THE CURB MARKETS GREATEST SWINDLE.

Press, Volume LVIII, Issue 10883, 6 February 1901, Page 3

THE CURB MARKETS GREATEST SWINDLE.

Bγ S. A. Nelsok. Many great rogues have trod the shady side of Wall Street; great in their ingenuity, great in their achievements, and great in the way they fought themselves out of or into gaol. There is an irresistible fascination about Wall Street for the rogue, though the dead-line' of the newspaper police stories, which says that no rogue is ever allowed by the detectives to pass south of Maiden Lane —the upper boundary of the money market—is a pleasing fiction, applicable only to common crooks, who would rob stores and pedestrians. The Wall Street rogue who masquerades in fine raiment as a financier, knows no sucli restraint, and he would be amused were you to mention it to him.

Now, Wall Street is always full of rogues. They travel singly, in pairs, and in gangs, and represent a dozen different types. More than one seemingly respectable office building harbours nests of them. These soldiers of fortune include some highly-polished villains, who, unfortunately, are never found out. They maintain w<h<ut appears to be excellent social and financial standing ; "and, if the veneer is a trifle thin in places, it is not apparent to other than those who have had personal contact with and chipped the veneer until the truth was revealed for the very few to see and wonder thereat.

From, the leader of this little army of adventurers to the cheap swindling speculator, who offers a supposedly confiding broker a New York draft on an alleged Spokane, Washington, bank account, is a long leap. The central figure? of this story, however, did not represent either type. Still, lie was a leader. He had no social status, it is true; but lie had brains and money, and. always played for heavj ,, stakes. Albert Yarn-ell was of French descent, and probably thirty-eight years of age. Of middle stature, robust build, rather coarse features, and a wearer of eye-glasses, he was not a person to attract attention off-hand. To study his face, one would first need the incentive of knowing the man and his deeds. You would then say, perhaps, that the man was neither good nor bad to look upon, but that the face lacked cultivation. The eyes were blue, the forehead and chin broad,* the nose rather large and the mouth well formed and strong. It just missed the finishing touches that would have made a strong, manly, and attractive personality. In financial affairs Yarnell was absolutely lacking in sense of morality. He respected no one, least of all himself. He gloried in his ingenuity as a rogue, and would as lief rob a widow as a banker. Both had been his victims, and if the gaol-doors yawned for him, he smilingly contemplated them— generally at a distance—although there ha<l been times when they had been dangerously near to closing in upon him. A partner in a Yarnell operation had said of him upon one occasion: "Stick a pin in that fellow and you'll get ice-water." That was another rogue's description of an absolute cold-blooded wretch who had no friends, wanted none, and helped the State with his evidence whenever it suited his convenience. Hi would take a weak man, use him as a tool, squeeze him dry, wind criminal cords around him, and then thrust him into the Lands of a district attorney looking for a victim.

Yarnell was versed in criminal law as far as it pertained t* high finance. He knew its highways and byways. In his legal calculations he differentiated with a fine eya and a clever brain regarding results ; would they indues criminal prosecutions by the State, or civil suits by individuals? He always preferred the latter. He retained two lawyers. One was a companion rogue, whose clients were by odds the cheekiest swindlers that ever worked upon the cupidity of the public and disgraced God's <jreen earth. When he was retained, to use his own words, he had to be "declared in" on the deal ; that is to say. he wanted and demanded a liberal share of the profits. If there were no profits, of course he charged his fees nevertheless. The other combined corporation with criminal law, and only accepted criminals as clients, because he was a spendthrift, and YarnelTs retainers were of handsome proportions.

In 1899, when several hundred thousand men were riotously drunk with stock speculation : when an over-capitalised trolley railroad that was not earning the fraction of a cent in the form of dividends sold at 136 dollars a share; when another, worn out, bankrupt, and ready for a receiver, was quoted at 212 dollars; when electric shares sold at prices inflated to the point of bursting; when, industrial stock promotions amounted to a couple of billions a year, Mr Yarnell threaded his way down Broad street and surveyed the curb market. A prince of schemers, he had a new scheme, and he knew that it would be richly productive for Albert Yarnell. To work out his complicated, plan so as to get the lion's share of the spoils, while his partners received the minimum, was the basis of the ideas shifting about in his knave's head.

