HOW THE STOCK CROOKS OPERATE

Twenty thousand a year is peanuts to Toronto’s high-pressure “blower boys” who peddle worthless stocks via the long-distance telephone. Here’s the inside story of how they fatten up a sucker, then “pour the load” to him for all he’s got

FRED BODSWORTH June 15 1951

HOW THE STOCK CROOKS OPERATE

Twenty thousand a year is peanuts to Toronto’s high-pressure “blower boys” who peddle worthless stocks via the long-distance telephone. Here’s the inside story of how they fatten up a sucker, then “pour the load” to him for all he’s got

FRED BODSWORTH June 15 1951

HOW THE STOCK CROOKS OPERATE

Twenty thousand a year is peanuts to Toronto’s high-pressure “blower boys” who peddle worthless stocks via the long-distance telephone. Here’s the inside story of how they fatten up a sucker, then “pour the load” to him for all he’s got

FRED BODSWORTH

IN MARCH 1950 a seventy-three-year-old widow in Geneva, Illinois, began receiving bulletins on Canadian mining and oil. stocks from a Toronto broker-dealer. The broker stressed that he had nothing to sell. The reassuring words “Send No Money” appeared prominently and frequently in the bulletins, which were issued, he claimed, merely as a public service. For several issues the bulletins talked vaguely about Canada’s mining and oil industries in general, referring occasionally to the vast p. fits investors had made. Then they began to make glowing references to a new company starting to drill in one of Alberta’s richest oil-producing sections. “Big companies,” however, had snapped up all the stock and “unfortunately it appears as though the public will not have an opportunity to take part in the venture.” Let’s call the company Bunkum Oils Limited.

Late in April 1950 the widow was somewhat flattered to receive a long-distance telephone call from the Toronto brokerage firm’s “vice-president.” His firm had succeeded in cornering a small

block of Bunkum Oil shares which it was releasing to a few selected clients. Since the public hadn’t had a chance to bid the stock up its price was still at the ridiculously low figure of twenty-five cents a share. Unfortunately, each client could be permitted only one thousand shares.

The widow agreed it was an unusual investment opportunity and mailed her cheque for $250, less exchange, to cover 1,000 shares.

A week later the “vice-president” telephoned again. One of the “big companies” had sold its Bunkum holdings to create liquid assets for a mining development of its own and now this Bunkum stock could be distributed, 9,000 shares each, among the original shareholders. There were now two producing oil wells on the property and the stock was certain to go up to the neighborhood of one dollar per share in a few days. However, 9,000 shares at the old price of twenty-five cents had been reserved for her. The widow thanked him, agreed at once to take the 9,000 shares.

During May 1950 there were several other telephone calls. Bunkum shares were described as rising rapidly in value, but because of their “special position” the Toronto brokerage firm could still offer them at twenty-five cents. In a few weeks the Illinois widow had a total of 30,000 shares which had cost her about $7,000.

At this point the “vice-president” began referring to $25,000 worth of stock in three large long-established U. S. corporations which had been left the widow by her husband, a doctor. She had never mentioned these securities, doesn’t know how the stock salesman learned about them. He “strongly recommended” she

sell them and invest her returns in Bunkum Oils.

But she refused flatly, insisting that $7,000 was all she cared to risk in a new venture. However, since her father had been born in Canada and she thought highly of her Canadian ties, she said she would appreciate it if the Toronto firm would sell her U. S. stocks and invest the proceeds in American Telegraph and Telephone, another of the New York Exchange’s old reliables. She sent her “blue chip” stocks to Toronto with the understanding she would get American Telegraph and Telephone in exchange.

But a few weeks later she received a letter confirming “your purchase of 111,000 shares of Bunkum Oils Ltd. at twenty-five cents per share.” The richly engraved Bunkum stock certificates were enclosed—$25,000 worth of them.

