effective use of lands within states must, therefore, be planned within such state in a manner to give consideration to the local problem.

It was felt that reciprocity and cooperation by the various Consumer states should be extended to and with the Situs states, supplementing the regulation by the Situs state with appropriate regulation of sales within the Consumer state.

Mr. H. B. Montague, Chief Postal Inspector, Post Office Department, Washington, D.C., indicated that the Post Office Department has adequate legislation on the books at the present time to regulate interstate land sales and needs only the cooperation of the various states to continue to use their legal weapons to police this industry.

Governor Pat Brown of the State of California, who addressed the Conference, states unequivocally that installment land sales frauds cannot be handled by the Federal Government. They must be handled by the states on a compact basis.

The Honorable Cecil F. Poole, U.S. Attorney for the Northern District of California, appeared for Mr. Nicholas deB. Katzenbach, present Attorney General of the United States, and read Mr. Katzenbach's prepared speech. In Mr. Katzenbach's speech, wherein he commented on the hearings before the Permanent Subcommittee on Investigations of the U.S. Senate, he stated:

"The report of their hearings states a conclusion borne out by the resultsthat is, the Federal mail fraud prosecutions were a very effective weapon and that further legislation was not required. While we had instituted mail fraud prosecutions many years ago, 'the stepped up' Federal program in the past few years met the problem created by the growth and extent of these operation." Mr. Nathaniel Kossask, Chief of the Fraud Section of the Criminal Division of the U.S. Department of Justice, stated that the Federal Government has several good statutes, applicable to this problem. In commenting on these, he said: "My friends, they will never race ahead of the mail fraud statute. They cannot. It was devised, that is the word in the statutes, it was promulgated with the most foresight of any criminal statutes. Justice Holmes epitomized the statute by describing it as being as broad as the evil against which it is aimed. . . There are no boundaries as long as there is an evil and to perpetrate this evil, you use the United States mail."

Towards the end of the Conference, a motion was made by one Real Estate Commissioner to adopt a resolution seeking Federal regulation. The motion failed for lack of a second.

Since the Conference, many states have enacted new legislation to meet the problems. It is our understanding that as of this date, 23 states, four territories and one Canadian Province have legislated with respect to this industry. Prior to the enactment of the present Act, Florida had adopted legislation in the installment land sales field. However, such laws were not adequate and did not provide protection in many required areas. In January, 1963, former Governor Farris Bryant appointed a Governor's Committee on Interstate Land Sales. Its membership consisted of representatives from the Florida Home Builders' Association, Florida Mortgage Banker's Association, Association of County Commissioners, Florida Savings and Loan League, Florida Bar Association, Florida Chamber of Commerce, Florida Association of Realtors, as well as members of the Florida land sales industry. After conducting hearings throughout the state, the Committee recommended enactment of the present law to be administered by a separate administrative agency which would include on its Board members of the land sales industry. This recommendation to create a separate agency having on its Board members of the industry was to enable complete regulation in the entire area of installment land sales activity by knowledgeable persons who were aware of the problems in this unique industry. We respectfully submit in evidence before this Honorable Committee the Report of the Governor's Committee on Interstate Land Sales dated March 30, 1963. In June, 1963, the Florida Legislature did pass an Installment Land Sales Act based upon the recommendations of the Governor's Committee. The purposes of the Act were three-fold:

1. To provide full and fair disclosure.

2. To prevent false and fraudulent methods of sale.

3. To provide adequate safeguards for purchasers of Florida property. The Florida Installment Land Sales Act is most comprehensive in its scope and authority, as well as in the enactment of rules and regulations, pursuant

to the authority of the state Act. The Florida Installment Land Sales Act encompasses the following:

1. The registration, regulation and control of salesmen, as well as subdividers. All salesmen must, likewise, be registered with the Florida Real Estate Commission, thereby making their activities subject to additional regulation and control.

2. Control, supervision and approval by the Board of all advertising and promotional material, regardless of where or when used.

3. The establishment of standards for advertising and promotional material, which standards are patterned after the Recommended Standards for Land Advertising adopted by the Association of Better Business Bureaus after consultation with members of the interstate land sales industry.

4. The furnishing of a comprehensive Property Report to all prospective purchasers of Florida lands and lands sold in Florida, which Property Report must be given before the purchaser obligates himself to the purchase of property. (Copies of typical Property Reports have been introduced in evidence before your Honorable Committee.)

