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American DeForest Wireless Telegraph Company 1907  

American DeForest Wireless Telegraph Company 1907

Product #: AmericanDeForest

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Beautiful certificate from the American DeForest Wireless Telegraph Company issued no later than 1907. This historic document has an ornate border around it with a vignette of an eagle with its wings spread out holding laurel in its claws. This item is hand signed by the company’s president, Abraham White and treasurer and is over 105 years old.

The United Wireless Telegraph Company was the largest radio communications company in the United States, beginning with its late-1906 formation, until its bankruptcy and takeover by Marconi interests in mid-1912. Although at the time of its demise the company was operating around 70 land and 400 shipboard radiotelegraph installations — by far the most in the U.S. — the firm's management had showed substantially more interest in fraudulent stock promotion schemes than in ongoing operations or technical development. United Wireless' shutdown was hailed as eliminating one of the major financial frauds of the period, however, its disappearance also left the U.S. radio industry largely under foreign influence, dominated by the British-controlled American Marconi.

United Wireless' establishment was announced with great fanfare in November, 1906 by its founder and first president, notorious stock promoter Abraham White. Legally, the company was the reorganization of the Amalgamated Wireless Securities Company, which had been organized under the laws of Maine on December 6, 1904. Initially capitalized by 1,000,000 shares at $10 a share, par value, in February, 1907 the capitalization was increased to 2,000,000 shares at the par value, divided between 1,000,000 preferred and 1,000,000 common.

Abraham White had previously headed, beginning in 1902, a series of radio companies of dubious character, culminating in the American DeForest Wireless Telegraph Company. (United's head office was located at the old American DeForest headquarters at 42 Broadway, in New York City, and the company continued publication of the house organ The Aerogram.) The newly formed United was initially promoted as being a consolidation of the most prominent U.S. and British radio firms, combining American DeForest with the worldwide holding of London-based Marconi's Wireless Telegraph Company, Limited. The information about American DeForest was true, as United leased the older company's assets for $1, a maneuver that, not coincidentally, blocked American DeForest's creditors, most prominently Reginald Fessenden, from collecting on their legal judgments. However, the grand claims about gaining control of the Marconi companies were immediately and vigorously denounced by Marconi officials as "repugnant", and Wilson's overture to form an international company under his control was quickly and effectively repulsed.

Missing from the new company was the American DeForest Scientific Director, Lee DeForest, who had been forced out in the summer of 1906. DeForest's version of the events was that he resigned in protest over the improper actions of company management. However, an alternate explanation is that he was no longer welcome, due to his inability to develop an effective and non-infringing radio receiver — American DeForest's employment of electrolytic detectors had led to the Fessenden lawsuits, resulting in adverse and expensive legal judgments over the company's appropriation. Moreover, General H. H. C. Dunwoody, an American DeForest vice president, had recently invented a non-infringing carborundum detector, which made the services of DeForest appear to be unneeded.

The new company had a tumultuous start. In addition to the Marconi rebuff, in February, 1907, just two months after its founding, control of the company was quietly obtained by a group of self-proclaimed "reformers", led by stock promoter Colonel Christopher Columbus Wilson, the president of the International Loan & Banking Company of Denver, Colorado. Wilson, who had previously promoted American DeForest stock, forced White out to become the new company president, with Wilson's nephew, W. A. Diboll installed as company treasurer.

In 1907, the radio industry had been developing for ten years, however, it had consistently lost money, for although the idea of wireless communication fired the imagination, there had been greater than expected difficulties in perfecting the technology to become commercially profitable. On land, radiotelegraph stations were not yet able to effectively compete with the existing network of landline telegraphs, and wireless telephony was still in the experimental stages. The main revenue source for the new communications technology was point-to-point radiotelegraph communication at sea, where the regular telegraph couldn't run, plus transoceanic transmissions, however, revenues from these sources were still very limited.

Because of the lack of legitimate opportunities, United was instead designed to prey upon the hopes (or greed) of investors who remembered the tremendous wealth that had been generated for early investors by the introduction of the telegraph and telephone. In addition, United Wireless promotional materials painted a glowing picture of the company's future, including claims that their engineers would soon perfect the wireless telephone, bringing income from subscribers listening to entertainment broadcasts, or using the device for personal communication. However, in truth, the limited engineering talents of the United staff never got much beyond the basic spark-gap radiotelegraph systems common to the industry of the day.

