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Senator COUZENS. Has any double liability been paid yet?
Mr. LORD. I think so, Senator.

Mr. Pecora. Mr. Lord, I show you what purports to be a photostatic reproduction of a letter addressed by you under date of March 4, 1930, to Mr. Frank Brandon, president of the City National Bank & Trust Co. of Niles, Mich. Will

you

look at it and tell me whether you recognize it to be a true and correct copy of such letter sent by you to Mr. Brandon on or about March 4, 1930?

jr. LORD, I would think so.
Mr. PECORA. I offer it in evidence.
The CHAIRMAN. It will be admitted.

(Photostatic copy of letter dated March 4, 1930, to Mr. Frank Brandon from Robert 0. Lord, was received in evidence, marked " Committee Exhibit No. 9, December 19, 1933.")

Mr. PECORA. The letter received in evidence as Committee's Exhibit No. 9 of this date reads as follows (reading] : COMMITTEE Exhibit No. 9

MARCH 4, 1930. Mr. FRANK M. BRANDON,

President City National Bank & Trust Co., Viles, Jich. DEAR MR. BRANDON : To provide the dividend requirements of the Guardian Detroit Union Group, Inc., on the basis of an annual disbursement of $3.20 per share, the dividend should be declared at the March meeting of your Board of Directors. I would suggest, therefore, that it would be in order for your board to declare a dividend of 2,4% for this quarter. This dividend should be payable not later than March 27th to stockholders of record March lith, and a check to cover the dividend on the shares standing in the name of Guardian Detroit Union Group, Inc., as well as the shares standing in the names of your directors, should be in the hands of Mr. B. K. Patterson, Treasurer, Penobscot Bldg., Detroit, on that date or on the date following. Your proportionate share of the expenses of the Group Company, incurred on account of services rendered by that company, will be figured and a memorandum sent you at a later date.

Please be good enough to promptly confirm this arrangement and advise me upon the declaration of your dividend. Very truly yours,

President. You signed that, I presume, as president, did you, Mr. Lord? Mr. LORD. I presume so. Mr. PECORA. "Comparing the phraseology of this last letter, exhibit no. 9, the one that I have just read, with the phraseology of your letter to Mr. Stalker marked " Exhibit No. 6", it would seem that the leters are practically identical in form. Does that occur to you, Mr. Lord, as being the fact !

Mr. LORD. Somewhat; yes.

Mr. PECORA. Was this a form letter that was used by the Group in order to advise the officers of the unit banks what dividends they should declare?

Mr. Lord. I would not call it a form letter; no. Mr. PECORA. Was it by accident that practically the identical phraseology is used in these letters?

Mr. LORD. I would think so; yes. I do not recall that there were ever any form letters used on that.

Mr. PECORA. Perhaps a similar accident occurred when this letter was drafted to Mr. Stalker and sent on March 4, 1930, a photostatic copy of which I now show you, and which I ask you to please look at and tell me if it is a true and correct copy of such letter.

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Mr. LORD. I do not get your point on the form letter, Mr. Pecora. They are expressed very much in the same way, almost identically.

Mr. PECORA. Would not that indicate that a form of letter suitable for this purpose had been prepared and was being consistently used ?

Mr. LORD. I do not think so.

Mr. PECORA. Then the drafting of these letters in identical phraseology was always an accident-or was it by design?

Mr. Lord. I do not know that it was an accident. I may have told my secretary to get out some previous letters that had been written on the question of dividends, and he may have read the letter and said that was the simplest.

Mr. PECORA. Is not that another way of saying a form letter was used on these occasions ?

Mr. LORD. I would not think so, Mr. Pecora.

Mr. PECORA. The same form of letter was followed in all these instances. Mr. Lord. The same general language; yes, sir.

Mr. PECORA. I offer in evidence the letter which has just been shown the witness.

The CHAIRMAN. Let it be marked.

(The document referred to, letter, Mar. 4, 1930, Lord to Stalker, was received in evidence, marked " Committee Exhibit No. 10", Dec. 19, 1933, and the same was subsequently read into the record by Mr. Pecora.)