She telephoned Toronto at once to demand return of her original securities. The man she talked to was very sorry for “the mistake,” but unfortunately the “vice-president” responsible was “out at the oil fields for a month or two” and nothing could be done about it until his return. She received this same brush-off numerous times during the summer of 1950. In October she agreed to accept repayment of five percent per month and sent the oil stocks back. She received one payment of $94, then no more. In January 1951 she had to pay “brokerage expenses” of $100 before the firm would even return the Bunkum stock certificates.

At Washington, where officials of the U. S. Securities and Exchange Commission showed me affidavits authenticating this story, this particular stock was termed “beautifully engraved invitations to the poorhouse.” The SEC, a U. S. government watchdog responsible for regulating the securities business and protecting investors, has learned that the Bunkum property in Alberta has no producing wells and no indications of oil. Little of the money raised has been spent developing the property. The stock has no market—that is, it can’t be sold at any price. The Illinois doctor’s widow was simply taken for a $32,000 one-way ride.

Lies Pave Their Path to Riches

Like thousands of others before her and since, she was fleeced by the ruthless methods and deliberately fraudulent stock-puffing of one of Toronto’s “stockateers.” Incredible as it may seem, these swindled victims have no effective redress and the crooks pocketing their money can carry on their racket with little danger of interference. For Ontario laws are hamstrung by legal technicalities, in cases of stock fraud which takes place in telephone conversations across provincial or international boundaries.

This is by no means a picture of Ontario stockbrokers as a whole. The overwhelming majority of brokers run legitimate businesses in a legitimate way with a uniformly high set of business ethics which has justified the confidence of the public over many years.

But a small ring of shrewd, smooth-talking stock promoters who promise prospective investors everything but the moon are raking in hundreds of thousands of dollars a month from suckers too far away and too gullible to check the accuracy of the sales talk they are handed. To a man, these mail-order and telephone peddlers of dubious stocks—dealers in fraud by remote control—are concentrated in Toronto. The agencies saddled with the thorny problem of iheir licensing and control are the Ontario Securities Commission and its government-sponsored Continued on page 61

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How the Stock Crooks Operate

Continued from page 13

aide - de - camp, the Broker - Dealers’ Association of Ontario.

Because frauds committed at home will quickly catch up with them they are carefully staying within the law in most of their dealings with Ontario investors. But staying within the law makes small profits, so most of their activities are aimed by mail and telephone at investors in the U. S. and o:her provinces where distance and legal complications make it almost impossible for court proceedings to be instituted against them.

For almost fifteen years they have been reaping a rich harvest. Periodically Ontario investigators line up evidence against one of them and cancel his license, but as fast as one is put out of business another swindle artist obtains a license and starts up. Today evidence collected by the SEC in Washington and by Better Business Bureaus and securities administrators in Canada indicates that they are operating on as large a scale as ever, in spite of Ontario’s efforts since 1947 to tighten up enforcement of securities laws.

Ontario authorities admit that the stock-investment business was once wild and woolly but insist it’s now run for the most part strictly on the level. Chairman O. E. Lennox of the Ontario Securities Commission told me that the OSC had canceled the licenses of twenty-five stock dealers and salesmen since July 1948. He admitted that a few were still selling by means of fraudulent telephone statements, “but when a man gets on the telephone he can say anything and it’s almost impossible to catch him.” W. M. Wismer, executive secretary of the Broker - Dealers’ Association, said: “U. S. authorities must be exaggerating a trickle into a flood. They keep talking about fraud, but they never send us any real evidence of it.”

But here are some sample stock swindles that have been engineered out of Toronto within the past two years:

A woman in Denver, Col., lost her dress shop, home and insurance when she raised $40,000 to invest in a stock which the Toronto salesman assured her could be sold at double its cost in six months to a year. The only important asset she didn’t mortgage was her car. Today the stock cannot be sold at any price.

