United States v. E. C. Knight

During the business boom of the early 1900s, Samuel Insull forged a corporate empire of utility companies. At the height of his utility reign, his companies operated in 39 of the 48 states. To make the empire work, one of his electric companies would sell properties to another Insull company at a profit, with the second company then selling to a third.

On 2 October 1934, Insull and 15 others were charged through Utility Securities Company with fraudulently scheming to induce investors nationwide to buy the common stock of Corporation Securities Company at inflated prices. The Insull-controlled companies were also charged with maintaining a fictitious market for the common stock, thus misleading prospective investors as to its value. To carry out the scheme, the defendants had used the mail to send circulars to those they intended to defraud. On 24 November 1934, Insull and the others were found not guilty.

The revelations of the trial produced immediate legislation, such as the Federal Securities and Exchange Act, to regulate the issuance of securities, control stock exchanges, and protect the unwary from holding companies. The trial provides insight into a time when a stock manipulator could build a pyramid of commercial wealth, making as much as a million dollars a week, at the expense of thousands of small investors doomed innocently to ruin.