by Paul R. Spitzzeri
With suspected con artists Thomas M. Hennessey and Harry D. Hibbs, concoctors of a fantastic scheme that purported to involve the massive mergers of some one-third of all American railroads and involved the securing of investments by a cadre of Angelenos, arrested and jailed on fraud allegations, the Los Angeles County Grand Jury was, according to the Los Angeles Times of 12 May 1925, prepared to launch its investigation of the matter.
The paper updated the amount of money obtained to some $700,000 from 143 persons and, while investigators were, to date, unable to track the funds, Frank E. Willard, a collections agent was served with a subpoena as to whether he had any such information, though, when questioned by the office of District Attorney Asa Keyes, he denied making this claim to investors. An unnamed investor asserted that the agent told him the money was dispersed among five safe deposit boxes and a couple more were to be opened, while retainers and commissions were expected and, when Willard insisted he made no claims, three persons confronted him and refused to say more, hence the call to appear before the jury.
While this drama was unfolding, the promoters, after four days cooling their heels in the hoosegow, were released on bonds provided by bail bonds broker and former police chief, Charles A. Jones, who appeared with their counsel, Paul Schenck. The first civil court action was claimed to have been initiated by James R. Durfee, whose family resided near the Temples in the Misión Vieja, or Old Mission, area south of El Monte. Durfee handed over $10,000, which was placed in Hennessey’s account at Citizens’ Trust and Savings Bank, so his filing was to request an involuntary trust to essentially freeze those funds.
Another wild claim made by Hennessey and Hibbs as part of their “stupendous scheme” was “the proposed purchase of a $5,000,000 right of way through the Malibu ranch, as it was said the former applied for an option to buy a railroad and the right-of-way at water level, but, when ranch owner May K. Rindge, who spent years and a fortune fighting off railroad and highway access to her land, had a broker look into this by contacting the federal Interstate Commerce Commission, it was learned that the schemers were under investigation.
Meanwhile, Hibbs was telling potential investors that former Secretary of the Treasury and Los Angeles resident William Gibbs McAdoo, who was director general of American railroads during the First World War when the federal government assumed control of them, was involved in the merger scheme. An investor related that, in 1920, Hibbs said he was to receive from $2 million to $8 million in commissions, that Hennessey would pocket $11 million and McAdoo “in facilitating the merger through his office,” would collect a million. Specifically, it was added,
He said the deal was just about to be closed, except that some question had come up over income tax, and a considerable sum was necessary to buy revenue stamps to put on the checks for commissions. He told us the money was here in the city and that he had seen it in the Federal Reserve Bank. He said he was temporarily up against it financially and if I would let him have $2200 to assist in buying the stamps he would repay me ten for one—he would give me $22,000.
Moreover, Hibbs claimed the windfall would come in ten days, but, of course, nothing came of it, though, when the unnamed investor threatened action, Hennessey returned the original sum. Hibbs also broadcast the story that his partner was a $20 million heir, but access to those funds were delayed until the rail merger was consummated, while he also claimed the involvement of a General Electric official regarding a supposed electrification plan for the project.
As we saw earlier in this post from census enumeration, in 1920 Hibbs was a Barker Brothers furniture store floor walker and he convinced the rug department head to invest $500, while “others in the store also were said to have been bilked” by their colleague, of whom it was said he was known in the business “as a man of means temporarily in straitened [financial] circumstances.” Hibbs was reported to have told investors that they would receive a referral bonus and also to have claimed that a nephew was an employee of the powerful Guggenheim family of financiers and “who tipped him off to big financial moves in advance of their taking place” and thus “was able to let his friends in on deals to clean up in speculations.”
While D.A. Keyes was in San Francisco investigating claims as part of the enterprise, he told reporters that Hennessey and Hibbs were working together for 13 years and compiled a “sucker list” of nearly 200 rich Angelenos and that one victim went to Keyes to seek their release for fear of the deal collapsing, demonstrating that the pair “certainly had a convincing sales talk.” He added that,
The two suspects are elderly, and there is nothing about them that would merit the attention they received, except the [perceived] plausibility of their story. They appeared to be substantial business men, but particularly there was nothing about them to attract suspicion.
