After being forced out of United Wireless in late 1906, Lee De Forest helped formed a group of interrelated companies, under the parent Radio Telephone Company. In late 1911, the U.S. government began prosecuting a number of persons associated with this new endeavor for stock fraud. The trial of the five Radio Telephone defendants concluded in December, 1913. James Dunlap Smith, W. W. Tomkins, and Elmer E. Burlingame were found guilty, while Lee De Forest and Captain Samuel E. Darby were not.
Telephony, November 25, 1911, page 655:
Wireless Telephone Promoter Arrested.
James Dunlop Smith, former president of the Radio Telephone Co., and of the Fiscal Agency Co., a selling agency of the Radio concern, was arrested last week in New York for using the mails to defraud. The investigations carried on by post office inspectors of the affairs of the Radio, a wireless telephone company now in the hands of a receiver, were an outgrowth of the recent shakeup of the United Wireless Co. which landed Col. Wireless Wilson and W. W. Tompkins, among others, in trouble. The alleged fraud on which Smith yesterday afternoon was arraigned before Commissioner Shields involves, the officers say, fraudulent sales of Radio Telephone Co. stock amount to at least $1,000,000 and perhaps to more. The complaint is made on information obtained by postal investigation and as the result of statements made by Elmer E. Burlingame, one of the master spirits of the Sun Electric Generator Co., and now under indictment, by Dr Lee De Forest and by Tompkins who is said to have been a partner of Smith. The Radio Telephone Co., was the parent concern of a string of companies, none of which was earning profits at a time when, it is charged, Smith represented to stock buyers that they were. Instead, it is charged, the companies were being run at a loss, and the money used to pay dividends was derived from other sales of stocks. At present the investigators say, the concern has but one wireless telephone plant in operation.