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Mr. LORD. Not the Group Co., each separate bank.

Senator Couzens. You madé no loans at all to any of your groups ?

Mr. Lord. The Group Co.?
Senator COUZENS. Yes.

Mr. Lord. The Group Co. had nothing to do with loans to
separate units.
Senator Couzens. You just borrowed ?
Mr. LORD. We borrowed money.
Senator COUZEXS. But you did not lend it?

Mr. Lord. I say we did not. The Group Co. may at some time or other have loaned a little money, but they were not in the business of loaning money to the public, if that is what you mean.

Senator Cotzens. How many employees were engaged in that Group organization?

Mr. Lord. Actively, Senator?
Senator COUZENS. Yes.

Mr. Lord. Some of these listed are more or less honorary. I was president. Colonel Walsh gave a great deal of his time to Group activities.

Senator CotzENS. Did you get salaries separate from those you got from the units?

Mr. Lord. My salary, I believe, was split between the bank and the Group Co.

Senator COUZENS. Was that true also of Colonel Walsh?

Mr. Lord. I could not say. The chairman of the Group board, beginning in January 1932, was very active, and had no salary what

ever'.

Senator Coczexs. Have you any figures to indicate how many of the employees there were on full time in this organization?

Mr. LORD. No; but perhaps I can get them. [After conferring with associates.] Approximately 30, both in the examining department and the accounting department. The real active officers, from the standpoint of executive capacity, were the chairman, myself as president, Colonel Walsh, Mr. Patterson when he was with us, and the secretary, who was, I believe, Mr. Haberkorn, at that time, of the Group Co.

Senator Cotzens. Were any of those on the pay roll of any unit separately from the Group?

Mr. Lord. The salary may have been split between them as mine was. I only know about my salary.

The CHAIRMAN. What was your salary? Mr. Lord. Do you want it since I was with the institution? The CHAIRMAN. Yes. Mr. LORD. For a portion of the year 1927—you see, I became head of the bank on June 15 when it opened, and I was there the first of June-for that portion of the year my salary was $29,176.62.

Senator Couzens. In other words, you double that to get the annual salary?

Mr. LORD. No; not quite, because I was there 7 months. During 1928 I received $50,010. I don't know how that $10 came in. This is my income-tax record. In 1929 my compensation was $84,759.92. In 1930 my salary was divided between the Guardian Detroit Bank, which paid me $37.249.86, and the Guardian Detroit Co. which paid me $11,250. The Union Guardian Trust Co. which was a consolidation of our Guardian Trust Co. and the Union Trust Co.-I had been president of our Guardian Trust Co. prior to that consolidation-the Union Guardian Trust Co. paid me $7,499.88.

Senator COUZENS. Was that in 1930?
Mr. LORD. That was the

year, 1930.
Senator COUZENS. What was the aggregate of that?

Mr. LORD. About $56,000. In 1931 the Guardian Detroit Bank paid me $24,166.56. The Guardian Detroit Co. paid me $10,000. The Guardian Detroit Union Group paid me $7,500. It was apparently the first year in which the Group paid any of my salary. The Union Guardian paid me $6,666.66. That totals about $48,000. In 1932 my total compensation was $45,479.14, divided $25,312.56 to the Gronp and $20,156.58 to the bank. The reason that the increase came from the Group was that I was spending more of my time all the time on Group matters, and the board felt it was entirely proper that that institution should pay me.

Senator Couzens. Did you get any compensation after the banks closed?

Mr. LORD. I think I got a couple of thousand dollars; I don't remember. That was until after the first of April, and then it was cut off entirely.

The CHAIRMAN. What became of the bank finally?
Mr. LORD. The Guardian National Bank?
The CHAIRMAN. Yes.

Mr. LORD. It is still in the hands of receivers. It will have paid out 15 percent through the cooperation of the senior Senator here, and others in Washington. An arrangement has just been completed that will pay in full the depositors who had on the date of the holiday $1,000 or less. That has been done by the fine cooperation not only of the authorities here in Washington, but also some of the bank depositors who have waived their rights to that 5 percent so that the little fellow can get his money in full.

The CHAIRMAN. This has been paid out of loans from R. F. C.? Mr. LORD. Yes, sir, only in partSenator COUzens. He stated a while ago how it was divided up. Mr. LORD. I think, Senator Fletcher, when they get through even with the 5 percent, the bank will owe less than $28,000,000 to R. F. C. and will have paid back since December 31, 1932, to the depositors $105,000,000.

