The San Francisco Call. Newspaper, April 10, 1904, Page 7

THE SAN FRANCISCO SUNDAY CALL. 7 beginning of the beginning l the distillers of turpentine carried competition to the quarreling polnt. It wus Alfred Neustadt, & banker & famous turpentine district, whe first called his brother-in-law's atten tion to the pitiable sight. Jacob Green. baum's soul thrilled during Neustadt's 1. He decided to form a turpentine trust. First he bought for & song all the bankrupt stilis—seven he secured options on of them. Then ine others, the tired-unto-death pla: Then the banking house of Greenbaum, Lazarus & Co. stepped in, interested accom plices, duped or coerced into selling enough ot TS to assure suc cess. cajoled the more stubborn wheedled the more credulous, gave wa> gracefully to the shrewder and gath ered them all into the fold. The Amer ine Company was formed ican Turpen with a capital stock of $30,000,000, of 200,000 shares, at $100 each. The cash needed to pay Greenbaum, Neustadt and others who sold their plants for “part cash rt stock” was pro- vided by an issue of $25,000,000 of & per derw a syndi- f Greenbaum, Lazarus Wechs) Morris Stein- Reis & Stern, Kohn, Fis- Siberman & Lindheim, Ro- ran & Co. and Zeman po L&S elder’s Sons the public sub- scribed for the greater part of the $25,000,000 ¢ both bonds and stock were on the New York Stock B hat is, they were s which floor $20.000,000 a pura to t payment we Greenbaum Turp” a street names of e Sk popularly ed, sorrowfully ack the st and while howling su During the * they sold more st spared not the widow r They even “st friends. They had sold mething which had cos natural wisk It was ¢ in the Sharpe street had said he would with the great plunger Sharpe was a financial 1 freethinker was hing more Turp” stock zel Wimbie anipulator ¥ knowr best bes ever Greenbau freelance freebooter Greenbat ptly admitted to Sharpe’s private office. It was a d ened room, the windows h; g wire screens summer and winter, in order that prying ss the st might not see his ¢ whose identity it should remain unknown tc He was alking up and down m, paus- ng from time to time to look at the tape Hallo, Greenb: How Sharpe?” quoth the millionaire senior partner of the firm of Greenbaum, s & Co. "I Lope you are wel his head to one side, his ey of caressing scrutiny, as though to ascertain the exact copdition of Sharpe’s health, Yes, you must be look so fine in a Jong time “You didn’t come ere just to tell I haven't seen you me this, Greenbaum, did you? How's your Turpentine? Oh”—with a long whistle—"1 see. You want me to go into it, hey?” And he laughed—a sort of half chuckle, half snarl Greenbaum looked at him admir- ingly; then, with a tentative smile, he said: “I am discovered!” “Well?” said Sharp, unhumorously. “What's the matter with a pool?” “How big?” coldly. “Up to the limit.” Again the trust- maker smiled, uncertainly. *“You haven't all the capital stock, I b Well, call it Greenbaum, more Jovially. Who is to be in_it besides you?” “Oh, you know; the same old crowd.” Oh, T know,” mimicked Mr. Sharpe, nfully; “the same old crowd. You ught to have come to me before. It will take something to overcome your own reputation. How much will each take? We'll fix that O K 100,005 uncertainly said and less if you take hold,” answered Greer m, laughingly rather some one else he me of them We ain't hogs Ha! hs But the distillers? “They are in the pool. I've got most of thei y off I see that it does not come out ur g There was a pause. B harpe's eyebrows were two deen lines, At length he said Bring your friends here this after- noon. Good-by, Greenbaum On the minute of 4 t called on Mr. Sharpe the senior partners o# the firms of Greenbaum, Lazarus & Co., 1 and Wechsler, Morris Steinfelder’s Reis & Stern, Fischel & ilberman & Lind Rosenthal, ran & Co. and Z h Bros, Mr. Sharpe appeared at the thres- hold How do you do, gentlemen? Don't ove, please; don’t move.” He made no motion to shake hands with any of them, but Greenbaum came to him and held out his fat dexter resolutely and Sharpe took it. Then Greenbaum sat down and sald. “We're here” and smiled blandly. Greenbaum tells me you wish to pool your Turpentine stock and have me market it for you.” All nodded: a few said “Yes”; one— Lindheim, aetat 27—said flippantly, “That's what.” Very well. What will each man's proportion be “I have a list here, Sharpe,” put in He intentionally omitted “Mr."” for effect upon his colleagues. Sharpe noted it, but did not mind it. Sharpe read aloud: Shares. Greenbaum, Lazarus & Co.. . 