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

The brief then outlines “operation” of the mines from December, 1924, until May, 1926 — a period of seventeen months — and states that “during this period only a few hundred carats of saleable emeralds were produced, which subsequently realized not over five thousand dollars, and that the great mass of the production was practically worthless because of the flaws and the light green color.

“This spoonful of emeralds,” the State continues, “was produced at a cost of sixty-two thousand dollars, a net loss to the company during that period of fifty-seven thousand dollars, without including sales expense and the cost of cutting — three to five dollars per carat.”

The statement is then made that Lewisohn put approximately one hundred thousand dollars into the enterprise up to February, 1926, and had sold to the public, in a period of about fifteen months, only about twenty-five hundred shares of stock.

The State’s Contention

It was at this time that Rice came into the picture, the State alleging that his agents obtained an option on the hundred thousand shares of treasury stock previously mentioned, he agreeing to pay one dollar per share, and also an option on the four hundred thousand shares, more or less, held by Lewisohn.

With that held in escrow for the Chivor Corporation and others, it was charged that this deal left only twenty-five hundred shares out of one million free in the hands of the public.

Within a few weeks, it was charged, Rice, operating in the name of A. B. Brown, began to sell the stock, starting it off at one dollar fifty per share. Soon it rose to two dollars, due, the State charged, to manipulation by Rice.

The attorney general cited one day’s trading wherein a witness alleged that Rice sold on the Boston Curb seven hundred thousand shares of stock, and that it was all bought by the Wall Street Iconoclast, his newspaper.

The State contended that this huge transaction, representing several million dollars and commissions to brokers of fourteen thousand dollars, was made possible through Rice lining up seventeen hundred investors to purchase Colombia Emerald, General Mines and other “sponsored” stocks; that he obtained their purchase money in advance and just made the market gesture as a matter of form, although the brokers were instructed to make out the stock certificates in the names of the seventeen hundred investors, and did so, sending the certificates by registered mail.

Rice’s culpability, it is the State’s contention, regardless of any other consideration, lay in the fact that he guided them to buy stock controlled by him, at prices fixed by him, without disclosing that he was the seller.

“The relation between Rice and his customers,” said the plea to the court, “was one of confidence and trust. They were his clients, looking to him for his advice in the purchase and sale of stock, and for the selection of independent brokers who would represent them in the negotiations on the Boston Curb Market to procure the best price in that market. Such a broker would need to be free to select the highest price.

“Instead of this, Rice selected brokers on the Boston exchange who admittedly represented him, and dealt with him as the principal, buying stocks from other brokers employed by Rice to sell Rice’s own stocks.

“This arrangement offends one’s ideas of common honesty and decency, placing, as it does, Rice’s customers in a helpless position of being obliged to take what Rice has already predetermined that he shall sell to them, and depriving them of the independent services of a broker who may negotiate at arm’s length with his antagonists.”

A Skillful Fighter

In other words, the State charges that Rice was playing both ends against the middle, operating his newspaper as a “come-on” to bring lambs to the shearing table.

How much Rice or anybody else reaped from these operations, originally revealed through the theft of his list by the Broadway “dynamiters,” is not known, but it is said to have run into millions.

Lewisohn, the State pointed out, made one dollar on every share of his four hundred thousand which may have been sold after the first one hundred thousand shares of treasury stock optioned to Rice had been disposed of.

Assuming that all were taken over by Rice, the net return to Lewisohn, after deducting the original hundred thousand dollars he had put into the ingenious proposition would be three hundred thousand dollars.

Few men in Wall Street are more skillful in market affairs than George Graham Rice, and, despite the fact he has been behind bars several times in his career, he has put up one of the stiffest fights in this and the Idaho Copper affair that Winter, in his enforcement of the Martin Act, has encountered.

He has surrounded himself with an array of brilliant lawyers, has spared no expense to prove his operations were legitimate, and probably, if necessary, will carry the fight to the Supreme Court of the United States.