An elderly Massachusetts man had an estate a year ago of about $50,000, most of which he had willed to associations interested in underprivileged youth. Five different Toronto promoters went to work on him. They praised his interest in youth and told him that a careful investment in Canadian oil stocks would double his estate and vastly increase the good his money would accomplish after his death. In six months they had taken him for $46,000. His stock today is worth less than $5,000. Said a Washington official who revealed this story to me: “It’s the saddest case we have heard of.”

Another Toronto promoter was boosting a new Ontario gold mine with telephoned assurances that a big mill was in operation on the property and the mine was already showing a profit. A registration statement filed at Washington with the SEC showed that the only construction on the property were two tents with accommodation for twelve men. Another said his property was adjoining the fabulously wealthy Noranda mine in Quebec. SEC checked

and discovered the property was seventeen hundred miles away in a Northwest Territories “moose pasture.”

While Ontario authorities suspend the odd stockateer each month, and insist the rest are perfectly honest, Bay Street’s reported ten or twenty “boiler rooms” are running full blast five days a week, peddling frauds to every sucker they can find. Their wellfurnished offices have long been known as boiler rooms because of the highpressure sales talk and literature that emanate from them.

The first step in a fraudulent stock promotion is to acquire a sucker list. Telephone books from U. S. and Canadian towns and cities are often used. Sometimes salesmen return from selling tours in the U. S. carrying a suitcase full of telephone directories they have lifted from hotels. There are also legitimate advertising concerns that compile mailing lists from the auto registries of various states and provinces.

You Can Buy a List of Heirs

Sucker lists are sometimes compiled from labor-union membership records. And the fact that the whole student body and faculty of some U. S. colleges have been circularized indicates the stockateers have access to college records.

But all such lists have a high wastage because many of the persons listed have no money to invest. There are sucker lists that yield far better returns. One available from a Chicago firm for $6,000 is a list of heirs and heiresses compiled from probate court records. There are lists of businessmen who have received U. S. tax refunds and another favorite is a list of widows worth $50,000 or more which is said to be compiled by a reputable U. S. financial house.

Another ready - made sucker list includes the names of legitimate brokerage house clients who have been regularly purchasing Canadian stocks. Brokers guard their clients’ identity carefully but some have found that many of these names leak out and their clients are then subjected to the high-pressure ballyhoo of the stockateers. These legitimate brokers suspect that some of their own junior employees are selling clients’ names to the stockateers. Another report is that an employee in the Foreign Exchange Control Board was forced to resign last spring when brokers complained that names of their American clients were leaking out to stockateers from foreign exchange records.

When a promoter goes to work with a new mining or oil stock issue and a new sucker list his sales procedure invariably follows a pattern proven years ago to be sure fire.

He starts out by sending information bulletins, slowly building up the prospect’s interest and ego. If he has time he usually sells the prospect a solid stock in one of Canada’s well-known mines and tries to make a profit for him on a few preliminary deals. The sucker begins to think that his new Canadian broker is a smart man. The promoter’s aim is: “Get ’em buying and trading.” Then gradually the information bulletin works around to the stock the promoter has intended to sell from the outset. All kinds of glowing claims are made. This one isn’t a speculation; it’s a gilt-edged investment!

The promoter introduces the sale with a “teaser.” Only a hundred or a thousand shares can be sold to a person. Then the sucker, as an “old customer,” is allowed a thousand more, another thousand, and so on, and all the time he is being fed exciting news

releases from the property. Then developments are too fast to keep him informed by mail, so the promoter starts sending him telegrams every day or two. Now, with maybe a few thousand dollars invested, he’s “ripe for the load.”

One evening he gets a long-distance telephone call from his Toronto broker. If the broker is, say, Smith and Co., it is almost always Mr. Smith, the president himself, who is calling. Mr. Smith, in confiding tones, reveals that a few hours ago the drilling crews brought in a well that promises to become the continent’s biggest oil producer, or they have hit gold ore that assays a hundred dollars a ton, or some other fantastic yarn. When the news hits the street next day the stock will double or treble its value in a few hours. Buy all you can. Sell your car for a few days if you have to; you’ll soon be driving a Cadillac anyway. If your order and cheque are postmarked tonight you can still have 25,000 shares at thirty-five cents a share. Often it takes every cent the sucker can lay his hands on.