38,000 L and 8. Wechsler . 14,000 Morris Steinfelder’'s Sons. . 14,000 ,Reis & Stern..... . 11,000 Kohn, Fischel & Co. . 10,000 Silberman & Lindheim. 9,000 Rosenthal, Shaffran & Co. 9,800 Zeman Bros.. 8,600 Total ...... . seenesana. 114,400 “It is understood,” sald Sharpe slow- ly, “that T am to have complete charge of the pool and conduct operations as 1 see fitt I want no advice and no questions. If there is any asking to be done I'll do it. If my way does not sult you we'll call the deal off right here, because it's the only way I have. 1 know my business, and If you know yours you'll keep your mouths shut in this office and out of it. “Bach of you will continue to carry the stock for Which he has agreed to stand in the pool. You've had it a year and couldn’t sell it, and you might keep it a few weeks more, until I sell it for you. It must be subject to my call at one minute's notice. I've looked into the company's business, and I he stock can easily sell at 75 Something like a gasp of astonish- ment came from those eight hardened speculators. Then Greenbaum smiled, knowingly, as if that were his pro- gramme, memorized and spoken by Sharpe. ‘It is also understood,” went on Sarpe, very calmly, “that none of you has any other stock for sale at any price, excepting his proportion in this pocl, and that proportion, of course, is not to be sold excepting by me.” No one said a word, and he continued: “My profit will be 25 per cent of the pool’s winnings, figuring on the stock having been put in at 29. The remain- ing profits will be divided pro rata among you; the necessary expenses will he :d similarly. I think that's all. And, gentlemen, no unloading on the sly—not one share. “I want you :to understand, Mr. Sharpe, that we are not in the habit of—" began Greenbaum with perfunc- tory dignity. He felt it was his duty to remonstrate before his colleagues. “Oh, that's all right, Greenbaum. 1 know you. That's why I'm particular. We've all been in Wall street more than a month or two. I simply said, ‘No shenanigan.’ And, Greenbaum,” he added, very distinctly, while his eyes took on that curious cold, menacing look, “I mean it, every d—d word of it. 1 want the numbers of all your stock certificates. Excuse me, gentlemen. I am very busy. Good afternoon.” “Sam is not half a bad fellow,” Greenbaum told them, as if apologizing for a dear friend's weaknesses. “He wants to make out he's a devil of a cynic, but he's all right. If you humor him you can make him do anything. I always let him have his way.” On the very next day began the his- torical advance in turpentine. It opened up at 30. The speclalties—brokers who made a specialty of dealing in it—took 16,000 shares, causing an advance to 32%." Everybody who had been “land- ed” with the shares at higher figures and had bitterly regretted it ever since now began to feel hopeful. As never before a stock had been manipulated with intent to deceive and malice pre- pense, so did Sharpe manipulate tur- pentine stock. The tape told the most wonderful storfes in the world, not the less wonderful because utterly untrue. At 60 the street thought there really must be something behind the move- ment, for no mere manipulation could put up the price thirty points in a month’s time, which shows what a wonderful krijst Sharpe was. And the people began to look curiously and ad- miringly and enviously and in many other ways at “Jakey” Greenbaum and his accomplices, and to accuse them of baving intentionally kept down the & IA)D SHALRE VNS S LOMLY “THA7 ol L AN TO WAVE COMFLETE EALGE or rVE, Pooz ! price of the stock for a year in order to “freeze out' the poor, unsophisti- cated stockholders and to “tire out” some of the early buyers, because “Turp,” being “a good thing,” Green- baum et al. wanted it all.for them- selves. e Then Sharpe sent for on the next day “Eddle”/fazarus swag- geringly offered to wager $10,000 against $5000 that a dividend on ‘“i'urp" stock would be declared during the 'year. Whereupon the newspapers, of their own accord, began to guess how great a dividend would be paid and when, and various figures were mentioned in the board room br. brckers who con- fided to their hearers that they “got it on the dead q. t. straight