World War I took a toll on Die Volkszeitung, St. Paul’s German-language newspaper. The long-time editor, Fritz Bergmeier, was sent to an internment camp. The paper lost its state printing contracts. Profits dwindled. After the war the paper’s owner, Clara Bergmeier, wanted to sell but found no buyers. This created an opportunity for an opportunist and con man, Clarence Cochran, to engineer a massive financial fraud aimed at German immigrants.
Arthur Lorenz and Clarence Cochran met in the Ramsey County jail in 1921. Lorenz, then editor of Die Volkszeitung, had been arrested on an Illinois warrant for criminal libel; he had called American World War I veterans “tramps, vagabonds, and bums” in a German-language newspaper in Chicago. Cochran had been arrested on a bad check charge.
Lorenz hired Cochran as Volkszeitung’s circulation manager. Within months he owned the newspaper. Clara Bergmeier had found no buyers at $100,000; Cochran agreed to pay her $150,000. He got the money (he had none of his own) by selling the stocks and bonds of Volkszeitung and two related businesses to many of its 16,000, mostly German-immigrant subscribers. The other businesses included Loring Park Sanatorium, which claimed a cure for diabetes devised in Germany, and Hardstone Brick Companies, which claimed to make superior bricks using German machines and formulas. Both businesses were fake, their stock and securities worthless.
Cochran’s sales team nevertheless sold some two million dollars of stocks and bonds to Volkszeitung subscribers, mostly in Minnesota, but also in Wisconsin, the Dakotas, Iowa, Missouri, and Montana. They were trained to play upon German ethnic pride and resentments left over from the anti-German xenophobia of World War I.
One obstacle that Cochran faced was Minnesota’s newly created securities law, which required stocks and some corporate debt, like bonds, to be registered with the state and their salesmen to be licensed. Cochran had had a license, but lost it, and was known to state investigators as a con man and crook. He nevertheless succeeded, for all the time he needed, in getting his ventures registered, at least in part because he had a friend in high places.
In 1925 Governor Theodore Christianson had appointed Minneapolis banker Andrew Nelson state securities commissioner. Nelson, then fifty-eight years old, had no government experience. He did, however, have a side-business: he owned a Swedish-language newspaper—Minnesota Stats-Tidning—that shared a building and printing plant with Volkszeitung. He and Cochran got to know one another. In 1926, the year Cochran wanted to register some of his Hardstone Brick companies, he arranged to buy Stats-Tidning from Nelson for fifty thousand dollars, considerably more than its market value. When Hardstone Brick of Little Falls (a company that existed only on paper) came before the Securities Commission for approval, state investigators warned Nelson that every Cochran enterprise was a fraud. Nelson approved it anyway. At that moment, Cochran owed Nelson $35,000, so for Nelson to get paid, he needed Cochran’s salesmen selling Cochran’s securities.
Meanwhile, the Securities Division was getting complaints from all over the state, and beyond that, holders of Volkszeitung, Loring, and Hardstone securities were not getting paid. The whole scheme soon came crashing down. Cochran, Nelson, and fourteen of their salesmen were charged with federal mail fraud.
The trial, held in today’s Landmark Center, lasted over fifty days, making it the longest in Minnesota history at the time. Nelson insisted he had done nothing wrong. Cochran blamed the government; with just a little more time, the brick companies would have started making bricks (they made none), and all would have been well. The jury did not agree. Cochran, Nelson, and Lorenz all got twenty years in prison. Most of the salesmen got prison time, too.
Almost all of the investors in Cochran’s enterprises were German immigrants of scant means. The number of identified victims exceeded one thousand, with losses ranging from twenty dollars to fourteen thousand. Average losses were only a few hundred dollars, but these people had very little to spare.