Mr. PECORA. The letter last offered in evidence as exhibit no. 10, of this date, is as follows [reading]:

MARCH 4, 1930. Mr. John N. STALKER, President, Union Trust Company,

Detroit, Michigan. DEAR MR. STALKER: To provide the dividend requirements of the Guardian Detroit Union Group, Inc., on the basis of an annual disbursement of $3.20 per share, the dividend should be declared at the March meeting of your Board of Directors. I would suggest, therefore, that it would be in order for your board to declare a dividend of 4 percent for this quarter. This dividend should be payable not later than March 27th to stockholders of record March 17th, and a check to cover the dividend on the shares standing in the name of Guardian Detroit Union Group, Inc., as well as the shares standing in the names of your directors, should be in the hands of Mr. B. K. Patterson, Treasurer, Penobscot Bldg., Detroit, on that date or on the day following. Your proportionate share of the expenses of the Group Company, incurred on account of services rendered by that company, will be figured and a memorandum sent you at a later date.

Please be good enough to promptly confirm this arrangement and advise me upon the declaration of your dividend. Yours very truly,

President. Signed by you as president.

I notice that the language of this letter is identical with the language of the other letter-not generally the same, but actually the same.

Mr. LORD. Is there any objection?

Mr. PECORA. I am not offering any objection. I am simply trying to develop the facts as to whether or not a form of letter had

been agreed upon and prepared and consistently used in all these instances.

Mr. LORD. I do not think I know of any discussion ever had on that form of letter. Probably it was my own dictation of the letter, my own thought in the letter, my own way of expressing it. Mr. PECORA. Did you have this phraseology memorized ? Mr. Lord. No. I probably took preceding letters. Mr. Pecora. And told your secretary to follow that language? Mr. LORD. Yes.

Mr. PECORA. You still would not call that the adoption of a form letter.

Mr. LORD. No; because every letter sent out was not that way, was it?

Mr. PECORA. What is that?

Mr. Lord. Was every letter sent out in regard to dividends exactly like that?

Mr. PECORA. Every one I have seen.

Mr. LORD. I have no copies of the correspondence, Mr. Pecora, except what you have shown me.

Mr. PECORA. Were you the author of this form of letter? I will not call it a form letter. I will call it a form of letter.

Mr. LORD. I assume I was, if I signed it. I do not know, Mr. Pecora.

Mr. PECORA. You did sign it, did you not?
Mr. LORD. I said I signed it, and I assume I was the author.

Mr. PECORA. But then you said “I do not know.” What is the fact? Are you the author of this form of letter?

Mr. LORD. I assume so.
Mr. PECORA. Dont' you know so?

Mr. LORD. As long as I signed it, I probably was the author. I have not any reason to think otherwise as to any letter I signed.

Mr. PECORA. If it was not the policy of the Group, expressed by these letters to the executive officers of the unit banks, to have the Group first determine the dividend it would pay to its stockholders, and then notify the unit banks that in order to enable the Group to pay that dividend the unit banks would have to make certain dividend contributions in the form of dividends at rates specified by you, then what do you mean when, in preparing this form of letter, you state. in the opening sentence in all cases, as follows (reading] :

To provide the dividend requirements of the Guardian Detroit Union Group, Inc., on the basis of an annual disbursement of $3.20 per share, the dividend should be declared at the March meeting of your board of directors. I would suggest, therefore, that it would be in order for your board to declare a dividend of 4 percent for this quarter.

Mr. LORD. It was necessary to budget the expenses and the dividends of the group corporation, of course, up to the next quarter, or within a few weeks of the declaration of the dividend. How could we know?

Mr. Pecora. But didn't you really put the cart before the horse in these instances, because it would seem from your letters to these bank officers that you first notified them what dividend disbursement was going to be made?

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Mr. LORD. No; I notified them what would be required to maintain

I a certain dividend on the Group stock.

Mr. PECORA. Then, in order to maintain an annual disbursement of $3.20 per share to the stockholders of the Group stock, you made the suggestions to the heads of the unit banks concerning the amount of dividends that those unit banks should declare and pay to the Group, did you not! ?

Mr. LORD. Suggestion; yes.
Mr. PECORA. It never was more than a suggestion, of course?
Mr. LORD. I do not think so; no.

Mr. PECORA. In form, anyway; because you are careful to say "I would suggest, therefore, that it would be in order for your board to declare a dividend " at a certain rate. But don't you think, Mr. Lord, as you look back on the events, that these suggestions of yours, couched as suggestions in the phraseology that you used, were really accepted by the officers and directors of the unit banks as commands from the throne ?

Mr. LORD. Knowing those boards, no; I would not think so.