from the in- gide.” And two days later Sharpe's unsuspected brokers offered to pay 1% per cent for the dividend on 100,000 shar®s, within sixty days or the money for- feited and the stock scld up to 88%. and the public wanted it. A big, broad market had been established, in which one could buy or sell the stock with ease by the tens of thousands of shares. The 114,400 shares, which at the incep- tion of the movement at the unsalable price of $30 a share represented a theo- retical $3,432,000, now readily vendible at $85 a share, meant $7,422,000; not half bad for a few weeks' work. And still Sharpe, wenderful man that he was, gave no sign that he was about to begin unloading. Whereupon the other members of the pool began to wish he were not quite so greedy. They were satisfied to quit, they said. They imnlored, individually and col- lectively, Jacob Greenbaum to call on Sharpe; and Greenbaum, disregarding a still, small voice that warned him agalnst it, went to Sharpe’s office, and came out of it two minutes later some- what flushed, and assured his col- leagues one by one that Sharpe was all right, and that he seemed to know his business, Also that he was cranky that day. The stock fluctuated between 60 and 65. It seemed to be having a resting spell. But as it had enjoyed these peri- ods of repose on three several occasions during the rise—at 40 and 48 and 56— the public became all the more eager to buy it whenever it fell to 60 or 59, for the street was now full of tins that “Turp” would go to par. And such was the public's speculative temper and Mr. Sharpe’'s good work that dis- interested observers were convinced the stock would surely sell above 90 at the very least. Mr. Sharpe still bought and sold, and the big block he had been obliged to take in the course of his manipulation diminished. On the next day he hoped to begin gelling the pool stock. That very day Mr. Greenbaum, as he returned to his office from his luncheon, felt well nleased with the meal, and therefore with himself and therefore with everything. He scanned a yard or two of the tane and smiled. “Turp” was certainly very active and very strong. “In gsuch a market” thought Mr. Greenbaum, *‘Sharpe can’t possibly tell he's getting stock from me. In order to be on the safe side I'm going to let him have a couple of thousand. Then, should anything happen, I'd be that much ahead. Ike!” he called to a clerk. “Yes, sir.” “Sell two — wait; make it 3000 — no, never mind. Sehd for Mr, Ed Lazarus.” And he muttered to himself with a subthrill of pleasure: “I can just as well as not make it 5000 shares.” “Rddie,” he said to his partner’s son, “give an order to some of the room traders, say, to Willie Schiff, to sell five—er—six tell him to sell 7000 shares of Turpentine and to borrow the stock. I ani'riot selling a share, see?” with a said dividend to be declared. wink. “It's short selling by him, do you understand?"’ “Do 1?7 Well, I guess. Il fix that part O. K.,” said young Lazarus com- placently. He thought he would cover Greenbaumi's tracks so well as to de- celve everybody, including that highly disagreeable man, Samuel Wimbleton Sharpe. He felt so confident, so elated, did the young man, that when he gave the order to his friend and clubmate, Willie Scpfl!, he raised it to 10,000 shares. Greenbaum's breach of faith had grown from a relatively small lot of 2000 shares to five times that amount. It was to all appearances short sfock, and it was duly “borrow- ed” by young Schiff. 1t was advisable that it should so appear. In the first place no member of the pool could sup- ‘ply the steck which he held, because Sharpe counld frace the selling to the oftice, as he had the numbers of the stock certificates. Isidore Wechsler, who held 14,000 shares, was suffering from a bad liv: the same day that Greenbaum was suf- fering from nothing at all, not even a conscience, - A famous art collection would be gold ‘dt auction that week, and be felt sure his vifigar friend, Ave Wolff, would buy a;couple of excep- tionally fine Troyons’and a world-fam- ous Corot merely to get his name in the papers. © 5% ' * 'Turp,’ 62 7-8.” said his nephew, who was standing by the ticker. Then old Wechsler had an idea. If he sold 2000 shares of Turpentine at 62 or €3, he wouid have enough to buy the best ten canvases of the collection. His name—ang the amounts pald—would grace. the columns