USA > Ohio > Ohio legislative history, 1913-1917 > Part 32
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"In the interest of the public service, I recommend action along these lines by the assembly."
"(Signed) JAMES M. Cox, Governor."
On the next day, February 6th, the Ohio Law was amended and made more nearly to conform to the Federal Constitution regulating Inter-State Commerce as viewed in the light of the above mentioned Court decision. This action on the part of the Governor and the Legis- lature was timely as succeeding events show.
In November, 1915, there was filed in the United States Federal District Court at Cincinnati, Ohio, a petition for an injunction by the Geiger-Jones Company of Canton, Ohio, against the Superintendent of Banks, as Commissioner of Securities, restraining the Superintendent of Banks from revoking the license of the Geiger-Jones Company, which had been granted on the first day of January, 1915. This suit was
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heard in November, 1915, and a decision rendered in February, 1916, granting the injunction and at the same time handing down an opinion declaring the Ohio Blue Sky Law unconstitutional.
Hon. Edward C. Turner, Attorney General of Ohio, appealed from the decision of the lower Federal District Court to the Supreme Court of the United States and a hearing was had thereon on its merits in October, 1916. Notwithstanding the fact that he was opposed by eminent counsel representing various interests, the United States Supreme Court in an opinion rendered January 22nd, 1917, upheld the contention of the Attorney General and declared the statute constitutional in its entirety.
While this case was pending, the dealer's license granted to the Geiger-Jones Company expired and when the United States District Court made its finding, application for renewal of the dealer's license was not made. The decision of the United States Supreme Court, how- ever, left the Geiger-Jones Company without legal authority to conduct its business. In a hearing before Governor Cox, Superintendent of Banks Mr. Berg and Attorney General McGhee an exhaustive inquiry was made into the Geiger-Jones Company's method of doing business and the way the industrial establishments under its supervision were being financed. With the implicit understanding that their methods be discontinued the Geiger-Jones Company was granted a dealer's license May Ist, 1917, forbearance being suggested on account of the fact that the said company and its large clientele have interest in a large number of manufacturing plants turning out iron and steel products and war supplies. So ended a case which had attracted widespread atten- tion and interest.
The so-called "Blue Sky Law" has two important functions : First, the licensing of all individuals, co-partnerships or corporations who deal in securities (the law defining securities as stock, stock certificates, bonds, debentures, collateral trust certificates or other similar instruments evidencing title to or interest in property) or real estate located out- side of Ohio. To secure a license the applicant must be of good busi- ness repute and submit references and other information to the Commis- sioner to establish this fact. The Department also has authority at any time to examine the books and records of any licensee to determine whether the business is being properly conducted. Second, any securities, and real estate if located outside of Ohio, offered for sale, must be ap- proved by the Commissioner before being sold within the state, al- though the statute contains broad and varied exemptions as to securities, and these exemptions preclude any possibility of hampering stable com- mercial business. After approval, a Certificate of Corporate Compliance is issued - to obtain this certificate very complete information must be
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filed in the department including certified copy of the certificate of incor- poration, rules, regulations and by-laws, method of operation, financial condition, salaries to be paid, amount of stock given for promotion, organization, patents, formulae, trade-marks, etc., and the terms upon which the stock is to be sold as well as certified copies of all contracts relative to carrying on the business. A personal inspection and thorough investigation is then made of the property upon which the securities are predicated, the information obtained is compared with that placed on file, and if a going concern is under investigation, the books are also carefully checked with particular reference to the profit and loss account and assets and liabilities.
To illustrate the work of the department, the following (an actual case) and similar propositions are regularly submitted for the approval of the Commissioner. A corporation was formed with a capital of $50,000, all common, $37,500.00 of which was to be issued to the pro- moters who had procured oil and gas leases on 400 acres of land in five different tracts located adjacent to proven property in an adjoin- ing state. The prospect for gas in paying quantities was excellent, as was shown after one of the examiners inspected the property. His report confirmed the facts, as submitted to the department by the ap- plicant, that the leases were valid, duly recorded, with an outlet to the market for the product and also that the men associated with this corpo- ration were of good standing, reliable and successful in business.
