William F Miller
Our next scammer is Mr 520 per cent as he was known, William F Miller, who launched the Franklin Syndicate on to the unsuspecting world in 1899.
On March 16th Miller, then president of the Brooklyn church’s Christian Endeavour Society, persuaded Oscar Bergstrom to hand over $10 to him to invest in the stock market, claiming he had access to inside information. In return for his money Bergstrom received a signed receipt, which stated “the principal guarantied against loss. Dividends weekly from $1 upwards till principal is withdrawn”. You can’t say fairer than that.
The way the scheme worked was fairly simple, a formula we will meet throughout this series. The investor was promised a return of 10% per week on their investment which was paid from the original deposit. The investor then has a choice of withdrawing the interest or reinvesting, the supposed returns being so great that they would be foolish if they withdrew the principal. The scheme would only hit the buffers if the investors demanded all their money back.
And success breeds success. So delighted were some of the earlier investors that they persuaded their friends and colleagues to join – Miller’s offer of 5% of the deposit of someone recommended to the scheme as commission no doubt helped. He advertised in 800 newspapers, spending some $32,000 of his investors’ money. But it worked. By the end of the summer of 1899 Miller had 22 employees and the office in Brooklyn was stuffed with cash. Long lines of people waited patiently outside the offices, either to deposit or receive their interest. At its height there were some 12,000 subscribers and Miller was taking between $20,000 and $63,000 a day.
But there were a number of problems, aside from the inherent design problem, that spelled disaster. Firstly, Miller introduced a partner, Edward Schlessinger, to the scheme. He was smarter than Miller and soon demanded his cut from the scheme. The gullible Miller obliged which Schlessinger squirreled away.
Then there was the problem of the receipts. A third partner, Col Robert Ammon, a lawyer, was brought into the syndicate in October 1899 and his brain wave was to incorporate the scheme, offering a share per $1 invested provided the guarantee was surrendered. Miller could not help gilding the lily because as well as promising a phenomenal 10% per week interest he claimed that the value of the shares would quickly multiply.
The newspapers, whilst happy to accept Miller’s adverts, wrote scathing articles about the shady, too good to be true scheme and the police were on the look-out for disgruntled investors. But none were to be found. Inevitably, though, the brave public front could not be sustained and on November 24th 1899 the three partners met at Ammon’s offices to plot their escape. Schlessinger stuffed his share of the loot into a satchel, supposedly around $145,000 and scarpered, never to be seen again.
Bizarrely, Ammon persuaded Miller to put his share into Ammon’s own account. By now a warrant was out for Miller’s arrest and he fled to Montreal but was soon arrested and in 1900 was sentenced to 10 years in chokey. Ammon put pressure on Miller to keep quiet about his involvement, paying his family a pension of $5 a week. Eventually Miller, by now ill with consumption, dobbed the grasping attorney in it and in 1903 he was sentenced in 1903 to four years for stealing $30,500.
What eventually happened to Miller is uncertain. Some say that on his release he ran a grocery whilst others say the consumption got him.