In 1917, Samuel Pandolfo raised $9.5 million through stock sales and built an automobile plant in St. Cloud, Minnesota. During the next two years, the plant turned out 737 automobiles and fulfilled numerous U.S. government war contracts. Yet by 1919, Pandolfo was out of business. Found guilty of mail fraud, Pandolfo received a three-year prison sentence in Leavenworth Federal Penitentiary, and his company was ultimately closed.
The government claimed that Pandolfo defrauded the 70,000 stockholders in his company by sending them misleading information. Among the charges was one that a company flier included a “plane’s eye view’” of the Pan Motor Car Company that wasn’t actually drawn in an airplane.
Others have countered that Pandolfo was done in not because of his business practices, but because of his beliefs. Pandolfo had the vision to believe that the average person could own shares of stock, and he eagerly sold it to them.
Pandolfo was no stranger to the newfangled contraption known as the automobile. Indeed, he had owned 37 of them in his 15 years in the insurance business, and he had very particular opinions of what constituted a good car. It needed high clearance for the back roads of the day, should have provisions for accommodating the driver overnight if that were required, and should have the ability to carry extra supplies that might be needed in sparsely populated areas.
Pandolfo incorporated his company in Delaware, and began selling shares of stock for $10. Half of this money went into what Pandolfo called a “surplus fund” and was used to pay stock sales commissions and company expenses. The other half went into the company’s capital fund. The stock’s par value of $5.00 was clearly printed on each of the stock certificates.
Pandolfo selected St Cloud, Minnesota, as the site for his plant because of its proximity to where most of the world’s iron-ore was then being mined, access to two major transcontinental railroads, access to a fine deep-water port in Duluth, Minnesota, a well-trained work force that was free of labor union issues, and a ready supply of electrical power generated by the Mississippi River.
St Cloud residents remember a Fourth of July picnic that Pandolfo threw in 1917 where 15,434 pounds of beef that required a whole railroad car to ship were barbequed for the crowd. St. Cloud residents are also familiar with the part of their city dubbed “Pantown” were Pandolfo erected 58 first-class homes as housing for his growing labor force. He also began production of his Pan-Model 250, the first model produced by his new factory that covered 22 acres of land, and included a huge drop-forge plant, the biggest in the U.S. east of Chicago.
Pandolfo’s troubles began when the Associated Advertising Clubs of Minneapolis, a forerunner of the Better Business Bureau, lodged a complaint with the State of Minnesota that Pandolfo was spending more on promotion than its Minnesota Charter permitted. The complaint was dismissed, but on November 16, 1918, a federal grand jury in Fergus Falls, Minnesota, indicted Pandolfo on four counts of "using the mails in furtherance of a scheme to defraud.” Pandolfo demanded an immediate trial on the charges, and when the government asked for more time to prepare its case, U.S. Judge Page Morris dismissed the charges.
Despite the dismissal of the case, the matter had slowed the sale of stock, and the Pan Motor Car Company was in need funds to launch full-scale production of its premier Pan Model A.
Pandolfo went on a whirlwind tour to promote this vehicle. It was Pandolfo's dream car. It had high clearance to negotiate just about any roadway, fold-down seats that transformed into a bed, and contained an ice chest to carry food and other refreshments. A flood of pamphlets and mailings were produced and sent out during this time period to promote the vehicle, and it was these promotional materials that ultimately did Pandolfo in.
On February 1, 1919, a federal grand jury in Chicago indicted Pandolfo, and all officers of the company, with seven counts of mail fraud for sending misleading materials through the federal mails. The case was heard by cantankerous Judge Kenesaw Mountain Landis who made several rulings hostile to Pandolfo. Ironically, the week the trial took place, the Pan Motor Car Company went into full production of the Pan Model A, and by the end of that month, 70 cars had been produced. Nevertheless. the jury was made to believe that the company was a sham, a shell company organized for no other purpose than to sell stock.
Requests by Pandolfo’s defense team to show the jury motion pictures of the plant in operation were denied by Judge Landis, who declared, "I have had as much experience with moving pictures as anyone in the past fifteen years, and I am not to be denuded of the opinion I have formed regarding them." The case went to the jury with the jury unaware that the plant was in full-scale production of its second model motorcar, or that the plant had fulfilled numerous U.S. government war contracts, including production of a tank-tread tractor, dubbed "the tractor that will win the war."
Pandolfo was convicted, and mounted an aggressive appeal of his case. The company continued to produce Pan Model A cars in his absence, but publicity of the trial affected public sentiment so greatly that it was impossible to sell additional stock needed to raise much-needed capital. The Pan Motor Company eventually closed for lack of funds. On April 5, 1923, Samuel Pandolfo surrendered to Chicago authorities, and was taken to Leavenworth Federal Penitentiary, where he served 21⁄2 years of a three-year term.
Upon his return to St Cloud, Minnesota, in October 1926, he was greeted by some 600 well-wishers and a brass band. He summed up the affair with his comment, "You don’t meet a crook with a brass band.”
Of the 737 Pan cars produced, only 5 are known to still exist. As for Judge Landis, he was appointed the first commissioner of baseball in November, 1920 following the "Black Sox Scandal". A commission of several members had originally been proposed, but Landis demanded that he be the sole representative, and that he be given lifetime tenure. He refused to relinquish his federal judgeship even after being censured and threatened with impeachment by the House Judiciary Committee, where the lone dissenting vote against censure was cast by Minnesota Representative Andrew Volstead known for authoring the Volstead Act, or the law enforcing Prohibition. Landis finally resigned from the federal bench in 1922.
Pandolfo suffered a stroke in December, 1959, and died January 27, 1960, in Fairbanks, Alaska.
The Pan Motor Company Office and Sheet Metal Works building on 33rd Avenue North, St Cloud, Minnesota, still stands, and is listed on the National Register of Historic Places.
Close Up of Vignette:
Capital Stock, issued in 1917Printer:
8” (h) x 11” (w)State: MN-Minnesota Subject Matter: Automotive and Related
| Auto Makers
| Scandals and Collapses Vignette Topic(s): Company Logo Featured
| Automotive Theme
| Cars Featured Condition:
Vertical fold lines, no cancels, pencil markings and some toning and edge faults from age.