One of the tracts, containing 66 acres was divided into plats 15 x 20 feet, and a sub-lease for gas and oil on each plat was to be sold for $10.00, with an agreement attached setting out that when the sub-leases were sold, $45,000.00 would be expended for drilling for oil and gas and the proceeds from the sale of oil and gas, if found, to be divided as follows: 10% of the one on whose plat the well was drilled, 50% to be divided among the owners of the sub-leases in proportion to the number owned and 40% to the corporation. Emphasis was placed upon the fact that $45,000.00 was to be expended for the developing of this 66 acre tract, the location for wells being made by a disinterested geologist. The incentive to invest was great, particularly when it was demonstrated that if a well were drilled on your sub-lease, the profits would amount to approximately $2,500.00 a year. The bait was alluring, indeed. In this plat of 66 acres there were 9,000 sub-leases to sell at $10.00 each, amounting to $90,000.00 - $45,000.00 of which went into the promoters' pockets before a well was drilled, and if oil and gas were found, an additional 40% from the proceeds from the sale of the oil or gas went to the promoters, most of which would go to pay dividends on the stock appropriated for obtaining the leases, which cost
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very little. When the 400 acres were platted in the same way however, and sold, the amount realized approached three quarters of a million, half of which was clear gain. The promoters could not lose. The records show that the people of Ohio did not have an opportunity to invest in a proposition on such grossly unfair terms.
The sale of stock is often based on just as unfair terms as the following case will illustrate. Recently a three million dollar corporation was organized, all common stock, a million of which was to be issued to one who held a patent on a punctureless automobile tire, and in addi- tion he was to get $30,000.00 in cash, the patent to be assigned to the corporation. The promoters were to get $350,000.00 worth of stock for 33 1/3 cents on the dollar and it was proposed to pay 15% commission for the sale of the remaining stock, the proceeds from such sale to be used to build and equip a factory for the manufacture of the patented tire. It was shown that, with certain other overhead expenses for organization, only a little more than one million would go to develop the business with an outstanding capital stock of three millions of dollars on which to pay dividends. Even after one million dollars had been spent for buildings, equipment, etc., if the patented tire did not prove practical (lots of patents do not) the patentee, in case of liquidation or failure, would participate in the assets to the extent of 1/3, not counting the $30,000.00 in cash already received. The custom of issuing as much as 51% of the stock of a corporation for either patents, promo- tion, oil leases, etc., is a thing of the past in Ohio, thanks to the Blue Sky Law.
The work of this Department had become so important and com- prehensive that the 83rd General Assembly created a separate state department known as the Securities Department, thereby relieving the Superintendent of Banks from supervising this work.
In addition the Commissioner of Securities has under his jurisdic- tion the adminstration of The Lloyd Act regulating the lending of money on chattel and other personal securities and on wage and salary earn- ings. In the past no part of our people have suffered more from the unscrupulously greedy money lenders than the necessitors and poor bor- rowers, and while there have been laws ostensibly regulating this busi- ness and limiting the charges which might be imposed, yet they have been entirely futile and inadequate for the lack of provision for ex- amination and punishment for law broken. This bureau has supervision and control over some 150 licensees and through the able administra- tion of the head of the department, has succeeded in practically driving out of the state the old style "Loan Shark", and this necessary business is now on a basis which seems fair 'both to the lender and the hard
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pressed poor. To keep the business in an honorable condition and to detect and prosecute law violators, requires constant attention and super- vision and this work, under the Commissioner of Securities is acceptably performed by one Chief Examiner and two Assistant Examiners.
