Samuel Insull Trial: 1934

Eighty witnesses identified books and records. Another 50 had been solicited and bought stock. As countless company names became blurs in jurors' minds, the big picture grew clear: The government was out to prove that Insull's success had been gained—repeatedly—by having one Insull electric company sell properties to another Insull electric company at a splendid profit, with the second company then selling to a third. The holding companies—the securities of which were proclaimed by a Halsey, Stuart salesman as "the jewels of the Insull empire"—and the investment companies had been created to expand the bubble … until the Depression deflated everything.

The specific charge against Samuel Insull and his cronies was that the circular mailed by Halsey, Stuart & Company inviting subscribers to buy stock in Corporation Securities was false and deceptive: The company, it said, would open with $80 million in assets, whereas it actually had only a bank loan of $3.5 million and 304,000 shares of Insull Utility Investments for which it had paid $7 million. And the circular failed to state that most of the stock the company intended to buy was common stock paying only a stock dividend, not cash.

Chief defense lawyer Floyd E. Thompson, a highly respected former Illinois Supreme Court justice, skillfully brought out his client's English training in business, his success with Thomas Edison and GE, the vast saving in the cost of electricity his "power pool" had generated, and his accumulation of utility companies to assure their continuing control and hold off government ownership.

Insull further testified that divisions of stock were in line with prevailing corporate practice, that stock dividends (rather than cash) were common and represented earnings plowed back to increase equity value. As to the offending circular, Insull said its statement of assets was based on completion of financing, entirely in accordance with market practice.

Next, Insull testified on the "buoyant" optimism of the financial community in March 1930, after the crash, and on how the Corporation Securities Company's portfolio depreciated some $45 million in late 1930, then appreciated $86 million in early 1932, when people thought the Depression was over. He and his associates had done nothing unusual in "supporting the market," he said; even the United States did it for government bonds. He himself had borrowed $5 million to bolster Corporation Securities Company, then borrowed a million from GE to reduce the bank loan. But by April 1932 his holding companies had gone into receivership. To avoid bankruptcy, he had given his creditors everything he had. He now owned no property, had no income, and depended on his son for food and shelter.