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Mr. PECORA. Will you enumerate such other mistakes as composed the “ many mistakes” you referred to?

Mr. LORD. I think one mistake that we made was that we did not liquidate our securities companies immediately in 1929.

Mr. PECCRA. Any others that you think of?

Mr. LORD. None in detail that I can recall at this time. I suppose if I went through I could pick out a lot more.

The CHAIRMAN. Could you have liquidated your securities?

Mr. Lord. Some of them, yes. But everyone felt, the general opinion was, that the depression was temporary and that recovery was a matter of a few weeks or months.

Senator ADAMS. Very high-grade authorities for that!
Mr. LORD. On very high-grade authority.

Mr. PECORA. After the consolidation of the Guardian Detroit Group, Inc., and the Union Commerce Corporation into the Guardian Detroit Union Group, Inc., what was, at their peak, the highest amount of resources controlled by the Guardian Detroit Union Group, Inc.?

Mr. LORD. I am sorry I cannot answer that. I think it was over 500 million, taking all the institutions.

Mr. PECORA. And what at their peak was the aggregate amount of deposits in the unit banks that were combined in this group?

Mr. LORD. My recollection is somewhere upwards of 420 million.

Mr. PECORA. Can you tell the committee in how many different cities or communities throughout the State of Michigan the Group controlled or owned bank units?

Mr. Lord. My recollection is 16. I could tell them by checking

it up

Mr. PECORA. And how many separate unit banks were comprehended in the Group?

Mr. LORD. At the start or at the time of the holiday, Mr. Pecora?
Mr. PECORA. Well, say at their peak first, the peak number?
Mr. LORD. I cannot answer that. I think there were 27.

Mr. PECORA. There were 10 national banks, 10 state banks, 7 securities companies, 2 joint stock land banks, 3 building companies, a title company, and a safe-deposit company, were there not?

Mr. LORD. That sounds about correct; yes, sir.

Mr. PECORA, Now, what was the original issuing price of the shares of the Group?

Mr. LORD. You mean the par value?
Mr. PECORA. The original issuing price.

Mr. Lord. There were no shares of the Group sold to the public, of the Guardian Detroit Group, except on that 10 percent subscription under which they were sold at $90 per share.

Mr. PECORA. To whom were those shares originally distributed ?
Mr. LORD. They were distributed to the then stockholders.
Mr. PECORA. Of the banks that had been acquired?

Mr. Lord. No; that started the Group. On the subscription rights that were distributed to then stockholders of the Group who had been stockholders of the banks acquired.

Mr. PECORA. That is the group composed of three institutions whose ownership is covered by the unified stock?

Mr. LORD. Yes, sir. You see, that was turned into Group stock, and Highland Park Institutions were acquired, and those stockholders were given the right to subscribe to the extent of 10 percent of their holdings.

Mr. PECORA. Now, what sources of income did the Group have after it consolidated with the Union Commerce Corporation on December 16, 1929?

Mr. LORD. It was principally from the dividends on the stock of the institutions.

Mr. Pecora. You say that was its principal income?
Mr. LORD. That was its principal income.
Mr. PECORA. Did it have income from other sources ?

Mr. LORD. It had income from its cash and minor assets that it might have, but that did not amount to a great deal as compared with the dividends from its units.

Mr. PECORA. Did the Group receive any payments from any of the unit banks for services of a supervisory or advisory nature?

Mr. LORD. I think at one time there was a slight service charge made, and the basis on which it was made and the amount I do not recall, Mr. Pecora. That did not come under my scope, the arrangement there.

The CHAIRMAN. You mean to say that of these upwards of 420 millions of deposits, 65 percent have been paid ?

Mr. PECORA. No; he was referring this morning in that testimony to only one bank.

Mr. Lord. Just to the Guardian National Bank of Commerce of Detroit, Senator Fletcher.

Mr. PECORA. How much of these deposits have been paid, of the 420 million?

Mr. Lord. I can only give you a very rough estimate. At the peak of 420 million, the aggregate deposits that are held unpaid today and are tied up in the course of being paiid through liquidation of banks that are closed or are in the hands of conservators, would run somewhere, as I recall it, around 90 million dollars. All the rest of it has either been paid back or is in banks that are paying a hundred percent, and you or I, who care to, can go in and get our money any time we want. That is merely an estimate, but I think that would be approximately correct, about 90 million dollars.

The CHARMAN. You mean to say the depositors have lost about 90 million !