This game is older than Mark Twain’s imperishable saying that “a mine is a hole in the ground with a liar at the top,” but as one crop of suckers is harvested there’s always another ripening. In the Bay Street boiler rooms there are always scores of suckers on the hook at various stages of the build-up which culminates with “the load.”

During the day girls sitting at long tables are busy folding, sealing and mailing the mimeographed letters and expensively printed pamphlets that catch the suckers’ initial interest. They go home at 5 p.m. and then the glibtongued telephone salesmen—the elite of the profession—arrive and go to work. Their job is to concentrate on the suckers who have received plenty of oiling up, to throw on “the load” at the crucial time and to hook them for everything. They are night workers, for the telephone calls are planned to catch the sucker at home just about the time he has finished a good dinner.

At 6 p.m. Toronto time, with their feet on their desks, their ties loosened, they start calling the Atlantic seaboard where the time is then 7 p.m. Squinting at case-history cards which tell each sucker’s background, they feed two or three calls at a time to the longdistance operator. They are masters of the psychological approach. When a sucker drops any information about his hobby, interests or family, it is noted on the case-history card as talking points for future calls. With a gift of gab and a conscience thinner than an eggshell the salesman usually succeeds in building up a close personal relationship with the suckers on his list. One salesman, when he discovered his Philadelphia prospect was a stamp collector, paid sixteen dollars for a collection of old Canadian stamps to send him. He got that money back several times over before he was finished with him.

At 7 p.m. the men on the phones switch their calls to the Michigan, Ohio and New York areas in the same time zone as Toronto. At 8 p.m. Toronto time it is 7 p.m. in the Midwest; St. Louis is one of the main targets now. By ten o’clock they have spanned the continent and the phones are ringing in San Francisco, Los Angeles and Vancouver. It is common Bay Street knowledge that California, especially the Los Angeles area, has the juiciest crop of suckers in the U. S

Though their backgrounds are investigated by the OSC and BrokerDealers’ Association before they are granted licenses, many of these salesContinued on page 63

Continued from page 61 men have spent their lives as confidence men or race-track touts, always looking for chances to make a soft dollar and barely staying within the law while doing it.

Their conversation is a colorful, expressive combination of gangsterlike slang and corrupted financing terms. “Teaser” and “the load” are common expressions. A sucker is a “mooch.” When a mooch gets the load and they discover he still has cash he might invest they “pour on a reload.” “Boiler room” and “bucket shop” are usually outsiders’ terms for a brokerage office that goes in heavily for mailorder and telephone stock sales, but in the trade itself the office is referred to merely as “the joint.”

Big Pay for “Blower Boys”

A dealer’s or salesman’s license is commonly called his “ticket,” less commonly his “reader.” A sale is a “pass,” a sucker’s name a “moniker.” The telephone is a “blower,” and a telephone salesman a “blower boy.” Since Don Ameche played the role of Alexander Graham Bell in a recent film the term “Ameche” for a telephone has become familiar slang.

When several crooked brokers get together and buy up large blocks of a stock, creating an artificial interest in it among the public, the stock-market quotations soar and the phony manipulation is known as a “whizzer.” Then, when the brokers sell out suddenly at a high price and leave ordinary investors holding the bag, this operation is called “pulling the plug.”

Salesmen’s commissions average twenty percent of everything they sell. Some good ones get twenty-five percent. A few whose “tickets” have been cancelled are dangerous to have around, but some promoters take the risk and give them jobs at ten percent. A head salesman usually gets two and a half percent on all sales his staff makes. An average blower boy is said to earn $20,000 a year. This is probably a conservative estimate: four salesmen whose registrations were canceled by the Ontario Securities Commission were reported by the OSC to have earned commissions of $34,588, $12,994, $13,491 and $12,404 respectively in the three months before the cancelation.

