2. High-sounding names.—The annals of fraud are decorated with magnificent names and resounding combinations of words, such as the Northwestern Fis cal Agency, The National Trust Company, The Re deemable Investment Company and The Sterling De benture Corporation. Mr. C. M. Keys in the World's Work of March, 1911, has made some interesting comment on their titles. He says: Into their names they like to weave the old and splendid words that once belonged to the vocabulary of legitimate in vestment, of sound finance, of public trust and confidence. Half a dozen of them use in their titles the words "Bond," "Fidelity," "Trust," "Sterling," "Funding," "Debenture," "Fiduciary," "Security"—what splendid sounding words they all are ! Best of them all is "Savings," and it has been used most liberally, in spite of the law's intent.
For many years past, it has been part of my business to look carefully into the character of various investment com panies that have offered securities to the public. The first result of this long practice is that when a new concern comes to light that has in its title any of these glorious old words, suspicion immediately takes command of my mind. I would sooner trust, off-hand, the "Red Hawk Stock-Selling Syndi cate" than the "Fidelity Funding and Savings Society." It is ten to one that the latter is a thick disguise for some notorious swindler who is afraid to put his name on paper.
3. Every prospect fraudulent pros pectuses picture a situation too good to be true. In their anxiety to play their game fast—for it has its dangers—the promoters can tolerate no sober discus sion of drawbacks, no point which may lose them a single possible subscriber. Many have no reputation to safeguard by giving the subscriber advance warn ing of possible future difficulties. Every point must be a favorable one, and it must contribute its share in arousing the victim to enthusiasm.
In a letter of October 5, 1908, addressed "To the Board of Directors of Temagami-Cobalt Mines Limited," but nevertheless printed and widely dis tributed, the writer said: "In addressing you, I shall speak with more freedom and positiveness than would be proper were I talking with a sub scriber to our stock." He then worked up his case, little by little, to extravagant phrases, such as, "mag nificent project," "silver in practically unlimited quan tities," "only one of innumerable veins on our prop- . erty," "will prove richly remunerative for at least 50 years," "in a few months more I am confident that none of our stock can be bought for any price." In similar letters, such phrases as "mighty fat profit," "greatest increase in percentage of sales ever known," and so forth abound.
In contrast to this flamboyant literature, in all the official promotion literature of the United States Steel Corporation only one laudatory phrase could be found. It was as follows : "We believe that the consummation of the proposed arrangement will re sult in decreased expenses, in lower and more stable cost of manufacture, and, without advance of prices of manufactured products, in larger net earnings ap plicable to dividends." It is well to observe exactly what a prospectus says. All statements made on the authority of others,
as of "an expert," or of "a conservative and successful business man," may be ignored. Likewise, all state ments of mere belief or expectation, such as "we can safely expect nearly 100 per cent in two years' time" may be passed over as having no binding character. A man is legally entitled to believe whatever he pleases, and this fact the promoter knows very well.
4. A very small amount of Sibyl of Cumea brought the proud Tarquin to terms when she offered her books of prophecy for sale, and finding her first terms refused, burned the books, one by one, before him. An opportunity seems most attractive to its just as it appears about to be withdrawn. A letter from the Sterling Debenture Corporation dated September 14, 1908, regarding the stock of the Telepost Company, said: Wise investors are securing stock in the enterprise now. The entire apportionments of Series A stock for several of the States have already been subscribed, but residents of your State can still, at this writing, secure shares in this first series.
But in January, 1910, if "Series A" stock was all gone, there was "Series B" on hand, as a paragraph from a letter of that date shows.
As noted on the inclosed post-card, very few shares of Series B stock of the Telepost Company remain for allot ment in Michigan. Many of the States have already taken up their entire apportionment. By sending in your appli cation at once you may still secure the advantage of receiv ing the two convertibles which go to subscribers of Series B.
5. Telegraph your order at once.—Twin sister to disappearing opportunity is the idea that opportunity can be seized only by prompt action. The usual cheap prospectus argues thus: this is a good thing; the stock will be over-subscribed; you must send in your order quickly if you would be accommodated. The emphasis put upon haste is almost invariably over done. This alone shows that no great rush is ex pected, and that the true point in the mind of the promoter is that the investor must be induced to act quickly, without investigation, and without mature consideration or else he will never patronize the proj ect at all. Lord Burleigh (who was William Cecil) advised his son, Robert Cecil, in choosing a wife: "If thy estate be good, match near home and at leisure; if weak, far off and quickly." This advice the pro moter has taken to heart. When his project is weak, he applies for the money of investors "far off and quickly." The following is an extract from a letter issued in booming a get-rich-quick stock : We have made it as easy as possible for you to grasp this opportunity at the time when you can make the greatest profits. You have no time to lose. If you want to become a partner in this growing concern, share in its prosperity, and thereby make your money earn the highest returns, under conditions of absolute safety, send in your order now. The price will advance any day. It may tomorrow. One day's delay may lose you hundreds of dollars. Meet your opportunity face to face. Don't turn your back. Fill out the inclosed order blank for all you can carry. Do it now.