read the <cite>Sun's</cite> story. The Scheftels company had thrown +$85,000 behind the market during the three preceding market days to +hold it against the attack of professionals. +</p> + +<p> +I called the Scheftels office on the 'phone and gave instructions that +a certified check for $40,000 be sent to Wasserman Brothers, members of +the New York Stock Exchange, with orders to purchase 10,000 shares of +Ely Central at $4<span class="smaller">1/8</span>, which was the +quotation at the close on the afternoon before. Orders to buy 15,000 +shares more at the same figure were distributed among other brokers. The +single order was given to Wasserman Brothers because I thought it good +strategy. They are a house of undoubted great responsibility and it +seemed to me that their presence in the market on the buying side would +have an excellent tonic effect. +</p> + +<p> +During the two hours' session I held the 'phone, receiving five minute +reports from the scene of action. Mr. Goodwin was at my side. At ten +minutes to twelve the brokers had reported the purchase, on balance, of +24,225 shares. Had they purchased 675 shares more they would have +completed the orders that were outstanding and it would have been up to +me to decide whether to lend further support or not. By that time my +figures showed that the Scheftels corporation had thrown behind the +market $200,000 in four days to hold it and I was beginning to have +"that funny feeling." During the last few minutes of the Saturday Curb +session the selling ceased and it seemed that possibly my fears were +unfounded. +</p> + +<p> +On Sunday, the 7th, my hopes went a-glimmering. All the New York papers +featured scathing articles, using as authority the <cite>Engineering & +Mining Journal's</cite> attack, which had appeared on the previous +afternoon. Dispatches indicated, too, that the papers of Boston, +Chicago, Los Angeles and San Francisco had played it up on the front +page as the most shocking mining-stock scandal of the century. +</p> + +<p> +By Monday, the whole country had been plastered with the sensation. Of +course my early Past, all of which was a family affair and had +transpired fourteen years prior, long before I essayed to enter the +mining promotion field, was dragged out of the skeleton-closet. It lent +verisimilitude to the stories. +</p> + +<p> +After reading the Sunday newspapers, I grasped the meaning of the move +and marshalled our forces. It was plain that we had been marked for the +sacrifice. It looked as though we hadn't a chance in a million of +weathering the onslaught if we lent the market further support. There +were about 500,000 shares of Ely Central in the public's hands, and, +without close to $2,000,000 in ready cash to throw behind the market, +we could not be certain of staying the tide. We didn't have anything +like that sum. Personally I did not give up the fight, but the outlook +was mighty blue. +</p> + +<p> +All day Sunday trusted clerks of the Scheftels company worked on the +books, making a statement of the "stop-loss" orders and +"good-till-cancelled" orders of customers. On Monday morning the +newspapers contained aftermath stories of the <cite>Engineering & Mining +Journal's</cite> arraignment. The air was surcharged with the impending +calamity. +</p> + + +<h3> +THE CLASH OF BATTLE +</h3> + +<p> +With a line of defense carefully outlined, I approached the fray. +First, the Scheftels corporation placed with reliable brokers written +orders to sell at the opening the stocks that were specified in the +stop-loss and good-till-cancelled orders of customers. Not an order to +sell a share of inside stock was given. It was also decided not to +place any supporting orders until after the market opened and it could +be determined with some degree of accuracy what the volume of stock +amounted to that was pressing for sale. +</p> + +<p> +Just before the market opened I could see from my office window a dense +crowd of brokers assembled around the Ely Central specialists. Although +ominously silent, they were struggling for position and were tensely +nervous. It was plain that the over-Sunday anti-Scheftels newspaper +publicity had racked Ely Central stockholders and created a panicky +movement to liquidate, which was about to find vent in violent +explosion. It was evident that the Scheftels corporation would have to +conserve every resource if the day was to be saved. +</p> + +<p> +The market opened. Instantly there was terrific action. Hundreds of +hands were waving wildly in the air. Everybody wanted to sell and +nobody wanted to buy. The chorus was deafening. Screams rent the air. +The tumult was heard blocks away. Every newspaper had a man on the +spot. Brokers from the New York Stock Exchange left their posts and +came to see the big show; the Stock Exchange was half emptied. The +spectacle had been advertised widely and everybody was keenly awake and +wrought up to a high pitch of excitement over what had been scheduled +to occur. +</p> + +<p> +Had the Scheftels brokers been supplied with orders to buy one-quarter +of a million shares of stock at the closing market price of the +Saturday before, $4 1-8, it was very apparent that they would have been +unable to hold the market. The opening sale was at $4. Downward to the +$3 point the stock traveled, breaking from 25 to 50 cents between +sales. Through $3 and on down to the $2 point the price crashed. Blocks +of 10,000 shares were madly thrown into the vortex of trading. The Curb +was a struggling, screaming, maddened throng of brokers. Every trader +appeared to be determined to crush the market structure. At $2 a share +there was a temporary check in the decline, but the bears renewed their +onslaught, gaining confidence by the outpour of selling orders. Within +less than an hour after the opening the stock hit $1 1-2 a share. At +this juncture the Scheftels broker in Ely Central reported that he had +executed all the stop-loss and good-till-cancelled orders entrusted to +him with the exception of 19,000 shares. +</p> + +<p> +"The Scheftels company will take the lot at $1 1-2," I said. +</p> + +<p> +In lending succor at $1 1-2 per share I was really stretching a point, +although at this figure the net market shrinkage of the Ely Central +capitalization was in excess of $3,000,000. This melting of market +value was awful to contemplate. On the other hand the newspaper +agitation was unmitigated in its violence, stockholders were convulsed, +a break of serious proportions was certain, and it was up to me to +conserve every dollar. The moment the Scheftels bid of $1.50 a share +made its appearance on the Curb and the selling from the same source +for the account of customers was discontinued, it was seen that the +force of the drive had spent itself, at least for the time being. +Support now came from the "shorts." They started to cash their profits +on their short sales of the days previous. Crazed selling was +transformed to frantic buying. +</p> + +<p> +The scene at this juncture was dramatic. It was the momentary +culmination of a cumulative, convulsive cataclysm. In refraining from +selling for its own account the Scheftels corporation violated one of +the sacred rules and privileges not only of the New York Curb but of +the New York Stock Exchange. In both of these markets it is the custom, +where brokers have advance information of an impending calamity, to +beat the public to the market and get out their own lines first, +leaving customers to take care of themselves. +</p> + +<p> +By deftly feeding stock to bargain hunters and to the "shorts" at +intervals and buying stock when it pressed for sale from frightened +holders at other periods the Scheftels company was able to support the +market that afternoon to a close with sales recorded at $2 a share. The +cash loss of the Scheftels company on its Curb transaction in Ely +Central that day was $60,000. This fresh sacrifice was needed to steady +the market. +</p> + +<p> +Tuesday, the following day, the daily newspapers belched forth further +tirades of abuse and calumny. The market crash in Ely Central was held +up to the public as proof positive that the project was a daring +swindle. The raid on the stock in the market was renewed. A Johnstown +flood of liquidation ensued. Fluctuations were violent. Opening at $2, +the price was forced down to $1. It afterward rebounded to $2, but the +waters would not subside, the stock was hammered again and it closed at +$1 per share. To meet the oncoming emergencies the Scheftels +corporation was obliged to fortify its cash reserve in the only one way +that offered. It was compelled to convert a large part of its reserves +of securities into cash and it had to sell on a declining market. Many +accounts were withdrawn by timid customers, and the Scheftels company +was further called upon to give stability to Rawhide Coalition and +Bovard Consolidated, other stocks which it had been sponsoring in the +markets. Loans were called by brokers with whom the Scheftels company +was carrying