of the papers. What was 3000 shares, or even 4000 shares, when Sharpe had made such a big, broad market for the stock? “Why, I might as well make it 5000 shares while I'm about it, for there's no- telling ‘what may happen if Sharpe should overstay his market. T'll build a new stable at Westhurst”—his coun- try place—"and call it,” said old Wechs- ler to himself, in his peculiar, facetious way so renowned in Wall street, “the Turpentipe Horse Hotel, in honor of Sharpe.” And so his 5000 shares were scld by E. Halford, who had the order from Herzog, Wertheim & Co., who re- ceived it from Wechsler. It was short selling, of course, Total breach of faith, 15,000 shares. Now, that very evening Bob Lind- heim’s extremely handsome wife want- ed a necklace, and wanted it at once; also she wanted it of filbert sized dia- mends. Lindheim, to his everlasting credit, remonstrated and told her: “Wait until the pool realizes, sweet- heart. I don't know at what price that will be, for Sharpe says nothing. But I know that we'll all make something handsome, and so will you. I'll give you 500 shares at 30. There.” “Lend me the money now, and I'll pay it back to you when you give me what T make on the deal,” she said, with fine finality, And seeing hesita- tion in Bob's face, she added solemnly: “Honest, I will, Bob. I'll pay you. back every cent this time.” “I'll thfnk about it,”” said Bob. He always said that when he had capitu- lated, and she knew it, and so she said, magnanimously, “Very well, dear.” Lindheim thought 1000 shares would do it, so he decided to sell a thousand the next day, for you can never tell what may happen, and accidents sel- dom help the bulls. But as he thought of it in his office more calmly, more de- liberately, away from his wife and from the influence she exercised over him, it struck him forcibly that it was wrong to sell 1000 shares of Turpentine stock. He might as well as not make it 2500; and he did. He was really a modest fellow, and very young. His wife's cousin sold the stock for him, appar- ently short. Total breach of faith, 17,500 shares. The market stood it well. Sharpe was certainly a wonderful chap. Unfortunately, Morris Steinfelder decided to sell 1500 “Turp.” and did so0. The stock actually rose half a point on his sales. So he sold another 1500 and, as a sort of parting shot, 500 shares more. All this through an unsuspected broker, Total breach of faith, 21,000 shares. The market was but slightly affected. Then Louis Reis of Reis & Stern, “Andy” Fischel of Kohn, Fischel & Co.; Hugo Zeman of Zeman Bros. and “Joe” Shaffran of Rosenthal, Shaffran & Co. all thought they could break their pledges to Sharpe with impunity, and each sold to be on the safe side. This last lump figured up 10,400 shdres. Total breach of faith, 31.400 shares. The market did not take it well Sharpe, endeavoring to realize on the remainder of his manipulative pur- chases, found that “‘some one had been there before him." An accurate list of the buyers and sellers was sent in every day by his lieutenants, for all but the most skill- ful operators invariably betray them- selves when they attempt to sell a big bunch of stock. He scanned it very carefully now, and put twe and two together; and he made certain in- quirfes and put four and four together —four names and four other names. He saw through the time-worn device of the fictitious short selling. He knew the only people who would dare to sell such a large anfount must be his colleagues. He also was convinced that their breach of faith was not a concerted effort, because if they had discussed the matter they would have sold a smaller quantity. He knew where nearly every share of stock to know was. It was his business everything about it. “Two,” ne said to his secretary, “may rlay at that game.” And he be- gan to play. By seemingly reckless plunging pur- chases he started the stock rushing upward with a vengeance—62, 64, 63, 86, four peints in as many minutes. The fioor of the Stock Exchange was the scene of the wildest excitement. The market—why the market was simply Turpentine. * Everybody was buying it, and everybody was wondering how high it would go. Greenbaum and the er seven included. It looked as if the stock had resumed its triumphant march (0. par. Then Sharpe called in all the stock his brokers were loaning to the shorts and he himself began to borrow it