Chapter XI: A Fight to the Death (1)

In professional quarters the Scheftels corporation was regarded as an interloper from the day it set foot in the financial district.

Its first offense was to reduce its commission rates. This move set the whole Curb against the enterprise. But as the play progressed it proved to have been unimportant in comparison to the unspeakable crime of telling the truth about other people's mining propositions that were candidates for public money. The Scheftels corporation had laid it down as a set rule that an established reputation for accuracy of statement was a great asset for any promoter or broker to have. To gain such prestige the principle was followed in the nation-wide publicity which emanated from the house that, no matter whom the truth hurt or favored, it must be told always, when publishing information regarding the value of any listed or unlisted security. Space in the Scheftels Market Letter or the news columns of the _Mining Financial News_ was unpurchasable.

The enforcement of this rule was a wide departure from prevailing methods. But that didn't make us hesitate. Having felt the speculative pulse for years, I knew its throb. The public, after losing billions of dollars, were becoming "educated." The rank and file of mining promoters--high and low--in Wall Street still believed that "one is born every minute and none dies." But I and my associates didn't. An uneducated public had been unmercifully "trimmed" in scores of enterprises backed by great and respected names. Speculators were ravenous for the truth. We decided to give it to them. We gave it to them straight.

This publicity system brought about the ruin of the Scheftels corporation through the powerful enemies it made. The policy was right all the same. Persisted in, nothing was or is better calculated to strengthen the demand for all descriptions of meritorious securities. The Scheftels corporation was the pioneer in the exploitation of this principle as a fundamental and underlying basis of brokerage and promotion. In pioneering this policy, however, the Scheftels company was sacrificed to the prejudices and wrath of the old school of promoters.

THE FIRING OF THE FIRST GUNS

Before the Scheftels corporation was on the Street three months it almost came a cropper. On the strength of excellent mine news it purchased nearly 300,000 shares of Rawhide Coalition in the open market, up to 71 cents per share. A determined drive was made against the stock by mining-stock brokerage firms which had sold it short. Bales of borrowed stock were thrown on the market by the crowd operating for the decline. The Scheftels company took it all in. Letters and telegrams were sent broadcast by market enemies urging stockholders to sell. A powerful clique had been losing big sums on the rise.

The Scheftels company published advertisements calling upon margin traders to demand delivery of their certificates. This expedient proved of small utility. The brokers continued to hold off deliveries to customers and sold and delivered to us all the stocks that they could borrow or lay hands on. The continued selling finally made inroads on the Scheftels corporation's cash-reserve to a point that forced it one day to stand aside and leave the market to the sharpshooters. That day, in a few hours, approximately half a million shares of Rawhide Coalition changed hands out of a capitalization of 3,000,000 shares. The corporation's loans were called. This forced it to throw large blocks of stock on the market. A sharp break ensued. That was just what was wanted by the interests which were gunning for us. They covered their short sales at great profit.

In the midst of the mêlée the Scheftels company tendered a Stock Exchange house of great prominence, which had loaned it for the account of a Salt Lake firm of brokers $12,500 on 50,000 shares of Rawhide Coalition, the money to take up the loan. A representative of the Stock Exchange house sheepishly stated that his firm had loaned part of the pledged stock to out-of-town brokers. He asked for time. Under threat of dire consequences the Stock Exchange firm bought stock back from us in the open market that afternoon to supply the deficiency, and then made delivery of this stock back to us in lieu of that which they had parted with. It had been specifically stipulated by the Scheftels company when the loan was made that the certificates must be held intact and that the stock must not be loaned out or sold while the money loan was in force.

This experience was repeated frequently during the Scheftels career on the Curb. It cost B. H. Scheftels & Company more than one million dollars, during the nineteen months of its existence, in giving loyal market support, in times of "professional" attack, to the stocks it had fathered or promoted and felt moral responsibility for.

Time and again the Scheftels company found among stocks delivered to it, against purchases made in the open market, the identical certificates it had pledged with loan-brokers as collateral for loans, and which had been hypothecated by it with the specific proviso that the certificates were not to be used. It opened our eyes to one of the most commonplace practices, not only on the Curb, but also on the Stock Exchange. Hardly a failure occurs on any of the Exchanges or on the Curb that does not reveal customers' certificates, which were originally pledged with the understanding that they were not to be "used," in the strong-boxes of others.

The first grievous offense of the publicity forces of the Scheftels corporation against Wall Street's "Oh-let-us-alone" promotion combine was a wallop in April and May, 1909, through the Scheftels market literature, at Nevada-Utah.

The combination which owned control took with bad grace the strictures on the property. We heard an awful underground roar. At that time the price of Nevada-Utah stock was around $3. The Scheftels Market Letter said that there was probably not 30 cents of share value behind the property. The price immediately began to crumble. It has been tobogganing ever since. The stock at the beginning of September of this year was quoted at 37-1/2 to 50 cents.

Such a thing as printing facts which would enlighten stockholders and the public as to the actual value and condition had not before been heard of when such enlightenment ran contrary to the plans of strongly entrenched promoters on the Street.

The campaign against Nevada-Utah, therefore, directed widespread attention to B. H. Scheftels & Company and the _Mining Financial News_.