Senator COUZENS. Was there any case where it was not followed out?

Mr. LORD. I think there were, Senator Couzens. I would have to check it up. I recall several cases where the amount was changed, or no dividend at all was paid.

Mr. Pecora. Those several cases were very, very few in number, were they not?

Mr. Lord. As I say, I don't know exactly what cases there were, but I have a recollection of my suggestion being changed.

Mr. PECORA. I observe that in your letter to Mr. Stalker of March 4, 1930, the letter received in evidence as exhibit no. 10, you suggested that his board, the board of the Union Trust Co. of Detroit, should declare a quarterly dividend at the rate of 4 percent for the quarter; but in the letter you wrote to him under date of June 4, 1930, which was the ensuing quarter, you suggested that the dividend rate for the quarter be 5 percent instead of 4 percent. When you made that suggestion and suggested an increase in the dividend rate for the second quarter of the year 1930 to Mr. Stalker's bank, did you know that their earnings had fallen off, and they were not equivalent to 4 percent for the quarter?

Mr. Lord, I would not know whether I knew at that time or not. Mr. PECORA. Didn't you say

Mr. Lord. I assume if I made that suggestion of an increase, I assumed the earnings were sufficient to justify it.

Senator Couzexs. In making all these suggestions to your units, did you just do it arbitrarily, or did you have a record of the earnings!

Mr. LORD. We had a record of the earnings, but in this particular case, Senator Couzens, the merger took place in that period between the two trust companies, and it was a very probable thing that I had no earnings figures at that time, in view of the details of consolidation.

Senator ('OUZENS. So, notwithstanding the fact that you had no record of the earnings, you fixed the dividend for them.

Mr. Lord. I suggested a 5-percent rate.

Mr. Pecora. As a matter of fact, Mr. Stalker's reply to your letter of June 4, 1930, which has been received in evidence here as Committee's Exhibit No. 7, tells you, or says specifically [reading]: However, as you are aware, a dividend of this amount has not been earned.

Does not that refresh your recollection to the point where you can tell this committee that when you wrote to Mr. Stalker on June 4, 1930, suggesting a dividend rate for the quarter of 5 percent, that you knew the earnings did not justify it?

Mr. Lord. Not to me; no. May I ask this, Mr. Pecora : Do you know what the earnings were for that 6 months? Do you know that the board of directors may not have gotten up-to-date earnings at the time of the declaration of their dividend, and justified it? I do not know.

Mr. PECORA. I simply know what Mr. Stalker, the president of the bank, knew, and said in his letter to you of June 5, 1930, that you knew, where he said [reading] : However, as you are aware, a dividend in this amount has not been earned.

Don't ask me what I know. I know only what the record shows, and this letter is part of the record, and was addressed to you, and reminds you of what was apparently a matter of knowledge on your part at that time, namely, that the dividend of 5 percent had not been earned. Now you tell us what you know about that, will you?

Mr. Lord. I have no recollection except from the correspondence that you gave me. I assume that the directors discussed the situation thoroughly, and in their judgment felt if safe and proper to declare that dividend, or they would not have done it.

Mr. PECORA. Do you persist in saying that, Mr. Lord, in the light of what Mr. Stalker wrote to you under date of June 5, 1930 ?

Mr. LORD. I do not declare dividends. I was one director out of 50 or 60.

Mr. PECORA. We know you had no legal power to declare the dividends, but we also know that you were the president of the group which owned these banks, controlled the designations of members of the board, and had effected an arrangement whereby persons becoming members of the board entered into an agreement to exchange, upon the termination of their membership upon the board, their qualifying shares for stock of the group. We know that, and so do you, do you not?

Mr. Lord. Surely.

Mr. PECORA. Now, Mr. Lord, I show you what purports to be a photostatic reproduction of a letter addressed by you to Mr. Henry H. Sanger, president of the National Bank of Commerce, of Detroit, Mich., under date of March 4, 1930. Will you look at it and tell us if you recognize it to be a true and correct copy of a letter sent by you to Mr. Sanger on that date?

Mr. LORD. I think so; yes, sir.
Mr. PECORA. I offer it in evidence.
The CHAIRMAN. Let it be admitted.

(The document referred to, letter, March 4, 1930, Lord to Sanger, was received in evidence, marked“ Committee Exhibit No. 11 ", December 19, 1933, and the same was subsequently read into the record by Mr. Pecora.)

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