The Los Angeles Record, also of the 12th, reported a delay in the grand jury’s investigation, while citing an investor as keeping the faith, telling a reporter, “I know everything will be all right, and I won’t take any action until I hear from Mr. Hibbs,” adding that if Keyes had just left well enough alone and “given Mr. Hibbs a day or two more,” when the expected payday was nigh, “he could make everything good.” Asked whether it was anticipated that there would be such a return of funds, plus the 10-1 realization of profit, the reply, “with some acerbity,” was “if I want it I will, however, I think it is perfectly safe where it is.”
Defense attorney Paul Schenck set the table for what could be argued in court; namely, that “the money [Hibbs] collected was made as personal loans,” so he told the Record,
The way to collect these debts is by a civil suit, not a criminal prosecution. My clients never pretended that the transaction was anything but a loan, and they stand willing to pay back all loans, on demand.
The charge of grand larceny on which my clients are held won’t hold water for a minute. The complaining witness [Brokaw] got every cent of his money back. He wasn’t robbed. He wasn’t even ‘gypped.’ It’s an outrage to make Mr. Hibbs and Mr. Hennessey appear in court.
An interesting twist in the Malibu right-of-way element was that, because of the purported offer by Hibbs and Hennessey of $5 million for the “water-level route,” even though Rindge’s representative found that it was bogus, the “valuation of the property” to be used for her battles against the county “was not to be abandoned,” while it was claimed that the figure was in line with others used to determine its value while Rindge sought $11 million from the county.
Lastly, the Record cited Deputy District Attorney Leonard W. Hamner, who accompanied his boss, Asa Keyes, to San Francisco to interview Western Pacific Railroad officials about Hennessey and Hibbs and their claims of a merger involving that line. Hamner related that none of the company’s principals knew of any such deal, though he added, “it would be possible, however, for a syndicate of financiers to buy stock in a railroad without the officials knowing about it.” One would think, though, that some type of reporting would reveal such information, including quarterly or annual reports.
While in the northern metropolis, Keyes also made it known that his department was on the lookout for a “Mr. Grant,” said by Hennessey and Hibbs “to be their attorney and to have in his possession the original contract by which they were to receive a commission of $200,000,000 for effecting the combine” of railroads, amounting to an astounding one-third of all the lines in the country. We’ll subsequently see how the Grant name comes into this twisted tale.
The following day’s Times, under the headline of “FEDERAL ACTION NEAR IN BUNKO,” stated that “the United States Postal Department may assume charge of the case in a few days. This was because D.A. office investigators passed on their superiors information, as quoted from Hamner that “one of the victims . . . was first attracted to the giant swindle scheme by letters through the mails” and that this person possessed the envelopes, though not the missives, and was turning those over as exhibits for legal proceedings. The postal department, however, did not take over the matter and it remained with the county’s D.A. office.
In his San Francisco trip with Keyes, Hamner learned that Hennessey and Hibbs told investors that the funds collected were to go to a quartet of Western Pacific board members, but he added that “none of the men . . . are on the executive board, nor does any of the railroad officials know them.” Moreover, it was remarked that “we found that the only thing the Hibbs and Hennessey outfit possesses is a name.”
When the grand jury convened, the opening witness was Interstate Commerce Commission local agent Lawrence B. McCord, who’d been investigating the matter for about a half-year and told the jury of his activities. Another three-dozen or so persons were to testify, including some of the investors who lost most heavily in the “bursting of the great railroad bubble.” As for collections agent Frank E. Willard, said to have told investors he knew where the stashed funds were located if fees and commissions were payable to him, admitted to the jury that he knew nothing about it.
Another witness told of how the promoters took him to a bank to watch bags of money transferred from an armored car and that “those bags contain money pouring in to close the merger.” One investor related that he went on a trip to a very rural area and saw stakes in the ground with the comment made to him that “those are the surveyors’ stakes for our new railroad.” A local oil company executive, however, when pursued for the project, hired an accountant to look into its viability, but Hennessey and Hibbs would not allow any inspection of books or records—if only more investors who handed over their money had done the same!