Mr. LORD. They have not lost it, because that is in course of liquidation in those banks.

Mr. Pecora. Now, did the directors and officers of the Group exercise any control over the declaration of dividends by the unit banks!

Mr. LORD. Exercise any control?
Mr. PECORA. Yes.
Mr. LORD. No, sir.

Mr. PECORA. Did they exercise any judgment at all with respect to the declaration of dividends by the unit banks?

Mr. LORD. They frequently suggested to the board the amount which they should consider in the matter of dividends.

Mr. PECORA. How frequently were such suggestions made to the various unit banks?

Mr. LORD. I assume every dividend date, because the units wanted to know what their contribution was to be.

Senator COUZENS. Contribution to what?
Mr. LORD. To the income of the Group Co., Senator Couzens.

Mr. PECORA. That is, the Group Co., in order to pay dividends to its stockholders, had to first receive dividends from the unit banks?

Mr. LORD. That is correct, sir.

Mr. PECORA. And the amount of dividends paid by the Group to its stockholders depended almost entirely upon the amount of diviJends that the Group received from the unit banks!

(Mr. Lord made no reply to the question.) Mr. PECORA. I have what purports to be a copy of a resolution which was adopted by the board of directors of the Guardian Detroit Group, Inc., on June 14, 1929, as appears from page 39 of the minute book of that company. Will you look at it and tell me if you recognize it to be a true and correct copy of the resolution so adopted on that date?

Mr. LORD (after examining document). Mr. Pecora, I would not know whether it was.

Mr. PECORA, What is that?

Mr. LORD. I would not know whether that is correct or not. I haven't the original of the minutes. I assume it was copied by your representatives and it is corret. I do not know whether it is correct. I haven't the original minutes here.

Mr. PECORA. Well, we have what purports to be a photostatic reproduction of page 39 of the minute book of the board of directors of the Guardian Detroit Group, Inc., reciting that resolution. Will you look at it and tell us if you recognize that to be a true and correct copy of that page of the minute book?

Mr. LORD (after comparing documents). That seems to be correct.
Mr. PECORA. I offer it in evidence.
The CHAIRMAN. Let it be admitted and entered on the record.

(Typewritten sheet purporting to be a copy of page 39 of Minute Book of Guardian Detroit, Group, Inc., was thereupon designated - Committee Exhibit No. 5, December 19, 1933.")

Mr. PECORA. I will read page 39 of the minute book into the record : Meeting of the directors of the above-named company

Namely, Guardian Detroit Group, Inc.beld June 14, 1929, in the office of the company, Penobscot Building, Detroit, Mich., at 12:15 p.m.

Meeting of the board of directors of the Guardian Detroit Group, Inc., was held at the time and place above named.

Mr. H. E. Bodman, chairman of the board, presided, and L. K. Walker acted às secretary of the meeting. All of the directors of the company were present except Mr. Edsel D. Ford. A waiver of notice of the meeting, signed by Mr. Ford, was presented and ordered placed on file.

The following resolution was offered, and being duly seconded, was unanimously adopted :

* Whereas dividends have been declared upon the stock of Guardian Detroit Bank, Guardian Trust Co. of Detroit, Guardian Detroit Co., Highland Park State Bank, and Highland Park Trust Co., payable in each instance June 28, 1929; and

" Whereas this company will be in receipt of funds resulting from the parment of such dividends sufficient to cover the dividends hereinafter declared : Now therefore be it

" Resolved, That a regular dividend of 50 cents per share and an extra dividend of 25 cents per share be and the same are hereby declared upon the stock of this company payable July 1, 1929, to stockholders of record at the close of business June 20, 1929." There being no business to come before said meeting, same is adjourned.

L. K. WALKER, Secretary. From time to time, Mr. Lord, did you, as the president of the Group, convey requests, both orally and in writing, to various bank units in the Group suggesting the dividend rate which such bank units should declare?

Mr. LORD. I think I conveyed suggestions to the board for their consideration.

Mr. PECORA. Were those suggestions ever rejected ? Mr. LORD. I would say that they were in cases. Mr. PECORA. In about what proportion of the cases did a rejection of the suggestion follow.

Mr. LORD. I would say a very small proportion, because the suggestions were always reasonable.

Mr. Pecora. Now I show you what purports to be a photostatic copy of a letter addressed by you as president of the Group to Mr. John N. Stalker, president of the Union Guardian Trust Co. of Detroit, dated June 4, 1930. Will you look at it and tell me if you recognize it to be a true and correct copy of such a letter sent by you to Mr. Stalker on or about that date?