stocks, deliveries were frantically tendered to the +Scheftels company of stocks it had purchased at previous high levels, +and a financial onslaught made generally that would undoubtedly have +sunk the Scheftels' ship but for the fact that we had backed-up in the +nick of time, had measured our distance, had gone just so far and not +too far, and had kept on the firing-line. +</p> + +<p> +An exceedingly gratifying feature of the sensational day was the way in +which our friends stood by us. The venom and selfishness of the +overwhelming assaults that had been made upon us convinced many of the +public that we were being made the victims of a special attack, and +with the natural impulse that governs honorable men they gave testimony +to their confidence in us. +</p> + +<p class="break"> </p> + +<p> +On Wednesday the campaign terminated. Ely Central weakened an eighth +from the $1 point, the closing of the day before, recovered to sales at +$1¾ and closed at $1½ bid; $1<span class="smaller">5/8</span> asked. +</p> + +<p> +All day long our offices were thronged with newspaper reporters and +with pale-faced and agitated customers. Our clients felt their +helplessness in such a tumult of warring forces. The only thing they +could do was to stand by and watch developments as the battle waged. It +was a proud moment for me when, at the end of the day's market, I +mounted the platform in the Scheftels customers' trading-room, gave +voice to a shrill cheer of triumph and wrote on the blackboard the +following: +</p> + +<p> +"We have not closed out a single margin account! We are carrying +everybody!" +</p> + +<p> +The scene which followed warmed the cockles of my heart. I was +literally mobbed, but it was a friendly mob. We all joined in a season +of noisy rejoicing. That we should have been able to survive the +three-days' siege with minimum losses to customers and without +sacrificing a single margin account was a signal achievement. I doubt +if there are many cases like it in the history of Wall Street. +</p> + +<p> +Scores of telegrams were received from out-of-town customers to whom +the margin respite was wired. One of these read: +</p> + +<div class="blockquote"> +<p> +You may look for a tidal wave of business. Your princely action +warrants 21 guns for the House of Scheftels. +</p> +</div> + +<p> +Another one was to this effect: +</p> + +<div class="blockquote"> +<p> +The whole situation was greased for your descent. It was a +shoot-the-chutes and a bump-the-bumps proposition. Congratulations +on your survival. +</p> +</div> + +<p> +Hundreds of letters of a similar tenor poured in upon us. Many of these +came from the camp of Ely itself, where large blocks of the stock were +held by mining men on the ground. +</p> + +<p> +Thursday the stock closed at $1¾; Friday it advanced to sales at +$1<span class="smaller">7/8</span> and hung there. +</p> + +<p> +The Scheftels organization now drew its first long breath. Friends and +enemies alike marveled how the corporation had managed to survive. We +had held the fort, but at murderous cost. +</p> + +<p> +I got busy with the publicity forces at my command. Through the +Scheftels Market Letter and the <cite>Mining Financial News</cite> the story +was told of the whole dastardly campaign. +</p> + +<p> +The Weekly Market Letter of the Scheftels company on November 13, 1909, +devoted 24 columns to the story of the raid. +</p> + +<p> +That the Guggenheim-managed Nevada Consolidated was well pleased with +the publication of the <cite>Engineering & Mining Journal's</cite> attack +seemed clear to me. The reason was this: In its attack the +<cite>Engineering & Mining Journal</cite> stated that two drillholes put down +by the Nevada Consolidated in the immediate vicinity of Ely Central had +failed to show better than nine-tenths of one per cent. copper ore +which, the article said, was below commercial grade. (At this late +date, October, 1911, they are mining ore in the steam-shovel pit of the +Nevada Consolidated that will not average more than eight-tenths of one +per cent. copper transporting it to the concentrator, more than twenty +miles away, and treating it at a profit. But this is not the point.) An +engineer of international prominence telegraphed the Scheftels company +from Ely as follows: +</p> + +<div class="blockquote"> +<p> +Two drill holes mentioned in <cite>Engineering & Mining Journal</cite> +article were completed only last week. Results must have been +telegraphed to New York. +</p> + +<p> +These holes gave great trouble on account of caving ground. I heard +drill runners say they were stopped on that account and were in ore +in bottom. In any case, it is not conclusive of unpayable ore in +vicinity. This condition often occurs. +</p> +</div> + +<p> +I could write a book in reply to the <cite>Engineering & Mining Journal's</cite> +tirade, showing the utter flimsiness of the statements it made. Limited +space forbids anything more than an outline. +</p> + +<p> +Charles S. Herzig was employed to report confidentially on the +property. Mr. Herzig's report was later checked up by Dr. Walter Harvey +Weed, a great copper geologist of known high standing who was formerly +one of the principal experts of the United States Geological Survey and +was himself a frequent contributor to the <cite>Engineering & Mining +Journal</cite>. Dr. Walter Harvey Weed wired to the C. L. Constant +Company, the metallurgists and mining engineers, from Ely, as follows: +</p> + +<div class="blockquote"> +<p> +After making a most thorough examination my opinion is Southern +part Ely Central property is covered by rhyolite capping. +Geological evidence demonstrates that the porphyry extends eastward +(through Ely Central) from steam-shovel pit and with excellent +chance of containing commercial ore beneath a leached zone. A well +defined strong Fault separates steam-shovel ore from rhyolite area +and this Fault Plane may carry copper glance (very rich copper ore) +of recent origin, due to descending solutions. The iron-stained +jasperoid croppings in the limestone areas give promise of making +ore in depth on Ely Central property as they do in Giroux. +</p> +</div> + +<p> +The <cite>Engineering & Mining Journal</cite> said in its article that the +northern portion of Ely Central showed the Arcturus limestone of the +district. It stated that in this limestone at various places there is a +little mineralization but never during the history of the district were +any profitable results obtained. As against this, Engineers Farish, +Herzig and Weed reported that the limestone areas on Ely Central would +likely show the presence of mines. As a matter of fact, Giroux, +neighbor of Ely Central, had sunk through this limestone and opened one +of the richest bodies of copper ore ever disclosed. +</p> + +<p> +The <cite>Engineering & Mining Journal</cite> said that in representing that +pay ore is likely to exist in the area of Ely Central sandwiched in +between the two big mines of Nevada Consolidated, the Scheftels company +was practicing deception. Not only did Messrs. Farish, Herzig and Weed +report in favor of the likelihood, but it is now a commonly accepted +fact that, unless all known geological indications are deceptive, Ely +Central has the ore in this stretch of territory. A report made as late +as September, 1911, by engineer Richard T. Pierce, for the +reorganization committee of Ely Central, expresses the opinion that an +area 1,300 feet by 1,900 feet at the south-east end of the Eureka +workings "will be found to contain mineralized porphyry, with +reasonable assurance that commercial ore will be had in it." +</p> + +<p> +Mr. Herzig's first telegram from Ely after examining the Ely Central +property was to this effect: +</p> + +<div class="blockquote"> +<p> +There is no question that the rhyolite was deposited in Ely Central +after the enrichment of the porphyry. The Fault that limits the +rhyolite in the Nevada Consolidated pit is indicated by several +feet thickness of crushed mineralized porphyry-rhyolite ore, which +is a positive evidence that the porphyry was enriched before the +faulting. The limestone and contact areas owned by the company, in +my opinion, have great potential value. The indications are in +every way similar to Bisbee. Rich carbonate ore has been +encountered on the Clipper and Monarch claims of Ely Central and I +look forward to seeing big ore bodies opened up at these places. +</p> + +<p> +Reports of both these engineers, many thousand words in length, +made later, confirm these messages. +</p> +</div> + +<p> +What probably convinced me more than anything else of the inaccuracy of +the statement regarding the Ely Central property by the <cite>Engineering +& Mining Journal</cite> was the attitude of Charles S. Herzig. He is my +brother. +</p> + +<p> +Up to within thirty days of the appearance of the attack in the +<cite>Engineering & Mining Journal</cite> I had not set eyes on him in +fifteen years. A graduate of the Columbia School of Mines, he had in +the interim examined