American DeForest stockholders were offered the chance to exchange their now essentially worthless holdings for United stock, in a series of complicated and confusing financial transactions that somehow were always to the advantage of the insiders at the expense of the regular shareholders. One unusual feature of the stock transfer offers was that the number of shares to be received was based on the amount of money originally paid for the stock, and not on the number of shares held. This was designed to penalize those who had made purchases on the open market at pennies-on-the-dollar, instead of paying the full price for purchases through the regular sales staff.

United Wireless commercial radio operator Graynella Packer aboard the S.S. Mohawk in 1910 — the first female shipboard radio operator.United management continued to offer new shares at inflated prices to the unwary, at the same time enforcing restrictions designed to artificially boost the stock price. A common practice was to include a clause that blocked the resale of the purchased stock on the open market, by refusing to register shares that had been transferred. These restrictions meant that United's management could declare arbitrary revaluations that increased at regular intervals, eventually reaching $50, allowing the company to claim fictitious appreciation that was never tested on the open market.

Because the primary objective of United Wireless was the sale of nearly worthless stock at inflated prices, day-to-day operations could be used as a "loss leader" for gaining publicity, and also for driving legitimate competitors out of business by starving them of revenue. Shipboard installations were provided at nominal rental cost or even for free, with the equipment and the radiotelegraph operators provided by United. While somewhat crude by industry standards, the United equipment was efficient enough to provide adequate service for its main clientele of coastwise shipping along the United States, as United, starting with its base along the Gulf and Atlantic Coasts, expanded to dominate the Pacific coast and Great Lakes, absorbing a series of smaller firms in the process. Also, by providing radio equipment to freighters and small passenger vessels which normally could not afford it, United's equipment did save the lives of seafarers who were now able to summon help when in distress.

Following years of complaints, in June, 1910 inspectors from the United States Postal Department finally moved to shut down what was described as "one of the most gigantic schemes to defraud investors that has ever been unearthed in this country", beginning with the arrest of Christopher Columbus Wilson and one of his top associates. In August, seven United officials were formally indicted in Federal court — in response, the 64-year-old Wilson, a widower, blithely married his 18-year old secretary.[1] A trial followed the next year, and that May five United officials, including Wilson, were convicted of mail fraud, receiving sentences ranging from one to three years. (Wilson would die in prison, at the Atlanta, Georgia penitentiary, in August, 1912.)

Crippled by the prosecution of its upper management, United declared bankruptcy and went into receivership in July, 1911. It faced a second crisis when it was sued by the Marconi company for patent infringement. The case came to court in March, 1912 and was quickly won by Marconi when the defendants said they had no defense, resulting in a judgment in favor of the plaintiffs. After a short period of negotiation, United's assets were exchanged for 140,000 shares of British Marconi, worth about $1.1 million, meaning that the United stockholders received about $2 per share for their holdings. United's physical assets were then transferred from the parent Marconi company to American Marconi.

Thus, Abraham White's original dream of consolidating the largest U.S. radio company with the Marconi operations had finally been achieved, although under very different circumstances than White had envisioned. American Marconi, previously a minor factor in the U.S. market, now dominated its few remaining competitors. However, despite its American charter, the company was seen as controlled by its British counterpart, so in 1919, pressured by the United States Navy, American Marconi would sell its assets to General Electric, which used them to form the Radio Corporation of America, creating a new dominant American radio company.

Overall, United Wireless' six-year dominance of U.S. radio communications had a strong negative impact, in part due to the skepticism and disrepute it and other fraudulent U.S. companies brought to the fledging industry. (Two other major fraudulent firms prosecuted in 1912 were the Radio Telephone Company and the Continental Wireless Company). Not all the reviews of the United era were completely negative — Lee DeForest, in his 1950 autobiography, while decrying the excesses of the company's senior management, did have good things to say about some of the technical staff, writing: "Charles Galbraith and his corps of honest, capable, hard-working men, engineers, and operators who had been instrumental in building up the American De Forest Wireless Telegraph Company, had gone determinedly ahead developing 'United' along sane and businesslike lines." However, a more common opinion about the most prominent U.S. radio firms of this era appeared in the December, 1907 issue of World's Work magazine: "The very word 'wireless' brings a smile to the lips of the Wall Street man... The time may come when the wireless will become suitable for consideration by investors. It will not come until some strong, clean, honest financial interests take charge and utterly eliminate the miserable, fraudulent, unwholesome methods that have marked the whole market history of these issues." John Bottomly, General Manager of American Marconi, assigned the job of incorporating United's assets into the Marconi operations, found the job challenging, reporting that: "A spirit of carelessness seems to have run through the whole conduct of [United] which is almost unparalleled in business history."



