Frenzied Finance Part 36

CHAPTER XXVIII

THE BOGUS SUBSCRIPTION

Later, on his way downtown, Mr. Rogers came to my rooms.

"Are you ready for the finals, Lawson?" he said cordially. He, too, had dined, and doubtless philosophized; his whole air showed me he had satisfied himself that I would submit to the logic of conditions. No man knows the human animal from his heart's seed to its bloom better than Henry H. Rogers--and I was human.

I told him I would hold the reporters until I got the word from him, and that it must not be later than midnight. No questions were asked nor a.s.surances given. He left in a moment for the National City Bank, and there in its solemn chambers he and James Stillman perpetrated the act which is the crime of Amalgamated, in itself a stark and palpable fraud, but aggravated by the standing of the men concerned in it, and the pledges that were slaughtered, into as arrant and d.a.m.nable piece of financial villany as was ever committed.

About eleven o'clock my telephone rang. I heard Mr. Rogers' voice.

"Lawson, Stillman's tally is so far completed that we know about where we are. Give out to the press that the subscription runs between four hundred and four hundred and twenty-five millions, call it four hundred and twelve millions, after throwing out one hundred and seventy millions from speculators, and sixty-two millions as defective, and after shutting out fifty millions more which were received too late. Each subscriber will be allotted fifteen to twenty per cent. of his subscription--call it eighteen per cent."

The figures were paralyzing. I made no attempt to a.n.a.lyze them. They came so late that as soon as the newspaper-men with me got them they flew to their offices and thus I escaped a strenuous ordeal of interviewing. Our arrangements for distributing the facts throughout the country were made through the _Boston Financial News_, to which we had given the exclusive right to send out the details, and its special wires were soon clicking the news to all the world. The next morning the press contained the particulars. I reproduce from the papers of May 5th the tale.

=$412,000,000 FOR AMALGAMATED COPPERS=

=$75,000,000 Subscribed More Than Five Times Over=

=FINANCIAL WORLD COPPER MAD=

Subscriptions of $412,000,000--the largest in any financial deal in the world's history--are reported by the _Boston Financial News_ to have been received toward the Amalgamated Company. "The world has gone copper mad" in truth.

Subscribers can be allotted only eighteen one-hundredths, or less than one share in five of the amount applied for.

One week ago, says the report, it was announced that the Standard Oil magnates, Rogers, Rockefeller, and their a.s.sociates, had begun their conquering march upon copperdom--that the much heralded copper consolidation was a thing of fact--that the Amalgamated Company had been incorporated, and that its first capital, $75,000,000, would be offered to the public by subscription through the National City Bank of New York at $100 per share--$100 per share, without a discount, a commission, or profit to any one.

Never before since the first dollar of civilization was invented to take the place of the stone tokens of barbarism had such a thing been heard of--$75,000,000 of stock to be sold to investors at $100 per share, and in one week after the birth of the corporation upon which it was based.

The financial world held its breath, and from that time up to the closing of the books of subscription, at twelve o'clock noon yesterday, the financial world, English, German, and French, have awaited with bated breath the outcome of this great feat of modern financiering.

During the entire week from all parts of the world have poured into the National City Bank applications, accompanied by checks for the first payment--one continuous stream of entreaties--for some of the shares of this great enterprise.

Nothing in history tells of such a movement.

Early in the week it became evident to the managers of the great industrial revolution that something must be done to stop the movement or it would run to such an extent as to cause serious trouble in the money markets of the world.

Since Monday most strenuous efforts have been made to discourage the taking of large subscriptions. To that end the powerful financiers interested have begged all who contemplated subscribing for over $1,000,000 to keep their applications down to that figure, and their efforts met with complete success.

Again, all those who were connected with the enterprise and who had intended subscribing on the same basis as outsiders for very large amounts, agreed that if the subscription ran over $150,000,000 they would refrain from subscribing that those who had subscribed would not become dissatisfied with the smallness of their allotment. Still the rush continued.

From all financial centres of the world came the unbroken chain of applications, until those most interested in the success of the undertaking were appalled at the magnitude of the interest aroused.

For the past forty-eight hours the National City Bank has had employed, night and day, a corps of forty-odd extra clerks calculating and arranging the applications and checks. At exactly twelve o'clock noon four uniformed watchmen closed the doors of the subscription department of the City Bank in the face of over three hundred intending subscribers, who were frantic at their vain efforts to get in their subscriptions before the appointed hour arrived.

