Fraudulent promotion of Alaska Dakota Development served an important purpose regarding the state’s oil industry
The 1957 discovery of the giant Swanson River oilfield on Alaska’s Kenai Peninsula excited interest from potential investors. As petroleum companies rushed to the new field, some shady promoters saw an opportunity.
By the end of the decade, New York Attorney General Carl Madonick noted that with securities fraud, the first big step was creation of a national market price via fictitious quotations and phony transactions.
Madonisk expained that such fictions helped to convince potential investors of a company’s legitimacy. He cited Alaska Dakota Development to illustrate such fraudulent schemes.
“We had one a few weeks ago involving a Los Angeles promoter of the stock of Alaska Dakota Development Company,” he declared in 1959.
“The promoters induced New York brokers to list fictitious quotations on the stock which then appeared in a publication of the National Daily Quotation Service,” he said. “Stock was supplied to a securities firm in Denver which in turn supplied stock to two firms in New York.”
Once brokers listed the fake quotations, the attorney general added, “a market was made to appear for the stock at the prices quoted – which of course was all the salesmen needed.”
In the case of Alaska Dakota Development Company, the firm of Hannibal Associates authored and perpetuated the fraud until the Securities and Exchange Commission revoked Hannibal’s license in March 1960. The fraudulent promotion of Alaska Dakota Development served an important purpose regarding the state’s oil industry, according to newspaper columnist Sylvia Porter.
“How Racketeers Sell Worthless Stock,” was the headline of one of her columns at the time. “Hoods Move On Wall Street,” was second column’s warning for potential investors.
In 1960, President Dwight D. Eisenhower established the Arctic National Wildlife Range in northeastern Alaska. Oil was discovered at Prudhoe Bay on the Arctic Coast in 1967.
Today, Alaska Dakota Development Company stock certificates only have collectible value. Learn more about modern scams, including the “pump and dump” marketing trick in the FBI article, Investors Beware, Stock Fraud Case Offers Lessons.
The stories of exploration and production companies joining petroleum booms (and avoiding busts) can be found updated in Is my Old Oil Stock worth Anything? The American Oil & Gas Historical Society preserves U.S. petroleum history. Please support this AOGHS.ORG energy education website. For membership information, contact firstname.lastname@example.org. © 2018 Bruce A. Wells.