Following the Nevada-Utah disclosure, the Daily Market Letter and the Weekly Market Letter of the Scheftels corporation and the _Mining Financial News_ took a good, strong, husky "fall" out of the La Rose Mines Company, capitalized for $7,500,000. The La Rose owns one of the greatest producing mines in the Cobalt silver camp. A market scheme was in progress, with La Rose as the medium, and W. B. Thompson, of Nipissing fame, as a chief manipulator. We called a halt to the game when the price reached a "high" of $8.50, and saved the public a huge sum of money. Under our campaigning the stock declined to $4, a decrease of $6,750,000 in the market value of the capitalization. This made W. B. Thompson and his associates the implacable enemies of the Scheftels company and myself. We didn't worry much. We were catering to the public. Indeed, we were pleased with our work.

Following this incident, the Scheftels Market Letter and the _Mining Financial News_ took a smash at a mining-stock deal in which W. B. Thompson and the Guggenheims were jointly interested. It was the now notorious Cumberland-Ely-Nevada Consolidated merger. Later the merger was enlarged and took in the Utah Copper Company, or rather the Utah Copper Company took in the others, and the Scheftels propaganda found another opportunity to do a great service for the stockholders of Nevada Consolidated.

Our attack hurt the Guggenheim reputation among investors all over the country and contributed to reduce their influence over the large stockholding body--more than 6,000 men and women--of Nevada Consolidated. Though finally successful, the Guggenheims were sore from the lashing and exposures to which they had been subjected. As for the Scheftels company and the _Mining Financial News_, they had still further established the honesty and value of their publicity service.

A market scheme to balloon the price of Ray Central Copper Company shares to several times their value was a precious enterprise against which we trained our publicity guns and fired several effective broadsides. The effort of the promoters to connect with the public purse here would not have been half so sensational if men of lesser prominence were identified with the operation. In our "bear" publicity on this one we minced no words. In doing so we again hit another powerful interest--the Lewisohns.

Later the exposure by the _Mining Financial News_ and the Scheftels Market Letter of market manipulations of the Lewisohn-controlled Kerr Lake still further "endeared" the members of these two organizations to that powerful faction, and more closely cemented the ties of fellowship between the ruling powers.

Keystone Copper, another Lewisohn "baby," was put through its courses on the Curb while Kerr Lake was being played in a stellar rôle. The deal in Keystone was an unobtrusive little thing, but awful good as far as it went from the one-sided point of view. I turned the searchlight of publicity on Keystone.

The Scheftels Market Letter and _Mining Financial News_ disclosures in the interests of speculators and investors regarding Nevada-Utah, La Rose, Cumberland-Ely, Nevada Consolidated, Utah Copper, Ray Central, and Kerr Lake were sensational enough, but they by no means included all of the work in this line. During 1909 this publicity literature took in practically every important mining company whose shares were traded in on the New York Curb. The unpleasant truths these forces were obliged to tell from time to time touched the delicate sensibilities of many leading lights on the Street. These had grown accustomed to an unvarying diet of sweets.

It would seem that their appetite for saccharine provender would have become cloyed and that a change would be a grateful relief. It was not. The truth was distasteful. It interfered with the noble industry of mining the public and it cut down the profits of that end of the game. In keeping up the record of day-by-day market and mine developments these publicity agents punctured many a rainbow-tinted balloon. Very frequently they gave to the public its first definite and intelligent idea of real value behind promotions and in properties. Where market prices represented an overplus of hopes and expectations the truth was told. The aim was to take mining speculation out of the clouds and plant its feet firmly on earth.

In this laudable effort we ran counter to the plans of the mighty. We also violated the vulgar unwritten rule of some of the Wall Street fraternity--"never educate a sucker." Our publicity work caused a readjustment of judgment and market values, besides those already mentioned, on such stocks as First National, Butte & New York, Trinity Copper, Micmac, Ohio Copper, United Copper, Davis-Daly, Montgomery-Shoshone, Goldfield Consolidated, Combination Fraction, British Columbia, Granby, Cobalt Central, Chicago Subway, and sixty to eighty others.

The live wires of our publicity service blistered the flesh of the Guggenheims, the Thompsons and the Lewisohns, and perturbed their widely diffused affiliations, connections and allies, including John Hays Hammond, J. Parke Channing, and E. P. Earle; also Charles M. Schwab, E. C. Converse, B. M. Baruch, United States Senator George S. Nixon, George Wingfield, Hooley, Learned & Company, many other New York Stock Exchange houses, a group of powerful corporation law firms, a noted crowd of influential politicians, Curb stockbrokers who had grown fat executing manipulative orders for the "inside," bankers who carried on deposit the cash balances of the mining companies, and even J. P. Morgan & Company, who were partners of the Guggenheims in their Alaska ventures and were for a time said to be meditating a merger of the copper companies of the country with those controlled by the Guggenheims as a nucleus.

THE STORY OF ELY CENTRAL

By keeping speculators out of stocks that were selling at inflated prices, the Scheftels corporation and the _Mining Financial News_ became endeared to a great popular moneyed element. The public was saved huge sums of money.

This, however, only carried out the negative end of a grand idea. The affirmative demanded that the Scheftels corporation must put its followers into a stock or stocks where they could actually make money.

The Scheftels corporation was on the eager lookout for a genuinely high-classed copper-mining proposition. It found what it was looking for in Ely Central, a property that is sandwiched in between the very best ground of the Nevada Consolidated, is bordered by the Giroux and occupies a strategic position in the great Nevada copper camp of Ely, birthplace of what is probably the greatest lowest-cost porphyry copper mine of America.