Up to eleven o'clock to-night the entire bank force, regular and extra, have been at work, and at this hour the figures were announced which make the subscription of the Amalgamated Copper the greatest event in finance since the world began.

After throwing out bids that were, on examination, proved to be the efforts of speculators to take advantage of the great interest to make money with no risk, and after throwing out bids unaccompanied by checks, or checks that were not satisfactory, the first cla.s.s amounting to over $170,000,000, and the last to over $62,000,000, the total cash subscription was found to have reached the gigantic sum of $412,000,000, which gave to each and every subscriber eighteen per cent. of his subscription.

It is not known how much was represented in the 300 subscribers who were too late, but it is estimated at $50,000,000--five of the 300 had single subscriptions of $1,000,000 each. It is estimated that the sum total of the subscriptions that were thrown out or that arrived by messenger or mail--for the mail is still pouring into the bank--was between $300,000,000 and $400,000,000, which, added to what insiders had intended to secure for themselves, would have carried the total to over $1,000,000,000.

It is estimated also that there are a great many who, antic.i.p.ating the enormous over-subscriptions, have refrained from subscribing and will purchase in the open market.

Immediately after the subscription closed, 140, or forty per cent. premium, was bid for the stock secured by the lucky bidders.

It is said the company will issue the next $100,000,000 at once, as those insiders who refrained from subscribing were practically promised that they would at once be given an equal opportunity to subscribe if they would hold back on this issue. It is apparent that the next subscription will be even greater and cause more excitement than the first one, particularly as it is agreed by all that the price of the stock will quickly mount to $200 per share, as it is to be put upon the English, German, French, New York, and Boston Stock Exchanges, and will undoubtedly become one of the greatest investments sought for by the wealthy cla.s.ses.

England sent in subscriptions for $50,000,000; Germany and France, $20,000,000 each; Boston and New England showed their steadfast faith in copper by subscribing for over $200,000,000.

There is great excitement at the clubs and meeting-places of investors and brokers to-night.

Here is what Mr. Rogers and Mr. Stillman did. After discarding all unsatisfactory and imperfect subscriptions, there remained subscriptions of between $125,000,000 and $150,000,000 which had complied with all legal conditions, and accompanying these were checks aggregating between $6,250,000 and $7,500,000. This was real money, in the bank and within reach, and the two great financiers, hungering for every dollar of it, determined to possess themselves of this great sum and use it as surety to compel the payment of the balance. First, they agreed that not a dollar of the five per cent. subscription should be returned; next, to so use this amount that no one to whom stock was allotted would back out, but, on the contrary, promptly take his whole allotment and pay up the balance. To effect this they decided to allot each subscriber just the number of shares of Amalgamated necessary to render the amount of money accompanying his subscription equal to about a twenty-five or thirty per cent. payment on his whole allotment. This would const.i.tute such a large margin as to a.s.sure the payment of the other seventy or seventy-five per cent. due. For instance, a man who applied for a hundred shares accompanied his subscription with a check for $500. He was allotted twenty shares, value $2,000, on which his $500 check represented a payment of twenty-five per cent. If the conditions of the National City Bank's advertis.e.m.e.nt had been complied with, he was absolutely ent.i.tled to three shares of every five subscribed for, or sixty in all. To bring about the proportion which Mr. Rogers wanted, a bogus subscription of five or six times the unallotted balance was put in by him, and this is where the fraud was committed. The National City Bank was in duty bound to protect the public from any such bogus subscription, and to see that fair treatment was accorded to all subscribers. Yet, unfaithful to the trust, it permitted this bogus subscription to be put in, many hours after the bids had been opened. It utterly failed to comply with the conditions of its advertis.e.m.e.nt, and was thus a direct party to the fraud perpetrated by its president and Mr. Rogers. The exact amount of the bogus subscription could not be decided until the exact figures of the subscriptions had been compiled, so the figures I gave out that night were only estimates. Within the next few days it was ascertained that the genuine subscriptions totalled $132,067,500, upon which an allotment of one share in five, or $26,413,500 of stock altogether, was made to the public.

In this way the conspirators secured from the public $26,413,500 of the original cost, $39,000,000, and yet retained over $48,500,000 of the authorized stock of $75,000,000. In other words the public paid two-thirds of the purchase price, and the conspirators retained nearly two-thirds of the property.

The fraud thus perpetrated amounts to this: Every subscriber legally ent.i.tled to three shares of Amalgamated stock was deprived of two of them by the National City Bank, and the proof is to be found in the books of said National City Bank. My readers may say here that this const.i.tutes a fortunate condition rather than a crime to be punished, for the less Amalgamated a man had, the better he was off, as the stock afterward declined. This conclusion is a false one, however.

