by Paul R. Spitzzeri
In a society always primed by get-rich-quick schemes of seemingly infinite variety and especially during economic boom times, the accounts of Ponzi schemes, bunko scams, confidence trickery and others are legion. Many of these concern lotteries, real estate, stocks and others which promise “too good to be true” returns on investment, but one endeavor in Los Angeles in spring 1925 stood out from the general run of such projects
Thomas M. Hennessey and Harry D. Hibbs embarked on a purported railroad merger plan in which they sought “loans” from Los Angeles residents and collected from $300,000 to a half-million and then were arrested and charged for the asserted swindle. The highlighted artifact from the Museum’s collection for this post is a press photo with dates of 11 and 19 May 1925 on it showing the two gents after they were nabbed with the caption on the reverse reading:
Accused of being “get-rich-quick-Wallingfords,” Harry D. Hibbs, left, and Thomas Hennessy [sic], right, are being held in the Los Angeles jail after alleged fleecing of hubdreds [sic] of victims in California or more than $500,000 within four months time. Police are now searching for a “mystery woman” whose picture was found in Hibbs’ possession. It is believed she could shed considerable light on the alleged swindle. According to District Attorney Asa Keyes the “Ponsi [sic] pair” convinced their clients they were going to merge several middle western railroad lines, involving $6,000,000, and that each dollar invested would pay 15 to 1.
As we’ll see, some of these details evolved differently, but the allegation substantially was correct, though the dollar amount was missing a few zeros. The reference at the beginning was to Get-Rich-Quick Wallingford, a 1910 play by George M. Cohan and adapted into a 1921 film and which concerned a conman operating in a small Iowa town (though a happy ending, including marriage, was his fortunate lot). In this case, however, the allusions were only very general.
Hennessey was approaching 50 years of age, hailed from New York state and settled in Los Angeles around 1914 to work as a real estate broker, though little could be found about him prior to the early Twenties, when he and his wife Edna resided in Hollywood and then at . The first significant mention of him in the early press was in late July 1924 involving a marital spat, in which it was alleged that Hennessey took up with Bertha Ross, a married woman and lavished her with gifts. Edna then filed for divorce and claimed his estate could be valued up to $12 million, an immense sum in those days.
Then, the cuckolded husband, Albert G. Ross, filed a “heart balm” suit against Hennessey for alienation of affection and sought $100,000 in damages, claiming that within just a few months of his 1922 marriage to Bertha, she took up with Hennessey, who showered her with jewelry, a car, a $2,000 piano and more. In short order, however, the divorce suit was dismissed and, in answer to the Ross suit, Hennessey asserted that Ross unduly influenced Edna to advance mutual financial interests in going after him. It was also stated that Bertha filed for divorce in the spring on the grounds of desertion and non-support.
The Hennesseys were briefly reunited, but, in mid-November, a second divorce suit was filed, as Edna claimed that her husband was drunk most of the two months after the summer suits and threatened to shoot her. Yet, as 1925 dawned, nothing seemed to have moved on the matter and it was then that Hennessey and Hibbs began work on their railroad merger plan.
Hibbs was about 60 at that time and the Ohio native, who was recorded in the 1920 census as a floor walker for the Barker Brothers furniture store and was married with a daughter, also did not appear much in the papers prior to the scheme. Then came news of the arrest of the two men, with the Los Angeles Times of 8 May running a photo of the pair above a headline of “DISCLOSE $300,000 BUNKO.”
The men were nabbed by a District Attorney’s office investigator in what was said to be “a bunko game” and with it added,
Hennessey and Hibbs represented that they were brokers of an organization known as the Western Pacific Corporation of Delaware. They also asserted . . . that they had a contract with a group of large railways of the United States to effect a merger of the same . . .
Hennessey and Hibbs told the prospective investors, it is said, that the deal involved $6,000,000,000 and that they were to receive a commission of 3 1/2 per cent, or approximately $200,000,000 for their part in bringing about the merger. They are asserted to have stated that the deal had been approved by the Interstate Commerce Commission and that the reason they wanted people here to invest was that they needed money to carry out their part.