By invading the Ely territory as promoter and annexing Ely Central, the Scheftels corporation committed what was probably, to the interests among whom our publicity work had wrought greatest havoc, an unpardonable crime. We butted into the very heart of the game, and became a disturbing factor in their mining operations.

The Ely Central property consists of more than 490 acres. Years before, in the early days of the camp, it had been passed over by the geologists and promoters who selected the ground for the Nevada Consolidated, Giroux and Cumberland-Ely, because it was covered by a non-mineralized formation called rhyolite. As development work progressed and the enormous value of the surrounding mines was disclosed, it dawned on their owners that they might have made a mistake and that it would be just as well to obtain possession of the Ely Central property.

The ground was especially valuable to the Nevada Consolidated, if for no other reason, as mere acreage to connect up and make compact the properties owned by them. The second demonstration of their bad judgment was the fact that, having planned to mine the Copper Flat ore-body by the steam-shovel method, they overlooked the value of the Ely Central property as affording them the only practical means of access to the lower levels of that pit for operation by the steam shovels.

Investigation had disclosed to me that the evidence which had been adduced by mine developments on neighboring properties was all in favor of copper ore underlying the Ely Central area. The rhyolite, which covered Ely Central, was a "flow," covering the ore, and not a "dyke," coming up from below and cutting it off.

Why was the property idle? Inquiry revealed that the Ely Central Copper Company was $89,000 in debt, and that a pre-panic effort to finance the corporation for deep mine development had failed. The panic of 1907-8 had crimped the promoters and they could not go ahead.

The Scheftels corporation entered into negotiations with the Pheby brothers and O. A. Turner, who held the control, for all the stock of the Ely Central company that was owned by them. During the progress of negotiations, early in July, 1909, I heard that the Guggenheims and W. B. Thompson were very much put out to learn that the Scheftels company was about to finance the company. They had belittled the value of the property, as would-be buyers are prone to do the world over.

Before I entered upon the scene the Pheby brothers had found themselves objects of persistent and mysterious attacks. Their credit was assailed in every quarter and they found themselves ambushed and bushwhacked in every move they made. They were forced into a position where it was believed they would accept anything that might be offered them for their interest in Ely Central. As fate would have it, the Scheftels company entered the race at this psychological moment.

Summed up, the Scheftels company actually contracted for 1,280,571 shares out of 1,600,000, which represented the increased capitalization for a total sum of $1,158,916, or at an average price of 90-1/2 cents per share. The time allowed for the payment of all the money was nine months, stipulated payments being agreed upon at regular intervals in between. The immediate effect of the arrangement was this: A dormant property, in debt and lying fallow, was metamorphosed into a going concern with good prospects of soon becoming a proved great copper mine, with an assured income to defray the expenses of deep mine development on a large scale, and a market career ahead of it that might be expected to match any that had preceded it in the Ely district from the standpoint of public interest.

During the progress of the negotiations the stock sold up to $1 per share. The selling for Philadelphia account of a large block of stock in the open market dropped the price back, of a sudden, to 50 cents. The Scheftels company bought stock on this break and urged its customers to do likewise. On the day the deal was concluded the market had rallied to 75 cents. Fully six weeks before the deal was arranged the Scheftels Market Letter and the _Mining Financial News_ had begun to urge the purchase of the stock. The Scheftels organization was not hoggish. The establishment was willing that the public should get in on the cellar floor. There were nearly 300,000 shares outstanding, which the Scheftels corporation had not corralled in its contract.

Readers of the Market Letter and the _Mining Financial News_ fell over one another to get in on the good thing. Therein they were wise. By early September the price had advanced in the market to $1. The Scheftels publicity was strong in favor of the stock. But it had not yet put on full steam. It was waiting for an engineer's report to make doubly sure it was right.

Col. Wm. A. Farish, a mining engineer of many years' experience and a man with a high reputation throughout the whole of the Western mining country, had been sent by the Scheftels company to make a report on the Ely Central. Years before Colonel Farish had reported on the Nevada Consolidated properties and outlined the very methods now being used for recovering its ores. But Colonel Farish had been ahead of his time, and the capitalists in whose interest he was acting were not prepared for such a radical step in advance of the then-existing methods, nor to believe that copper ores of such low grade could be mined at a profit, especially 140 miles from the nearest railroad. Times and conditions changed, and the 140 miles were spanned by a well-equipped rail connection.

Colonel Farish's opinion verified our fondest expectations. The report set forth that the mine possibilities of Ely Central were nearly as great as those of the Nevada Consolidated itself. On the basis of this report, which was made in September, the project acquired a new significance. Development operations were undertaken to prove up the ground in an endeavor to demonstrate the existence of the 33,000,000 tons of commercial porphyry ore which Colonel Farish indicated in his report would likely be found within the boundaries of the southern part of the Ely Central property.

The prospect fairly took the Scheftels organization off its feet. We were dazzled. We saw ourselves at the head of a mine worth $25,000,000 to $40,000,000. No time was lost in organizing a campaign to finance the whole deal. Having no syndicated multi-millionaires to back it up, the Scheftels corporation went to the public for the money, the same as hundreds of other notable and successful promoters had done. The ensuing publicity campaign to raise capital has been described in hundreds of columns of newspaper space as one of the most spectacular ever attempted in Wall Street.