The 14 May number of the Times discussed how the grand jury was to hear from the long list of witnesses, all who provided funds between $5,000 and $30,000, and including those politicians, former office holders, movie directors and others, though Keyes would not reveal names because of the general reluctance, perhaps out of embarrassment, to help with the prosecution. Moreover, he told the paper, “many . . . have gone into hiding” which hindered his department’s work because of the “unwillingness of reputed wealthy victims to assist the officials.”
Hamner, meanwhile, was dispatched to San Diego to determine the whereabouts of the “Mr. Grant” said to have that important contract, but it was added “the officials are beginning to believe that ‘Mr. Grant’ is as mythical as the merger.” Keyes’ counterpart in San Francisco confirmed the lack of proof of any merger as Hennessey and Hibbs claimed existed to their investors and it was thought there might be victims of the con job in that city, as well. Keyes’ investigators were scouring banks throughout the county on the hunt for missing monies so that they could be attached.
In shorter accounts, the Record discussed the parade of witnesses to testify in the grand jury proceeding, while the Los Angeles Express reported that more arrests were anticipated, with investigators telling the paper that at least two other confederates were eyed. The paper added that the D.A. office was only able to trace under $50,000 of the funds collected, but Keyes told it that he and his staff were “working on a theory that the accused brokers were not alone in the huge financial scheme, and that the trail may yet lead to a ‘higher-up.'” Hamner, however, returned from San Diego empty-handed in the search for the elusive Mr. Grant.
In its edition of the 15th, the Times, in addition to summarizing some of the testimony of a quartet of witnesses who were the first to be interviewed by the grand jury, none of the information of which offered anything new from previous reporting, went into more detail about Hamner’s southern sojourn. It was added that “Fred Grant” was not just holding the purported contract, but it was to whom Hennessey and Hibbs “entrusted most of their funds collected from their clients.” The account continued,
Hibbs and Hennessy had declared that “Grant” was a nephew of U.S. Grant, II, scion of the famous Civil War general [note how his two-term presidency was omitted].
“I interviewed U.S. Grant [actually, the son of the former president and general],” Hamner stated upon his return, “and was told that no such person existed in the Grant family. The only Fred Grant whom U.S. Grant could recall was an uncle who died fifteen years ago.”
Subsequent accounts in the press as the investigation continued covered attempts to track down the collected money, which was deposited in several banks, though withdrawals took place just before Hennessey and Hibbs were arrested, suggesting that they were aware to some degree that they were being observed.
Not a great deal of new information was forthcoming, though another bizarre component of the audacious scheme, revealed to the grand jury and reported by the Record of the 22nd, was that Hennessey and Hibbs had, in 1923, a purported certified check drawn out for $1 billion to ostentatiously display at a “jubilee meeting” for investors. Hibbs explained to the investors that Hennessey “was going east to cash it in a few days,” but, of course, this was delayed because of the August death of President Warren Harding, the check could not be cashed until a new president took office, but the transaction was never consummated.
Film director Monta Bell testified that the schemers told him that auto king Henry Ford had $15 million invested in the merger plan and that he would use some of his 10-1 profits to invest in the movie industry. When Hibbs said, “I can direct the allocation of this fund. How would you like a million or so to play with?” the director replied “fine, let’s go to the bank now,” but Hibbs proposed the 10-1 loan asking for $10,000. To this Bell answered, “nothing doing, Santa Claus is dead.” Further, Hibbs asked Bell to introduce him to film legend Charles Chaplin as a potential investor, “but with little or no success.”
In its 25 May edition, the Record reported that Hennessey’s alleged paramour, Bertha Ross, was to be called to testify to the jury as she was ‘believed to be in complete possession of all the facts” of the scheme. It may be that the gifts showered on her by her assumed lover, including an apartment house, car, $2,000 in cash, and $3,500 worth of jewelry, came from the investors’ “loans.” The paper remarked that an unnamed movie star acquaintance of Ross was expected to testify, though nothing was located about what transpired other than Ross could not be located when she was called to appear.
Three days later, with the investigation concluded, the Record informed readers,
One of the largest indictments ever drawn up here by the grand jury, containing 46 counts of grand larceny by trick and device and obtaining money under false pretences, was scheduled to be returned today in the case of Thomas Hennessy and Harry Hibbs, renowned “10 to 1” railway “merger” brokers.
This is a good place to stop for a return tomorrow to continue the tale, so check back in with us then!