Mr. LORD. It is pretty difficult to read, Mr. Pecora. Is this the only copy you have of it ?

Mr. PECORA. Yes.

Mr. LORD (after perusing document). I would think that was the true and correct copy:

Mr. PECORA. I offer it in evidence.
The CHAIRMAN. Let it be admitted and entered in the record.

(Photostat of letter from Robert 0. Lord to John N. Stalker, dated June 4, 1930, was thereupon designated " Committee Exhibit No. 6, December 19, 1933.")

Mr. PECORA. The letter received in evidence as Committee's Exhibit No. 6 reads as follows:

JUNE 4, 1930. Mr. John N. STALKER. President Union Guardian Trust Co.,

Detroit, Mich. DEAR MR. STALKER: To provide for the dividend requirement of the Guardian Detroit Union Group, Inc., on the basis of an annual disbursement of $3.20 per share, a dividend should be declared at the June meeting of your board of directors. I would suggest, therefore, that it would be in order for your Board to declare a quarterly dividend equal to 20 percent annually.

This dividend should be payable not later than June 27, 1930, to stockholders of record, June [it aj pears to be] 16, and a check for $28.024.00 covering the shares standing in the name of Guardian Detroit Union Group, Inc., as well as directors qualifying shares, the dividends on which have been assigned to us, should be in the hands of Mr. B. K. Patterson, treasurer, Penobscot Building, Detroit, Mich., on the 27th instant or on the day following.

Please be good enough to promptly contirm this arrangement and advise me upon the declaration of your dividend.

Yours very truly,

Signed, I take it, by you as president. Now, did you after you sent this letter to Mr. Stalker, receive from him a reply in writing, a photostatic copy of which I now show you?

Mr. LORD (after perusing document). I assume this came to me.
Mr. PECORA. I offer that in evidence.
The CHAIRMAN. Let it be admitted and entered in the record.

(Letter dated June 5, 1930 from John N. Stalker to Robert O. Lord was thereupon designated “ Committee Exhibit No. 7, December 19, 1933".)

Mr. PECORA. The letter just received in evidence as committee's
Exhibit No. 7 reads as follows, on the letterhead of Guardian Detroit
Union Group, Inc. [reading]:

INTRAGROUP MEMORANDUM
Date: June 5, 1930.
To: Mr. Robert 0. Lord.
From: Mr. John N. Stalker.

DEAR MR. LORD: We have your letter of the 4th instant with respect to the 5 percent quarterly dividend, which you suggest that we pay this month. I presume a dividend of this amount is necessary to the fulfillment of your plan and the officers are prepared to recommend it to the Board. However, as you are aware, a dividend of this amount has not been earned. In addition to that, the Trust Company is setting up no reserves and we feel that is not as it should be. There is no doubt in my mind that the company will suffer some losses.

I want to bring up at this time, so that it will not be overlooked, the fact that in turning over our Bond Department to the Guardian Detroit Company we lost a very important source of earnings, which even under present conditions would mean over $300,000 per year. Were our earnings sufficient to justify dividends at the annual rate of 20 percent, we would not raise a question of the loss in income from the Bond Department, but under the circumstances, we feel that the Trust Company is entitled to and must have some relief the latter part of the year.

JOHN N. STALKER. Mr. PECORA. When you received this letter from Mr. Stalker in which he pointed out that the suggested dividend rate of 20 percent per annum which was embodied in your letter to Mr. Stalker of June 4, 1930, had not been earned, and that no reserves had been set up by the company, what did you do about the matter? Mr. Lord. Have you no further correspondence on the subject ? Mr. PECORA. Have you no recollection?

Mr. LORD. I have no recollection. I assumed the company had a substantial undivided profit account from which it could pay its dividend.

Mr. PECORA. And you are willing to assume that the directors of this unit bank, despite the fact that its president had brought to your attention immediately upon receipt by him of your letter suggesting, as you call it, a dividend declaration at the rate of 20 percent per annum, carried out your suggestion?

Mr. LORD. Mr. Pecora, I assumed that the directors of the Union Guardian Trust Co. used their judgment in the declaration or nondeclaration of the dividend.

Mr. Pecora. And their judgment coincided with your suggestion, did it not?

Mr. LORD. Apparently. I have no record to show whether that amount was declared at that time.

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