Friday, March 26, 2010

Wilbur B. Foshay's Amazing Story

Wilbur Burton Foshay’s first important business venture was the United Gas Improvement Co. of Hutchinson, Kansas. In 1914, he borrowed two thousand dollars and moved to Minneapolis, where he started another utilities outfit. Then, in 1916, he borrowed another six thousand dollars and launched Wilbur B. Foshay Utility Company. The venture, which started with one employee in a small office in the First National-Soo Line Building in Minneapolis, eventually became Foshay Enterprises.

A federal judge once described Foshay's business legacy as a "Napoleonic adventure" in which Foshay discovered that he could sell stocks and securities of utility companies if people believed the companies were making large current incomes on the invested capitol. Indeed, Foshay's basic strategy was to buy up utility companies, manage them, then sell stock in his utility empire. By 1929, he had thousands of employees and many thousands more of investors.

Foshay Enterprises managed public utilities in twelve states, two Canadian provinces, Mexico, Nicaragua, Honduras and Alaska. It featured additional executive offices in Chicago, New York, and San Francisco. Branch offices were located in Boston, Denver, Des Moines, Saint Paul, Hartford, Los Angeles, San Jose, San Diego, Portland, Seattle, Wichita, Houston and Dallas. The company’s slogan read, "All your money ... All the time ... On Time."

With an estimated wealth of twenty two million dollars, Foshay announced his plan to construct a 447-foot tower (607-feet to the top of the flag pole) modeled after the Washington monument. The thirty-two-floor Foshay Tower cost almost four million dollars to build and was the first skyscraper west of Chicago. Foshay’s personal office and living quarters were on the 27th and 28th floors and the building sported seven hundred and fifty bay windows and 163,000 square feet. Outside, on the roof of the building, sat ten-foot letters that read: FOSHAY.

The Foshay Tower enjoyed a three-day dedication, from August 29 to September 1, 1929. Foshay spent one hundred and sixteen thousand dollars on the grand event (some say $120,000). Secretary of War, James Williams Good, was in attendance, as were seven governors and several foreign diplomats. John Philip Sousa and his band were on hand to play the specially composed “Foshay Tower - Washington Memorial March.” Time magazine would later say that it was “the biggest day in the life of Wilbur Burton Foshay, utilitycoon.”

Within two months, the stock market crashed and (in the words of Time) Foshay’s empire came down with a “thud.” The twenty thousand dollar check to Mr. Sousa bounced and Foshay lost everything, including the tower. Charles Rudolph Walgreen, the chain-druggist, happened to be friends with Foshay and set him up with a job in Salida, Colorado. The former utlitycoon found himself managing a granite works. He continued to keep pictures of the stupendous Tower that used to be his around the office, but he also kept a small sign around that had been in his possession for years. It read: WHY WORRY? IT WON’T LAST. NOTHING DOES.

Within a year, Wilbur Foshay was indicted back in Minnesota on seventeen counts and tried for devising a "scheme" to "defraud and to obtain money and property by means of false and fraudulent pretenses, representations and promises." At the time, it was the state’s most expensive criminal prosecution. Each day, huge crowds gathered in the streets just to get a glimpse of the defendants arriving at the court. It took a lot of "influence" to land an actual seat in the courtroom itself.

The first trial seemed to have been sunk by a hung jury. Then it was discovered that one of the jurors - the lone holdout - had worked for Foshay for ten days. The juror was prosecuted for perjury and convicted, but killed herself and her entire family before serving the six-month sentence. They were all found dead in a car, the victims of carbon monoxide poisoning.

The second trial was conducted in 1932 and lasted nine weeks. It featured eleven volumes of condensed testimony and almost fifteen hundred exhibits. Foshay and associate Henry H. Henley took the witness stand for several days throughout the course of the trial and entertained with insights into their various and crafty methods of bookkeeping. The two admitted, for example, that the companies' "surplus" and "earnings" figures (routinely highlighted in advertising materials) were actually the result of "write-ups" or "appreciations." The duo tried to label their bogus number productions as mere exercises in "creating value," but Henley also admitted company records would "certainly" indicate a deficit if the "write-ups" were eliminated.

On March 22, 1932, Foshay and Henley were convicted on four of the original seventeen counts, fined one thousand dollars and sentenced to fifteen years in Leavenworth prison. But the Houdini's of Bookkeeping were in slight disagreement with the verdict. So, they immediately filed an appeal and their lawyers produced briefs meticulously identifying what they perceived to be about five hundred “errors” in the conduct of the trial. The briefs (if you will) placed particular emphasis on the fact that there was much public interest in the case, so much that a fair trial may not have been possible, at least not in Minnesota. Foshay's lawyers also wondered how well the jurors (most of which were farmers, "unlearned in book") digested the fourteen hundred four hundred and eighty-nine exhibits. At the same time - with some irony - the briefs complained that certain exhibits were excluded by the court. Henley made a "bitter complaint" that his fourteen days on the witness stand were just not enough. The lawyers also complained that they did not get to ask enough questions.

It took the Circuit Court of Appeals for the Eighth Circuit months to consider each of the "countless points" argued in the briefs, but it upheld Foshay's conviction on November 13, 1933. The court agreed that the "brazen, false pretense" of Foshay's advertising was deliberate and intentional. His financial structure was not a "sound and conservative money-making institution" whose gains were "honestly reflected." Sixty million dollars of other people's money were "brought into his control" by "juggling of figures," "pretense," and "prevarication." Foshay and Henley's luck was such that even a dead judge, William S. Kenyon, agreed that the trial was fair and the guilty verdict conformed to the evidence. Kenyon simply had the poor taste to die before the court's opinion was completely written.

Time magazine reported Foshay’s loyal friends back in Salida “didn’t forget him.” They signed petitions and “fought for his release.” And Franklin Roosevelt did in fact commute the sentence to a mere five-year term, on January 24, 1937. As a result, Foshay became immediately eligible for parole. The sentence of Foshay's trial testimony partner, Henley, was also commuted on the same day. Attorney General Homer Cummings told reporters hundred of persons had asked that Foshay’s sentence be reduced.

Wilbur Foshay returned to Salida and was made secretary of the Chamber of Commerce. His salary was a whopping $1,800 a year. But there, he combined his record-keeping and marketing skills to create a nation-wide ad campaign for the city. “Cap” (as he was known) had pictures taken of “local bathing beauties” holding an oversized heart with the message FOLLOW THE HEARTS TO SALIDA written on it. The “leg art,” placed on billboards along the highways, was said to have “gone over fine with the tourists” As if to mock his own conviction for “brazen, false pretense,” Foshay then took up a public relations campaign for Salida’s amazing “fur-bearing trout.”

On June 27, 1947, fifteen years after the original sentence, and ten years after President Roosevelt's commutation, Harry S Truman granted Foshay a full, complete and unconditional pardon. Foshay died in relative obscurity in a Minneapolis nursing home in 1957.

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