mining properties in South Africa, Egypt, +Australia, the East Indies, Siberia, every European country, Canada, +Mexico, Central America, South America and the United States in the +interests of some of the world's greatest financiers. These expert +examinations had covered deposits of gold, silver, copper, lead, zinc, +coal and other minerals. In the engineering profession he is known as +an expert who has his first failure yet to record. His standing is +unquestioned as an engineer and a mine-valuer. +</p> + +<p> +I had heard some criticism of the Farish report, made by engineers of +the modern school, in which it was pointed out that Colonel Farish had +failed to give scientific reasons for all of his deductions. I asked +Captain W. Murdoch Wiley, then a member of the C. L. Constant Company, +assayers, metallurgists and mining engineers, whether he could induce +my brother to make an examination. I did not approach Charles myself, +because we had been estranged. So it was that when he returned from +Europe after an absence of many years, he had not even looked me up. +Captain Wiley arranged for a meeting at the Engineers' Club. I went +there, and was formally introduced by Captain Wiley to my brother +across a table. +</p> + +<p> +"What will you take to make a report on Ely Central?" I asked in the +same matter-of-fact way I would have addressed a stranger. +</p> + +<p> +"What's the purpose of the report?" +</p> + +<p> +"The Scheftels company wants confidential, expert information such as +you are qualified to give as to the value and prospects of the +property," I answered. +</p> + +<p> +"I'll take $5,000," he said, "but only on one condition. I am going to +the Ely and Ray districts to report for English capitalists, and I can +take your property in at the same time. My report is not to be +published and I reserve the right to make a verbal instead of a written +one. If you really want to know what I think of the property, I am +quite willing to give it a careful examination and let you know. +Because of the stock-market campaign you are making, I would not accept +your offer if, did I report favorably, your idea would be to make use +of the report in the market." +</p> + +<p> +The bargain was struck. A few days later Mr. Herzig received $2,500 +from the Scheftels company, on account, and a check for traveling +expenses. He left for Ely. +</p> + +<p> +On the Saturday morning when the New York <cite>Sun</cite> article appeared +containing the excerpts from the <cite>Engineering & Mining Journal's</cite> +onslaught, I wired my brother substantially as follows: +</p> + +<div class="blockquote"> +<p> +Savage attack in <cite>Engineering & Mining Journal</cite> on Ely +Central. If your report on property is favorable, I beg you to let +us have it by wire and allow the use of it to counteract. +</p> +</div> + +<p> +An hour later I followed it up with another message telling him not to +wire any report. I set forth that because he was my brother, it might +prove of little avail, now that the publication had been made, and that +it might only tend to do him personal damage in the profession because +of the unqualified manner in which the <cite>Engineering & Mining +Journal</cite> had taken a stand against the property. In reply he wired +Captain W. Murdoch Wiley the short but decisive report already quoted +herein, regarding the geological reasons why Ely Central should have +the ore, which afterward was fully verified by Dr. Walter Harvey Weed +in the message also reproduced in the foregoing. In a letter from Ely +to Captain Wiley confirming the message, the original of which is in my +possession, Mr. Herzig said: +</p> + +<div class="blockquote"> +<p> +I have formed a very favorable opinion of the property. I feel that +it has the making of a big mine, and under the circumstances I am +willing to stand a little racket for a time. +</p> +</div> + +<p> +The same day he wired Captain Wiley to buy for his account 2,500 shares +of Ely Central at the market price, which order was executed through +the Scheftels company. +</p> + +<p> +Editor Ingalls of the <cite>Engineering & Mining Journal</cite> and my +brother had been friends for years. My brother had been employed early +in his career by the Lewisohns, Guggenheims and the Anaconda Copper +Company, and later in Europe, Australia and India by mine operators of +even higher class. Up to the time when the <cite>Engineering & Mining +Journal's</cite> attack appeared he had not committed himself on Ely +Central. When he did commit himself it was with the foreknowledge that +in doing the unselfish and courageous thing his name would be +besmirched if under development Ely Central turned out to be what the +<cite>Engineering & Mining Journal</cite> had declared probable. In that +event his relationship with me would be held up as positive proof of +duplicity and it would look bad for him. The fact that under all these +circumstances he jumped into the breach satisfied me that the attack of +the <cite>Engineering & Mining Journal</cite> was unjustified. +</p> + + +<h3> +A BOMBSHELL IN THE ENEMY'S CAMP +</h3> + +<p> +As soon as the Scheftels corporation was able to obtain a copy of the +corroborative report of Dr. Walter Harvey Weed, which the great copper +geologist made to the C. L. Constant Company, it filed a libel suit +against the <cite>Engineering & Mining Journal</cite> for $750,000 damages. +Simultaneously Mr. Scheftels filed another suit for an additional +$100,000 in his own behalf. +</p> + +<p> +The filing of the Scheftels libel suits against the <cite>Engineering & +Mining Journal</cite> was a bombshell. It was formal notice to the forces +arrayed against us that we did not propose to be made victims of an +unholy hostility and that we were determined to proceed along old lines +and not abate in the slightest our wide-open publicity measures. It was +also noticed that we proposed to go through with the Ely Central deal. +</p> + +<p> +After it became evident that we intended to keep on fighting, the +Scheftels offices were openly visited and inspected in detail one day +by the late Police Inspector McCafferty. In a bullying manner this +police official let it be known that we were in official disfavor with +him. His manner could hardly have been more offensive if he had been +invading a den of counterfeiters. Mr. McCafferty did not specify just +what he was after or just what he expected to find, but he made it +plain to us that we were marked and that he had it in for us. He +stalked scowlingly through the entire establishment and made vague +threats of what was in store for us. +</p> + +<p> +Late that night I learned that the Inspector had invaded the +living-rooms of my associate, Nat. C. Goodwin, where he delivered +himself somewhat as follows: +</p> + +<p> +"What are you fellows trying to do, anyway? What are you trying to put +across on us? Do you think we are going to stand for any such newspaper +notoriety as you are getting and watch it with our arms folded? Do you +think we are fools or crazy, or what? I want you to understand that you +fellows have got your nerve with you. Get busy or the police will be on +your backs to-morrow!" +</p> + +<p> +I told Mr. Goodwin that our enemies had evidently sicked the Inspector +on to us, but that I didn't think any action would be taken. We were +victims and not culprits, and unless, indeed, the United States was +Russia, nothing untoward could happen. +</p> + +<p> +I promised Mr. Goodwin, however, that I would attend to the matter +without delay. I laid all of the facts regarding the newspaper attack +before a prominent citizen who promised forthwith to convey the +information in person to the Inspector or one of his superiors. He did +so. That was the last we heard of the matter. +</p> + +<p class="break"> </p> + +<p> +The <cite>Engineering & Mining Journal's</cite> lawyers addressed themselves +to customers of the Scheftels company, who had lost money in the market +break in Ely Central from $4 to $1.50. By letter they urged them to +send on a full statement of facts and suggested that they might be of +service, and without charge. +</p> + +<p> +Letters of this character were sent to large numbers of our customers, +many of whom simply sent them to us. In some cases, however, customers +who had read the attack in the <cite>Engineering & Mining Journal</cite> or +quotations from it in widely circulated daily newspapers, needed but +the letter from the lawyers to induce them to come forward with a +complaint. +</p> + +<p> +On the whole, this fishing expedition must have been something of a +water-haul and a disappointment, for the attorneys of the +<cite>Engineering & Mining Journal</cite>. +</p> + +<p> +The Post-office Department at New York, in January and February, sent +letters broadcast to readers of the Scheftels Weekly Market Letter, +asking whether the business carried on was satisfactory—the usual form +that is used where a firm is under investigation. Scores of these +letters were forwarded to us by customers with