This, together with the legitimate reé- quirements of the ‘big short interest, created a demand so greatly in excess of the supply that Turpentine loaned at a sixty-fourth, at a thirty-second, at an eighth and finally at a quarter pre- mium over night. It meant that the shorts had either to cover or to pay $25 per diem for the use of each 100 shares of stock they borrowed. On the 31,400 shares that the syndicate was borrow- ing it meant an expense of nearly $5000 a day, and in addition the stock was rising in price. The shorts were losing at the rate of many thousands a min- ute. There was no telling where the. end wculd be, but it certainly looked stormy for both the real and fictitious shorts. Mr. Sharpe sent a peremptory mes- sage to Greenbaum, Lazarus & Co., I & M. Wechsler, Morris Steinfelder’'s Song, Reis & Stern, Kohn, Fischel & Co.; Silberman & Lindheim, Rosenthal, Shaffran & Co. and Zeman Bros. It was the same message to all: “Send me at once all your Turpen- tine stock.” There was consternation and dismay, also admiration and self-congratula- tion, among the recipients of the mes- sage. They would have to buy back in the open market the stock they sold a few days beforé. It would mean losses on the treasonable transactions of fully a quarter of a million, but the pool “stood to win” simply fabulous sums, if Sharpe did his duty. There were some large blocks of stock for sale at 66, but Sharpe's brokers cleared the figures with a flerce, irre- sistible rush, whooping exultantly. The genuine short interest was simply panic-stricken, and atop it all there came orders to buy an aggregate of 81,400 shares—orders from Messrs. Greenbaum, Wechsler, Lindheim, Stein- felder, Reis, Fischel, Shaffran and Ze- man. The stock rose grandly on their buying 4000 shares at 66, 2200 at 66%, 700 at 675, 1200 at 68, 3200 at 6935, 2000 at 70, 5700 at 70%, 1200 at 72. Total, 31,400 shares bought in by the “Skin- dicate.” Total, 31,400 shares sold Samuel Wimbleton Sharpe to his own assoclates in the great Turpentine pool. In all he found buyers for 41,700 shares that day, but it had taken purchases of exactly 21,100 to “stampede the shorts' earlier In the day, and in ad- dition he held 17,800 shares acquired in the course of his bull manipulations which had not been disposed of when he discovered the breach of faith, so that at the day’s close he found him- self not only without a share of stock manipulatively purchased, but “short” for his personal account of 2800 shares. On the next day came the second chapter of the big Turpentine deal. Mr. Sharpe, having received the pool’s 114,400 shares, divided it into three lots —40,000 shares, 50,000 shares and 24,400 shares. The market had held fairly strong, but the lynx-eyed room trad- ers failed to perceive the usual “sup- port” in “Turp,” and bggan to sell it in order to make sure. Slowly the price began to yleld. All that was needed was a leader. Where- upon Mr. Sharpe took the first lot of the pool stock—40,000 shares—and hurled it full at the market. The im- pact was terrible; the execution ap- palling. The market reeled -crazily. The stock, which after selling up to 72%, had “closed” on the previous day at 71%, dropped twenty points and closed at 54. - On the next day he fired by volleys 50,000 shares more at the market. The stock sank to 41%. Such a break was almost unprecedented. Greenbaum rushed to Sharpe’s office. The terrible break gave him courage to do anything. A Wall street worm will turn when the itself. ‘“What's the matter?” he asked an- grily. “What are you doing to Turpen- tine?” Sharpe looked him full in the face, but his voice was even and emotionless us he replied: “Somebody has been selling on us. I don’t know who. I wish I did. I was afrald'I might have to take 100,000 sbares more, 50 I just sold as much as I could. I've marketed most of the Pool’s stodk. If it had not been for the Jag of stock I struck around 60 and 62 Turpentine would be selling at §5 to 90 to-day. Come again next week, Green- baum, and keep cool. Did you ever know me to fail? Good-by, Greenbaum, and don’t ralse your veice when you #peak to me.” “This has gone too far,” sald Green- baum, hotly. “You must give me an explanation, or by heaven I'll—" “Greenbaum,” sald Mr. Sharpe in a listless voice, “don’t get excited. Good- by, Greenbaum. Be virtuous and you will be happy.” And he resumed his caged-tiger