Boss shanghaier Sullivan’s mining-stock fraud career

By Finn J.D. John
September 1, 2020

FOR ANYONE INTERESTED in the shanghaiing of sailors on the old Portland waterfront, the name “Larry Sullivan” needs no introduction.

Smooth, polished, well-connected and ruthless, Larry Sullivan was essentially the Boss Tweed of the Portland waterfront from the early 1890s right up to the moment the music stopped. At his heyday he had a hand in pretty much every form of vice in Portland. His shanghaiing activities had sparked international incidents and gotten the Port of Portland blacklisted by British shipping interests. In collaboration with the Grant brothers of Astoria, he’d run all other “crimps” out of town, and the political machine he ran (brokering the services of sailors and vagrants in his boardinghouses as “repeaters” to traipse about town voting dozens of times) had given him what seemed like ironclad political cover.

But in 1904, as the upcoming Lewis and Clark Centennial Exposition drew near, a reforming spirit was in the Portland air. Thousands of visitors were about to come to Portland and see it for the first time, and the city’s underworld was far too much on public display for that to go well if changes were not made.

Larry Sullivan was the Portland underworld, and he had good enough political instincts to know when to hold ’em and when to fold ’em; and when progressive crusader Harry Lane was elected mayor of Portland, Sullivan knew the good times were over. The reputation he’d forged in the go-go years of the late 1890s were about to earn him a very high position on the reformers’ target list.

He made one final attempt to transition into a less vulnerable racket — a play for a monopoly on Portland’s garbage-hauling service. But this got ratted out to the papers, and a great public outcry ensued. Larry decided it was time to leave.

Selling his stake in the Portland Club, his gambling house, to fellow underworld tycoon Nate Solomon and closing the doors on his sailors’ boardinghouse, Larry packed up and headed east, looking for fresh fields of endeavor.

And, in a rip-roaring Nevada mining boomtown called Goldfield, he found what he was looking for.

Still in partnership with the Grant brothers, Sullivan opened a gambling parlor in Goldfield. The town was, of course, awash in money, much of it in the hands of miners and prospectors who had a great deal of trouble hanging onto it even without guys like Sullivan in town. So Sullivan and Grant built a proper gambling palace there — which, if it wasn’t as palatial as the Portland Club had been, was certainly fawncy enough to impress the miners. He named it The Palace, and it did very well indeed.

And it was at The Palace that Larry met one of the most colorful and rascally characters in the history of American con-artistry: George Graham Rice.

GEORGE GRAHAM RICE'S life story is strongly reminiscent of the Warren Zevon song “Mr. Bad Example.” His real name was Simon Herzig, and he was born in 1870 in New York City, the son of a middle-class family; his father was a furrier.

As a young man, he was definitely “fast,” in the parlance of the day — being especially fond of gambling pursuits. His father caught him stealing from the family business and sent him to reform school; it didn’t take, and when he was 25 he was sent up the river for real, to do a four-year stretch at Sing Sing for forging a check drawn on dear old Dad’s accounts.

After his release, he changed his name and got into the newspaper business for a little while. This, as anyone who has ever gotten into the newspaper business at a lower level than “owner” can tell you, was not a career calculated to bring in enough cash to finance the high-roller lifestyle to which Rice aspired. So he quit and returned to New York.

There, in early 1901, with $7.30 in his pocket, he met an old friend who had a red-hot tip on Silver Coin, an underrated horse entered for a race in New Orleans the next day. Rice’s friend added that his friend had good insider information on a number of horses, and suggested that the two of them make a few bucks putting them to good use.

Rice had a better idea. Rather than betting his last $7 on this horse and maybe clearing a $63 profit, Rice spent the money on a newspaper ad: “Bet your last dollar on Silver Coin,” the ad screamed. “He will win at 10 to 1.” Under this headline, the ad went on to urge bettors to subscribe to his horse-racing tip sheet for $5 a copy, and signed it “Maxim & Gay” — a company name he made up on the spot.

Then Rice and his friend sat in a tiny office he’d rented on credit and waited.

Sure enough, Silver Coin won, and suddenly half the betting population of Manhattan was beating a path to his door, eager to pay $5 each.

This enterprise made Rice a ton of money, most of which he promptly blew at the gambling table as fast as it came in the door. But for a couple years, he and his pal enjoyed a real high-roller lifestyle as purveyors of the hottest tipsheet in town.

But, of course, all good things must come to an end, and within three years Maxim & Gay had been shut down by the U.S. Postal Service for mail fraud.

Rice came out of the whole thing with very little to show for it, other than three years’ experience writing advertising copy. But he’d put that experience to good use. By the end of Maxim & Gay's run he was maybe America’s best writer of swindley ad copy.

Following a year or so trying to get rich betting on horses — he ran his poke up over $100,000 and then lost it all — Rice tried to break his gambling habits by moving to San Francisco.

There, he met up with another old friend, and tried going back into the race-track tip business. This time, though, it didn’t work as well. Soon he was busted flat once again.