"The Curb," or outside security market, is the overflow from the Stock Exchange* Scores of brokers meet in Broad street every <iay and trade in the middle of that thoroughfare along the curbstones; hence the name. They buy and sell those stocks and bonds which for one reason or another are not dealt in on the Stock Exchange, and the number is large. Most of the brokers are young fellows serving their apprenticeship and representing Stock Exchange firms. Others are older and richer, and represent themselves. All have a code of business honour, but unlike the regulations of the Stock Exchange, their laws for the protection of principal and client are unwritten. Thus the curb market is rataer an elastic proposition. Yarntll proposed to stretch it. and he did.

On this afternoon, r,3 he looked over that curious collection of brokers, he was thinking of the, boom in electrical stocks. They were having a glorious day. A group of promoters were floating stocks en a new bask—they offered you 100 shares of the Ekctric B'all'jcn. Company, par value lOOdol a j-hars, and called for the subscription money in small instalments. You bought IGO shares of Balloon, paid in 500dol, or sdol a share, and the promoters ran the %uota-

tions up several hundred per cent., just to tickle the subscribers. If you bad the cunning of a fox, you sold out quickly; but the public were not then in a selling mood, although the stocks in question stood for inventions that were purely experimental in character.

Yarnell had determined to float the Electric Axe Company, and to float the stock into the tin boxes of some of the leading brokerage firms of the street. Seemingly this was an absolutely impossible task. Catch a Wall street veteran asleep? Never! And his scheme,"so difficult in conception, so simple in execution, had the stamp of criminal genius. Yarnell called his confederates together, and this is what they did: They rented an office in a. fine building, painted the Electric Axe Company sign on the door in pretty gilt letters, bought a worthless elecrical invention, which is not a difficult thing lo do, selected a. list of directors' and officers' names, with and without authorisation (forgetting directors is a simple anatter), capitalised and incorporated the company in, New Jersey with several millions of mythical capitals and proceeded to print an engraved stock certificate. The colour scheme of the printing was green and black, and the certificates were as pleasing to look upon as your Uncle Samuel's Government bonds. Yarnell's company did not have a solitary asset, and it did not require any.

The scene is now shifted to the curb market. Working through his brokers, Yarnell every day fixed the prices of his stock. He found that the newcomer was welcomed. It represented new commissions, and the times were so tremendously swiffc that few brokers had even minutes to spare to investigate the infant which was clothed so respectably. Yarnell's brokers bought and sold the stock by the process known as "washing"; that is to say, they conspired to manipulate the price. * As they , had all the stock, and never contemplated its delivery unless they sold to an outsider, they couldreadily advance quotations to any point thej- desired. Electric Axe was launched at 3*dol a share, and in a ftw weeks Yarnell's four brokers, who jostled their way about in the unwieldy curb crowd surging up and down Broad street, had vociferously bid the price up to 80dol. In the interval. Messrs Bryant, and Rice, one of Yarnell's dummy firms, were sending out 5000 mimeograph circular letters to a selected list of 5000 credulous investors. This circular letter read: — "100 Points Profit.—Everybody remembers the sensational advances which occurred in New York Air Brake and Storage Battery Stocks within recent months. The first public price of Air Brake was 22d01, and of Storage Battery 28dol, for each lOOdol of stock. Each has been selling close to 200dol a share during the past month—advances of 180 to 165 respectively. The same interests which boomed Air Brake and Storage Batter- axe now launching another stock on the outside security market, and will boom the same upward more than 100 points within ninety days. If you desire to buy this stock for 100 points advance, and will contract to pay us a fair share of your profits, communicate with us immediately. We want nothing whatever for ourselves witliin ninety days, or until at least 50 points profit are realised. Purchases can be made through your own bi-okers, or through us. If you prefer to have us buy the stock for you, send us the amount you desire to invest and wo will execute your order immediately in he open market."