At the 1904 World's Fair in Saint Louis, Missouri, American DeForest President Abraham White organized a sweeping and impressive promotion, in order to establish American DeForest as the preeminent radio company in the United States, while at the same time selling lots and lots of stock of dubious value. White would achieve both goals.

Included as part of the company promotion was this four-page bulletin, showcasing the company's radio tower, which had been set up on the Louisiana Purchase Exposition fairgrounds. (The observation tower had originally been built in 1893 at Niagara Falls. However, because ice from the tower kept falling on an adjacent glass-roofed museum, it was declared a nuisance and ordered to be torn down by December 31, 1903. Abraham White purchased the dismantled tower, and had it moved to the Saint Louis fair.) This publication's purple prose -- the bulletin was printed in purple ink -- included statements such as: "It is safe to say that within a year the revenue accruing to the American DeForest Company from this source alone will surprise the most enthusiastic stockholder." However, the surprise awaiting enthusiastic individuals unfortunate enough to have bought American DeForest stock, would be how little revenue the company actually would take in over the next few years from ongoing operations. And notably omitted from this overview of the company's future were its stock fraud and patent infringement lawsuits, and eventual bankruptcy.

World's Fair Stations. The American DeForest Wireless Telegraph Company has now ten operating stations at the Louisiana Purchase Exposition, and installations are now being arranged for at Chicago, Memphis, Omaha and Kansas City. On the front page of this bulletin will be seen a reproduction of a drawing of the main tower of the Company. From this tower a continuous stream of messages is being aerographed to different parts of the fair grounds and to various points of the City of St. Louis. The DeForest installations at the World's Fair have been installed at considerable expense to the Company, but it is proving a very lucrative investment, as contracts are now being made for the supplying of World's Fair bulletins to the newspapers of the prominent cities and towns within a radius of two hundred miles of St. Louis. It is also the intention of the Company to make these stations the nucleus of a complete wireless system to operate between Chicago and New Orleans, in fact the apparatus is now being manufactured for Texas and Mississippi Valley stations. It will be very gratifying to the stockholders of the American DeForest Company to know that a complete set of DeForest Wireless apparatus has been installed in the U. S. Government Building at the World's Fair and is now being operated under the direct supervision of a representative of the United States Patent Office. The importance of this will be apparent when it is known that out of 700,000 inventions, seven of the most notable were selected and that one of these was the DeForest System of Wireless Telegraphy.

DeForest War News Service. One of the most interesting and important features of the Russo-Japanese War has been the successful use of Wireless Telegraphy. In several instances it has been instrumental in bringing about Japanese victories. Both the Russians and Japanese armies have made constant and successful use of it. In February last, the London Times closed a contract with the American DeForest Company to install its apparatus upon the Steamship "Haimun" and at Wei-Hai-Wei, and on March 31st the Company commenced the transmission of messages. Since that date over 10,000 words have been aerographed, giving in several instances the only accurate description received by the Press of engagements between the Japanese and Russian Fleets. These messages in nearly every case were transmitted from distances ranging from 150 to 200 miles and were taken up by the responders without any difficulty whatever.

DeForest System and the Modern Newspaper. One of the surest evidences of the practicability of Wireless Telegraphy is shown in the urgent desire of the leading newspapers on both sides of the Atlantic to adopt it as a permanent adjunct to their business, it being the best and most economical means of supplying bulletins of important events. Less than two years ago the American and English Dailies refused to consider the free use of a prominent wireless system; now the same papers are paying handsomely for its use. Since the recent practical demonstration of the efficiency of the DeForest System in the transmission of Russo-Japanese War correspondence for the London Times, New York Times and Philadelphia Public Ledger, the Company has been receiving daily requests for installations by prominent newspapers throughout the country. So far the construction department has completed three; namely, the La Presse of Montreal, Canada; St. Louis Star and the St. Louis Post-Dispatch. The two last named are receiving daily wireless bulletins of important events transpiring at the World's Fair grounds. In commenting upon the service furnished by the American DeForest Company, the St. Louis Star has the following to say: "As fast as copy could be filed at the tower, it was flashed through the air almost instantaneously to the Star Wireless Station. Messages were transmitted at the rate of 40 words per minute and not a hitch occurred. This enterprise has proved remarkably successful." The above facts will give some idea of the marvellous growth of the DeForest System. This, however, is just the commencement; other installations will follow just as quickly as the orders can be filled. It is safe to say that within a year the revenue accruing to the American DeForest Company from this source alone will surprise the most enthusiastic stockholder.