But meanwhile, Rice had been hearing about the gold and silver mining boom up in Nevada. And so had his partner.

“Rice,” the partner said one day, “come up to Tonopah and be my press agent. We will get hold of a mining property up there, promote a company, and make a barrel of money.”

Why not, Rice thought? It looked to be as good as any other racket just then.

And so, off the two of them went to Tonopah, and subsequently to Goldfield.

Upon arrival, the two of them went into business, and soon the good times were once again on the roll.

BY THE TIME Rice met Larry Sullivan at Sullivan and Grant’s “palace” in Goldfield, he was doing a booming business in Nevada as the owner and copywriter of an advertising agency, working with the local mine owners. He provided a full-service kind of operation — not only placing ads for investors, but also sending out hundreds of fake “human interest” stories about life in the mining camps for East Coast and West Coast newspapers to run. These articles were basically dime-novel narratives of feuds and gunfights and gold strikes and virtuous-maiden-rescuings and all the other wild-West story tropes; and, of course, they prominently featured Rice’s clients in heroic roles. They were eagerly run by newspapers all over the country, and were very popular with readers. (In fact, it was some of these stories, reprinted in the Portland newspapers, that initially attracted Larry Sullivan to Goldfield.)

Naturally, the people who read Rice's breathless Wild West yarns (which were, remember, being presented as actual true stories) came to feel like they knew the mines and the people who ran them. Naturally, they were much more comfortable investing their money in them. Investors' cash poured over the transom of Rice's agency even faster than subscription orders had during the good old go-go days of Maxim & Gay.

Soon, Rice was once again happily gambling away large swaths of his “earnings.” After Sullivan arrived and built the Palace, he did a lot of his gambling there. By this time, of course, he was a pretty good gambler; Larry probably had his work cut out for him keeping him from winning too much.

One day, Rice was cashing out $2,500 in winnings, and Larry came out to talk to him.

“Say, young feller, why don’t you cut me in on some of your mining deals?” he said. “I’m game!”

“Are you?” Rice shot back. “Well, stack up $2,500 against that money and I’ll see if you are.”

Sullivan came across on the spot.

“Okay,” said Rice. “Put that money in a sack, and go get that big coonskin coat of yours, take a night ride by automobile to Tonopah … When you get there look up the owner of the Jumping Jack Mine. He is a member of the Ancient Order of Hibernians. An Irishman can buy that property from him much cheaper than anybody else. You go and buy it.”

“What will I pay?”

“He wants $85,000, but get it as cheap as you can.”

“What? With this $5,000?”

“Yes. Pay him the $5,000 down and sign a contract to pay the balance in 60 or 90 days.”

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This was done. The two of them got the mine for $45,000, and transferred it into a corporation with a million shares; and then Rice got busy sending advertising orders out, along with breathless notifications to various brokerage houses back east.

Larry probably had a few very bad moments over the subsequent week or so. The telegraph bill came to $1,200 (“When Sullivan learned of its size he nearly collapsed,” Rice wrote). Then, having dipped his toe in that far, Sullivan found Rice putting the bite on him for an additional $10,000 to cover the ads he’d placed. He must have been wondering, at that point, whether he wasn’t being taken for a ride.

He found out six days later, when the ads appeared in newspapers all over the country.

“Within ten days … Sullivan showed me telegraphic orders for 1,280,000 shares of Jumping Jack stock at 25 cents a share,” Rice writes. “That week and the next, Sullivan gave me carte blanche to speculate in local mining stocks with partnership money, and within a fortnight we had made another small fortune from (Jumping Jack) securities. These were advancing in price on the San Francisco Stock Exchange by leaps and bounds.”

This was the beginning, as Humphrey Bogart might have said, of a beautiful friendship.

Soon their partnership was formalized into the Sullivan Trust Company, and the two of them launched themselves upon a stunningly lucrative run. They’d buy up mines, incorporate them, boom them back East and let the money just roll on in. If the mines were productive, that was great; but it was understood by all parties that mines were speculative by nature, so they could (and did) get away with a number of promotions of properties that never came close to breaking even.

V.I.P. customers would often come to town to inspect their properties. Most likely the mines were “salted” before their arrival to encourage them; although there’s no record of them having done so, it was pretty common practice among shady mine promoters.

The Sullivan Trust Company boomed up a series of mines, several of which turned out to be pretty productive. Soon they were riding a real tiger. A genuine full-fledged investment bubble was growing in mining-stock investments, and Goldfield was Ground Zero in it.

AT THE PEAK of the excitement, Larry Sullivan — who, as you may know, was a former professional prizefighter — was in the thick of plans to stage a “battle of the century” in Goldfield between Oscar “Battling” Nelson, the lightweight champion of the world, and former lightweight champ Joe Gans. Legendary boxing promoter “Tex” Rickard had come to town to back Nelson, and the Sullivan Trust Company was the primary backer for Gans.