Now, the contest of wits became desperately sharp. The time had arrived for a staggering exhibition of nerve and audacity to carry off the grand play. Yarnell took five of his best dressed, smoothest, and most reliable fellow blackguards and sent them to Boston. Philadelphia, Chicago, St. Louis, and Denver. Each was supplied with 7500dol; each opened, by Yarnell's directions, an account with a stock brokerage and banking house having private wire connections with New York. The five then traded in conservative railroad stocks on a 10 per cent, margin, and in each instance 7500d0l cash collateral was up to secure their speculations. To understand this, it is necessary that the reader should understand just what a margin transaction is. If you buy a house and lot for 10,000dol and mortgage it for 8000dol, you are buying on a margin of 20 per cent., represented by your 2000dol equity. If you buy IO.OOOdoI worth of stock on a margin of 20 per cent., or 2000dol, your equity becomes your margin in the stock, and your broker borrows the remaining 8000dol to carry it, or, in other words, it is mortgaged to that amount. As Yarnell's agents traded, they made acquaintances and friends. One day when the melon was ripe for cutting, each of the agents received a letter, which read much in this way: — Established 1812. CUTTING fnTcS?' Bankers and Brokers, 200 Wall street. New York, April 4th, 1899. My dear Hamilton,— I am glad to hear that your health is improving. I knew that the rest would benefit you. When do you expect to return? iou really should be nere, as you are missing unusual opportunities. We have never had a better market in which to trade. I met Governor Flower at the Lawyer's Club to-day, and he assures mc that Brooklyn Rapid Transit will sell at 150, but take my advice and keep out of it. Stick to more conservative securities. I advise you to buy St. Paul, Union Pacific common, ard Atchison preferred. You can give the St. Paul to your wife. The Union Pacific will pay a dividend in twelve months, and the Atchison preferred will be placed on a 5 per cent, basis in the same time.

And, by the way—you remember John MorseV Well, he is the power behind Electric Axe, a new but sound curb security. If you were here I would certainly urge you to take on 200 or 300 shares, as private trials I have witnessed demonstrate conclusively the success of an invention that will be immensely profitable.

My regards to your family when you write to them. Mrs Cutting tells mc that ehe met Mrs Hamilton in Paris in February.—Very sincerely yours, JOHN CUTTING.

"You're lucky to have such a friend," said Mr. Hamilton's broker, as he read the forged letter.

"Do you trade in industrials?" asked Hamilton abruptly.

"^Sometimes —on a 20 per cent, margin." 7r \Vell,. it seems to mc that after that letter 1 ought to get a couple of hundred at least. I don't take much stock in tips, but Cutting is one of my father's oldest friends. You know who Cutting is?" "Of course. One of the oldest bankers in New York. ,, "Well, wire your New York correspondents, and see what they think of Electric Axe." The reply was— "Electric Axe has been rapidly advancing. It is 80 bid, 81 asked. Don't know much about it. Looks all right. "HUDSON axd TAYLOR." Back clicked a hurry-up order: — "Buy 300 Electric Axe at 80i on a 20 p?r cent, margin for one of our customers. He is buying on a tip from John Cutting. "STOUT and THOMAS." From New York was returned this dispatch : — "We have bought for your account and risk 300 Electric Axe at 80£. "HUDSON and TAYLOR." The deal was going through without friction. Now, its status was: — Each of the five confederates had 7,500 f'ol up as margin, making a total of 37,500 dol; each of the five had persuaded brokers to buy up 300 shares of Electric Axe at 80. Theirbrokers had bought in the open market 1500 shares of Axe at 80dol a share, or 120,000d0l in the aggregate. Yarnell had 120.000d0l of the brokers' money; they had 37,500d0l of his. Yarn ill's gross profit ry the deal was 02,500101. ThrVery day the last lot of stock was delivered Yarnell telegraphed a cipher message to his dummy speculators, telling them to fly. In the meantime he had disposed of 40,000d0l of worthless stock to country investors, and the great game was over.

To fold up the Electric Aze tent ar.d steal quietly away was the last act. The typewriters were immediately discharged, the rented machines returned, the name came off the office door, the office furniture disappeared, and in twelve hours not a remnant of the Electric Axe Company remained.

la a few days a telegram of enquiry to N«w i T ork was followed by a commotion. Electric Axe ii&ve b«cn offeied on the Cuib

from 80dol down to Idol, with no support. The brokers who ten days before had been furiously bidding 80dol for it had disappeared. Five out-of-town brokers boarded limited traine and travelled in haste to Wall street. But the birds had flown.

In May, Mr Yarnell closed hb city house —he has a fine one—and sailed abroad. He did not visit the Exposition, preferring to avoid the Americans who crowded Paris, for he required a considerable period of rest.