First Stock Scandal

The U. S. aviation industry's first stockjobbing scandal broke open last week. Whenever public imagination fixes on an industry, as on Oil a decade ago and Gold before that, crooks easily sell stock of little or no value to everready gulls.

The company hit last week was Airvia Transportation Co., which is just getting its wing-hold commercially. U. S. postal inspectors swooped into its Manhattan offices, ordered officers and employes to bring their account books to a Federal grand jury for study. Other inspectors did the same at Coastal Airways office, because of that line's pending merger with Airvia. Still other inspectors visited Hadley & Co., investment security sellers. Federal warrants were issued for the arrest of one Austin Howard Montgomery (alias Arthur Montgomery, alias Monte Griffo, onetime convict) and Gerald Tiffany (alias Harry Taylor). Trans-Atlantic Flyers Roger Quincy Williams and Lewis A. Yancey brought about the investigations and warrants.

According to the flyers, Promoter Montgomery, reputedly head of Hadley & Co., made them president and vice president respectively of Airvia and financed their Rome flight for the use of their names. They were each to get $300 a month, 1,000 shares of Airvia before the flight, 4,000 more shares after the flight. To protect the values of their stock they stipulated that Promoter Montgomery sell no Airvia stock publicly for two years. While they were in Europe, Promoter Montgomery began to reave out stock at $8 to $12 a share. For that reason, Messrs. Williams and Yancey say, they resigned from Airvia.

That might have terminated as an internal company dispute. But Promoter Montgomery mailed Airvia prospectuses which intimated that the company would earn $2,430,000 per year. In its first three weeks of operation it earned only $8,000. The flyers told the postal authorities, disclosed Promoter Montgomery's prison record (five years at Atlanta for using the mails to defraud).

It was not the only scandal in which Austin Howard Montgomery and his Hadley & Co. were currently involved. They got Clarence Chamberlin, another trans-Atlantic flyer, to be president of Crescent Aircraft Corp., organized last year to manufacture commercial airplanes. They paid $4 for Crescent stock, tried to sell it for $12 to $16 a share with the intimation that Crescent planes had been ordered for passenger service between New York and Newfoundland, Bermuda and London. Clarence Chamberlin, a gull for no long time,* was vexed. He asked and received a temporary injunction against Hadley & Co. selling Crescent stock. Chamberlin also had newspapers print his public warning against buying Crescent stocks. This scandal, however, did not create official investigation. Airvia-Coastal. The postal inspectors last week made a just distinction between promoting a company and operating it. Airvia Transportation Co. itself is not under criticism, nor is Coastal Airways.

Airvia operates Savoia-Marchetti seaplanes between New York and Boston. Its new president is Capt. James Aquila ("Jim Eagle") Stader, soldier-engineer. A weather-beaten man who keeps his double-breasted coat buttoned military fashion, he is an able executive on whom generals depended in the War, whom President Coolidge used in Silesia, whom President Hoover as Secretary of Commerce used in that Department. President Stader knows scores of regular Army officers, especially in the Coast Guard service, friends who might aid him in running Air via and its forthcoming merger with Ezio De Angelis' Coastal Airways. Major General James Guthrie Harbord, president of Radio Corp. of America, happy that another old Army officer had got himself an important civilian job, telegraphed his friend "Jim" congratulations.

The densest air passenger traffic along the U. S. east coast is between Boston and New York. Along the west coast it is densest between Los Angeles and San Francisco-Oakland. Between Boston and New York, Colonial Airways with land planes last week carried 180 passengers. Airvia with seaplanes also approached the 200 mark.* Competition between the two transport companies will soon extend along Colonial's New York-Albany-Montreal route. Coastal Airways now operates between New York and Albany. When, next month, it merges with Airvia as Airvia-Coastal Transportation Corp. the line will go to Montreal. At present Coastal is using Fairchild planes equipped with pontoons. That is a business anomaly. Fairchild is a subsidiary of Graham Bethune Grosvenor's Aviation Corp., and Aviation Corp. owns competitive Colonial. Airvia-Coastal will replace its Fairchilds with Savoia-Marchettis, made by American Aeronautical Corp., an allied concern.

Another of Airvia-Coastal's projects is to run planes in the winter, when the New York-Boston business falls off, down to Palm Beach, Havana, Nassau, Bimini. There it will run into political and business opposition. The British Atlantic Airways is pulling political ropes to keep U. S. aviation companies out of British possessions. To obstruct Pan-American Airways, which operates between Nassau and Miami and among the West Indies, is the Atlantic Airway's chief aim. New York, Rio & Buenos Aires, which will touch British possessions near South America, is another Atlantic Airway's butt. Pan-America's heaviest winter traffic is between Miami and Havana. New York, Rio & Buenos Aires proposes to run from Tampa to Havana. Southern Skylines last week arranged with the Seaboard Airline rail-road for a rail-air route from New York to Miami. Airvia-Coastal will use Savoia-Marchettis down the Coast. This complicated situation about Florida and the West Indies means a dog fight for business next winter. The executives of the various companies, however, love fights, and the fun will attract pay-passengers, to each concern's profit.

*In the Tattler, New York smartchart, he signed an article which included his appreciation for the "unlimited cooperation" given the Crescent Company by Hadley & Co.

*Colonial, progressive, last week, began its own air express service between Boston and New York. At one city a Western Union messenger boy will take a customer's parcel to a Colonial plane. At the other city another W. U. boy will deliver the parcel to the addressee.