Sullivan, who’d been one of the dirtiest fighters on the Portland waterfront, became Gans’s manager, and according to Rice’s memoir, he did quite a bit of advance work in preparation for the fight. Having learned through the grapevine that the referee Rickard had picked really needed the work, he lodged an objection, claiming the ref was prejudiced against Gans because Gans was Black. The referee, who had traveled to Goldfield from Chicago just to cover this fight, met with Sullivan to plead his case, promising he would never dream of favoring Nelson.

“Gans is a clean fighter,” Sullivan told him, “but Nelson isn’t.”

“If he does any fouling in this fight I’ll make him quit or declare him out,” pledged the referee.

Having planted this little seed, Sullivan pronounced himself satisfied, and withdrew his objection.

WHEN THE FIGHT got started, it was soon obvious that it would run long. Twenty rounds in, the fighters were still battling it out; but Rice was getting worried.

“This doesn’t look like the cinch for Gans you said it would be,” Rice whispered to Sullivan.

“Wait a minute,” Sullivan whispered back, and went to Gans’s corner and held a long whispered conference with him.

Upon his return, he told Rice that Gans had hurt his right wrist and didn’t think he could use it for a knockout blow. But not to worry: they had a plan.

During the subsequent dozen rounds or so, Gans took special pains to make it look like Nelson was fighting dirty and he (Gans) was battling squeaky-clean. By the 40th round it was clear that Gans had gained the sympathy of the crowd.

Sullivan now hurried over to Gans’s corner and held another whispered conference. Apparently it was time to spring the trap.

They sprang it (according to Rice) in Round 42 — this was already the longest-running boxing match anyone had ever heard of. Gans, after taking a blow low on the midriff, dropped to the mat, clutching his crotch and howling in agony.

Sullivan leaped into the ring. “You saw that foul, didn’t you?” he shouted to the referee. “It’s a foul, isn’t it? Gans wins, doesn’t he?”

The ref — who had not seen the foul blow land, if it did — was white as a ghost. He nodded and muttered something, and Sullivan raised both arms to the skies and hollered, “Gentlemen, the referee declares Gans the winner on a foul!”

The crowd, which by now was more than ready to believe Nelson was a foul fighter, roared its approval. Nelson’s protests were drowned out.

Was there a foul? The history books say there was. Rice, in his memoir, says there was not. But Rice isn’t exactly a disinterested observer, so we’ll never really know.

“I won that fight,” Sullivan boasted to Rice afterward (or so Rice writes). “I told Gans that if he lost he would be laying down on his friends, and that he had the audience with him, and it was time to take advantage of Nelson’s foul tactics.”

THE SULLIVAN TRUST Company, of course, couldn’t last forever. The mines it promoted were sometimes profitable, but Rice and Sullivan didn’t much care if they were or not; and, as the mines started petering out, their batting average started to sink. The whole thing collapsed in 1907.

The unabashed and unrepentant Rice moved on, becoming publisher of the Nevada Mining News and launching efforts to “boom” the town of Rawhide. Later he got involved in another mining-stock swindle, this one dedicated to manipulating the stock of Ely Central Copper Company. This time, the collapse took him down with it, temporarily; he spent a year in prison after pleading guilty to mail fraud. It was during that year in durance that Rice wrote the memoir I’ve been quoting so liberally from, cheekily titled “My Adventures with Your Money.” (By the way, this memoir — which is in the public domain, and you can read it on line for free — is well worth the two or three hours it’ll take to read it. Like its author, it’s every bit as entertaining as it is untrustworthy.)

Rice would have lots more adventures with “your money” in the years after his release, booming fake mining companies and publishing sketchy periodicals, making and gambling away vast quantities of money. He spent four years in federal prison in 1928 after being caught defrauding investors in a fake copper mine, earned the moniker “The Jackal of Wall Street,” and finally died in 1943.

As for Larry Sullivan, he moved on to Mexico and tried to pull a George Graham Rice-type swindle down there, but was stymied by the fact that the mine he bought was an utter dud; and he lacked the magic touch that Rice had with press releases and public relations. Later he landed a job in Los Angeles, supposedly as a private detective working with Clarence Darrow for the defense of the McNamara brothers — the men who blew up the Los Angeles Times building, killing 21 people, as part of a labor strike. He was suspected of trying to bribe the jury, but nothing was ever proved.

Sullivan then got involved in Mexican lotteries in southern California for a while, until authorities clamped down on that.

By the time he got back to Portland, all the things he knew how to do — run gambling houses, fix fights, and serve liquor — were illegal. He tried anyway, bounced around in and out of trouble with the law and calling in old markers to stay out of jail.

Finally, when the First World War broke out, he ended up as a security man at a shipyard — quite possibly the first legitimate employment he’d entered into in his wild and colorful life.

But by then his health wasn’t good enough to support a life of crime any more. He died in 1918 of Bright’s Disease — nephritis of the kidneys — at the age of 55.

(Sources: The Oregon Shanghaiers, a book by Barney Blalock published in 2014 by The History Press; My Adventures with Your Money, a book by George Graham Rice published in 1911 by The Gorham Press of Boston)

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