The CHAIRMAN. What became of this holding company?
Mr. Lord. It is in receivership.

The CHAIRMAN. Dil you sell any of the stock of the holding company to the public?

Mr. LORD. Did we sell any to the public?
The CHAIRMAN. Yes.

Mr. Lord. There were dealings in it all the time. Unfortunately, the stock was listed on the Detroit Stock Exchange; and I might say here that it was listed over my protest. No bank stock should ever be listed on an exchange.

The CHAIRMAN. And the public bought from the Exchange?

Mr. LORD. They bought it on the Exchange. The only direct offer. ing that the Guardian Detroit Group as such, my group, as against the Union Commerce Group, made, was in 1929. The Guardian Detroit Group offered to its stockholders the right to subscribe to an amount of stock equal to 10 percent of their holdings. The Union Commerce corporation did, however, make an offering, but I have not the record of it here.

Senator Couzens. Was that 10 percent all subscribed by your stockholders?

Mr. LORD. Yes, sir.

Mr. PECORA. Mr. Lord, as the board of directors of the Guardian Detroit Union Group, Inc., was constituted and as its various committees of the board of directors were constituted, there were represented on the board of directors the operating or executive heads of most if not all of the banks that were units of this group; is not that a fact?

Mr. LORD. Certainly the senior executives in most cases, Mr. Pecora, and in some cases the operating heads.

Mr. PECORA. Do you recall having appeared on April 23, 1930, before a meeting of the Committee on Banking and Currency of the House of Representatives during the second session of the Seventyfirst Congress, where hearings were being held on House Resolution No. 141 ?

Mr. LORD. Yes; I think so. That was the MacFadden committee, was it not?

Mr. PECORA. Yes. And at that time you read to that committee a prepared statement, many extracts from which have been embodied in the statement which you read to this committee this morning!

Mr. LORD. Some of them; yes.

Mr. Pecora. I have what purports to be a printed copy of that statement of yours to the house committee on April 23, 1930, and I want to read therefrom the following extract to see if you recall having made the statement [reading]:

Aside from the detail of illegality or any intent to usurp the functions or bamper the activities of the board of directors of a local unit bank, such a course would run directly counter to prudence, good judgment, and common

Experience indicates that the bulk of profitable business enjoyed by a given bank is the result of the personal efforts of the directors and officers. Hence any policy which impairs even in the slightest degree the prestige or enthusiasm of the local board of directors is a body blow at the growth of the local unit bank and therefore at the growth and prosperity of the group as a whole. The deliberate adoption of policies so obviously suicidal is unthinkable. Nevertheless extreme care must be exercised to insure that group management does not, perhaps unconsciously, encroach upon the statutory and customary authority and responsibility of the unit bank management. Accordingly, it is deemed advisable to particularly emphasize “the group policy of noninterference with local management” by formal action of the group board of directors.

Do you recall generally that statement?
Mr. LORD. It sounds familiar.

Mr. PECORA. In that statement you attempted to give the House Committee on Banking and Currency, in April 1930, a statement of a principle that was governing and guiding the board of directors of this Guardian Detroit Union Group?

Mr. LORD. In general; yes.

sense.

Mr. PECORA. As a matter of fact, Mr. Lord, was that principle strictly adhered to?

Mr. LORD. So far as I personally know, it was. It is not always possible to control some other individual. But it certainly was the policy of the Group to let the unit banks be run by their own boards and their own officers.

Mr. PECORA. Did the board of directors of the Group—and by the Group I mean the holding company known as the Guardian Detroit Union Group, Incorporated—have any control over the selection of the boards of directors of the unit banks in the Group?

Mr. LORD. I assume they had control, because the Group owned the stock. So far as exercising that control is concerned, I do not know whether it ever forced a director on a local unit, except in Flint, where that defalcation had occurred and where it was necessary to put 35 men in there to keep the bank running.

Mr. Pecora. Did the board of directors of the Group suggest from time to time to any of the local or unit banks names of persons to serve on the board of directors of your unit banks?

