INSURANCE FRAUDS

Taranaki Daily News, 29 April 1930, Page 5

INSURANCE FRAUDS

“MUSHROOM” COMPANIES.

HUGE SUMS INVOLVED.

Sydney, April 18. Sydney detectives are at present investigating the questionable standing of nearly a score of “mushroom insurance companies established in Sydney during recent years, and their discoveries are understood to have astounded

them. Few (if any) of the companies under investigation by the police have any financial standing whatever, and. the deeper they delve the more convinced are the police becoming that most of the companies are connected in some way, and that when one falls definitely all must fall. Two or three men are prominently associated with each company, either as directors or in some other official capacity, and detectives have found the financial affairs hopelessly involved one with the other.

Credulous investors are beginning to realise that they have purchased gold bricks in taking shares in tib® companies. The method of the promoters has been to register a company with a capital of £1,000,W0 (nominal, of course) I and then, with high hopes, perhaps, start out to sell business on an actual capital, | in one instance, of 10s. They have employed “go-getter” salesmen to hawk their scrip from door to door in the suburbs and in the country districts, and ! by painting a rosy picture of all purely imaginary, they have induced credulous investors to part with their money for the scrip. Some huge sums have been 1 handled by the promoters of some of the coin-’ '

panics, but they have been dissipated in huge salaries and directors’ fees, while claims against the companies they are supposed to direct and manage are stacked high, with little (if any) hope of ever being met, though, the premiums are paid and the claims are peifectly legal Detectives have found that the men selling shares in Giese companies have criminal records for fraud in many in•‘stances, are entirely unscrupulous, and

that many of the officials of the companies have questionable records for honesty. So parlous is the position of many of them that last Friday two of the companies now under investigation were unable to pay the salaries of their staffs.

“When the full story is told,” said an insurance expert, in commenting on the position, “it will be found that the position closely approaches the Hatry frauds.’*