As far as the boss is concerned a hot telephone salesman is worth all he makes.

Recently one gang of stock buccaneers had to raise ten thousand dollars on short notice. The boss called in his five salesmen. They pulled out their sucker cards, looking for someone they could give “the load.” One salesman had a brain wave. “I’ll get $10,000 by tomorrow night,” he promised. The stock they were pushing claimed to be a uranium property in northern Canada. There was no more uranium there than in the company’s brass ashtrays, but telephone salesmen were already representing it as a producing mine that had started to ship ore. The salesman selected a businessman in the state of Washington whom he already had on the hook for $9,000 of uranium stock. At eleven o’clock that night, 8 p.m. on the Pacific Coast, he phoned the man.

“Mr. X,” he said, “I think I’m going to have some big news for you regarding your uranium stock in twenty-four hours. I can’t reveal anything now, but where will you be tomorrow night at eight o’clock?”

Mr. X would be home.

“All right, I’ll call again then.” And the salesman hung up. It was a deliberate “teaser” to get the man stewing for twenty-four hours. At 11 p.m. next night he called again.

“My hunch was right,” he exclaimed. “The U. S. Government has just contracted to buy the entire output of our mine. The uranium content is higher than any other ore they have found. So you’ve got the whole U. S. Treasury behind your stock. The papers will be full of the news tomorrow and we expect the stock will hit five dollars in two or three days. If you’re smart you’ll buy all you can tonight. Don’t wait for the mails, it’s a dollar a share tonight but it’ll be five dollars before your cheque could ever get here. Better wire us all the money you can right now.”

Actually there is only one producing uranium mine in Canada—Eldorado on Great Bear Lake—and the Government owns it lock, stock and barrel. And if there were another uranium producer, Canada’s Atomic Energy Control Board wouldn’t permit the U. S. Government or anyone else to buy its output. But the salesman guessed correctly when he gambled on the Washington businessman not being wise to that. He also knew that the Washington sucker would have no inkling that the same dollar-per-share stock was selling that day in Toronto for twenty cents.

He didn’t get the $10,000 he promised the boss. But he got $8,000--by wire that very night.

In Washington, officials of the SEC told me repeatedly that their charges of stock swindles were directed only against a small ring or combine of Toronto promoters. They said that of the three hundred brokers and broker-dealers in Toronto there were only about ten who specialized in worthless or near worthless stocks and used all the fraudulent means they could devise to sell them.

Commissioner Richard B. McEntire, the SEC’s authority on Canadian securities, said: “The vast majority of broker-dealers in Canada are of course honest and legitimate. We have tried to make this distinction at all times.”

Milton P. Kroll, SEC counsel, added: “Unfortunately that distinction is lost on the U. S. public which reads newspaper accounts of crooked stock deals and gets the idea that the whole Canadian mining and oil industry is a racket. Canada needs U. S. capital to develop its natural resources and we want you to have it. But the utterly ruthless practices of this ring are bringing disrepute on the brokerage business as a whole and unless Ontario cleans it up you will find U. S. investors afraid to buy stocks in any Canadian enterprise.”

Underworld Link Hinted

In April this year Toronto brokerage firms with New York branch offices reported that New York trading even in well-known Canadian stocks had dropped as much as fifty percent during recent months. They blamed it on recent unfavorable U. S. publicity regarding Toronto’s swindle artists.