Mr. LORD. Mr. Pecora, before every annual meeting of these local banks the heads of the unit banks used to come in and discuss all of their plans for their boards and for the next year's business with me or with some of the other officers in the Group. Does that answer your question?

Mr. Pecora. It is an answer to the question.

Mr. Lord. The matter was discussed just like you would discuss it with any stockholder, a substantial stockholder.

Mr. PECORA. Now will you answer the question a little bit more specifically?

Mr. LORD. May I have it again, please?
Mr. Pecora. The reporter will read it.

(The question referred to was read by the reporter as above recorded.)

Mr. LORD. I think that might have been done at times where a bank perhaps needed some talent that we thought could be supplied either locally or from our own organization. I do not recall specific instances. Do you have such a specific instance in mind?

Mr. PECORA. I have before me what purports to be a photostatic reproduction of a letter addressed to Mr. L. H. D. Baker, of the National Bank of Commerce, Union Guardian Building, Detroit, Mich., dated July 24, 1931, which apparently was sent out by you. Will you look at it and tell us if it serves to refresh your recollection of an instance where the name of an individual was suggested by you on behalf of the Group to the officers or directors of a unit bank for inclusion on the board of directors of such unit bank?

Mr. LORD. Yes; I recall the incident rather vaguely.

Mr. Pecora. Would you say that was a true and correct copy of a letter sent by you to that gentleman ?

Mr. LORD." I think that is; yes.
Mr. Pecora. I offer it in evidence.
The CHAIRMAN. Let it be admitted and made a part of the record.

(Photostatic copy of letter dated July 24, 1931, addressed to L. H. D. Baker, National Bank of Commerce, Union Guardian Building, Detroit, Mich., was received in evidence, marked “ Committee Exhibit No. 4, Dec. 4, 1933.")

Mr. PECORA. I will read the exhibit to the committee (reading]:

COMMITTEE EXHIBIT NO. 4

JULY 24, 1931.

(Personal) MR. L. H. D. BAKER, % National Bank of Commerce,

Union Guardian Building, Detroit, Michigan MY DEAR LEE.--As you may know, Mr. D. F. Valley is giving a very considerable amount of his time toward the affairs of the Michigan Industrial Bank. In order to accomplish what we want, I think he should be a director in this bank and I am going to ask you if you will be good enough to send me your resignation as a director so that we can have the Board elect Mr. Valley in your place.

This is no reflection whatever upon you or your service to that institution. I do not think it wise to ask any of our outside directors to resign and am, therefore, taking the liberty of asking this favor of you. Very truly yours,

President. ROL N This letter was signed by you as president of the Group, was it not?

Mr. Lord. I believe so. I don't know whether it was signed by me as president of the Group or not.

Mr. PECORA. The initials below, in the left-hand corner, are “R. O. L."

Mr. LORD. Yes. I imagine it was written on the bank letterhead. Mr. PECORA. It was signed by your name, was it not? Mr. LORD. It was signed in my name. Mr. PECORA. What were you going to say about this? Mr. LORD. My recollection of the circumstances is rather vague. Mr. L. H. D. Baker was an employee or officer of the National Bank of Commerce. The matter of Mr. Valley taking his place on the Michigan Industrial Board was discussed personally with the president of the Michigan Industrial Board, and it was put up to them for their approval.

Senator COUZENS. Did he accept the suggestion? Mr. LORD. I believe so, because he left the bank shortly after that. Mr. PECORA. Do you know of any other instances where suggestions of a generally similar character were made and carried out?

Mr. LORD. I do not recall any specifically.

Mr. Pecora. I have here what purports to be a photostatic reproduction of a memorandum entitled "Intra-Group Memorandum " addressed to Mr. Joseph H. Brewer, president of the Grand Rapids National Bank, from Mr. Patterson, executive vice president, Guardian Detroit Union Group, Inc., bearing date September 29, 1931, and which reads as follows (reading]:

I anticipate that it is going to be necessary to make a few changes in the members of the board of directors of the National Bank of Ionia, but we will not do so until the next meeting. What would you think of the advisability of your going on the board in place of one man who we think has served his purpose to the institution (I do not refer to either Messrs. Green, Robinson, or Chapman)? Inasmuch as the bank is located only a short distance from you it probably would not require a great deal of your time, and I apprehend that your presence on the board would give it the right kind of balance, and as time goes on I am certain that the people of Ionia would more and more

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