Flynn’s Weekly Detective Fiction. Vol. 27, No. 2, September 24, 1927

“Nowhere in this periodical is there any disclosure that the defendant Rice or the ‘Rice interests’ have any interest in the profits which will accrue to the defendants from the public’s purchase of the four securities sponsored by this periodical; but, on the other hand, there is a studious concealment of such fact, in direct violation of the relation of trust and confidence that the periodical is calculated to inspire.

“Matched” Sales

“To further inspire the relation of trust and confidence, the periodical contains inflammatory attacks upon the New York Stock Exchange in the interests of the public, and also to induce the public to purchase sponsored stocks it contains cunning references to quotations of these stocks from transactions on the Boston Curb Market, purchases and sales which the testimony of defendant’s accountant, Reis, and the transcript of the defendant brokers’ accounts conclusively demonstrate were ‘cross’ or ‘matched’ sales.”

This latter reference means sales where a person in control of a stock sells a given number of shares to himself in the open market at a price determined by him, the transaction being intended to show an activity which the stock does not actually possess. Where the price of a stock is progressively advanced by this method, it is known as “rigging” the market, and there have been a number of cases where big stock exchange operators have been expelled by that organization for indulging in the practice.

In addition to the boosting in the Iconoclast, the attorney general charged that Rice used a corps of high pressure salesmen to induce the public to invest in Colombia Emerald stock, of which he owned or exercised control over practically all that was available to the public.

High Finance!

As to the emerald mine itself, the State presented a graphic historical picture, stating in part, with reference to an affidavit filed by the defense:

“The history of the Somondoco Mines, owned by the defendant Colombia Corporation, is set forth with great detail. Disrobed of its romantic verbiage, it baldly discloses that these mines, although known to history and to the public generally, were permitted to lay buried for over two centuries, until 1896, when they were resurrected by the Colombian Company, which produced nothing.

“That, in 1919, some German interests attempted a promotion which proceeded no farther than an option; that in December, 1919, the original promoters of the present project, the McFadden-Gross group, obtained options and transferred the mines to the Colombian Emerald Syndicate, ‘which started to sell their stock on the New York Curb Market at fifteen and one half to twenty dollars a share in October to December, 1919, representing six to eight million dollars for the four hundred thousand shares at a time when they did not even own the property and even their options were of dubious, if of any value.’

“This promotion, according to Breger — a witness — went on the rocks and that corporation — Colombian Emerald Syndicate — was petitioned in bankruptcy in the United States District Court for the Southern District of New York; as a result of which proceeding, the trustee in bankruptcy, in the latter part of 1924, sold its entire assets, including the two mines, the canal and other paraphernalia, together with a stock of unsold emeralds to a dummy for McFadden for seven thousand eight hundred dollars.

“Thereafter, according to Breger, in 1924, the Chivor Emerald Corporation was organized by McFadden and took over the identical property now owned by the ‘Lewisohn interests’ and again promoted a stock jobbing proposition on very little production.

“After this unhappy career, according to Breger, the ‘well-known Lewisohn interests’ were introduced into the picture and organized the defendant Colombia Emerald Development Corporation to take over and operate this unfortunate property. The two mines were thereupon, in the latter part of 1924, transferred by the Chivor Emerald company to defendant Colombia Emerald Development Corporation for the entire capital stock of that corporation, consisting of one million shares of no par value.

“The Lewisohn interests thereupon paid defendant Colombia Emerald Development Corporation fifty-one thousand dollars cash and receive five hundred and fifty thousand shares of the stock, leaving four hundred and fifty thousand tied up in escrow for the benefit of the Chivor Corporation.

A Spoonful of Emeralds

“Shortly afterward one hundred thousand shares of this stock was returned to the treasury of the Colombia Emerald Development Corporation, fifty thousand from the Chivor Corporation and fifty thousand from the ‘Lewisohn interests.’

“According to Breger, therefore, the entire history of these Somondoco mines was one of failure, and as the record established, it ran true to form up to the time when this action was filed against these defendants.”