All these various properties were either owned or controlled by Scherer, Hunn, Greenbaum &Beck and had been acquired with the use of the same original capital in various entirely legal ways, which at the present moment are irrelevant. The firm was a strictly honorable business house, from both their own point of view and that of the Street. Everything they did was with and by the advice of counsel. Yet not one of these active-minded gentlemen, including Mr. Greenbaum, the dolichocephalous Scherer and the acephalous Hunn, had ever done a stroke of productive work or contributed anything toward the common weal. In fact, distress to somebody in some form, and usually to a large number of persons, inevitably followed whatever deal they undertook, since their business was speculating in mining properties and unloading the bad ones upon an unsuspecting public which Scherer, Hunn, Greenbaum &Beck had permitted to deceive itself.
Thus, when Greenbaum called upon Mr. Elderberry for advice, it savored strongly of Koko's consulting Pooh-Bah and was sometimes almost as confusing, for just as Pooh-Bah on these occasions was won't to reply, “Certainly. In which of my capacities? As First Lord of the Treasury, Lord Chamberlain, Attorney-General, Chancellor of the Exchequer, Privy Purse or Private Secretary?” so the financial and corporate Elderberry might equally well ask: “Exactly. But are you seeking my advice as secretary of Horse's Neck, of Holy Jo, of Cowhide Number Five, or as vice-president of Hooligan Gulch and Red Water, treasurer of Amphalula or president of Blimp Consolidated?”
Just now it was, of course, obvious that he was addressing the company in his capacity of secretary of Horse's Neck.
“It goes without saying, gentlemen, that this property is pretty nearly down and out. You will recall that most of the insiders sold out on the tail of the Goldfield Boom and waited for the market to sag until we could buy in again. The mines are full of water, work was abandoned over four years ago, and the property is practically defunct. The original capitalization was ten million shares at one dollar a share. We own or control at least four million shares, for which we paid ten to fifteen cents, while we had sold our original holdings for one dollar sixty to one dollar ninety-five a share. While Horse's Neck represents a handsome profit-in my opinion”-he cleared his throat again as if deprecating the vulgarity of his phrase-“it is good for another whirl.”
“You say it's full of water?” inquired Hunn.
“It will cost about fifty thousand dollars to pump out the mines and a hundred thousand to repair the machinery. Then there's quite an indebtedness-about seventy-five thousand; and tax liens-another fifty. Half a million dollars would put Horse's Neck on the map, and if the Amphalula vein crosses the property it will be worth ten millions. If it doesn't, the chance that it is going to will make a market for the stock.”
Mr. Elderberry swept with a bland inquiring eye the shore of the glassy sea about which his associates were gathered.
“I've been over the ground,” announced Greenbaum “and it's a good gamble. We want Horse's Neck for ourselves-at any rate until we are confident that it's a real lemon. Half a million will do it. I'll personally put up a hundred thousand.”
“How are you going to get rid of the fifty thousand other stockholders?” asked Mr. Beck dubiously “We don't want them trailing along with us.”
“I propose,” answered Mr. Elderberry brightly, in his capacity as chief conspirator for Scherer, Hunn, et al., “that we organize a new corporation to be called 'Lallapaloosa Limited' and capitalize it at a million dollars-one million shares at a dollar a share. Then we will execute a contract between Horse's Neck and Lallapaloosa by the terms of which the old bankrupt corporation will sell to the new corporation all its assets for one hundred and twenty-five thousand dollars. We underwrite the stock of Lallapaloosa at fifty cents a share, thus supplying the new corporation with the funds with which to purchase the properties of the old. In a word we shall get Horse's Neck for a hundred and twenty-five thousand and have three hundred and seventy-five thousand left out of what we subscribe to underwrite the stock to put it on its feet.”
“That's all right,” debated Hunn. “But how about the other stockholders in Horse's Neck that Beck referred to? Where do they come in?”
“I've thought of that,” returned Elderberry. “Of course you can't just squeeze 'em out entirely. That wouldn't be legal. They must be given the chance to subscribe at par to the stock of the new corporation on the basis of one share in the new for every ten they hold in the old; or, as Horse's Neck is a Delaware corporation, to have their old stock appraised under the laws of Delaware. In point of fact, they've all written off their holdings in Horse's Neck as a total loss years ago and you couldn't drag 'em into putting in any new money. They'll simply let it go-forfeit their stock in Horse's Neck and be wiped out because they were not willing to go in and reorganize the property with us.”
“They would if they knew about Amphalula,” remarked Beck.
“Well, they don't!” snapped Greenbaum, “and we're under no obligations to tell 'em. They can infer what they like from the fact that Horse's Neck has been selling for ten cents a share for the last three years.”
“Is that right, Chippingham?” inquired Beck of the attorney who was in attendance. “I mean-is it legal?”
“Perfectly legal,” replied Mr. Chippingham conclusively. “A corporation has a perfect right to dispose of its entire assets for a proper consideration and if any minority stockholder feels aggrieved he can take the matter to the Delaware courts and get his equity assessed. Besides, everybody is treated alike-all the stockholders in Horse's Neck can subscribe pro rata for Lallapaloosa.”
“Only they won't,” grinned Scherer.
“And so, as they are wiped out-the new corporation-that is us-in fact gets their equity, just as much as if they had deeded it to us.”
“That is, we get for nothing about one-half the value of the property,” agreed Elderberry. “Now, I've been over the list and I don't think you'll hear a peep from any of them.”
“He's got 'em on the list-he's got 'em on the list;
And they'll none of 'em be missed-they'll none of 'em be missed!”
hummed Mr. Beck. “It looks good to me! I'll take a hundred thousand.”
“Mr. Chippingham has the papers drawn already,” continued Elderberry. “Of course you've got to give the old stockholders notice, but we can rush the thing through and before anybody wakes up the thing will be done. Then they can holler all they want.”
“Well, I'll come in,” announced Hunn complacently.
“So will I,” echoed Scherer. “And the firm can underwrite the last hundred thousand, and that will clean it up.”
“Is it all right for us to underwrite the stock ourselves at half price?” inquired Mr. Beck. “I mean-is it legal?”
“Sure!” reiterated Mr. Chippingham. “Somebody's got to underwrite it; why not us?”
“Move we adjourn,” said Mr. Greenbaum. “Elderberry-the usual.”
Mr. Elderberry removed from his change pocket five glittering gold pieces and slid one across the glass sheet to each director.
“Second motion. Carried! All up-seventh inning!” smiled Mr. Scherer; and the directors, pocketing their gold pieces, arose.
If, as it has been defined, ethics consists of a “system of principles and rules concerning moral obligations and regard for the rights of others,” it may be interesting to speculate as to whether or not these gentlemen had any or not, and, if so, what it may have been. But in considering this somewhat nice question it should be borne in mind that Messrs. Scherer, Hunn, Greenbaum &Beck were bankers of standing, and were advised by a firm of attorneys of the highest reputation. On its face, and as it was about to be represented to the stockholders of Horse's Neck, the proposition appeared fair enough.