MONEY & BANKING: Fraud and Deceit

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"Fraud and Deceit"

Growing mushrooms in a subterranean room on his Cleveland estate is the hobby of pudgy, sleepy-eyed Carmi Alderman Thompson, onetime Treasurer of the U. S. (1912-13) and currently president of Fidelity Investment Association. Old Financier Thompson may soon have more time for his mushrooms, for last week SEC asked a Federal judge in Detroit for injunctions whose effect might put Fidelity out of existence "as a fraud and deceit."

SEC has already jumped on nine other "thrift plans" this year, but mostly for minor offenses in their business of selling their shares on the installment plan. Charges in Fidelity's case are more grave: That Fidelity obtained money and property by means of untrue statements, had failed to maintain required reserves against its $276,000,000 in outstanding certificates, had resorted to interfund transfers to write up the book value of securities by "well over $1,000,000," had used investors' funds for the benefit of trie officers and directors of the company.

Fidelity was founded by Joseph Fry Paull as a loan company in Wheeling, W. Va. 27 years ago, later bought an annuity bond business, now has branches in 57 cities with 2,000 salesmen in the field selling certificates with a face value of some $6,000,000 every month. Carmi Thompson has been president for only three years. Actual boss is Founder Paull's son-in-law, onetime Assistant U. S. Attorney General John Marshall, whose family are the biggest stockholders. Sleek, bright-eyed Mr. Marshall, who is chairman of the board, said Fidelity would fight.

A good deal more wrought up than slow-spoken Carmi Thompson, Chairman Marshall pointed out that a Department of Justice investigation four years ago found nothing wrong. Snapped he: "If the SEC followed the same liquidity rule they are trying to force on us they would ruin a good many insurance companies."