party presenting the enterprise. In many cases of the kind no investigation is possible—the work itself is really investigation— and the backers of such a proposition take chances that their hopes and expectations will be realized. Such an investment, while entirely legitimate, is purely speculative-a "grub-staking" proposition with the odds much against the parties putting up the money and wholly outside the realm of ordinary business.

One of the most remarkable cases in comparatively recent years of such an investment is that of the notorious Keely Motor. It is the more remarkable because at any time a genuine investigation would have disclosed its real nature and in the early stages have saved its backers hundreds of thousands of dollars. No better illustration could be given of the importance of investigation.

Keely was a Philadelphia carpenter and the wages of carpenters then being modest-was in humble circumstances. In the course of private investigations he professed to have discovered a new and mighty force which he had not yet been able to "control." He appealed for funds to enable him to effect this control. The funds were forthcoming and for over thirty years he drained money from a credulous public on this pretext, never showing any practical results and always refusing investigation beyond a certain point.

Keely was quite willing at any time to exhibit the results of his alleged wonderful force or application of force, but any proposal for a real and thorough investigation was met by a direct and positive refusal or was side-tracked by a cloud of meaningless words and phrases seemingly held in reserve for just such occasions.

Keely's Demonstrations

Keely's work was carried on with great secrecy. His laboratory was closed to everyone but himself and an occasional assistant. Demonstrations were given in adjoining apartments by means of tubes leading from the laboratory to the demonstration

rooms. There was alleged to be a close affinity between the mysterious force and musical vibrations. Thus, when Keely struck a tuning fork it set a brass bowl revolving at the rate of 600 revolutions a minute. A violin bow rasped over a tuning fork would start the motor-the "Keely Motor"-to revolving rapidly, the power thereby produced, Keely said, being equal to a pressure of 25,000 pounds to the square inch.

The new force was to revolutionize industry. According to Keely, "by the new system, to perfect which I am devoting all my time and my energies, dynamos will become a thing of the past and electric lighting will be effected by a polar negative disc independent of extraneous power to run it, other than that of sympathetic polar attraction, as simple in its construction, almost, as an ordinary typewriting machine."

Keely's startling demonstrations aroused high expectations. As stated by a writer at the time, "The stockholders had sense enough to see that if Keely's stories were true nothing more could be desired, for the new force must at once supersede coal and all other means of producing power." In other words, one of the mighty forces which undoubtedly pervade the universe was to be harnessed and to be operated for the good of mankind, and this was to be done at no greater cost than that involved in the magic vibration of Keely's tuning fork.

Keely Motor Financing

Despite the nebulous, unproved nature of the whole thing, the Keely Motor Company was organized in 1874 for the exploitation of the discovery, with a capitalization of one million dollars. It was, however, a stock-jobbing operation from the first. Comparatively little cash went to Keely or the company, for the promoters took three-fourths of the stock themselves and promptly unloaded it on the public, realizing large sums therefrom. The capitalization was later increased but the same fraudulent methods characterized its financing; and while the public invested

hundreds of thousands of dollars in Keely Motor stock, comparatively little of it was spent on practical work. In 1875, influenced by Keely's promises and marvelous demonstrations, the stock rose to nearly $600 a share.

The work and the demonstrations went on year after year. As late as 1897 Keely's motor was inspected by the general manager of the Manhattan Elevated Railway, the chief electrical engineer of the Western Union Telegraph Company, and the mechanical engineer of the Metropolitan Street Railway Company. "They were much impressed and declared that the force was a new one." Keely could not, however, "bring it to earth." Meanwhile Mr. Keely's backers, who were business men of the highest personal and financial standing, stood by him through disappointment and repeated postponement, never seeming to tire of pouring their money into the hopper of the mill that Keely's motor was turning. Finally, its running was stopped by the death of the principal actor. Then and not till then did the apparently unsuccessful inventor appear in his true character as a successful imposter. Mechanism in his laboratory supplied by well-known means all the power required for Keely's demonstrations.