remarks to the effect +that evidently "somebody was after us." An inquiry of this sort is +calculated to do terrible damage to the reputation and standing of any +house that does a quasi-banking business. Our attorneys complained to +Inspector Mayer of the New York division of the Post-office that an +injustice was being done. No more letters of the character described +were sent out, because the early replies that were received by the +Inspector to his circular letter brought forth no serious complaints. +However, it was afterward disclosed that the investigation did not +cease here and that the Post-Office Department continued to conduct a +searching inquiry only finally to abandon its enterprise. +</p> + +<p> +Enters upon the scene an associate of the <cite>Engineering & Mining +Journal's</cite> lawyers defending that publication against our suit for +libel. He called at the Scheftels offices and demanded from Mr. +Scheftels information with regard to the account of C. H. Slack of +Chicago. He got it. It showed that Mr. Slack had purchased 50,000 +shares of Bovard Consolidated at 10 cents per share, for which he had +paid cash, and that Mr. Slack had purchased an additional 100,000 +shares at 14¼ and 14¾ cents per share; and that Mr. Slack had +refused, after the market declined to below the purchase price, to pay +the balance due, because of delayed delivery. +</p> + +<p> +The delay in delivery was accidental. The Scheftels company actually +had in its possession two million shares of the stock or more, and the +delivery would have been tendered earlier but for the fact that the +raid on Ely Central had piled up so much work for the clerical force +that everything was set back. We knew of no legitimate excuse for Mr. +Slack, because he could have ordered the stock sold at any time, +delivery or no delivery. The Slack transaction receives amplification +here, because later, when the Scheftels corporation was raided by a +Special Agent of the Department of Justice, it figured as one of the +cases cited by the Agent in the warrant sworn to by him against B. H. +Scheftels & Company as proving the commission of crime. +</p> + +<p> +Another case about which Mr. Scheftels was asked to give full +information was that of D. J. Szymanski, a corn doctor at 25 Broad +Street. Mr. Scheftels had urged the Doctor to buy Ely Central when it +was selling at 75 cents before the rise. Later, when the advance was +well under way, above the $3 point, the Doctor bought some stock +through the Scheftels corporation. When the price hit $4 he was urged +to take profits. He refused to do so. When the attack began and the +price broke badly the Doctor saw a big loss ahead. +</p> + +<p> +He called at the Scheftels' office and begged for the return of the +money he had lost in his Ely Central speculation. +</p> + +<p> +The investigation was heralded among the brokers and caused much market +pressure on the stocks fathered by the Scheftels company. We were not +dismayed. To strengthen our position and to give added token of our +good faith we increased our development operations at the mines. Our +expenses in that quarter were swelled to the limit of working capacity +on our underground explorations, as I realized that our salvation might +depend on making good in quick order with Ely Central from a mining +standpoint. We knew the ore was there and that it was up to us to get +it before our enemies got us. +</p> + + +<h3> +A GOVERNMENT RAID IS RUMORED +</h3> + +<p> +Out of a blue sky late in the month of June came news to the Scheftels +office that a newspaper reporter on the New York <cite>American</cite> had +stated that he had seen a memorandum in the city editor's +assignment-book to watch out for a Scheftels raid by the United States +Government. The information was reliable and it gave us a shock. Yet +the thought that the powers of a great government like the United +States could be used to crush us without giving us a hearing seemed +unbelievable. +</p> + +<p> +To be on the safe side Mr. Scheftels, accompanied by an attorney of +high standing, visited Washington. They went direct to the Department +of Justice, where Attorney-General Wickersham's private secretary, +after a friendly conversation, referred them to the chief clerk. He +reported, after a search of twenty-five minutes' duration, that there +was no charge against B. H. Scheftels & Company. He even volunteered +the information that he did not know that such a firm was in existence. +</p> + +<p> +It afterward developed that at the very time Mr. Scheftels and the +attorney were at the Department of Justice a special rubber-shoe +investigation was on under the dual direction of a young Washington +lawyer on Attorney-General Wickersham's personal staff, and a Special +Agent of the Department of Justice. The latter had been given +extraordinary powers as a special agent of the Department of Justice, +ostensibly to "clean out Wall Street." +</p> + +<p> +Satisfied they were in the wrong place, Mr. Scheftels and the +counsellor departed from the Attorney-General's office for the +Post-Office Department. They were referred to Chief Inspector Sharp. +The lawyer requested that the Scheftels corporation be given a hearing +before any action was taken on any complaints that might reach the +department. Mr. Sharp agreed to this on condition that the attorney +would agree for the Scheftels company that an inspection of the books +of the corporation would be permitted on demand at any time. There was +a ready assent. A memorandum to this effect was left with Inspector +Sharp. +</p> + +<p> +Mr. Scheftels left the Department with positive assurance that no snap +judgment would be taken. Edmund R. Dodge of Nevada, personal counsel of +B. H. Scheftels & Company, then addressed a letter to U.S. Senator +Newlands with the request that he take the matter up direct with the +Postmaster-General. +</p> + +<p> +Senator Newlands, under date of July 2, wrote Mr. Dodge that he had +addressed a letter to the Postmaster-General with the request that +notice be given to Mr. Dodge in case any complaint or information was +lodged against the Scheftels corporation. A few days later Senator +Newlands sent Mr. Dodge a letter from Theodore Ingalls, Acting Chief +Inspector of the Post-Office Department, in which Mr. Ingalls said it +was the practice of the Department in case of alleged use of the mails +for fraudulent purposes to give individuals against whom complaint has +been made full opportunity to be heard either through person or +counsel, should adverse action be contemplated as a result of the +investigation of such allegation. +</p> + +<p> +Feeling that our house had been securely safeguarded against surprise +parties, I at this junction took a trip to Nevada, where urgent +business matters required my attention. While I was in the West +telegrams were sent me that the premier mail-order mining-stock +bucket-shop firm on Broad Street was flooding the mail and burdening +the telegraph wires with urgent appeals to stockholders of Rawhide +Coalition, one of our specialties, to sell out their holdings, as a +severe break in the price of the shares was impending. Forewarned of +this attack, I telegraphed instructions from Reno to meet the onslaught +with a notice in the <cite>Mining Financial News</cite> addressed to +investors, telling them to be on their guard. +</p> + +<p> +My trip to the West made a pocketful of money for investors by my +purchase of the control in the Jumbo Extension company on a monthly +payment plan. The price of the stock tripled in the market. My +re-entrance into the Goldfield camp was especially distasteful to the +Nixon-Wingfield interests. Before I left Goldfield I was actually +warned that the vengeance wreaked on the Sullivan Trust Company would +be visited on the Scheftels company for daring to reinvade the +Goldfield district. +</p> + +<p class="break"> </p> + +<p> +Late in August the Scheftels company endured what was probably the most +severe strain it had been put to since its incorporation. We had been +making heroic efforts to rally the price of our specialties on the New +York Curb market. We were meeting with unusual resistance from +professional sources. At the period of which I narrate, Ely Central had +registered a low quotation of 62½ cents and we had successfully +strengthened it to around $1. All the way up we met with heavy sales. +One day deliveries crowded in so fast that three cashiers working in +the "cage" were unable to keep up with the transactions. The business +of the corporation had been heavy in the general list as well as in the +house specialties. There was more than sufficient money on hand to +finance all the transactions that day, but not, however, unless +deposits were made in bank as rapidly as our own deliveries were made +and collected for by our messengers. +</p> + +<p> +About 2 o'clock in the afternoon a report reached the Curb that the +bank checks of B. H. Scheftels & Company were not being promptly +certified. As this rumor gained currency the