by Paul R. Spitzzeri
Yesterday’s second part of this post following the remarkable career of oil promoter C.C. Julian ended with his leaving the board of directors of his Julian Petroleum Company, which experienced a meteoric rise in stock unit purchases through relentless folksy advertising and the bringing in of some productive wells in the amazingly prolific Santa Fe Springs field starting in 1922.
Yet, Julian was the subject of local, state, and federal investigations ranging from selling stock without a permit to non-payment of income taxes. To boot, he was the target of a gunman who sprayed Julian’s home one evening and was knocked to the floor in a restaurant fight with comedic film legend Charles Chaplin.
After it became clear that there were financial problems in the “Julian Pete” company, a reorganization was effected at the end of 1924 that led to the sale of his interests in the firm to New York oil company owner Sheridan C. Lewis and the replacement of most directors by men from outside the area. Though Julian maintained a public role, that changed with his resignation from the board in early 1925.
Julian then turned to another project which he claimed would net millions of dollars: a lead mine in the appropriately named Leadfield, California, situated in the mountains alone the border with Nevada north of Death Valley. Julian’s Western Lead Mines Company, actually formed in mid-1925 as a Nevada corporation, but taken over by him and his associates, was listed on the Los Angeles Stock Exchange early the following year.
Among his partners was vice-president Jake Berger, who was brought into the Julian Petroleum Company in 1924, and J.H. Roth, another Julian associate, as a director, joining John Salsberry. By early February 1926, Julian was advertising his latest “baby” with all the verve, vim, and vigor he’d employed with his oil projects at “Julian Pete.”
Predictably, he talked about the “hidden treasure” of his claims, the $100-300 million he expected to draw from it, and the urgent need for investors to “mail me your check for the amount you wish to shoot” in stock. He added, however, purported positive analyses from eight mining experts, one of whom supposedly told the irrepressible promoter that Julian “would be dead and buried for fifty years” and the mine would still issue forth millions of dollars of product.
Within just several weeks, however, trouble was again brewing for Julian, who sued the state corporation commissioner and his assistant, as well as Los Angeles Times publisher Harry Chandler and members of the paper’s editorial and reporting staff for conspiring to deflate Western Lead’s stock value. This was because corporation commissioner Edward Daugherty called upon twenty Los Angeles stockbrokers to answer questions about the Western Lead project.
In April, the corporation commission, continuing its investigation into the company’s practices, issued a subpoena, not unlike what was done with “Julian Pete” a couple of years before, requiring Roth, as company secretary, to produce Western Lead’s books. Shortly afterward, Julian’s suit against the commission and the Times was dismissed after the defendants filed a demurrer and the judge stated that he found his arguments “unintelligble.” An amended complaint was subsequently denied.
By the end of the month, Julian refused to turn over the books requested by the commission and the state mineralogist and his assistant said no more than $150,000 was needed to determine the potential of the Western Lead mine. Moreover, a purported expert witness hired by Julian turned out to have been convicted of mining fraud in Oregon in 1904.
The corporation commission then issued a determination, after its investigation, that Western Lead Mines Company stock was to be banned. The entity wrote to stock brokers informing them that the sale of these instruments “would be unfair, unjust and inequitable to the purchasers thereof.”
In late September, Julian was sued by two men who claimed he committed fraud in mine dealings. One, J.H. Van was convicted of his own questionable business dealings, and stated that Julian illegally broke an oral arrangement on a commission for the acquisition of mine property in western Arizona near the California border. The other case was filed by John Salsberry, a Western Lead Mines director, who alleged that Julian converted some of Salsberry’s stock for his own use and failed to deliver the rest of the certificates or pay him its value. In this latter matter, Julian was ordered to pay Salsberry the value of the stock, but defaulted.
Undaunted, Julian merged, early in August 1926, several of his mining properties, including the Leadfield one that was handled previously by Western Lead Mines, into a District of Columbia chartered company, Julian Merger Mines, Inc. Relying on his familiar tactic of aggressive, folksy marketing, Julian sold almost 1.3 million of nearly 7 million issued shares of stock.
Once again, however, he confronted his bitter enemy in the state corporation commission, which asserted that, under the state securities act, Julian could not sell stock in California without the required permit. Julian’s argument, which had no legal merit, was that the state could not regulate his stock sales because his company was chartered in the District of Columbia.
He was ordered to cease and desist in the sale of Julian Merger Mines stock in mid-October and the matter went to court in hearings that lasted into early 1927. H.B. Flesher, a director of the firm, was arrested for the sale of stock. When the corporation commissioner approached Los Angeles County District Attorney Asa Keyes about prosecuting Julian for criminal conduct, the latter demurred claiming that the Flesher case was still in the court system. Keyes, it will be remembered, was actively supported by Julian in his 1924 campaign for that office.
Ever seeking a way out of current difficulties, Julian formed, in February 1927, a new mining venture called the New Monte Cristo Mining Company, that mine being the subject of the suit by J.H. Van the prior fall. He intended to issue 10 million shares, but was careful to note in a letter to stockholders that, while none was to be sold in California for obvious reasons,
inasmuch as my office has had many inquiries during the past week as to where the stock can be purchased, [I] want to tip off to anyone desirous of purchasing the security that it is possible to obtain a limited amount of shares on the street or from the different brokerage houses of the city at prices ranging from 60 to 70 cents a share.
This old habit of his for selling stock in new ventures that all, for basically the same reasons, went by the wayside finally led to the culmination of a massive legal brouhaha that included the fate of “Julian Pete” under Sheridan C. Lewis.
At the end of June 1926, Lewis, who’d shepherded Julian Petroleum from the merger of his firm and Julian in late 1924, arranged another combination; this time with Marine Oil Company. There was to be a name change to reflect the origins of Marine back east: California and Eastern Oil Company.
Suddenly, in early May 1927, the Times reported that,
one of the greatest financial furors in the history of Los Angeles was created yesterday when State Corporation Commissioner Friedlander revoked the permits of the Julian Petroleum Corporation and the California Eastern Petroleum Company following the action of the board of governors of the Los Angeles Stock Exchange suspending trading in the stock because of an asserted overissue.
Moreover, Friedlander announced that an investigation into the finances of California Eastern was to be launched and a county grand jury investigation or a complaint to the district attorney were also discussed as possible. This came just as California Eastern was on the verge of announcing a reorganization, perhaps to forestall the inevitable from the commission.
In a statement, Julian asserted that he’d had no involvement in his namesake corporation since 28 December 1924 and “declared he will tell ‘a few interesting facts’ to the general public on the radio.” Lewis, meanwhile, issued his own communique claiming he would move forward with the reorganization of California Eastern with assistance from some of the best business minds in Los Angeles. Additionally, the beleaguered president pledged to put his personal holdings and funds in a trust as a sign of his desire to protect stockholders while the firm underwent “a complete audit and check-up.”
Tomorrow we move to the next phase of this dramatic story!