Financing a Swindle-The Sea Water Gold Process

I. The Process. The history of the Keely motor merely emphasizes the general proposition that where adequate investigation or publicity is refused the enterprise should be avoided. There is always some way to demonstrate an honest and meritorious enterprise without injury to anyone interested. If this cannot be done, it is a fair assumption that something is wrong with the undertaking.

The truth of this could hardly be better illustrated than by the unhappy experiences of sundry Boston capitalists with the Electrolytic Marine Salts Company, organized something over twenty years ago for the extraction of gold from sea water-so

remarkable an instance of fraudulent financing as to justify some detail. At that time the possibilities of foreign exchange as a simple and effective means of separating the Boston public from its surplus funds were not realized. Therefore, when an adventurer, one Jernagan by name, wished to enrich himself rapidly and without giving an adequate quid pro quo, he was forced to the comparatively clumsy scheme referred to. It is a scientific fact that gold exists in sea water in minute quantities, and Mr. Jernagan claimed to be able to get it out with profit.

Jernagan's alleged process involved the use of quicksilver in open containers over which the sea water passed, the contained gold and silver as it came into contact with the quicksilver forming an amalgam. An electrical current passing through the mercury expedited the amalgamation. To demonstrate the working of this process, Jernagan proceeded to install a "plant" at Niantic, on the shores of Narragansett Bay. Here he built a long wharf out over the water. On this stood a little eight-by-ten house. A small island lay opposite and not very far away. From this island Jernagan and an associate-formerly a diver by trade -laid a wire across so that it was possible for a person clad in a diving suit and guided by this wire to go under the water between the island and the wharf no matter how dark the night.

When this point was reached, Jernagan-who had been a minister before he became a swindler-confided to two of his former parishioners, both men of wealth, the startling news that he could recover gold, and incidentally silver as well, from common sea water. His hearers were interested but incredulous. They were invited to come down to the bay and see for themselves. The invitation was accepted.

2. Investigation of the Process. To avoid any possibility of fraud the two investigators were requested to bring their own quicksilver, and to avoid publicity the test was made at night. The party proceeded to Niantic and, after dusk, made their way to the building on the wharf. Here Jernagan exhibited a lead

lined box open at the top, in which the elusive sea water gold was to be caught. After carefully examining it and satisfying themselves that it was all right, the visitors poured in their quicksilver. The box was then attached by platinum wires to a small battery and let down to the bottom of the bay, there to gather in the precious metals from the rolling waves.

When morning came the watchers were prepared to swear that no mortal had approached the apparatus. Naturally, having only normal eyes and the night being dark, they could not see Jernagan's confederate, attired in his diving costume and guided by his wire, walking along the bottom of the bay till he reached their box, replacing their quicksilver with "salted" quicksilver of his own, and making his way back beneath the huge ice-cakes they heard grinding and crashing against the wharf.

When the box was drawn up it was found that the quicksilver had eaten holes through the lead lining, and much of it had escaped. Taking what remained, the watchers carried it themselves to an assayer, and waited until he tested it and announced that it contained gold to the value of about $4.50. Taking into consideration that much of the amalgam had escaped, this was not a bad result for one night's work with only one small battery and the very crude apparatus employed.

3. Financing the Electrolytic Marine Salts Company. After this "investigation," Jernagan's two friends were thoroughly satisfied of the practicability of his invention, and furnished money for him to carry on his experiments and to perfect his machinery. By the fall of 1897 Jernagan was ready to begin his public campaign, and in November of that year the Electrolytic Marine Salts Company was incorporated with a capital stock of $10,000,000, in shares of $1 each. This stock was by agreement to be sold, the proceeds going 45 per cent to Jernagan, 35 per cent to the company, and the remaining 20 per cent as commissions to the firm through which the sales were made.