excitement on the Curb +increased. The Curb concluded that we were at last "busted." Motley +throngs began to assemble in front of the offices. The fierce yells of +brokers could be heard bidding for and offering Scheftels checks below +their face value. A throng of the riffraff of the Street swarmed in +front of the building. +</p> + +<p> +One or two individuals, implacable enemies who had repeatedly led the +market onslaught against the Scheftels stocks, offered Scheftels checks +for small sums at as low as 50 cents on the dollar. These were licked +up by our friends who had been assured that we were financially all +right and that some mistake must have been made at the bank. +</p> + +<p> +Investigation showed that dilatory message service was responsible for +the bank's delay in certifying. Our deposits did not reach the bank as +promptly as they should have. As a special favor to us that afternoon, +while the tumult in front of our doors was greatest, the bank continued +to certify checks until 3:30 o'clock, extending the closing time 30 +minutes. Then they reported that a comfortable cash balance was still +on hand. +</p> + +<p> +The next morning the newspapers started a jamboree. First-page, +last-column, double-leaded, scare-head stories greeted every New Yorker +for breakfast, telling him about the panic among Curb brokers to sell +the Scheftels checks the afternoon before. Needless to say it was the +kind of notoriety that was likely to do greatest injury to the House of +Scheftels. If anything half as bad had been printed about the strongest +bank in New York, that bank would have been forced to close its doors +before the day was half over. +</p> + +<p> +Nor did I for a moment underrate the danger of our position. Between +two suns I managed to assemble $50,000 in addition to our cash +reserves, with promises of as much more as was needed. We easily held +the fort. At the end of the day's business I created a diversion by +appearing in the Scheftels board-room, flourishing a handful of $1,000 +bills before the newspaper men. The scribes found the Scheftels +corporation meeting all demands, and, at the end of the session, with a +small bale of undeposited money in its possession. +</p> + +<p> +The strain, however, was great. Confidence was again impaired. Many +accounts were withdrawn by customers. We were compelled to ease our +load by selling accumulated stocks at a loss. The price of Ely Central +and other Scheftels promotions dropped. The decline was assisted by +general weakness in other Curb stocks. +</p> + +<p> +Peculiarly enough, at the time when the market for Ely Central shares +was lowest, during the latter part of September, fourteen months after +the Scheftels company had taken hold of the proposition, mine reports +were most favorable. Underground development work and churn drilling +had set at rest for all time the question of whether or not mineralized +porphyry underlies the rhyolite cap or flow extending eastward through +Ely Central ground from the steam-shovel pit of the Nevada +Consolidated. Upward of $240,000 had been paid out for administration, +mine equipment and for miners' wages to make this demonstration. +</p> + +<p> +The Scheftels company was now informed that the Nevada Consolidated was +actually meditating a trespass on the Juniper claim of the Ely Central +company, in order to secure an outlet from the lower levels of its +giant steam-shovel pit. Warning in writing had already been served on +the Nevada Consolidated officials against such a course. On September +25th attorneys of the Ely Central Copper Company secured from a Nevada +court an order restraining the Nevada Consolidated from proceeding with +this trespass and citing it to show cause why it should not cease to +trespass on other Ely Central ground. +</p> + +<p> +The attorney telegraphed to New York that a bond was required before +the injunction could be made operative. On September 27th and 28th +telegrams were exchanged between the Ely Central offices in New York +and the Nevada attorneys of the company at Reno as to providing +sureties for the bond. +</p> + +<p> +The sureties never qualified. A catastrophe befell us and brought to an +earthquake finish the house of B. H. Scheftels & Company and all its +ambitious plans. +</p> + +<p class="break"> </p> + +<p> +The constant turmoil in which the House of Scheftels had found itself, +from the day the <cite>Engineering & Mining Journal's</cite> attack appeared, +had made it impossible for the Scheftels company to hold the markets +for Ely Central and Rawhide Coalition. Impairment of credit, money +stringency and a general declining market were partly responsible. But +there was another important factor. Because of the time-limit of its +options, the Scheftels company was forced, from time to time, to throw +stock on the market at prices which showed an actual loss. +</p> + +<p> +It had one market winner which showed customers and the corporation +itself a large profit, namely, Jumbo Extension. I held an option on +approximately 450,000 shares of this stock at an average price of 35 +cents, which I had turned over to the corporation. The market advanced +to 70. Following the tactics employed in Ely Central at the outset of +that deal, the Scheftels corporation had urged all its customers to buy +Jumbo Extension at the very moment when I was negotiating for the +option in Goldfield, with the result that purchases were made in the +open market by readers of our market literature at from 25 cents up, +with accompanying profit-making. +</p> + +<p> +As the price soared, a short interest of 150,000 shares of Jumbo +Extension had developed among brokers in San Francisco and New York, +and it was very apparent from the demands of stock for borrowing +purposes that it would be impossible for the short interests to cover +excepting upon our terms. The Scheftels company was making ready for a +"squeeze" of the shorts such as had not been administered before in the +history of the Curb. At the very moment of victory, however, when we +were making ready to execute a magnificent market coup in Jumbo +Extension in the markets of San Francisco and New York, we were plunged +without warning to complete ruin. +</p> + + +<h3> +THE RAID ON B. H. SCHEFTELS & CO. +</h3> + +<p> +The destruction of the Scheftels structure was consummated on the 29th +day of September, 1910. I was standing on the front stoop of the +Scheftels offices, watching the markets for the Scheftels specialties. +A broker with San Francisco connections made me a bid of 68 cents for +10,000 shares of Jumbo Extension. I promptly refused. At that very +moment my attention was called to the violent slamming of a door behind +me. Turning to a Scheftels employee who was standing by my side, I +learned that a number of strangers had filed into the customers' room +without attracting any particular attention. I tried to get in. The +door was locked. Undoubtedly something serious was transpiring. I +walked a full block through the hallway to the New Street entrance of +the building where the offices of the <cite>Mining Financial News</cite> +adjoined those of the Scheftels corporation. I tried the door there +with similar result. It was locked against me. +</p> + +<p> +That settled it. I concluded that the ax had fallen. +</p> + +<p> +The shock of realization that our offices were being raided by the +Government did not for a moment throw me off my balance or put fear in +my heart, nor did the sense of the outrage affect me at the moment. +There was but one sickening thought—the ruin of the edifice I and my +associates had labored day and night for so many months to build and +the fate of our customers who had invested their money in the companies +we had promoted. +</p> + +<p> +In three seconds I was on my way to the place where I thought succor +could be found—the offices of the Scheftels attorneys. I walked across +the street to the New Street entrance of a building that extends from +Broadway to New Street, ambled across to the Broadway side, jumped on a +surface car, rode three blocks to Broadway and Cedar Street, jumped +into an elevator, and in a few minutes entered the offices of House, +Grossman & Vorhaus. +</p> + +<p> +"Go over to the Scheftels offices," I said, "and be quick! I think we +are being raided." +</p> + +<p> +In a moment two members of the law firm were on their way. Within ten +minutes after the raiders had entered the offices the lawyers were on +the spot. They were denied admittance and had to content themselves +with waiting outside the door until the prisoners were taken out. +</p> + +<p> +The moment the lawyers left their offices I began to use the 'phones to +provide for the release on bail of the men arrested. I found it +necessary to go in person and so I left the lawyers' offices and walked +down Broadway. My attention was attracted by the clanging of the bell +of the police-patrol wagon. As it wheeled past me on the run I could +see my associates huddled together in the Black Maria on their way to +the bastile. +</p> + +<p> +For the moment, I lost full sense of the gravity of what was +transpiring and was overcome by a feeling of joy that I had been spared +that ignominy. That self-felicitating slant of an intensely serious +situation passed. My associates were in trouble and it was up to me to +help them. I was at large and I knew that I could do more for my +friends and myself by not immediately surrendering. +</p> + +<p> +I returned to the lawyer's office, where I remained. All this time the +thought never entered my mind that we were in any sense guilty of any +intent to defraud anybody, or that we had committed any offense against +law or the rules of fair conduct. The one consuming and controlling +idea in my mind was that somebody had put one over on us and that it +was up to me to organize for defense against the abominable outrage. +</p> + +<p> +What transpired behind the closed doors while the Scheftels lawyers +were attempting to gain an entrance for the instruction of the +corporation, its officers and employees as to their rights, beggars +description. Gentle reader, you would not conceive the reality to be +possible. Armed with a warrant which conferred upon him the right to +arrest, seize, search and confiscate, the Special Agent of the +Department of Justice had secured from the local police headquarters a +detail of fifteen heavily armed plain-clothes men. +</p> + +<p> +Once inside the Scheftels establishment, the doors were locked and +egress barred. The main body of invaders then took possession of the +front offices, while others searched through the back rooms and +boisterously commanded everybody to remain where they were until given +permission to depart. The establishment was under seizure, every foot +of it, and every person found within its doors was held prisoner. The +Special Agent took pains to impress upon everybody within hearing that +he was in supreme command. Leaving police guards in the front room, he +stalked into the telegraph-cage where two or three operators were +sitting at tables. +</p> + +<p> +Pressing the muzzle of a revolver into the face of Chief Operator +Walter Campbell—a quiet and inoffensive man—the Special Agent +commanded: +</p> + +<p> +"Cut off that connection!" +</p> + +<p> +Mr. Campbell didn't at first see the gun because it was pointed at his +blind eye. When he got his first peep he concluded that a maniac had +invaded his sanctum and he almost expired with apoplexy on the spot. +</p> + +<p class="break"> </p> + +<p> +Returning to the front office, the Agent entered the cashier's cage and +took possession of the company's pouch containing its securities. +</p> + +<p> +He gave no receipt to any responsible employee of the Scheftels company +for anything. When Mr. Stone, one of the cashiers, suggested to him +that he was there to safeguard the securities, he thundered, +</p> + +<p> +"Come out of there!" +</p> + +<p> +"What authority have you for this?" demanded Mr. Stone. The Agent +thereupon showed his badge. +</p> + +<p> +A moment later one of the deputies pried open the cash-drawer. The +Special Agent was at his elbow. +</p> + +<p> +"Oh, look what's here!" cried the deputy. +</p> + +<p> +Thereupon the Agent of the Department of Justice impounded the contents +of the cash-drawer, without counting the cash, checks, money-orders, +etc., or giving any member of our firm a receipt for them. +</p> + +<p> +Turning to the Scheftels officers and employees who had been placed +under arrest, he ordered them removed from the room. +</p> + +<p> +It was about as raw a performance as was ever witnessed in a peaceful +brokerage firm's banking-room. +</p> + +<p> +Bookkeepers were ordered to close up books. United States mail in the +office was impounded, including mail that had been received in the +office for delivery to others. +</p> + +<p> +The Scheftels employees were commanded to stand in their places with +arms folded. The desperadoes among them—those for whom a warrant had +been issued and who had been jerked out and huddled together in the +outer room—were then searched for deadly weapons. One penknife and the +stub of a lead-pencil were found on their persons. The deadly knife was +hardly sharp enough to serve the purpose of nail-manicuring. Not one of +the men under arrest would have known how to use a revolver if it had +been placed in his hands. +</p> + +<p> +The men taken into custody were: Mr. Scheftels, aged 54, quiet and +inoffensive, rounding out an honorable business career without a +blemish of any kind on his character or standing; Charles F. Belser, +one of the cashiers of the corporation and a 32d degree Mason, who +never before in his life had been so much as charged with the violation +of the spirit of a minor ordinance; Charles B. Stone, aged 60, another +cashier whose sons and sons-in-law had served their country in the army +and who, himself, was as peaceful as a class leader in a Sunday-school; +John Delaney, Clarence McCormick, William T. Seagraves and George +Sullivan, clerks of the establishment, who were as likely to offer +resistance that would require gun-play to combat as were a quartette of +psalm-singing children. +</p> + +<p> +Mr. Scheftels protested in a dignified and self-respecting way against +the brutal demonstration. He asked to see the authority for the raid. +This was refused until after he and the other desperate characters were +collected in another room. His demand to see the officers' warrant was +met by a vulgar exclamation from the Special Agent, to the effect that, +"If you don't shut up, we will put the irons on you! If you are looking +for any trouble, you —— —— stiff, you will get what you are looking +for!" +</p> + +<p> +The absurdity of the armed invasion appealed to everybody but the +ringleader of the raiders. It was a ludicrous situation from a service +viewpoint. There had been no time up to the moment of the raid when a +single man armed with proper authority could not have accomplished with +decency and in good order everything and more than was done by the +"rough house" and brutal invasion of the armed band. +</p> + +<p> +Private papers were grabbed and bundles of certificates of stock, +packages of money, checks, receipts and everything that came in sight +were carried away. No complete record was made at the time of the raid +of the documents and other valuables seized. The temporary receiver for +B. H. Scheftels & Company, before his discharge later on, was able to +gather together and take an accounting of part of the seized assets of +the corporation, but I have no doubt that many thousands of dollars +worth of securities and money were hopelessly lost. +</p> + +<p> +When the wreck was complete the prisoners were driven like malefactors +out of the front entrance, down the steps and loaded into the Black +Maria. Five thousand people witnessed the act. The prisoners pleaded in +vain to be allowed to pay for taxicabs to convey them before the United +States Commissioner. They urged that as yet they had had no hearing and +were innocent in the eyes of the law, and until convicted of some +offense they were entitled to decent treatment. This request was +refused. The delay in the start to the Federal building was just long +enough to give the dense crowd that had filled the block time to insult +the victims of the atrocity to the fullest extent. Friends of the +arrested men boiled over with indignation and several fights occurred. +Men were knocked down, trampled upon and the clothing torn from their +backs in the desperate mêlée. The scene was disgraceful. +</p> + +<p> +An army of newspaper reporters, attended by a camera brigade, were on +the spot and snapshotted the prisoners as they entered the Black Maria. +With bells clanging and whips lashing, a start was made up Broad Street +to Wall. Then the vehicle turned up Broadway and ding-donged on to the +Federal building. There the men were arraigned. Bail aggregating +$55,000 was demanded. Later several of the men taken into custody in +this brutal manner were not even indicted. +</p> + +<p> +Called upon to identify the prisoners, the Special Agent of the +Department of Justice was unable to point out any of them except Mr. +Scheftels. A stenographer in the employ of the corporation was forced +to single them out. +</p> + +<p> +The warrant proved to have been sworn to by the Special Agent and had +been granted on his affidavit that the corporation had committed crimes +against some few of its customers. Two of them have already been +mentioned in this article as Slack and Szymanski, whose statements had +been furnished to the attorneys of the <cite>Engineer & Mining +Journal</cite>. +</p> + +<p> +From the Court House to the Tombs, the Scheftels desperadoes, in +shackles, were escorted up Broadway. Later in the day when bail was +ready and the prisoners were sent for, they were handcuffed again and +marched in parade up streets and down avenues of the densest section of +New York City. +</p> + +<p class="break"> </p> + +<p> +I had worked all afternoon in the