Certainly the inexperienced dabbler in stocks cannot distinguish between legitimate and bogus promotions, and the entire brokerage business is suffering as a result. One of Toronto’s most reputable brokerage firms received a postcard recently from an American asking for details about a Manitoba mining property. The broker put prospectuses, maps and a geologist’s report in an envelope and mailed them. A week later he received another postcard from the man. The prospective investor had scribbled indignantly on the card: “What are you trying to hide —putting everything in an envelope? Why don’t you be frank and honest and use postcards like I do?” Continued on page 65

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Throughout the U. S. and even to Hawaii the Toronto blower boys are sowing a trail of hate and suspicion. Their mass mailings and telephone solicitations reach millions of prospects. One shyster broker’s firm sent out three million pieces of mail in a single stock promotion that lasted a year. And when Ontario authorities investigated another firm, whose license they Hater canceled for unethical stockpushing, the OSC discovered that the firm’s three salesmen had run up a $19,900 long-distance telephone bill in one year.

Ironically, the ringleaders in this traffic are known in several cases to be former U. S. confidence men who fled so Canada to escape possible U. S. arrest. These figures, far in the background and rumored to be linked with underworld circles in New York, are m no way connected officially with the brokerage trade. It is common knowledge along Bay Street that several broker-dealer firms are merely fronts in which the firm’s president who actually holds the license is only a figurehead.

These big-time crooks couldn’t apply for broker-dealer licenses in their own names without being investigated by ihe Ontario Securities Commission. But it is a fairly simple process for îhem to put up the cash, find a “front” whose reputation will stand up against OSC scrutiny and establish a brokerdealer business that is theirs in everything but name. Legal fees, the cost of obtaining a property and incorporating a mining company, and the cost of printing and mailing thousands of pieces of promotional literature can reach $50,000, so the “front” is usually helplessly obligated to the boss who calls the tune from behind the scenes.

If the front decides to cut himself loose from the underworld organization which owns his business there are several ways to bring him back into line. One broker-dealer was mysteriously attacked, beaten up an I spent three weeks in Toronto hospital recently. He is said to have been a front who decided he would run his own show. After the beating he was afraid to talk. Usually, however, more subtle methods than a gangster strongarm does the job. If a front becomes non-co-operative it is a simple process to force him into bankruptcy, for the mining company owning the stock and several broker-dealers selling that stock are often part of the same ring, and one troublemaker can always be squeezed out by manipulating the others against him.

Evidence of a link between Toronto’s stockateers and the U. S. underworld has never been established in a court of law. “To be frank,” said one prominent broker, “it simply isn’t healthy to talk.” No one knows, he said, where the network begins and where it ends.

Even the Ontario Securities Commission has admitted that “fronting” exists, although Commissioner Lennox scoffs at the suggestion that an underworld organization is behind it. Where fronts have been uncovered, he said, they have been found to have been set up by promoters attempting to carry on business after their licenses were canceled by the OSC for unethical stock-pushing.

A skilfully established front is difficult to pin down legally. Usually when one is uncovered the license is canceled, but rarely does the case have sufficient legal basis to support c criminal prosecution in court. Agreements between the front and his real boss are^invariably verbal; payoffs are in cash. The chief runs his business without ever going near the office and

the front’s books are carefully manipulated so that the link with the chief cannot be detected by surprise audits periodically carried out by the OSC.

Investigators have shadowed suspects for weeks without uncovering evidence which would link the chief and his front. One method of bamboozling investigators is for the chief to throw a big house party at which his front is merely one of twenty or more guests. The OSC suspects that the parties are merely window-dressing to give the boss and his office manager a chance to get together and talk business.

Washington authorities have evidence that several firms, ostensibly independent of each other, constantly send out identical letters and sales pamphlets, except for company names and lists of officers.

But in spite of Bay-Street rumors and SEC files bulging with evidence of fraud, authorities in Toronto and Washington appear to be hopelessly deadlocked by conflicting opinions on

what is happening. As the controversy grows hotter several other Canadian provinces are lining up on Washington’s side to press for action to thwart these telephone bandits. Ontario securities officials are faced with a difficult problem. They must try to curb the swindlers by methods that will not interfere with the legitimate sale in the U. S. of Canadian securities —vital to Canadian development.