July Ist, 1917, Judge P. A. Berry, Assistant Commissioner under the Banking Department was appointed by Governor Cox as Commis- sioner of Securities. The number of employees were increased from three as a division of the Banking Department to seventeen as a separate department. Samuel J. Black, Upper Sandusky, was appointed Deputy Commissioner, A. L. Stewart, Columbus, Ohio, Chief Examiner and R. V. Barto, Columbus, Ohio, Chief Examiner of the Chattel Loan Division, and under the Commissioner's direction an organization has been perfected, the examiners are traveling all over the United States, with an occasional visit either to Canada or Mexico, in order to inspect the physical assets of each corporation making application to sell in Ohio securities or real estate located outside the state, after which a written report is submitted covering each case in detail.
Someone has said that it costs money to be governed, but the tax- payers of Ohio do not contribute one cent toward maintaining the Blue Sky Department. The foreign inspections are particularly expensive but the cost is assessed against the applicants who wish to sell securities or real estate, and although the cost of operating the department is now about $40,000.00 a year, this, like other departments which were provided for by the Constitutional Convention and created when James M. Cox was Governor, is more than self-supporting, as the receipts are now more than $75,000.00 a year, so that approximately $35,000.00 net will be turned into the Treasury. The annual fee for a license is $50.00 and each agent the licensee names costs $5.00. There are about 600 licensees and some of them like The Geiger-Jones Company and the R. L. Dollings Company have scores of agents. It is right and proper, too, that the licensees and the ones who have securities certificates should pay the bill. Millions of dollars' worth of securities are passed upon each month, the sale of many issues are refused, while in nearly every case the original plans are re-vamped in order to give the Ohio investor a "square deal".
It can readily be seen what tremendous responsibilities the Com- missioner of Securities must assume and the work has become so voluminous that it is often necessary for him to remain at his desk from 12 to 14 hours. His wide experience in business affairs, his prac- tice as an attorney, his activities as a member of the General Assembly, together with his experience on the bench have qualified him in a fitting manner for this strenuous work. At a convention of representatives
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from all the states having Blue Sky Laws held in Chicago, March, 1918, Judge Berry was selected to preside and also made a member of the Executive Committee of the National Organization. The purpose of this organization is to work out a uniform system of procedure among the several states and establish general rules which will apply to all classes of securities which are to be sold as well as real estate, and also devise means to conserve the loanable capital of the United States for war purposes Of the twenty-nine states now having Blue Sky Laws the practical operation of our law has been most successful and it was fitting to have this state so recognized, as the importance of the work to be done by the National Organization, of which Judge Berry is a member, cannot be overestimated.
HON. PATRICK A. BERRY
The Commissioner of the De- partment of Securities in Ohio is well known as one who has honored other positions in the service of the people. Hon. Patrick A. Berry was born in Knox County, Ohio, and his father, John Berry, was a native of Belmont County, who came to Knox County when 12 years old. The mother, Mary Ann (Critchfield) Berry, was a native of Knox County, Ohio. Both parents of Judge Berry are dead. Patrick A. Berry attended the district schools and Danville Normal Academy, also Bethany College, Bethany, W. Va. He then took the law course at the University of Michigan, Ann Arbor, graduating in 1892 with the degree of B. of L.
Mr. Berry first commenced practice of his profession at Atlanta, Ga., remaining there four years, then returned to Mt. Vernon, Knox County, Ohio, which has been his home ever since. Judge Berry served in the Ohio House of Representatives as the member from Knox County during the 74th and 75th General Assemblies. He was twice elected on the Democratic ticket Probate Judge of Knox County, serving two terms in that office. He was for many years chairman of the Knox
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County Democratic Executive Committee. Judge Berry was appointed Commissioner of the Securities Department by Governor Cox July Ist, 1917. On August 17th, 1899, Mr. Berry was joined in marriage with Miss Elizabeth Kirk Cameron, of Millersburg, Holmes County, O., and the four children born of the union are all dead.