Here, in simple terms, is an ill.u.s.tration of what was done in Amalgamated and of what the wrong was.

B had a valuable race-horse and decided to dispose of him in five shares. He offered these five shares for public subscription and advertised that if over five were subscribed for he would split up the shares and allot them pro rata. There were on the final day seven subscriptions. Instead of turning over the horse to the seven subscribers to own and race in their own way, B notified them that twenty-one subscriptions had been received, and that for their seven he had allotted them a one-third owners.h.i.+p, while the other subscribers would retain two-thirds. In the two-thirds resided the right to manage and race the horse, and the seven had no say whatever in this direction.

The seven honest subscribers, not suspecting that B had simply sold them one-third of his horse for nearly his whole cost, and that he still retained a two-thirds owners.h.i.+p in him, supposed that fourteen others had subscribed on the same terms as themselves. If the horse were really able to race and thereby earn large sums of money, it was by this fraud in B's power to make him appear so worthless that the seven bona-fide subscribers would be inclined to turn over their owners.h.i.+ps to B at his own figure. Contrariwise, B could so dose the horse as to make him appear more valuable than he really was, and use the advantage to dispose of his fourteen shares for fict.i.tiously high prices.

The world a.s.sumes an att.i.tude of horror and amazement at the mention of crime, and thousands of words are written to describe what led up to and away from any given overt deed; but the deed itself, however grave, shameful, or portentous, seems strangely barren and bloodless set down in naked words. Yet the mountain peak that tops the great ranges is but a shoulder over its neighbor, though it may be the apex of a continent.

A misconstrued word has caused the spilling of the blood of millions; the needle-point of a stiletto has severed kingdoms. Between temptation and consequence there is but little s.p.a.ce, yet it is deep and wide enough for all the poison in the tongues of all the world's serpents.

To-day, a simple peasant, humble, gentle, is an insignificant atom in the great Russian Empire, and Nicholas is the supreme ruler of rulers.

To-morrow, by a simple swing of an arm a bomb is thrown, and the peasant is the one human being in all the world; the face of Russia is changed, and Nicholas--is not.

The first crime of Amalgamated is a matter of mathematics. It involved plain fraud and misrepresentation, the insertion of a bogus subscription and the disruption of solemn pledges, but the commission of it was nothing more than a matter of arrangement between two men, one the master of the greatest of all business organizations, and the other the head of the strongest bank in the United States. The consequences were world-wide. That night no bomb was thrown, but a seed was sown for the cruelest harvest of crime, dishonor, unhappiness, and desolation ever reaped within the confines of our republic.

NOTE.--The above statement has now been in the hands of the public, has been printed and commented on in thousands of the leading journals of the world for twelve months, and no Government official has taken cognizance of it. The charges I make const.i.tute one of the gravest business crimes ever committed by any national bank. If they are true, the Government at Was.h.i.+ngton has no more important duty than to punish the criminals. If they are false, I should be sent to prison. What a commentary on our boasted freedom and equality! The National City Bank does business at the old stand. Rogers, Rockefeller and Stillman walk the streets; so do I, and since I published the above statement and submitted the above proof, at least half a dozen poor national bank clerks and officials who have stolen a few hundreds or thousands have been sent to prison, or have committed suicide to avoid being sent there.

CHAPTER XXIX

THE AFTERMATH

It was just past the midnight of May 4th. The last newspaper-man had taken his departure, my friends had all retired, and I was alone for the first moment since the news had come from the City Bank. I had not then stopped to a.n.a.lyze its character, for there had been only time to announce it. Now, however, I sat down at my desk and with a pencil and a piece of paper began to cipher out what the "412 millions" meant. As I figured, cold sweat began to gather on my forehead, and the further I figured the colder the sweat, until at last in an agony of perplexity I again called up Mr. Rogers. My agitation must have betrayed itself in my voice, though I tried to a.s.sume a tone of calm inquiry.

"Mr. Rogers," I said, "I've been vainly trying to figure out the meaning of the subscription figures you gave me and I cannot make head or tail of them. You said '400 to 425 millions'; of course that means you have put in our dummy subscription, but what was the real subscription? It is absolutely essential that I know to-night, for in the morning I shall be besieged for information, and ignorance on my part may get all hands into trouble."

"Lawson," he replied, "you must not talk such things over the wire--you don't know who is listening. You must not."