I had absolute faith in the great merits of Ely Central, a faith that has not been dimmed in the slightest degree by the vicissitudes through which the company, the Scheftels corporation, and myself personally have passed. Within thirteen months the Scheftels corporation caused to be spent for mine development more than $150,000, and on mine and company administration an additional $75,000. When the Scheftels company was raided by the Government on September 29, 1910, and a stop put to further work the expenses at the mine had averaged for the nine months of that year above $15,000 a month. Work was going on night and day. Every possible effort was being made to prove-up the property in short order. Core-drills sent down from the surface had already revealed the presence of ore at depth, and I am sublimely certain that another month or two would have put the underground air-drills into contact with a vast ore-body identical in quality and value with that lying on either side in Nevada Consolidated acreage.

Ely Central was the New York Curb sensation in 1909-1910. I used the publicity forces which had been so successful in protecting the public against the rapacity of multi-millionaire mining-wolves to educate them up to the speculative possibilities of Ely Central.

Up went the price. Between the first of September and the middle of October the market advanced to $2 3-8. On October 13th advices reached us that 30 per cent. copper ore had been struck in the Monarch shaft. The Monarch is an independent working, far removed from the area that is sandwiched in between the main ore-bodies of the Nevada Consolidated. We were highly elated. The prospect looked exceedingly bright to us, and there was no longer any hesitation in strongly advising our following to take advantage of an unusually attractive speculative opening.

The market boomed along in a most satisfactory way. By October 26th the price reached $3; on November 3d it was $4 a share, and three days thereafter $4-1/4 was paid.

The expenses of the Scheftels company on publicity work at this time amounted to about $1,000 a day. Money for mine development on Ely Central was being spent as fast as it could be employed. We were trying to sell enough stock at a profit over the option price to defray the publicity expenses, keep the mine financed, and meet our payments on the option, but no more. We were not making any effort to liquidate on a large scale, a fact which was reflected in the advancing quotations.

When the price of Ely Central hit $4 in the market, the Scheftels company rated itself as worth from $3,000,000 to $4,000,000. I had visions of leading the Guggenheims and Lewisohns and Thompsons up the Great White Way with rings in their noses. Nat. C. Goodwin, who had a 25 per cent. interest in the Scheftels enterprise, enjoyed similar visions, only his fancy ran to building new theaters for all-star casts.

While Ely Central stock was going skyward and all the speculating world was making money in it, our publicity forces were busily driving the bald facts home regarding La Rose, Cumberland-Ely, Nevada-Utah and other pets of the mighty. Our batteries never let up for a moment. These various attacked interests were getting ready to strike back. If their movements had been directed by an individual general they could not have worked with more community of interest. One day the sky fell in on us. The plans had been beautifully laid for our complete ruin. That we escaped utter annihilation was almost a miracle.

On Wednesday, November 3d, the result of our market operations on the New York Curb was that we quit long on the day nearly 8,000 shares of Ely Central at an average price of $4. On the same day our customers ordered the purchase of nearly twice as much stock as they ordered sold. This indicated to us that the Curb selling was professional. There was nothing very remarkable about this performance because brokers doing business on the Curb very frequently play the market for a fall.

On Thursday, the day following, the Scheftels company was again compelled to purchase stock on the Curb in excess of sales to the extent of 7,600 shares, while on the same day the buy orders of house customers exceeded their orders to sell at least three to one. The professional selling was now accompanied by rumors on the Curb which spread like the smell of fire that trouble of some dire sort was pending for the Scheftels company. Most of this emanated from an embittered brokerage quarter and we paid little attention to it.

On the succeeding day, Friday, November 5th, the professional selling was quieted to a point that compelled the Scheftels company to go long of only 6,600 shares on the day in its Curb market operations. The purchase of so small a block of stock excited no suspicion in the Scheftels camp, although it should have, because Scheftels' customers on this day purchased more than four times as much stock as they ordered sold, pointing conclusively to a great public demand and much shorting by professionals.

Then came the _coup de main_.

THE ASSAULT ON ELY CENTRAL

The 6th day of November fell on a Saturday. The New York _Sun_ of that morning published under a scare head a vicious attack on the Ely Central promotion. The attack was based on an article which was credited in advance to the _Engineering & Mining Journal_ and appeared in the _Sun_ ahead of its publication in that weekly. The _Sun_ had been furnished with advance proofs. The Ely Central project was stamped as a rank swindle. Everybody identified with it was raked over and I, particularly, was pictured as an unprincipled and dangerous character, entirely unworthy of confidence and at the moment engaged in plucking the public of hundreds of thousands. It was stated that the Ely Central property had been explored in the early days of the Ely camp and found of no value whatsoever from a mining standpoint. The Scheftels corporation was accused of setting out in a cold-blooded way to swindle investors on a bunco proposition.

I was in my apartment at the Hotel Marie Antoinette at 9 A.M. when I read the _Sun's_ story. The Scheftels company had thrown $85,000 behind the market during the three preceding market days to hold it against the attack of professionals.