HON. SAMUEL J. BLACK
House Bill No. 556 which was enacted into law by the Eightieth General Assembly of Ohio authorized the purchase of a farm site and the building of a new penitentiary for the state. Hon. Samuel J. Black was author of the bill and Governor Cox ap- pointed him secretary of the Commission which was appointed to carry out the plans for a new prison. Mr. Black rendered val- uable service in this position, without pay, and his services in the Department of Secur- ities have proven a great aid to his chief.
A more complete personal sketch of Mr. Black may be found on page 550, Vol. I, of this work.
OHIO BOARD OF CLEMENCY
MR. PRICE RUSSEL, Wayne County.
MR. A. E. McGHEE, Franklin County.
MR. EDWARD J. FAHEY. Secretary, Springfield.
OHIO BOARD OF CLEMENCY
Prior to the passage of the indeterminate sentence law, in 1913, the Board of Pardons served a helpful and humane purpose in the administration of our penal affairs. Under the old law, and coincident with the time when many of the smaller counties lacked a resident judge of the common pleas court, it was neither strange nor unusual that dras- tic administration of justice at times crept across the threshold of our courts. Confirmed, but smooth crooks, with records unknown to the courts, occasionally received sentences sufficient for the offense of which convicted, but grossly inadequate in view of the criminal instincts of the offenders. In other instances, especially in small counties where a wave of crime created an abnormal state of the public mind, this some- times found echo in harsh sentences, especially in the case of first offenders.
As best it could, but with lack of personal knowledge or contact with prisoners, the Board of Pardons sought to equalize and rectify as cases were brought to its attention. But as personal investigations were rarely, if ever, taken up by the old board on its own motion, naturally the prisoner with friends and ability of initiation received the most attention. It is not unusual for high-class crooks to have both.
Governor Cox and the prison authorities, all of whom saw clearly the inherent weakness of the old board and the lack of time on the part of the Board of Administration to give individual study to the case of each convict, conceived the idea of a new board to take over the duties of the two old ones and, in the interest of society, give its entire time to the problem of how, when and under what process of supervision it is best to set the offender free.
So, in 1917, the Ohio Board of Clemency was created, taking over the duties of the Board of Pardons and parole work of the Board of Administration which, as best it could, in view of the many other duties developing on it, had charge of the matter of paroles. Naturally the two old boards were conflicting, pardons being applied for, and some- times recommended, when parole, with its attendant supervision, should have been the course.
Under the new law applications for clemency are general in nature and the Board of Clemency grants relief, if any is proper, in the man- ner best adapted to the particular case. This Board is in continuous
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session. No final release or parole is granted, or pardon recommended, until after personal, and in unusual cases, sometimes several personal interviews. The Board also advises with and keeps in close touch with the judges and prosecuting attorneys of the State. No able-bodied prisoner is released until employment is provided.
All in all, the present Board conceives its duty to be one of pro- tection to society by standing between it and confirmed criminals and those of such deranged criminal instincts that it is unsafe for them to be at large. On the other hand it extends the hand of helpfulness to first termers, young offenders and others where the evidences of reformation are real rather than pretended. This is the concetpion of a duty to the public, and spirit of helpfulness to those whose frailties have enmeshed them in the net of the law, as it appears to the present members of the Board.
A member of the Board has contributed the following article show- ing the great advance made in the cause of Prison Reform during the administration of Governor Cox.
"Today in the Ohio Penitentiary men are not asked to 'do time', but to render service.
"Less than twenty years ago the Ohio Penitentiary was pointed out as one of the blackest spots on the prison map of the nation. Only a dozen years ago, when delegates to the International Prison Congress made a visit to Ohio, they were entertained at Mansfield Reformatory, but were skillfully guided away from the Ohio Penitentiary while in the State.
"Today the Ohio Penitentiary holds one of the foremost positions among American prisons. Its treatment of prisoners has been revolutionized. Contract labor has been ousted, the old methods of brutality and force have disappeared, and rational methods of kindness and education have been installed.
"This great change has been brought about without the troubles that attended similar changes in other prisons. There has been no lack of discipline at any time, and Ohio has seen no period of maudlin sentimentality masquerading as reason where the uplifting of standards in prison was sought.