The return promised was 10 to 1 (not 15 to 1 as in the caption), an incredible promise, while it was noted that all the documentation provided to those who handed them funds was a simple receipt. Hibbs was arrested at an office in a building at Spring and 8th streets (across from two edifices recently completed by Homestead owner Walter P. Temple and associates), while Hennessey was picked up at his business partner’s residence.
When investigators arrived at the downtown headquarters, the Times continued,
There was a big office force present and everybody seemed to be busy, including a half-dozen girls and eight or ten salesmen and clerks, but the “syndicate” had no books and the desks were found to be empty, the investigators said.
Hennessey, when taken to the District Attorney’s office, varied demands to see his lawyer with reiterations that the deal is “perfectly legitimate.”
“It will be terrible,” he said, “if I have to show my contract. If that is disclosed the deal will be off.”
While Hibbs told officials of the $200 million commission, Hennessey stated that the amounts would be $11 million each and it was mentioned that the pair claimed the purported railroad mergers were to have taken effect in 1913, but the outbreak of World War I halted the movement, which was only recently restarted.
The Los Angeles Record, under the heading of “PROMINENT L.A. MEN VICTIMIZED,” stated that “scores of men and women prominent in many walks of life in Hollywood and Los Angeles” were the victims of the “alleged master bunko men,” with D.A. Keyes telling the press that the half-million dollar figure was a conservative estimate. A “sucker list” found on Hibbs when he was taken in had the names of Los Angeles County Supervisor Frank E. Woodley, who handed over $31,000; car dealer Earle C. Anthony, who ponied up two grand; movie director John G. Wray put in $5,000; and an uncashed $10,000 check from former District Attorney and Congress member James McLachlan was found in the office. It was also learned that Hennessey and Hibbs formed their enterprise by at least 1921.
A former police judge and current lawyer, Ray Chesebro, was said to have invested $5,500 and, while he denied this, also told the paper “I know both men well and have the utmost faith in them. I know that in the end everyone will know these men are on the level.” A Barker Brothers department manager (and past Hibbs co-worker) asserted “I believe, though, that everything will come out all right, as I have confidence in these men.” McLachlan, however, “wept for joy” when told his check was recovered, saying “it was the last cent I could borrow.”
The Record also reported that dozens of callers to Keyes’ office begged him to keep their names private, but he refused citing public records laws, though it was notable to see phone numbers published. Meanwhile, the paper expressed incredulity that the representations made by Hennessey and Hibbs as to the massive scale of the purported rail mergers were so readily believed by prominent people, as well as more common folk, but “what is even more remarkable, [is that] Hibbs and Hennessy [this spelling was often used] continue to insist that their ‘proposition’ is legitimate, and they will repay their investors ten for one, if they are allowed to carry out their ‘contract’ with eastern financiers. The paper also recorded that, when investigators entered the office, a woman was handing Hibbs a $5,000 check.
The following day’s edition of the paper reported that the “alleged master swindlers” pled not guilty to charges of fraud in a justice court, with a hearing set for the 19th before another justice of the peace, while bond was set at $50,000 for Hibbs and double that for Hennessey (because the latter was considered more a flight risk, due to his marriage troubles, while Hibbs had his wife, daughter and son-in-law in his household). It was added that their claims of a legitimate endeavor were contradicted when a telegram was received from a New York City bank, denying Hennessey’s insistence that he was an administrator of a $20 million estate that was of an uncle and former Big Apple mayor. Instead, it said that Hennessey opened a $14,000 account there a few months prior.
The accused swindler, moreover, told of how he inherited a $3 million estate from his father, also in New York state, but Keyes inquired and heard from a police chief, listed by Hennessey as a reference, in Schenectady, who said there was no such person or windfall. The D.A. and a deputy, meanwhile, traveled to San Francisco to look into another assertion of Hennessey that he was in control of a railroad syndicate, which also turned out, of course, to be a falsehood. Supervisor Woodley, it was noted, filed a suit against the two promoters with the action said to “effectively tie up their bank accounts.”
Moreover, the county official told that, when it came to his “unwise investment,” he “knew Hibbs for a number of years, and had faith in him. I took his word that Hennessey was all right. I had confidence that the railroad merger he represented was financially sound, and on this basis I called the attention of my friends to this matter.” Why a high-ranking figure like Woodley, however, would simply accept the tales spun by the two confidence men without seeking any type of corroboration or verification is, of course, an obvious issue.