I called the Scheftels office on the 'phone and gave instructions that a certified check for $40,000 be sent to Wasserman Brothers, members of the New York Stock Exchange, with orders to purchase 10,000 shares of Ely Central at $4-1/8, which was the quotation at the close on the afternoon before. Orders to buy 15,000 shares more at the same figure were distributed among other brokers. The single order was given to Wasserman Brothers because I thought it good strategy. They are a house of undoubted great responsibility and it seemed to me that their presence in the market on the buying side would have an excellent tonic effect.

During the two hours' session I held the 'phone, receiving five minute reports from the scene of action. Mr. Goodwin was at my side. At ten minutes to twelve the brokers had reported the purchase, on balance, of 24,225 shares. Had they purchased 675 shares more they would have completed the orders that were outstanding and it would have been up to me to decide whether to lend further support or not. By that time my figures showed that the Scheftels corporation had thrown behind the market $200,000 in four days to hold it and I was beginning to have "that funny feeling." During the last few minutes of the Saturday Curb session the selling ceased and it seemed that possibly my fears were unfounded.

On Sunday, the 7th, my hopes went a-glimmering. All the New York papers featured scathing articles, using as authority the _Engineering & Mining Journal's_ attack, which had appeared on the previous afternoon. Dispatches indicated, too, that the papers of Boston, Chicago, Los Angeles and San Francisco had played it up on the front page as the most shocking mining-stock scandal of the century.

By Monday, the whole country had been plastered with the sensation. Of course my early Past, all of which was a family affair and had transpired fourteen years prior, long before I essayed to enter the mining promotion field, was dragged out of the skeleton-closet. It lent verisimilitude to the stories.

After reading the Sunday newspapers, I grasped the meaning of the move and marshalled our forces. It was plain that we had been marked for the sacrifice. It looked as though we hadn't a chance in a million of weathering the onslaught if we lent the market further support. There were about 500,000 shares of Ely Central in the public's hands, and, without close to $2,000,000 in ready cash to throw behind the market, we could not be certain of staying the tide. We didn't have anything like that sum. Personally I did not give up the fight, but the outlook was mighty blue.

All day Sunday trusted clerks of the Scheftels company worked on the books, making a statement of the "stop-loss" orders and "good-till-cancelled" orders of customers. On Monday morning the newspapers contained aftermath stories of the _Engineering & Mining Journal's_ arraignment. The air was surcharged with the impending calamity.

THE CLASH OF BATTLE

With a line of defense carefully outlined, I approached the fray. First, the Scheftels corporation placed with reliable brokers written orders to sell at the opening the stocks that were specified in the stop-loss and good-till-cancelled orders of customers. Not an order to sell a share of inside stock was given. It was also decided not to place any supporting orders until after the market opened and it could be determined with some degree of accuracy what the volume of stock amounted to that was pressing for sale.

Just before the market opened I could see from my office window a dense crowd of brokers assembled around the Ely Central specialists. Although ominously silent, they were struggling for position and were tensely nervous. It was plain that the over-Sunday anti-Scheftels newspaper publicity had racked Ely Central stockholders and created a panicky movement to liquidate, which was about to find vent in violent explosion. It was evident that the Scheftels corporation would have to conserve every resource if the day was to be saved.

The market opened. Instantly there was terrific action. Hundreds of hands were waving wildly in the air. Everybody wanted to sell and nobody wanted to buy. The chorus was deafening. Screams rent the air. The tumult was heard blocks away. Every newspaper had a man on the spot. Brokers from the New York Stock Exchange left their posts and came to see the big show; the Stock Exchange was half emptied. The spectacle had been advertised widely and everybody was keenly awake and wrought up to a high pitch of excitement over what had been scheduled to occur.

Had the Scheftels brokers been supplied with orders to buy one-quarter of a million shares of stock at the closing market price of the Saturday before, $4 1-8, it was very apparent that they would have been unable to hold the market. The opening sale was at $4. Downward to the $3 point the stock traveled, breaking from 25 to 50 cents between sales. Through $3 and on down to the $2 point the price crashed. Blocks of 10,000 shares were madly thrown into the vortex of trading. The Curb was a struggling, screaming, maddened throng of brokers. Every trader appeared to be determined to crush the market structure. At $2 a share there was a temporary check in the decline, but the bears renewed their onslaught, gaining confidence by the outpour of selling orders. Within less than an hour after the opening the stock hit $1 1-2 a share. At this juncture the Scheftels broker in Ely Central reported that he had executed all the stop-loss and good-till-cancelled orders entrusted to him with the exception of 19,000 shares.

"The Scheftels company will take the lot at $1 1-2," I said.

In lending succor at $1 1-2 per share I was really stretching a point, although at this figure the net market shrinkage of the Ely Central capitalization was in excess of $3,000,000. This melting of market value was awful to contemplate. On the other hand the newspaper agitation was unmitigated in its violence, stockholders were convulsed, a break of serious proportions was certain, and it was up to me to conserve every dollar. The moment the Scheftels bid of $1.50 a share made its appearance on the Curb and the selling from the same source for the account of customers was discontinued, it was seen that the force of the drive had spent itself, at least for the time being. Support now came from the "shorts." They started to cash their profits on their short sales of the days previous. Crazed selling was transformed to frantic buying.

The scene at this juncture was dramatic. It was the momentary culmination of a cumulative, convulsive cataclysm. In refraining from selling for its own account the Scheftels corporation violated one of the sacred rules and privileges not only of the New York Curb but of the New York Stock Exchange. In both of these markets it is the custom, where brokers have advance information of an impending calamity, to beat the public to the market and get out their own lines first, leaving customers to take care of themselves.