"Because the methods employed were rational and based on common sense, they have appealed to the men doing their sentence, and the records show the generous measure of response, on the part of the prisoners, to every effort for betterment of prison conditions.
"During 1917 more than 1,200 prisoners were at work part of the time out- side the prison walls, being permitted to go either alone or under nominal guard to perform needed labor for the State. Few States are able to show so large a number of prisoners in the 'Honor Squad' doing 'trusty' work outside prison walls.
"Of the large number trusted outside the walls only two per cent. violated the trust reposed in them and ran away. Of the number that broke faith all were later caught and returned, save six. The use of the Honor Squad was thus carried on for one year with a net loss of one-half of one per cent. of the men trusted. It is reasonably certain some, if not all, of the six missing, will later be located and brought back, as the hunt for the men is not allowed to cease.
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"The records tell their own story of how fully the Honor Squad members are co-operating in the development of the 'Trusty' system. Men who have com- pleted their sentences and are free out in the world, are quick to give information where runaways may be found. Men on the Honor Squad regard a runaway as their enemy, as one who would do violence to all others in prison. Numerous instances of high sense of honor are shown each year by the men working as 'trusties', these men regarding their promise to go straight while outside as a con- tract that must be observed and fulfilled.
"Men out on honor are employed at the London new prison farm, and at the State institutions all over the State. They till the farms and gardens and care for the work about the buildings. A big squad helped construct the new building at the State Fair Grounds last fall, their work helping make possible its completion in time for the National Dairy Show. Another big squad worked a week helping get ready the packages that went on the Christmas train to the soldiers at Montgomery, Alabama.
"Another large delegation of 'trusties' is employed at the Soldiers' Home at Sandusky, where the need for nurses grows rapidly each year owing to the physical condition of a large number of the inmates there.
"In whatever field the 'trusties' have been employed the work done has been good and few men have failed to respond cheerfully to the need for their services.
"Prison records show interesting facts relative to the operation of the inde- terminate sentence law. It became effective May 29th, 1913. From that time up to Jan. 15th, 1918, 2,055 men, sent to prison under its provision have been released under its terms. Of the 2055 only 68 have been sent back for recommission of crime. This is less than three and one-half per cent.
"As in the honor squad, so in the indeterminate sentence law, prisoners have given hearty co-operation. That explains the small percentage of failures.
"Under the old determinate sentence men came to prison to 'do time'. Under it they got a specific period of time, they knew the number of months and days they had to do. There was lacking any big incentive to reformation because the State made no effort to develop that idea.
"Under the indeterminate sentence men do not 'do time', they render service to the State. Much rests on the prisoner. He can help himself by right conduct and good service. He can prolong his stay by demonstrating a defiant attitude toward law, authority and society. There must come from him not only obedience to rules and performance of service, but a reflection of a right mental attitude to warrant a release being granted him. When his offense and his state of mind warrant there is not much delay in releasing him after he has served his minimum sentence.
"This condition has an appeal to the prisoner who stops to think. The record shows the response the men have made to the situation. The average prisoner has been willing to do team work with the officials and protect and advance his own interests while inside, and many of them continue in that line when released.
"Not the least helpful of prison influence is the prison school. About 350 men are in school each day. By completing forty weeks in common school work they gain a month of good time. Many men doing life sentences are cheerful workers in the school.
"Releasing men from the blight of ignorance has a far-reaching effect. Hun- dreds of men come to prison unable to read or write. Their work is small. It is made larger as they learn; as they feel the sharp, sweet consciousness of aroused intelligence, of vivid life with its appeal.
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"Today in Ohio intelligent effort is being made to appeal to the good in men, to send them out better able to act the part of men. Sentences may run from one to a long term of years. Releases on parole are granted when men have met the requirement of the law, and when they appear willing and able to go out and offend no more. Errors have been made. Other errors are inevitable, but the records of the prison tell the general story."
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