5. Furnishing of adequate safeguards to insure that the purchaser will receive good title to the property contracted for, free of encumbrances and having all of the improvements promised to the purchaser. Included are appropriate release clauses in mortgage and encumbrances, escrow accounts and/or performance bonds for promised improvements.

To summarize briefly, the matter of Federal regulation of interstate land sales is not a new one. It has been considered by several previous Senate Committee hearings, conferences of law officials, Better Business Bureaus, and industry associations. The ultimate conclusion appears, without question, to be that regulation should be left to the individual states with cooperation and reciprocity among them. This challenge has been largely met by most of the states affected and as a result, most of the so-called "fringe operators" have been eliminated. The stature of the industry has been raised immeasurably, and the confidence of the public has largely been restored. In support, we respectfully submit copy of an article which appeared in the June 13, 1966, issue of Barron's magazine, appended hereto (see below).

There has been adduced at the current hearing testimony to the effect that "long arm" legislation is needed and would materially aid the states in regulating the interstate land sales industry. We respectfully submit that in the pursuance of "Creative Federalism", attention should be directed toward assisting the states in their present regulation rather than substituting Federal regulation for state regulation, and especially Federal regulation which, in itself, is and must always be less effective than basic state and local regulation of land and the local problems attendant thereto.

We recognize that the Florida Installment Land Sales Act is not perfect and that one obvious loophole still exists. The state regulatory agency and members of the industry joined together in a concerted effort to remove this loophole during the 1965 Session, but were unsuccessful. This does not mean that the state agency and industry will cease their efforts, but rather our industry is optimistic that this loophole will be closed during the 1967 Legislative Session. Tremendous progress has been made in regulation of this vital industry, and progress will continue to be made. The Securities Exchange Act of 1933 was not perfect and has constantly been revised and amended, and will undoubtedly, in the future, require further revision. Our Industry is proud of the part we have taken in creating a strong and healthy climate and will continue to strive toward this goal. There are now and will always be miscreants, or as Senator Neuberger stated, violators of the law. You can legislate against sin, but you cannot legislate it out of existence. The total number of installment land sellers who are not subject to regulation by the State of Florida represent less than 2% of the annual business done by the industry. Further, not all of this 2% are miscreants or wrongdoers.

We respectfully submit and urge to your committee that Federal legislation, as proposed, is totally unnecessary. The economic hardships placed upon the small but legitimate land developers, as well as the large legitimate land developers, far outweigh any possible good that may appear to be done by S-2672. The inherent evil in such a bill is the possible deluding of purchasers into believing that they are thoroughly protected by Federal law, while actually the proposed Bill solves but a small fraction of the problems and matters regulated by

the states. Equally disastrous would be the reluctance of states to legislate, if there were Federal regulation, all as particularly evidenced by previous testimony at the hearing.

For all of the foregoing reasons, we respectfully urge that S-2672 be not favorably reported by your Committee.

EXHIBIT

[From Barron's (Boston, Mass.), June 13, 1966]

SAND IN THEIR SHOES-SOME WELL-HEELED INTERESTS LATELY HAVE COME ON DOWN TO FLORIDA

"Owning a piece of land is a basic part of the American dream. We're giving thousands of Americans a chance to make that dream come true."-HENRY DUBBIN, Chairman, Canaveral International Corp.

(By Lawrence A. Armour)

MIAMI. Almost everywhere on a certain day last October, the big news was a misfiring Agena rocket and the scrubbing of Gemini 6. But not in Orlando, the city nearest Cape Kennedy. "Disney Is Here," trumpeted the Evening Star in banner type. "It's official," echoed the Sentinel. Even in Miami, where fantasy is a way of life, the Herald full-paged it-"Disneyland: Where Dreams Can Come True." Today, the excitement seems justified. Having pieced together 27,433 acres of real estate, Walt Disney plans to create a $100-million project in the middle of the Sunshine State. "For years," an aide noted the other day, "Walt has envisioned a completely new kind of vacation and recreation wonderland. This will be it: an entire community designed for total family enjoyment."

STRANGERS IN PARADISE

In extending the milieu of Mickey Mouse from one tropical coast to the other, Mr. Disney was drawn by many things. Like Southern California, Florida boasts a balmy climate, a year-round tourist trade and an ever-increasing population of transplanted "senior citizens." What's more, Florida's industrial economy is booming. As it happens, these factors have induced several other big-name investors to come on down. Last year, Pennsylvania Railroad invaded the territory, taking on a 51% interest in Arvida Corp., the land-development firm founded by Alcoa's Arthur Vining Davis. Early this year, Westinghouse Electric sparked new excitement when it announced plans to take over Coral Ridge Properties. Not least, City Investing Co.-a conservative holding company, but with a well-deserved reputation for shrewdness-caught everyone's eye by putting up some $9 million in April for a 17% interest in Florida's farflung General Development Corp.