lawyers' offices with one object in +view, namely, the securing of bail for the imprisoned men. I succeeded. +I now got busy with my own bail, the court having fixed it in advance +at $15,000. In the morning I walked from my lawyers' offices to the +Post-Office Building and surrendered myself, being immediately released +on surety which was waiting in the office of the United States +Commissioner. As I left the building I recognized scores of Scheftels +customers. Several grasped my hand. +</p> + +<p> +My indignation grew as the circumstances came up under review and I had +time to connect and collate the facts. Gradually the whole truth +revealed itself. I can relate only part of it. The full, detailed story +would extend itself into a volume, and the space here at my command is +limited. I learned that from the moment the Special Agent had been put +on the scent with permission to put us out of business he had never +slackened his effort to turn the trick. +</p> + +<p> +His efforts attracted the attention of sundry newspaper editors with +Wall Street affiliations and also enemies generally who hastened to +coöperate with him. His office as a Special Agent of the Department of +Justice gave to his statements weight which would not have been given +to them had he as an individual sponsored the charges. His official +position imparted exaggerated importance to his statements in the eyes +of newspaper men, and, after the raid, to the public. +</p> + +<p> +A person whom we shall characterize as the Tool now appears on the +scene with alleged information which he placed at the service of the +Special Agent to back him up before the Assistant United States +attorneys in New York with testimony since recanted over the signature +of the false witness. +</p> + +<p class="break"> </p> + +<p> +In the preceding chapter I called attention to some of the atrociously +false statements that were published on the day following the raid. I +gave only an inkling. The newspapers declared that Ely Central had cost +the Scheftels company 5 cents per share, that the capital stock was +over-issued, and that the property was worthless. Jumbo Extension, +which has since distributed $95,000 in dividends to its stockholders, +has still a treasury reserve of $100,000 and is selling to-day in the +markets at a share valuation of about one-quarter of a million dollars +for the property, was also described as a "fake stock." Rawhide +Coalition, which has produced upward of $400,000 in bullion, and which +is to-day recognized as one of the substantial gold mines of the Far +West, was labeled plain junk. Bovard, which represented an investment +of nearly $100,000 for property account and mine development and which +had been promoted at 10 cents per share on representations that it was +a "prospect," was stated to be a raw steal. +</p> + +<p> +The Scheftels corporation was said to have got away with millions of +dollars by selling "fake mining stocks." It was also stated that I had +profited to the extent of millions for my personal account. The +Scheftels mailing-list was described as a regulation "sucker list," +notwithstanding the fact that the principal names that were on it were +stockholders in Guggenheim companies. +</p> + +<p> +The ringleaders were pictured as myself—"a man with an awful +Past"—and the "notorious character," "Red Letter" Sullivan. Mr. +Sullivan was styled as the facile letter-writer who had addressed the +"suckers" and hypnotized them, principally widows and orphans, to +withdraw their money from the savings-banks and send it to the +Scheftels sharks. "Red Letter" Sullivan was also referred to as a man +with a "Past." +</p> + +<p> +The true facts regarding Mr. Sullivan's connection with the Scheftels +company were these: A few months before, he had applied for a position. +He was then employed as manager of a Boston stock-brokerage office. He +was awarded the job of time-clerk in the stenographers' department. +</p> + +<p> +His job, while employed with the Scheftels company, was to see that the +stenographers reported on time, did their work properly and were not +paid for any services they did not render. He had little or nothing +whatever to do with the correspondence department. He never dictated +any answers to letters received by the Scheftels company. Never was he +employed in an executive capacity by the Scheftels company. We knew +little or nothing of the "Red Letter" title with which he had been +decorated. The first we learned of it was in the newspapers after the +raid. Investigation revealed that ten years before, while a broker in +Chicago, he had issued a weekly market letter which was printed on red +paper. +</p> + +<p> +I have thus far not given space to one of the greatest wrongs connected +with this disgraceful proceeding—the wrong and damage inflicted upon a +multitude of helpless stockholders. While the Special Agent of the +Department of Justice and his armed followers were wrecking the +Scheftels offices and terrorizing the place, the Scheftels group of +mining stocks was being savagely raided on the Curb and enormous losses +were inflicted on the public. Thousands of margin accounts were wiped +out in less time than it takes to tell of the massacre. Declines in Ely +Central, Jumbo Extension, Rawhide Coalition and Bovard Consolidated +exceeded $2,000,000. This loss was distributed among approximately +fourteen thousand shareholders of record and as many more not of +record. +</p> + +<p> +This large army of innocent shareholders was helpless. From such +species of confiscation the law affords no relief or recourse, except +actual acquittal of the arrested persons, in whom lies the confiding +investor's only chance for the market rehabilitation of his securities. +</p> + + +<h3> +A TOOL'S CONFESSION +</h3> + +<p> +The signed confession of the Tool of the Special Agent, who appeared +before Assistant Attorneys Dorr and Smith at the United States +Attorney's office in New York, which says he gave false testimony, and +the voluntary statement of John J. Roach, a stock broker who was +employed by the now defunct firm of Frederick Simmonds, regarding the +relations between the Special Agent and that firm, while Special Agent +of the Government, reveal the weak foundations of the Government's +charges. +</p> + +<p> +The Tool, prior to the raid, had been in the Scheftels employ. For a +few months he had been a traveling business-getter for the firm. Then +he was discharged. He associated himself with Frederick Simmonds, a +member of the Consolidated Stock Exchange. Mr. Simmonds was badly in +debt. The Tool had no money. The Agent, when he was trying to get the +United States Attorney's office in New York to agree that the +information collected was sufficient to warrant a raid, prevailed upon +the Tool to appear before the assistant attorneys and give testimony. +</p> + +<p> +In this story the chief value of the Tool himself is that he has no +value. He made his statements against us to Mr. Dorr, assistant U.S. +district attorney. Then he gave me a statement, signed in the presence +of witnesses, recanting the statements made to Mr. Dorr. To this he +later added a written postscript enforcing his recantation. Then he +re-recanted and said that a large part of his first recantation, signed +by him and initialed by him on each page with his initials was false. +The reader is left to judge just which one of the Tool's three +positions is the one in which he tells the truth. It is obvious that he +must be lying in the two others, and it is not impossible that he may +be lying in all three—except that some of the stuff in his first +recantation, which he later denies in his second, has been verified +from other sources. +</p> + +<p> +Here is the main point to bear in mind concerning the Tool,—the +sovereign power of seizure, search and confiscation brought into play +by our great Government without due process of law, was based in part +on the flimsy testimony of such a person. Thousands of investors +suffered from the blow, as well as myself and associates. +</p> + +<p> +It would appear from the Roach statement that he was largely +instrumental in bringing about the crisis that resulted in the +suspension of the Simmonds firm and in the disclosures of the Special +Agent's relations therewith. These facts have become, in most +instances, matters of public record. They came out during the hearings +before the receiver for the bankrupt concern. It was found that the +liabilities of the "busted" firm were $85,000 and the assets 100 shares +of cheap mining stock and between $1,500 and $2,000 in cash. It was at +this conjunction that the Special Agent was allowed to resign from the +Department of Justice. The Tool he had foolishly used had proved to be +a two-edged one. The Agent had been "hoist by his own petard." +</p> + + +<h3> +THE GUGGENHEIMS +</h3> + +<p> +Probably the most surprised branch of the Government at the time of the +Scheftels raid was the Post-Office Department. The crime charged was +misuse of the mails. Why, if