On the Great Lakes. The construction department is working day and night in rushing forward the apparatus for the numerous stations to be erected at the prominent cities from Rochester, on Lake Ontario, to Duluth, at the western end of Lake Superior. Stations have already been completed at Buffalo and Cleveland, and in the recent tests held under the supervision of Dr. Lee DeForest, no difficulty was experienced in establishing communication between these two points, a distance of 180 miles. The equipment of the first of the Cleveland & Buffalo Steamships is under way. This line of Steamers will be in constant communication during the summer with the DeForest stations from the time they leave Buffalo until they reach Detroit.

Havana--Key West System. The Havana station has been finished and the work on the Key West installation is being rushed to completion. From present indications the Company expects to be in active competition with the cable companies before the end of the present summer. The present cable rates between those two points is 10 cents per word, and as the rate decided upon for aerograms is 5 cents per word, it is safe to say that the revenue to the American DeForest Company from this source will be immense. The Company has decided to follow the Havana-Key West system by installations at various points in the West India Archipelago, as it is not only an ideal but very profitable field for wireless telegraphic work.

Central and South American Stations. The highly successful operation of the American DeForest Wireless stations at Boca del Toro, Panama, and Port Limon, Costa Rica, by the United Fruit Company, is already bearing out the prediction that the Central and South American Republics would soon discard cable communication on account of its cost, and supplant it with Wireless. In this connection the following paragraph from the "Syren" of New York is of interest: "The Government of Panama has granted to the United Fruit Company a concession covering a period of fifteen years for the operation of a system of wireless telegraphy between Panama, Colon, Boca del Toro, and the Bay of Limon, and the Central and South American countries." Arrangements are now being made for the equipment of the entire fleet of 75 steamers of the United Fruit Company with DeForest apparatus.

Subsidiary Companies. No stone has been left unturned to make the DeForest System a universal success. The fact that Subsidiary Companies have been formed and are now forming in all sections of the globe shows a growing confidence in the superiority of this system. Up to the present two Subsidiary Companies have been organized, one operating in Canada and the other in Great Britain. Thirty-three and one-third (331/3) per cent. of the stock of the Canadian Company, and nearly one-half of the capitalization of the English Company reverts to the American DeForest Wireless Telegraph Company (Parent Company). In addition to above, negotiations are now under way for the forming of companies in Central and South America. As the DeForest System has created an unprecedented record in the wireless telegraphic field--such growth being the result of intrinsic worth--it is a foregone conclusion that this success will also new organizations, and for this reason will prove not the least of the many sources of revenue of the American Wireless Telegraph Company.

Crowning Triumph of the DeForest System. Much has been said pro and con regarding the relative values of the different systems of wireless telegraphy now in use. If, however, the judgment of the officials of the United States Government Naval Equipment Bureau can be taken as a criterion, all argument upon this question is at last settled, as after a series of competitive tests including all prominent wireless systems, a contract has been awarded by Admiral Manney, Chief of the Naval Equipment Bureau, to the American DeForest Wireless Telegraph Company, for the equipment of five of the largest wireless telegraph circuits in the world. The service which the American DeForest Company guarantees to establish will create new records in space telegraphy, inasmuch as the messages must not only traverse the ocean, but considerable parts of land in the West Indies. Under the contract the above Company agrees to maintain thorough service on the following circuits: Key West to Panama, 1,000 miles; Porto Rico to Key West, 1,000 miles; Guantanamo, or the South Cuban coast, to Panama, 720 miles; Pensacola to Key West, 450 miles; Guantanamo, or South Cuban Coast, to Porto Rico, 600 miles. Under this agreement the Government agrees to operate in harmony with all stations and vessels equipped with the DeForest System, and all DeForest aerograms will, when required, be received without charge at the Government Stations. The vast importance of this contract will be apparent, as it greatly augments the present revenue of the Company, and entails the equipment of the entire fleet of 240 Battleships and Cruisers of the U. S. Navy with the DeForest System, conclusively stamping its superiority. GREATER NEW YORK SECURITY CO., 100 Broadway, New York.

Product #: AmericanDeForest

Normal Price: $99.95
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