By deftly feeding stock to bargain hunters and to the "shorts" at intervals and buying stock when it pressed for sale from frightened holders at other periods the Scheftels company was able to support the market that afternoon to a close with sales recorded at $2 a share. The cash loss of the Scheftels company on its Curb transaction in Ely Central that day was $60,000. This fresh sacrifice was needed to steady the market.

Tuesday, the following day, the daily newspapers belched forth further tirades of abuse and calumny. The market crash in Ely Central was held up to the public as proof positive that the project was a daring swindle. The raid on the stock in the market was renewed. A Johnstown flood of liquidation ensued. Fluctuations were violent. Opening at $2, the price was forced down to $1. It afterward rebounded to $2, but the waters would not subside, the stock was hammered again and it closed at $1 per share. To meet the oncoming emergencies the Scheftels corporation was obliged to fortify its cash reserve in the only one way that offered. It was compelled to convert a large part of its reserves of securities into cash and it had to sell on a declining market. Many accounts were withdrawn by timid customers, and the Scheftels company was further called upon to give stability to Rawhide Coalition and Bovard Consolidated, other stocks which it had been sponsoring in the markets. Loans were called by brokers with whom the Scheftels company was carrying stocks, deliveries were frantically tendered to the Scheftels company of stocks it had purchased at previous high levels, and a financial onslaught made generally that would undoubtedly have sunk the Scheftels' ship but for the fact that we had backed-up in the nick of time, had measured our distance, had gone just so far and not too far, and had kept on the firing-line.

An exceedingly gratifying feature of the sensational day was the way in which our friends stood by us. The venom and selfishness of the overwhelming assaults that had been made upon us convinced many of the public that we were being made the victims of a special attack, and with the natural impulse that governs honorable men they gave testimony to their confidence in us.

On Wednesday the campaign terminated. Ely Central weakened an eighth from the $1 point, the closing of the day before, recovered to sales at $1-3/4 and closed at $1-1/2 bid; $1-5/8 asked.

All day long our offices were thronged with newspaper reporters and with pale-faced and agitated customers. Our clients felt their helplessness in such a tumult of warring forces. The only thing they could do was to stand by and watch developments as the battle waged. It was a proud moment for me when, at the end of the day's market, I mounted the platform in the Scheftels customers' trading-room, gave voice to a shrill cheer of triumph and wrote on the blackboard the following:

"We have not closed out a single margin account! We are carrying everybody!"

The scene which followed warmed the cockles of my heart. I was literally mobbed, but it was a friendly mob. We all joined in a season of noisy rejoicing. That we should have been able to survive the three-days' siege with minimum losses to customers and without sacrificing a single margin account was a signal achievement. I doubt if there are many cases like it in the history of Wall Street.

Scores of telegrams were received from out-of-town customers to whom the margin respite was wired. One of these read:

You may look for a tidal wave of business. Your princely action
warrants 21 guns for the House of Scheftels.

Another one was to this effect:

The whole situation was greased for your descent. It was a
shoot-the-chutes and a bump-the-bumps proposition. Congratulations
on your survival.

Hundreds of letters of a similar tenor poured in upon us. Many of these came from the camp of Ely itself, where large blocks of the stock were held by mining men on the ground.

Thursday the stock closed at $l-3/4; Friday it advanced to sales at $1-7/8 and hung there.

The Scheftels organization now drew its first long breath. Friends and enemies alike marveled how the corporation had managed to survive. We had held the fort, but at murderous cost.

I got busy with the publicity forces at my command. Through the Scheftels Market Letter and the _Mining Financial News_ the story was told of the whole dastardly campaign.

The Weekly Market Letter of the Scheftels company on November 13, 1909, devoted 24 columns to the story of the raid.

That the Guggenheim-managed Nevada Consolidated was well pleased with the publication of the _Engineering & Mining Journal's_ attack seemed clear to me. The reason was this: In its attack the _Engineering & Mining Journal_ stated that two drillholes put down by the Nevada Consolidated in the immediate vicinity of Ely Central had failed to show better than nine-tenths of one per cent. copper ore which, the article said, was below commercial grade. (At this late date, October, 1911, they are mining ore in the steam-shovel pit of the Nevada Consolidated that will not average more than eight-tenths of one per cent. copper transporting it to the concentrator, more than twenty miles away, and treating it at a profit. But this is not the point.) An engineer of international prominence telegraphed the Scheftels company from Ely as follows:

Two drill holes mentioned in _Engineering & Mining Journal_
article were completed only last week. Results must have been
telegraphed to New York.

These holes gave great trouble on account of caving ground. I heard
drill runners say they were stopped on that account and were in ore
in bottom. In any case, it is not conclusive of unpayable ore in
vicinity. This condition often occurs.

I could write a book in reply to the _Engineering & Mining Journal's_ tirade, showing the utter flimsiness of the statements it made. Limited space forbids anything more than an outline.