the Scheftels aggregation were guilty, +didn't the Post-Office Department do the raiding? Why didn't it issue a +fraud order? The Scheftels company has since been declared solvent by +the courts and the temporary receiver discharged. To this day no fraud +order has been issued. Only a short period before the raid, a +presentation on the part of the Post-Office Department of all of the +evidence in the case had been met with a decision that there was no +ground for action. +</p> + +<p> +That the Guggenheim interests did not fail to take advantage of the +plight of the House of Scheftels immediately after the raid finds +conclusive proof in the transpirations in the Ely mining camp. Soon +after the Special Agent descended on the Scheftels offices, an +application in Ely was made for a receiver to take charge of the assets +of the Ely Central Copper Company. The attorneys making the application +were Chandler & Quale, attorneys for the Nevada Consolidated Copper +Company, a Guggenheim enterprise. When the court appointed a receiver +he named this firm as attorneys for the receiver. Attorney J. M. +Lockhart for the Ely Central made a protest that these lawyers, because +of their connection with the Nevada Consolidated were not the proper +persons to protect the interests of the now defenseless Ely Central +stockholders. Then the court appointed another attorney, named Boreman. +</p> + +<p> +Shortly after the receiver was appointed, he applied to the courts for +permission to sell to the Nevada Consolidated for $30,000, which +represented the entire cash indebtedness so far as the receiver knew, +the surface rights to a large acreage of Ely Central and the rights +through Juniper Canyon. This, if accomplished, would have given to the +Nevada Consolidated a railroad right of way that would have solved the +problem confronting it of the transportation of the ores from the lower +levels of the steam-shovel pit. Without such an outlet these ores could +not have been handled without great expense and much difficulty. The +benefits that would have accrued to Nevada Consolidated were almost +incalculable. At the same time, such action would effectually cut the +Ely Central property into two parts. According to the petition it was +stipulated that in selling the surface rights the Ely Central should +cede to the Nevada Consolidated practical ownership, because it was +specified that Ely Central could not interfere in its mining operations +with any rights granted. Attorney Lockhart of Ely Central fought the +receiver and his attorneys and won a victory. The Ely Central property +was saved intact for the stock-holders. +</p> + +<p> +Later, an application was made to the court to sell the entire property +of the Ely Central for $150,000. This was believed to be in the +interests of the Nevada Consolidated. In answer, a petition was filed +to discharge the receiver on the ground that the court originally +appointing him had no jurisdiction. The court finally decided that it +was without jurisdiction, because neither fraud nor incompetency had +been proved, and the property had not been abandoned. The receiver was +discharged. +</p> + +<p> +What has been the attitude of the Department of Justice since the raid +was made? Since the raid the Government has spent several hundred +thousand dollars to disclose sufficient evidence from the books to make +a case of any kind. One stand after another has been taken only to be +abandoned after exhaustive research for evidence to sustain the +original excessive pretenses. Grand Jury after Grand Jury has thrashed +over masses of evidence presented them. Armies of accountants have +worked day and night for weeks and months in an effort to substantiate +the action of the authorities who were led into the commission of a +grave wrong. +</p> + +<p> +The charge that the Scheftels corporation sold fake mining stocks has +fallen to the ground. Government examinations of the properties have +revealed them to be all that they were cracked up to be. Careful and +industrious reading of the mass of market literature sent through the +mails by the Scheftels corporation has failed to disclose deliberate +misrepresentation regarding the potentialities of any of the mining +properties. +</p> + +<p> +The Scheftels corporation transacted considerable margin business with +its customers in the stocks which it sponsored—Ely Central, Jumbo +Extension, Rawhide Coalition and Bovard Consolidated. If the Scheftels +corporation was run by rascals wouldn't they have been tempted +frequently to throw their weight on top of the market and endeavor to +break the price of stocks to wipe out the margin traders? Did the +Government find any evidence of this in the books? No. It found +evidence—overwhelming and cumulative—that on nearly all occasions the +Scheftels corporation actually exhausted its every resource to support +the market in its stocks and hold up the price in the interests of +stockholders. Evidence was also found in quantity that the Scheftels +company discouraged the practice of margin-trading. +</p> + +<p> +The superseding indictment handed down by the Grand Jury late in +August, 1911, eleven months after the raid, eliminated the charge of +mine misrepresentation regarding the Scheftels promotions and reduced +it practically to one of charging commissions and interest without +earning them. +</p> + +<p> +Not less than 85 per cent. of the total brokerage transactions of the +Scheftels corporation were in their own stocks, and at nearly all times +in the Scheftels history it had on hand, put up on loans or in banks +under option, anywhere from three million to seven million shares of +these securities. It actually bought, sold and <em>delivered</em> in this +period over fifteen million shares of stock! +</p> + +<p> +As already stated, the Scheftels corporation made it a practice to sell +stocks on the general list as an insurance against declines in the +market which might carry down the price of its own securities, and +this, in the finality, was what the Government, after the expense of +hundreds of thousands of dollars and the employment of the wisest of +counsel, was compelled to tie to in order to justify in the eyes of the +great American public the use of the rare power of seizure, search and +arrest and of its denial of a prayer for a hearing to the victims which +was made before the arbitrary power was used. +</p> + + + + +<h2> +<a name="XII"> </a> +CHAPTER XII +<br><br> +<span class="smallsc">The Lesson of It All</span> +</h2> + + +<p> +What is the lesson of my experience—the big broad lesson for the +American citizen? This is it: +</p> + +<p> +Don't speculate in Wall Street. You haven't got a chance. The cards are +stacked by the "big fellows" and you can win only when they allow you +to. The information that is permitted to reach you as to market +probabilities through the financial columns of the daily newspapers is, +as a rule, poisoned at its fountain. It has for its major purpose your +financial undoing. Few financial writers dare to tell the whole +truth—even on the rare occasions when they are able to learn it. Most +of them are, indeed, subsidized to suppress the truth and to accelerate +public opinion in the channels that mean money in the pockets of the +securities sellers. As for the literature of stock brokers it is +generally even more misleading. Few brokers ever dare to tell the whole +truth for fear of embittering the interests and being hounded into +bankruptcy and worse. +</p> + +<p> +As for myself, what excuse have I had for catering to the gambling +instinct? This is it: I thought the promoter and the public could both +win. I now know that this happens only rarely. As the game is now +generally played by the big fellows, the public hasn't got a chance. +</p> + +<p> +I have not got a dollar. Who profited? +</p> + +<p> +The answer is: If anybody, the aggregate. The world has been the +gainer. It is richer for the gold, the silver, the copper, and other +indestructible metals that have been brought to the surface, as a +result of this endeavor, and added to the wealth of the nation. +</p> + +<p> +But for the gambling instinct and the promoter who caters to it, the +treasure-stores of Nature might remain undisturbed and fallow and the +world's development forces lie limp and impotent. +</p> + + +<p class="ctrtoppad"> +THE END +</p> + +<div class="tn"> +<p class="ctr"> +Transcriber's Note: +</p> + +<p> +Minor typographical errors have been corrected without note. +</p> + +<p> +Irregularities and inconsistencies in the text have been retained as +printed. +</p> +</div> + +<div>*** END OF THE PROJECT GUTENBERG EBOOK 44274 ***</div> +</body> +</html> + diff --git a/44274-h/images/cover.jpg b/44274-h/images/cover.jpg Binary files differnew file mode 100644 index 0000000..06bef2b --- /dev/null +++ b/44274-h/images/cover.jpg diff --git a/44274-h/images/logo.jpg b/44274-h/images/logo.jpg Binary files differnew file mode 100644 index 0000000..5138805 --- /dev/null +++ b/44274-h/images/logo.jpg |
