Ponzi schemes came into vogue in the 1920s, with a Cedar Rapids cigar store owner in the middle of a big one.
In a Ponzi scheme, people invest in a business and immediately begin seeing big returns on their investment. But there is no business. The big returns are coming from the money other people, also seeking big returns, are investing in the mythical venture. It works as long as new money keeps coming in and as long as investors don’t seek to take all their money out.
This local scheme involved Cedar Rapids tobacco shop owner George Earl Huckins and his father, Elmer S. Huckins, of Hancock, Wis.
The Huckins’ cigar store was at 205 First Ave. East. The store sold cigarettes, cigars, accessories and boxed candies.
George happened upon an ad in a New York paper offering 26 percent interest on cash investments. He took a gamble that seemed to pay off. He soon had his father investing as well. Over the next three years, both were making serious money.
They began seeking other people to invest in the cigar “seconds” business, promising a 26 percent return.
With the money rolling in, George invested in a local baseball team, the Cedar Rapids Baseball Corp., in 1929.
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Baseball executive William Speas invested $15,000 — about $225,000 in today’s dollars — in the cigar “seconds” business. Charles Negus, Huckins’ partner in the First Avenue cigar store, invested $45,000 to $70,000, reporters were told, though those amounts could not be corroborated.
Then the stock market collapsed in October 1929. Nervous investors started to demand their money back. The Huckinses were expected to pay dividends Dec. 6. None came, and George and Elmer disappeared.
The first criminal charge was filed against George on Dec. 17, 1929. Four investors filed lawsuits seeking to reclaim $73,750.
By Dec. 19, the cigar store was in receivership, and the Huckinses were wanted for obtaining money under false pretenses.
The Huckinses hired noted criminal lawyer W.J. Barngrover. The younger Huckins paid his legal fees by transferring his stake in the baseball club to Barngrover.
Barngrover was the only person outside the family who knew exactly how the financial scheme worked, but the scope of its victims quickly became apparent: They lived in at least four states — California, Wisconsin, Iowa and Colorado.
Early on, the Huckinses dodged a charge by postal inspectors that they had used the mails to defraud when a prosecutor couldn’t prove the Huckinses were not in the cigar business.
But their legal troubles were far from over.
During one of the court proceedings, witnesses for the state “revealed a mass of evidence concerning the entire history of the Huckins’ scheme,” The Gazette reported.
Testimony indicated the “mysterious bonanza” had begun about five years before, “when George Huckins was driving a delivery wagon for a local merchant, and that an investment of $150 started the speculator in a business that attracted several millions of dollars.”
As the scheme progressed, investors were offered 52 percent and 26 percent dividends on their money. Once, a dividend of 104 percent was proffered in hopes of drawing in a new investor.
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“The Huckinses were declared to have advised prospective investors to mortgage or sell their homes in order to invest, representing their business as a wholesale cigar business that handled large surpluses of ‘seconds,’ which the manufacturers had on their hands,” The Gazette reported.
In a surprise move, on Jan. 7, 1930, Linn County Attorney Carl Hendrickson submitted his case against the Huckinses to a Linn County grand jury.
The Gazette reported that witnesses who entered the grand jury room — which met behind closed doors — were Negus, Speas and Emil “Dutch” Levsen of Springville, a former big league pitcher, all of them investors in the cigar “seconds” business.
Also testifying: Verne Marshall, managing editor of The Gazette, and Earl Coughlin, the newspaper’s sports editor. They both told the grand jury they’d heard George Huckins say he was not in the wholesale cigar business at all.
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