Yet, on 9 August 1923, the supervisor was recorded in Hibbs’ notebook as receiving a $5,000 “bonus,” based on that amount paid over by two men whose transaction is accompanied by the supervisor’s surname. Not only that, but another notation showed that the usual 10-1 ratio of return on investment was raised for Woodley to 15-1. In fact, an October 1923 entry showed a $10,000 bonus equal to another person’s investment/loan, while another note in the book indicated that Chesebro was promised a 20-1 return on $500 presented. When car dealer Anthony was called, he denied investing any money, but when asked if his name was used to attract others, “he grunted non-committally, and hung up.”
A retired business figure, John Brokaw, filed the affidavit for the initial complaint against Hennessey and Hibbs and his $30,000 payment, with about 4% interest, was returned, but he observed that “of course, they gave me a little ‘dicky-bird’ which purported to absolve them from responsibility in case of loss.” He added that the schemers said “they were raising money to be used in influencing high officials in Washington, to sanction the merger of railroads,” which sounds a good deal like bribery.
Yet, at least two others were supporters of Hennessey and Hibbs, with one saying “I knew it was a gamble when I did it” and that “anything at 10 to 1 is gamble,” while the other insisted “investors always have received their money when they asked for it” so “I’m not worrying a bit.” Another man handed over $2,000 in early February 1923, but the funds were returned eight months later, according to Hibbs’ notebook. While Hennessey’s domestic troubles were played up, it was added that Hibbs carried a folded photo in his wallet of “a remarkably beautiful woman” so authorities were on the lookout for her, in case she had any useful information.
The Record also informed readers of a prospectus prepared by the brokers for potential clients and which claimed that General Electric, United States Steel and trusts for the tobacco and farm tractor industries requested them to work on financing for a cereal company and that the duo were purportedly able to raise $50 million for the project. When the Western Pacific Railroad was offered for sale, the document continued, the cereal firm funds were to be utilized for that purpose, so $17.5 million was expended for that and a second line. This led to a scheme to acquire all southwestern bankrupted railroads and it was claimed that a meeting at the Hotel Green in Pasadena generated a staggering $808 million.
With this gargantuan sum, it was averred, the Western Pacific Corporation took on ownership of a half-dozen names railroads and others “making a total of about one-third of the mileage in the United States.” The prospectus also broadcast that Hennessey inherited millions from his parents and uncle and was retired from business except to pursue this project, while Hibbs was promoted as a “confidential man for some of the heaviest financial interests in New York for a number of years, being associated with the Carnegie Trust company.”
Other lies concerned the claim that the pre-World War I merger deal noted above was preempted by government control of railroads during the conflict, though it was asserted that Hennessey was permitted by federal authorities “to remain in control of transferring and ‘culminating’ the merger.” Another strange aspect of the scheme was the promise that “exemption from the income tax is promised the investor” and that “exemption banks [stood] ready to distribute to investors when reports of their contributions are turned in by Hibbs.”
Photographs from Hibbs’ memorandum book were published by the Record showing Supervisor Woodley’s role as a “steerer” receiving bonuses for referrals of other investors, with the word “agent” used. The paper appended a headline of “What Do You Make of This, Watson?” an allusion to the famous fictional detective Sherlock Holmes. Meanwhile, this seems a good time to halt and return tomorrow with part two, so check back for that.
After another century of widespread fraud and deception, it is hardly surprising to learn that some prominent figures were among the victims of scams a hundred years ago, as noted in this post.
I once read an article ranking the professions most vulnerable to scams, and professors and police officers were near the top of the list. I believe that highly educated individuals and those involved in law enforcement can sometimes be overly confident, assuming that no one would dare deceive them.
One of my neighbors received a notice claiming that she had won a large prize and was required to pay several thousand dollars in taxes in advance. She consulted her niece, a top university graduate with a degree in accounting. After carefully reviewing the matter, the niece told her aunt that, according to IRS regulations, the amount requested appeared legitimate and should be paid in advance. Trusting that advice, she made the payment and regretted it a few weeks later when she discovered it was a scam.
There are many people who may or may not be intellectual, but apparently they still need to be more intelligent.