Charles S. Herzig was employed to report confidentially on the property. Mr. Herzig's report was later checked up by Dr. Walter Harvey Weed, a great copper geologist of known high standing who was formerly one of the principal experts of the United States Geological Survey and was himself a frequent contributor to the _Engineering & Mining Journal_. Dr. Walter Harvey Weed wired to the C. L. Constant Company, the metallurgists and mining engineers, from Ely, as follows:

After making a most thorough examination my opinion is Southern
part Ely Central property is covered by rhyolite capping.
Geological evidence demonstrates that the porphyry extends eastward
(through Ely Central) from steam-shovel pit and with excellent
chance of containing commercial ore beneath a leached zone. A well
defined strong Fault separates steam-shovel ore from rhyolite area
and this Fault Plane may carry copper glance (very rich copper ore)
of recent origin, due to descending solutions. The iron-stained
jasperoid croppings in the limestone areas give promise of making
ore in depth on Ely Central property as they do in Giroux.

The _Engineering & Mining Journal_ said in its article that the northern portion of Ely Central showed the Arcturus limestone of the district. It stated that in this limestone at various places there is a little mineralization but never during the history of the district were any profitable results obtained. As against this, Engineers Farish, Herzig and Weed reported that the limestone areas on Ely Central would likely show the presence of mines. As a matter of fact, Giroux, neighbor of Ely Central, had sunk through this limestone and opened one of the richest bodies of copper ore ever disclosed.

The _Engineering & Mining Journal_ said that in representing that pay ore is likely to exist in the area of Ely Central sandwiched in between the two big mines of Nevada Consolidated, the Scheftels company was practicing deception. Not only did Messrs. Farish, Herzig and Weed report in favor of the likelihood, but it is now a commonly accepted fact that, unless all known geological indications are deceptive, Ely Central has the ore in this stretch of territory. A report made as late as September, 1911, by engineer Richard T. Pierce, for the reorganization committee of Ely Central, expresses the opinion that an area 1,300 feet by 1,900 feet at the south-east end of the Eureka workings "will be found to contain mineralized porphyry, with reasonable assurance that commercial ore will be had in it."

Mr. Herzig's first telegram from Ely after examining the Ely Central property was to this effect:

There is no question that the rhyolite was deposited in Ely Central
after the enrichment of the porphyry. The Fault that limits the
rhyolite in the Nevada Consolidated pit is indicated by several
feet thickness of crushed mineralized porphyry-rhyolite ore, which
is a positive evidence that the porphyry was enriched before the
faulting. The limestone and contact areas owned by the company, in
my opinion, have great potential value. The indications are in
every way similar to Bisbee. Rich carbonate ore has been
encountered on the Clipper and Monarch claims of Ely Central and I
look forward to seeing big ore bodies opened up at these places.

Reports of both these engineers, many thousand words in length,
made later, confirm these messages.

What probably convinced me more than anything else of the inaccuracy of the statement regarding the Ely Central property by the _Engineering & Mining Journal_ was the attitude of Charles S. Herzig. He is my brother.

Up to within thirty days of the appearance of the attack in the _Engineering & Mining Journal_ I had not set eyes on him in fifteen years. A graduate of the Columbia School of Mines, he had in the interim examined mining properties in South Africa, Egypt, Australia, the East Indies, Siberia, every European country, Canada, Mexico, Central America, South America and the United States in the interests of some of the world's greatest financiers. These expert examinations had covered deposits of gold, silver, copper, lead, zinc, coal and other minerals. In the engineering profession he is known as an expert who has his first failure yet to record. His standing is unquestioned as an engineer and a mine-valuer.

I had heard some criticism of the Farish report, made by engineers of the modern school, in which it was pointed out that Colonel Farish had failed to give scientific reasons for all of his deductions. I asked Captain W. Murdoch Wiley, then a member of the C. L. Constant Company, assayers, metallurgists and mining engineers, whether he could induce my brother to make an examination. I did not approach Charles myself, because we had been estranged. So it was that when he returned from Europe after an absence of many years, he had not even looked me up. Captain Wiley arranged for a meeting at the Engineers' Club. I went there, and was formally introduced by Captain Wiley to my brother across a table.

"What will you take to make a report on Ely Central?" I asked in the same matter-of-fact way I would have addressed a stranger.

"What's the purpose of the report?"

"The Scheftels company wants confidential, expert information such as you are qualified to give as to the value and prospects of the property," I answered.

"I'll take $5,000," he said, "but only on one condition. I am going to the Ely and Ray districts to report for English capitalists, and I can take your property in at the same time. My report is not to be published and I reserve the right to make a verbal instead of a written one. If you really want to know what I think of the property, I am quite willing to give it a careful examination and let you know. Because of the stock-market campaign you are making, I would not accept your offer if, did I report favorably, your idea would be to make use of the report in the market."

The bargain was struck. A few days later Mr. Herzig received $2,500 from the Scheftels company, on account, and a check for traveling expenses. He left for Ely.

On the Saturday morning when the New York _Sun_ article appeared containing the excerpts from the _Engineering & Mining Journal's_ onslaught, I wired my brother substantially as follows:

Savage attack in _Engineering & Mining Journal_ on Ely Central. If
your report on property is favorable, I beg you to let us have it
by wire and allow the use of it to counteract.