The actions of this oddly-assorted yet highly-esteemed trio took Wall Street by surprise. Florida land development, after all, can be a pretty risky business. Many an investor still vividly recalls the great bubble of the 'twenties. Many, indeed, were twice-burned-not only by the sun-when scandal struck the peninsula again in the early 'sixties. (General Development, in fact, is one of the publicly held survivors: a $30 stock in 1959, it sells today at a depressed, and depressing, $6 a share.) Tales abound of the fast-talking promoters who sold swampland to naive northerners ($10 down, $10 a week,) then walked away. Controversy continues to swirl around the industry's merchandising and accounting practices. But City Investing, Westinghouse, Walt Disney and the Pennsy seem to be saying that this time, Florida values are here to stay.

UNSHIFTING SANDS?

Around the palmy peninsula, indeed, evidence abounds that they are right. Over on the Sunshine State's West Coast, for example, halfway between the venerable ports of Tampa and Fort Myers, stands the bustling community of Port Carlotte-scarcely a dot on the map a decade ago. A scrubby piece of pastureland until General Development came along, Charlotte today is a town of 14,000, with over 6,000 landscaped homes, modern utilities, nearly 200 busi

nesses, a couple of $10-million banks, 17 houses of worship, a 75-bed hospital, a yacht club, an 18-hole golf course and even a bus line that regularly shuttles across the 92,000 acres.

Moreover, while Disneyland may be unique in this part of the country, Port Charlotte is not. Other new residential centers, with names like Deltona, Canaveral Groves, Cape Coral and Rainbow Lakes Estates, have been evolving along much the same lines, changing wilderness into well-defined, well-developed and thriving communities. Many are owned and managed by multimilliondollar corporations. Virtually all are still growing; indeed, in sales of both homesites and homes, they are doing a land-office business.

In the heady climate of Florida, finally, the prospects are good that these hardy, increasingly well-financed developments and their sponsors-will continue to burgeon. The painful scandals that shook the industry a few years ago served to weed out marginal firms, clearing the way for the those with wellplanted roots. It also produced a crop of new statewide real-estate regulations, further stimulating the strong companies by affording public investors protection against undue risk.

In their own behalf, the developers have broadly diversified operations, strengthened selling procedures, cut costs and boosted efficiency. Not least, they have improved their financial quality to the point where one large company, Deltona Corp., announced this year the successful arrangement of a revolving line of credit collateralized by installment accounts. "This," says Deltona President Frank Mackle, Jr., "amounts to a recognition by some of the country's leading lending institutions that our receivables are both strong and stable."

TROPICAL LANDLORDS

According to Carl Bertoch, executive director of the Florida Installment Land Sales Board-an agency, by the way, set up through one of the new statutes to police the industry-approximately $1 billion worth of real estate on the peninsula and nearby islands is being developed today. Much of the acreage, to be sure, is in private hands. One such development, Sombrero Beach Estates, "nestles in the fabulous Florida Keys" and "offers discriminating investors the convenience of city living and the pleasure of Hawaiian latitudes." Another, Treasure Cay, invites settlers to Abaco Island in the Bahamas: "Every site is just a walk away from one of the world's loveliest beaches, a fairway or a lagoon."

About a dozen of the top companies, though, are publicly owned. Del E. Webb Corp., a pioneer of the "integrated" community for retired citizens-and mainly involved out West-has set up a "Sun City" near Tampa. Major Realty Corp., established in the late 'fifties to wholesale Florida land, owns several thousand undeveloped acres near Orlando. Major, however, has never quite gotten off the ground; its only other asset, a 34-story apartment house in Philadelphia, also is on shaky footing.

More firmly entrenched in the Sunshine State are such firms as American Realty & Petroleum Corp., owner of Albuquerque's Rio Ranch Estates and two Florida operations, Silver Springs and Rainbow Lakes Estates. Oakland Consolidated Corp., which concentrates on homebuilding rather than the sale of land, is developing a 200-acre tract near Orlando and a 1,000-acre project just outside Cape Kennedy. Canaveral International Corp. virtually fronts on the launching pads with two developments: 9,000-acre Canaveral Groves Estates and 14,000-acre Canaveral Acres. The company also has a new development. Freeport Ridge, on Grand Bahama Island.