pacing up and down his of- fice. As by magic Mr. Sharpe’s burly private secretary approached and said, “This way, Mr. Greenbaum,” and led the dazed trustmaker from the office. The next day Mr. Sharpe simply poured the remaining 25,000 shares of the pool's stock on the market as one pours water from a pitcher into a cup. The bears had it all their own way Everybody was selling because some- body had started a rumor that the courts had-dissolved the company for gross violation of the anti-trust law and that a recelver had been appointed. Having sold out the last of the pool's stock Mr. Sharpe “took in” at $22 a share the 2800 sharés which he had put out at $72, a total profit on his smali “line” of $140,000. Turpentine stock had declined fifty points in fifteen business hours. It meant a shrinkage in the market value of the company’s capital stock of $15,- 000,000. The shrinkage in the self-es- teem of some of the pool was measur- able only in billions. Sharpe notified his associates that the pool had-completely realized—i. e., had sold out—and that he would be pleased to meet them at his office on Monday— this was Thursday—at 11 a. m., when he would have checks and an account- ing ready for them. He refused him- self to Greenbaum, Wechsler, Zeman, Shaffran and others who called to see what could be done to save thelr repu- tations from the wreck of Turpentine. The stalwart private secretary told them that Mr. Sharpe was out of town. He was a very polite man was the sec- retary, and an amateur bozer of great proficiency. Failing to find Sharpe, they hastily organized a new pool, of a self-protec- tive character, and sent in ‘“‘suppert- ing” orders. They were obliged to take large quantities of stock that day and the next in order to prevemt a worse smash, which would hurt them in other directions. They found themselves with more than 50,000 shares on their hands and the price was only 26 to 23. And merely to try to sell the stock at that time threatened to start a fresh Tur- péntine panic. They met Sharpe on Monday. His speech was not so short as usual. He had previously sent to each man an envelope containing a check and a statement, and now he said in a mat- ter of fact tone: “Gentlemen and Greenbaum, you all know what I did for Turpentine on the up-tack. Around 62 I began to strike scme stock which I couldn’t accoun: for, I knew none of you had any for sale, of course, as you nad pledged me vour honorable words not to sell save through me. But the stock kept com- ing out, even though the sellers bor- rowed against it, as if it were short stock, and T began to fear I had met an inexhaustible supply. It is always best on such occasions to act promptly, and so after driving in the real shorts, 1 sold out our stock. The average price was 40. If it had not been for that mysterious selling it would have been €0. After commissions and other legiti- mate pool expenses I find we have made 9 points net, or $1,029,600, of which 25 per cent, or $250,000, comes to me according to the agreement. It is too bad some people didn't know enough to hold their stock for 0. But there is so much stupidity in the dis- trict. T trust you are satisfied. In view of the circumstances I am. Yes, indeed. Good day, gentlemen; and you too, Greenbaum, good day!” Outside they compared notes, and in ® burst of honesty they confessed. Then, illogically enough, they cursed Sharpe. The pool was not “ahead of the game.” They had soc much more stock on their hands than they desired that in reality they were heavy losers. And ag time wore on they had to buy more “Turp,” and more “Turp,” and still more “Turp.” They thought they could emulate Sharpe and rush the price up irresistibly—at any rate up to 50. They declared a dividend of 2 per cent on the' stock. But they could not market Turpentine. Again and again they tried; and again and again they failed. And each time the failure was worse, because they had to take more stock. It 1s now quoted at 16 to 18. But it Is not readily vendible at that figure, nor, indeed, at any price. Opposition dis- tilleries are starting up in all the tur- pentine districts and the trade outlook is gloomy. And the principal owners of the stock of the American Turpen- tine Company, holding among them no less than 140,000 out of the entire issue of 300,000 unvendible shares, are the famous “Greenbaum Syndicate.” 5 market misbehaves