An hour later I followed it up with another message telling him not to wire any report. I set forth that because he was my brother, it might prove of little avail, now that the publication had been made, and that it might only tend to do him personal damage in the profession because of the unqualified manner in which the _Engineering & Mining Journal_ had taken a stand against the property. In reply he wired Captain W. Murdoch Wiley the short but decisive report already quoted herein, regarding the geological reasons why Ely Central should have the ore, which afterward was fully verified by Dr. Walter Harvey Weed in the message also reproduced in the foregoing. In a letter from Ely to Captain Wiley confirming the message, the original of which is in my possession, Mr. Herzig said:

I have formed a very favorable opinion of the property. I feel that
it has the making of a big mine, and under the circumstances I am
willing to stand a little racket for a time.

The same day he wired Captain Wiley to buy for his account 2,500 shares of Ely Central at the market price, which order was executed through the Scheftels company.

Editor Ingalls of the _Engineering & Mining Journal_ and my brother had been friends for years. My brother had been employed early in his career by the Lewisohns, Guggenheims and the Anaconda Copper Company, and later in Europe, Australia and India by mine operators of even higher class. Up to the time when the _Engineering & Mining Journal's_ attack appeared he had not committed himself on Ely Central. When he did commit himself it was with the foreknowledge that in doing the unselfish and courageous thing his name would be besmirched if under development Ely Central turned out to be what the _Engineering & Mining Journal_ had declared probable. In that event his relationship with me would be held up as positive proof of duplicity and it would look bad for him. The fact that under all these circumstances he jumped into the breach satisfied me that the attack of the _Engineering & Mining Journal_ was unjustified.

A BOMBSHELL IN THE ENEMY'S CAMP

As soon as the Scheftels corporation was able to obtain a copy of the corroborative report of Dr. Walter Harvey Weed, which the great copper geologist made to the C. L. Constant Company, it filed a libel suit against the _Engineering & Mining Journal_ for $750,000 damages. Simultaneously Mr. Scheftels filed another suit for an additional $100,000 in his own behalf.

The filing of the Scheftels libel suits against the _Engineering & Mining Journal_ was a bombshell. It was formal notice to the forces arrayed against us that we did not propose to be made victims of an unholy hostility and that we were determined to proceed along old lines and not abate in the slightest our wide-open publicity measures. It was also noticed that we proposed to go through with the Ely Central deal.

After it became evident that we intended to keep on fighting, the Scheftels offices were openly visited and inspected in detail one day by the late Police Inspector McCafferty. In a bullying manner this police official let it be known that we were in official disfavor with him. His manner could hardly have been more offensive if he had been invading a den of counterfeiters. Mr. McCafferty did not specify just what he was after or just what he expected to find, but he made it plain to us that we were marked and that he had it in for us. He stalked scowlingly through the entire establishment and made vague threats of what was in store for us.

Late that night I learned that the Inspector had invaded the living-rooms of my associate, Nat. C. Goodwin, where he delivered himself somewhat as follows:

"What are you fellows trying to do, anyway? What are you trying to put across on us? Do you think we are going to stand for any such newspaper notoriety as you are getting and watch it with our arms folded? Do you think we are fools or crazy, or what? I want you to understand that you fellows have got your nerve with you. Get busy or the police will be on your backs to-morrow!"

I told Mr. Goodwin that our enemies had evidently sicked the Inspector on to us, but that I didn't think any action would be taken. We were victims and not culprits, and unless, indeed, the United States was Russia, nothing untoward could happen.

I promised Mr. Goodwin, however, that I would attend to the matter without delay. I laid all of the facts regarding the newspaper attack before a prominent citizen who promised forthwith to convey the information in person to the Inspector or one of his superiors. He did so. That was the last we heard of the matter.

The _Engineering & Mining Journal's_ lawyers addressed themselves to customers of the Scheftels company, who had lost money in the market break in Ely Central from $4 to $1.50. By letter they urged them to send on a full statement of facts and suggested that they might be of service, and without charge.

Letters of this character were sent to large numbers of our customers, many of whom simply sent them to us. In some cases, however, customers who had read the attack in the _Engineering & Mining Journal_ or quotations from it in widely circulated daily newspapers, needed but the letter from the lawyers to induce them to come forward with a complaint.

On the whole, this fishing expedition must have been something of a water-haul and a disappointment, for the attorneys of the _Engineering & Mining Journal_.

The Post-office Department at New York, in January and February, sent letters broadcast to readers of the Scheftels Weekly Market Letter, asking whether the business carried on was satisfactory--the usual form that is used where a firm is under investigation. Scores of these letters were forwarded to us by customers with remarks to the effect that evidently "somebody was after us." An inquiry of this sort is calculated to do terrible damage to the reputation and standing of any house that does a quasi-banking business. Our attorneys complained to Inspector Mayer of the New York division of the Post-office that an injustice was being done. No more letters of the character described were sent out, because the early replies that were received by the Inspector to his circular letter brought forth no serious complaints. However, it was afterward disclosed that the investigation did not cease here and that the Post-Office Department continued to conduct a searching inquiry only finally to abandon its enterprise.

Enters upon the scene an associate of the _Engineering & Mining Journal's_ lawyers defending that publication against our suit for libel. He called at the Scheftels offices and demanded from Mr. Scheftels information with regard to the account of C. H. Slack of Chicago. He got it. It showed that Mr. Slack had purchased 50,000 shares of Bovard Consolidated at 10 cents per share, for which he had paid cash, and that Mr. Slack had purchased an additional 100,000 shares at 14-1/4 and 14-3/4 cents per share; and that Mr. Slack had refused, after the market declined to below the purchase price, to pay the balance due, because of delayed delivery.