Toronto’s stockateers have built up a widely held belief that U. S. complaints of fraud are based merely on the selling of stocks below the border that have not been approved and registered under the somewhat difficult U. S. Securities and Exchange Commission Jaws.

In Washington I discovered that SEC authorities are only mildly concerned about the failure of many Toronto dealers to register their stocks in the U. S. But they are bitterly resentful about the utterly untrue and fraudulent telephone statements.

“We are not so concerned about what is being sold, but we are hopping mad about how it is being sold,” Milton P. Kroll, SEC counsel, told me. “When we say fraud, we mean fraud exactly as you understand the word in your country.”

But OSC Chairman Lennox told me that in spite of the barrage of complaints from Washington there has been little really helpful co-operation. He said the SEC had provided Ontario with evidence of only four cases of fraud in the past 18 months and two of them failed in court.

But there remains one very simple and obvious method of trapping the stockateers. The OSC could send an investigator to Detroit or Chicago and have him represent himself to a stockateer as just another American sucker. When the stockateer started “pouring on the load” a complete tape recording of the phone conversations could be made for use as air-tight evidence for prosecution.

When I asked Lennox if the OSC had ever considered such a step he

admitted it would probably work well ! but said it had never been tried. He said the OSC regards the protection of Ontario citizens as its first respon| sibility.

“The whole trouble,” said one broker,

“is that a promoter under existing laws can make money selling stock on a property that’s a turkey. He’s just interested in selling stock; it doesn’t matter to him whether he develops a mine for he gets his piofit just the same. Mine financing could be rigged so that there’s little profit for the ; promoter until a mine is actually in sight.”

The biggest profit opportunity is in j what the trade calls “vendor’s shares.” Most companies are formed with an original capitalization of four million shares, twenty-five percent of which are usually vendor’s shares, held by the president or prospector. Ten percent of these vendor’s shares (usually 100,000) can be sold immediately for the president or prospector, and none of this capital goes into the company treasury for work on the property. Some companies start out with great fanfare, the vendor’s shares are sold for about $25,000, and then the whole enterprise dies quietly before any attempt at mining has been made.

Several brokers told me: “If there

were no vendor’s shares released for sale, promoters would have to look for a real piece of mining property that had some chance of being developed into something. The OSC contends that ten percent release of vendor’s shares is essential so that the prospector can get some immediate return for the work he has done.

Washington authorities have been campaigning for years for an extradition treaty that would permit them to bring Canadian stockateers to the U. S. for trial. Canadians have been fighting the proposal. Here again there seems to be a skilful and misleading propaganda campaign engineered by the stockateers themselves. The stockai teers have tried to plant the false impression that an extradition treaty would mean arrest and a U. S. trial for scores of reputable brokers guilty only of selling unregistered stocks in the U. S.

Before a Canadian stock dealer can be extradited now, a prima facie case of fraud would have to be proved against him using the U. S. evidence but in a Canadian court and under Canadian law. Washington authorities assured me that, if Canada insisted, the SEC would probably accept an extradition treaty in which it was specifically stated that extradition could not be made for merely failing to register a stock.

The stockateers have another argument in their anti-extradition propa¡ ganda. Canada and the U. S. have an extradition act now which covers “obtaining money or goods, or valuable securities by false pretences.” SEC counsel Kroll says, however, “The crime of false pretences is so limited that it is not applicable to the subtle and technical type of fraud you get in securities transactions.” He points out, too, that Canada’s own criminal code in five different sections dealing with fraud uses the words, “fraud, not limited to false pretences.”

Reports on recent talks between SEC and Ottawa authorities indicate that an attempt may be made again to broaden the present “false-pretences” clause in the Extradition Act so as to cover fraud as it is interpreted under the criminal code.

Meanwhile your only real protection againsc being fleeced is your own knowledge and caution. Know the tricks of the stockateering game so that you can spot a crooked deal, iç