OFFSHORE, TOO

Coral Ridge Properties, which Westinghouse acquired for about $30 million in stock, owns hotels, apartment houses, shopping centers and undeveloped acreage throughout Florida as well as the Caribbean. Mary Carter Paint, with two years experience developing 3,000 acres on Grand Bahama, went for more last January when it purchased a 75% interest in Huntington Hartford's Paradise Island (once called Hog Island)-a 700-acre retreat 500 yards off Nassau's shores. The firm paid some $12.5-$15 million for land and facilities into which Mr. Hartford had put an estimated $30 million.

City Investing, newest arrival on the scene, purchased all 1.3 million of the shares of General Development Corp. held by Louis Chesler, the Canadian financier who founded the concern with the Mackle brothers (long since departed and

now running Deltona). Along with New York's Sterling Forest, City has interests in everything from hotels and theaters to uranium mining and hydro-foils. General Development has a number of communities like Port Charlotte under way. As for the Pennsy (which also has bought into real estate operations in California and Texas), it purchased its 51% interest (some 3 million shares) in Arvida Corp. from the estate of Mr. Davis; that company, still actively traded, has extensive residential and industrial projects going up in Palm Beach, Sarasota, Dade County and elsewhere.

Rounding out affairs are two other big developers, the aforementioned Deltona Corp., at the moment earthmoving into high gear at its two major propertiesDeltona and Marco Island-and Gulf American Land Corp., a diversified operation which last year became first in the field to top $100 million in sales.

UP, SHELTERING PALMS

Financially speaking, most of these firms did well in 1965 (see table on p. 402). By and large, they expect to do even better in 1966. Oakland Consolidated's president, Sumner Kramer, looks for earnings of 50 cents a share this year, on sales of $18-$20 million-up from 35 cents and $11.4 million, respectively, in 1965. At American Realty, sales in the fiscal year ended April 30 probably shot up 45% to $7 million, and earnings a whopping 75% to 40 cents a share.

Deltona, which netted a record 62 cents in the first quarter of 1966, expects "sales and earnings to continue their forward trend throughout the rest of the year." The same goes for General Development, which earned 12 cents in the first quarter, up from six cents in the like '65 period. "If our sales people turn in only a reasonable percentage of what they say they're going to do," says President Charles Kellstadt, "we're going to have ourselves one lovely year."

Canaveral's fiscal year, ending September, could be lovelier still. Recovering from the effects of an ill-fated attempt to turn the ocean liner Italia into a kind of floating resort (the "Imperial Bahama Hotel"), the company expects to net about 50 cents a share this year on sales of roughly $4 million. Last but barely least, Gulf American is off to what ought to be a record year. Sales for the first six months, ended February 28, hit $73.7 million, highest in history for any land company; six-month earnings set a record of their own, soaring 82% to $1.15 a share.

NEW DAY DAWNING?

All this may have a familiar ring to investors who went wild over Florida land once or twice before. The most sensational boom was that memorable bubble of the 'twenties. In those days, as a mangrove patch was being transformed into the fabulous pink-and-white fairyland called Miami Beach-and Henry Flagler was criss-crossing the barren countryside with railroads, and then resorts-Florida caught the nation's fancy. Everyone wanted to buy a piece of paradise. After a while, it seemed as though everyone had. "It was one of those periods of mass insanity that are strewn throughout history," says Carl Bertoch. "Appropriately enough, it was a perfect prelude to the even greater madness that ended a few years later with the '29 crash."

In the mid-'fifties, the Florida real estate game again became a national pastime. Only $10 down and $10 a month would buy a chunk-however remote of the country's fastest growing state. Shivering Midwesterners and Down Easterners, by the hundreds of thousands, took the plunge. Prices boomed. Developers became millionaires. But abuses began to cloud the picture, and by 1962, the public was up in arms. So were state legislatures-not only in Tallahassee. New laws went on the books and new agencies went into action. One of the most effective, Mr. Bertoch's Florida Installment Land Sales Board, set about reviewing industry promotion, saw to it that purchasers got a detailed property report, and followed up by requiring developers to make good on their promises of roads, sewers and the like.

Before the clean-up campaign began, however, something else happened that his the Florida land market like a hurricane. The something was called Fidel Castro. Cuban threats to lob missiles a mere 90 miles into Sunshine State backyards-no matter how cold it got up North-really put a chill on the busi"Selling land was next to impossible," recalls one developer. Accordingly, fringe operations pulled up stakes and fled the scene. Of an estimated 1,200 to 1,600 firms selling Florida land on installment plans in the early 'sixties, less than 200 are registered today.

ness.