Ponzi Publisher

Such unseemly things as rubber checks, accusations of "goldbricking" and confessions in the attorney general's office seemed as far away as the man in the moon when last month a dignified, well-printed and well-written new business weekly called The Financial Observer appeared in Manhattan's downtown section (TIME, Feb. 15). At $10 a year, The Financial Observer booked 1,000 subscribers, among them J. P. Morgan. Newsstand sales went to 9,000 a week. Backer of the Observer was one John Bruce Heath. His respectable and even eminent staff* understood John Bruce Heath was a ; big capitalist from Canada. Actually this compelling little personage with a soft voice and wonderfully persuasive eyes was not John Bruce Heath at all but John Neville. He had been jailed for fraud in Illinois, was wanted by the police of Boston, where he had mulcted various people of some $100,000 to start his financial sheet. Like Boston's Charles Ponzi, he promised huge returns on funds entrusted to him for reinvestment, made enough "dividend" payments from principal to reassure his victims, who then hurried to pile in more & more. But none of these outrageous facts was known to the Observer's subscribers until last week.

The bad news began to break when an $8,500 Observer check for advertising promotion "bounced" from Manhattan's Chemical Bank & Trust Co. Since Mr. Heath had functioned as treasurer of Observer Co., up to this point not a soul had suspected that the paper's books would not bear auditing. Headed by Managing Director Eugene MacLean, onetime Washington Post general manager, the Observer editors promptly asked a court for an assignee to preserve the weekly's remaining assets. Next thing the staff knew, New York State Assistant Attorney General Bernard Abramson was in the office on "an anonymous tip" looking over the ledgers, and shaking his head at what he saw. Neville, who had not been seen for several days, was soon found and arrested. He confessed his peculations to Mr. Abramson, exonerated all his Manhattan and Boston associates. By week's end he was in Boston City Jail, waiting trial for grand larceny, and the year's prize story for crooked publishing was ready for an airing.

The financial flight which was thus arrested in mid-career began late in 1935 when Neville, who first had police trouble in 1926, met grey-haired, respectable Miss Cecilia M. Bainton, a popular music teacher in the Boston schools. It was not long before Neville had Miss Bainton lending her name to The Bainton Associates, Inc., which purported to be an investment trust paying 25% returns monthly. Hypnotic, honest-looking Neville convinced his clients that as a Wall Street wizard he could make this profit possible by trading their money in stocks. Mr. Neville further convinced everyone of his good faith by marrying Miss Bainton's niece.

Oddest thing about the Neville case is that the magazine which he came to Manhattan to found, was seemingly a useful and worthy publication. All it lacked was advertising, which was coming in too slowly to prevent the $100,000 war chest he had made from Bainton Associates from vanishing. The Neville investors had no idea where their money was going. The editors in New York did not know where theirs was coming from. But both parties soon knew when the money gave out. Last week, the Observer editors, having perforce suspended the paper, were hoping to "reorganize," but were none too sanguine about the Observer'?, chances of ever appearing again. When he signed his confession, Neville simply explained that the reason for all his thimblerigging was that he wished to be a big, admired financial publisher, had just taken a short cut to raise the money. Sobbed he: "I wanted that reputation more than anything else in the world."

*Including Author Reginald Wright Kauffman (who resigned after the first issue), News Commentator Raymond Gram Swing, Columbia University's Ralph West Robey, who was economic adviser to Candidate Alf M. Landon.

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