Weiss v. Haight & Freese Co.

Decision Date13 July 1906
Docket Number208.
Citation148 F. 399
PartiesWEISS et al. v. HAIGHT & FREESE CO.
CourtU.S. District Court — District of Massachusetts

William P. Maloney, Asa P. French, George Hogg, and James S. Allen Jr., for complainants.

I. R Clark, G. F. Ordway, and Franklin Bien, for defendant.

In Equity. On exceptions to report of master.

May 8 1905, the following bill in equity was filed by complainant as administratrix of Charles Weiss, deceased:

May 8, 1905, the following bill in equity was filed by complainant, as administratrix of Charles Weiss, deceased:

To the Judges of the Circuit Court of the United States for the District of Massachusetts:

Anna L. H. Weiss, of Needham, in the county of Norfolk and commonwealth of Massachusetts, as she is the administratrix of the estate of Charles Weiss, late of said Needham, deceased, intestate, the plaintiff being a citizen of said commonwealth of Massachusetts, brings this, her bill, against Haight & Freese Company, a corporation incorporated under the laws of the state of New York, but having a usual place of business in Boston in the county of Suffolk and commonwealth of Massachusetts, having appointed the commissioner of corporations of said commonwealth its attorney for service of process.

And thereupon your orator complains and says that she brings this bill as a creditor of the said defendant on her own account and in behalf of all such other creditors as may choose to join herein. That your orator is informed and believes, and therefore alleges, that the defendant at the times hereinafter mentioned, and thereafter, has pretended to carry on the business of buying and selling stocks, bonds, commodities, and securities upon commission, and to execute orders for the purchase and sale of the same. That, with the purpose of deceiving and defrauding such persons as may be induced to deal with it, the defendant has organized offices to carry on such pretended business in Boston aforesaid, and in New York and Philadelphia, with other branch offices and connections elsewhere. That the said defendant, although authorized by its charter to buy and sell stocks bonds, and securities, upon commission, in reality executes no orders for the purchase or sale of the same, except when it becomes necessary to do so for the purpose of covering up and concealing the real nature of its business, which is in substance to accept all orders for the purchase and sale of any stocks, bonds, commodities, or securities which may be given to it at the market prices, and by inducing its customers to execute powers of attorney or other authority for the purchase and sale of the same, and by permitting customers to trade upon a very slight margin, to take advantage of market fluctuations in such a way that the account of each customer may be pretended and represented to have been sold out at a price showing a loss to such customer. That, in pursuance of the aforesaid fraudulent scheme the defendant charges its customers a commission for the pretended execution of their orders of purchase and a similar commission for pretended execution of orders of sale, and interest computed upon the difference between the amount paid by such customer as margins and the whole market value of the securities supposed to have been purchased as aforesaid, and upon fictitious loans and balances, so that the interest so charged amounts to a very large sum. That, for the purpose of carrying on the said pretended business, the defendant has a special form of contract with its customers, which is as follows:

'When stocks are purchased this order may be executed in any city or place, whether on any exchange through a member thereof and subject to its customs and rules, or by private purchase, as Haight & Freese Company may elect; and any other client of Haight & Freese Company may be the seller. But Haight & Freese Company is not to be obliged to disclose the name of any client in any event. The purchase may be made delivery on purchaser's demand. Haight & Freese Company may pledge for any amount the securities, when bought, mingled with the securities of other customers or of brokers themselves, and may loan any stock, giving borrowers the right to sell and return different certificates, and may, without any demand of or notice to me whatever, and on any exchange, or by private sale, close out all transactions on margin: (1) As to securities, whenever margin is less than one-half of one per cent. of the aggregate of the par value of all the securities being carried for me on margin, and (2 as to commodities whenever margin is exhausted. All orders to buy, hereafter or heretofore given, are to be considered as subject to the above unless otherwise expressly stipulated therein.'

And when stocks are sold, as follows:

'This order may be executed in any city or place, either on any exchange through a member thereof and subject to its customs and rules, or by private sale, as Haight & Freese Company may elect, and any other client of Haight & Freese Company may be the buyer. But Haight & Freese Company is not to be obliged to disclose the name of any client in any event. Haight & Freese Company may, without any demand of or notice to me whatever, and on any exchange, or by private purchase, close out all transactions on margin: (1) As to securities, whenever margin is less than one-half of one per cent. of the aggregate of the par value of all the securities being carried by me on margin, and (2) as to commodities whenever margin is exhausted. All orders to sell, hereafter or heretofore given, are to be considered as subject to the above unless otherwise expressly stipulated therein.'

That if the account of any customer dealing with said defendant is not closed out so as to show a loss, or if the result of the double and illegal commissions so charged, and interest charges as aforesaid, do not exceed any apparent profit made by such customer, he is induced to continue his trading until the account shows a loss, or until the same has been closed out for lack of sufficient margin; but in fact no business is transacted, and all transactions are entirely fictitious and fraudulent as against its customers.

That your orator is informed and believes, and therefore alleges that, in pursuance of the above-described fraudulent scheme and pretense, the defendant induced your orator's intestate, Charles Weiss, on or about the 2d day of September, 1902, to begin to give it orders for the purchase and sale of stocks and securities, and induced him to pay it from time to time between the said 2d day of September, 1902, and the 31st day of January, 1905, various sums of money amounting in the aggregate to $5,380. That the said sums were paid by him to the defendant as margins against his account, and for commissions and interest charged as aforesaid. That the said Weiss was fraudulently induced by said defendant to believe that his orders for the purchase and sale of securities had been duly executed, and that his said transactions had resulted in large losses. That the said Weiss continued to deal with said defendant as aforesaid up to within a short time of his death, which occurred on the 17th day of February in the current year, 1905. That thereafter your orator, being the widow of the said Weiss, having been duly appointed administratrix of his estate, and having duly qualified as such administratrix, had an interview with one of the employes of said defendant with reference to the said account of her intestate, and the said defendant represented to your orator that there was due to her under said account only the sum of $160, as the alleged balance thereof, and falsely pretending and representing that that was the entire amount due to your orator, induced her to accept the same and sign a receipt therefor. That your orator was then ignorant of the fact that the defendant's transactions with her intestate under said account had been fictitious, and that no stocks or bonds had been purchased or sold thereunder; but she has since been informed, and now believes, and therefore alleges, that in fact no actual purchases or sales were made for her intestate under said account, and that the said account was wholly fraudulent and fictitious, and so manipulated as to show a loss of the money paid in as aforesaid. That the defendant now owes your orator the said sum of $5,380 less the said amount of $160 received by her as aforesaid, to wit, $5,220 with interest thereon.

That your orator is informed and believes, and therefore alleges, that many other persons besides her intestate have been deceived and defrauded in the same manner as above stated. That by means of large advertisements in the newspapers the public have been induced to believe that the defendant is engaged in legitimate business, whereas in fact said business is a mere swindling device known as a 'bucket shop.' That the defendant has made and is making large profits from its customers, which its officers and persons controlling its affairs constantly withdrawn and convert to their own use. That the defendant has no capital, and keeps no regular books of account, but, in order to conceal the real nature of its business, has prepared and keeps false and fictitious books of account. That the defendant has a large number of creditors and has not sufficient assets to pay their claims, but is carrying on its business operations from day to day by means of the money received from customers dealing with it.

To the end, therefore, that the defendant may, if it can, show why your orator should not have the relief hereby prayed, and may, according to the best of its knowledge and belief, full true, direct, and perfect answer make, but not upon oath, which is hereby waived, to the allegations herein...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT