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Now, Mr. Lord, after having heard that communication read, do you recall whether or not its contents were ever brought to your attention?

Mr. LORD. I do not recall the details of the contents. I do know that the impairment of capital was repaired, and I assume that all other requirements of the Comptroller's office were carried out.

Mr. PECORA. When did you first learn that the capital of this Niles Bank, one of your Group units, had become as seriously impaired as the Deputy Comptroller of the Currency says it was in this letter?

Mr. LORD. I do not recall, but I assume that that letter was written and received by Mr. Brandon.

Mr. PECORA. You have been telling this committee consistently since you began testifying here on the subject that the general procedure pursued by the Group in making suggestions to its unit banks with regard to dividend declarations by them was that before sug. gesting such a thing the executive officers of unit banks would indicate, either by mail, telephone, or other conversation, what was the condition of the unit banks.

Mr. LORD. Yes, sir.
Mr. PECORA. Now, is that so or not?
Mr. LORD. It is so.
Mr. PECORA. That is so?
Mr. LORD. Yes, sir.

Mr. PECORA. Well, then, didn't Mr. Brandon, sometime prior to the time when the Group was suggesting that his bank declare a dividend, in September of 1931, indicate to you the true condition of his bank, of its impairment of capital and its consequent inability to declare a dividend ?

Mr. LORD. I do not think that Mr. Brandon realized the condition of his bank until

Mr. PECORA (interposing). He did not?
Mr. LORD. No; I do not think so.

Mr. PECORA. Do you mean to say that Mr. Brandon was the kind of a bank executive that he did not realize, until it was brought to his notice by the national bank examiner, what the real condition of his bank was, with regard particularly to the serious impairment of capital

Mr. LORD. Mr. Pecora, later on

Mr. PECORA (interposing). Will you just answer that question ? Do you think that Mr. Brandon was that kind of bank executive!

Mr. LORD. I do.
Mr. PECORA. When did you first learn that he was that deficient !
Mr. LORD. After this examination.
Mr. PECORA. And not before?
Mr. LORD. But let me say this,
Mr. PECORA (interposing). And not before?

Mr. LORD. There was a question in our minds about Mr. Brandon for some time.

Mr. PECORA. Was he ever removed! I mean when that first came to your attention?

Mr. Lord. Not at first, but later.
Mr. PECORA. How long later was it?

Mr. LORD. I cannot remember the date when he was removed, but it was done by his own board of directors.

Mr. PECORA. And you don't know when it was?
Mr. LORD. It was before the bank holiday.
Mr. PECORA. The bank holiday was declared in the early part of

this year.

Mr. LORD. Yes, sir.
Mr. PECORA. And this was back in 1931.

Mr. LORD. I do not know when he was removed. But I will try to find out for you.

Mr. PECORA. Mr. Patterson, back there in the room, just indicated by a shake of his head that he was not removed. Mr. LORD. No: he said he did not know the date. Mr. PECORA. Oh, he did not know the date? Mr. LORD. No. And I do not recall the date of the removal. Mr. PECORA. Can't you get it?

Mr. LORD. I would not know where to get it except from the bank's records. Mr. Patterson thinks it was in April of 1932.

Mr. PECORA. On April of 1932, some 6 months after you learned of bis deficiencies?

Mr. LORD. I do not remember the date.
Mr. PECORA. The date of this was October of 1931.
Mr. LORD. All right. Sometime 6 months afterward; yes.

Mr. PECORA. All right. Now, I want to direct your attention to a matter concerning another one of your bank units, the Union State Bank of Dearborn. In that connection I want to show you what purports to be a photostatic copy of a letter addressed by you to Mr. Warren J. Rachow, president of the Union State Bank, Dearborn, Mich., under date of March 4, 1930. Will you kindly look at it and tell me if you recognize it to be a true and correct copy of such letter?

Mr. LORD (after reading the letter). I think that is correct.

Mr. PECORA. Mr. Chairman, I offer the letter in evidence and ask that it may be made a part of the record.

The CHAIRMAN. Let it be admitted, and the committee reporter will make it a part of the record.

(A letter dated Mar. 4, 1930, to Warren J. Rachow, president, Union State Bank, Dearborn, Mich., by R. O. Lord, was marked "Committee Exhibit No. 30, Dec. 20, 1933", and will be found immediately following, where read by Mr. Pecora.)

Mr. PECORA. The letter just received in evidence as Committee Exhibit No. 30, of this date, reads as follows:

MARCH 4, 1930. Mr. WARREN J. RACHOW, President, Union State Bank,

Dearborn, Michigan. DEAR MR. Rachow: 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 142 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 Building, 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 to 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, And it is signed by yourself. Mr. LORD. What is the date of that?

Mr. PECORA. March 4, 1930. It was the end of the first quarter of the existence of the Group.

Mr. LORD. Yes, sir.

Mr. PECORA. Do you recall what action was taken by the Union State Bank of Dearborn in response to this letter of yours?

Mr. LORD. I do not.

Mr. PECORA. Perhaps your recollection might be refreshed by looking at this letter, or what purports to be a photostatic copy of a letter, which I now show you, purporting to have been sent to you by Mr. Rachow, president of the Union State Bank of Dearborn, under date of March 7, 1930. Will you kindly look at it and tell me if you recognize it to be a true and correct copy of such a letter received by you about that time!

Mr. LORD (after reading the letter). I recognize Mr. Rachow's signature.

Mr. PECORA. Mr. Chairman, I offer it in evidence and ask that it be made a part of the record.

The CHAIRMAN. Let the letter be admitted, and the committee reporter will make it a part of the record.

(A letter dated Mar. 7, 1930, to R. O. Lord, written by Warren J. Rachow, President of the Union State Bank, Dearborn, Mich., was marked'" Committee Exhibit No. 31, Dec. 20, 1933", and will be found immediately following where read by Mr. Pecora.),

Mr. PECORA. The letter which has just been received in evidence as Committee Exhibit No. 31, written on the letterhead of the Union State Bank of Dearborn, Mich., dated March 7, 1930, reads as follows:

MARCH 7, 1930. Mr. ROBERT 0, LORD, President, Guardian Detroit Union Group, Inc.,

Detroit, Michigan. DEAR MR. LORD: Replying to your letter of March 4th, subject-Quarterly dividend which should be paid by our bank not later than March 27th, to stockholders of record March 17th, 1930, and suggesting that we declare a dividend of 142 per cent, desire to say.

At a regular meeting of our Board, held March 5th, this matter came up for action. Our director, Mr. Frank W. Blair, stated that 112 per cent would not be enough, suggesting that it should be 3 per cent quarterly, placing us upon a basis annually of 12 per cent. The suggestion was put in the form of a motion which was duly supported and carried unanimously. We will, therefore, set up $6000.00 for this purpose and mail you our draft covering the stock standing in the name of the Guardian Detroit Union Group, Inc., and the shares standing in the name of our directors in the manner suggested by you. Very truly yours,

WARREN J. RACHOW,

President. Mr. PECORA. The Mr. Frank W. Blair referred to in this letter was, at the time this letter was written, chairman of the board of he Group, was he not?

Mr. LORD. I believe he was.

Mr. PECORA. He was not an officer of the Union State Bank of Dearborn, was he?

Mr. LORD. He was a director. I would not say he was not an officer; I do not know.

Mr. PECORA. Mr. Frank W. Blair was vice president, according to this letterhead.

Mr. LORD. Then he was. Mr. PECORA. But according to the annual report of that bank for the year 1930, he was not an officer?

Mr. LORD. Mr. Blair is here. Perhaps he knows when he resigned as an officer.

Mr. PECORA. But he was a director?
Mr. LORD. Yes, sir.

Mr. PECORA. Do you know any reason why this particular bank at this time should have gone beyond your suggestion with respect to the dividend it should declare and to have accepted rather the suggestion of one of its directors, Mr. Blair, who happened at the time to be the chairman of the Group board?

Mr. LORD. I have not the slightest idea, Mr. Pecora. I was not at the meeting. So far as I know, I was never told the reason for that increase in the dividend. I assumed the bank could afford to make the increase. I do not know.

Mr. PECORA. Would you further assume that Mr. Blair, as chairman of the Group board, had an influence on the board of this bank that was enhanced because he was chairman of the Group?

Mr. LORD. I would not know that. I do not know what relationship Mr. Blair had with his fellow directors of the Union State Bank. I assume they respected him or they would not have had him as a director.

Mr. PECORA. Do you think they also respected his position as chairman of the Group board ?

Mr. LORD. I have no doubt of it. Mr. PECORA. Neither have I. Now, Mr. Lord, I want to show you a typewritten statement purporting to represent the amounts of dividends declared by different bank units of the Group to the Group during the years 1929, 1930, 1931, and 1932, respectively. Will you please look it over and tell us if it is a correct statement of such dividends?

Mr. LORD. Mr. Pecora, I have no way of checking the accuracy of this statement.

Mr. PECORA. Do you know Mr. Ubank?
Mr. LORD. Yes, sir.
Mr. PECORA. He is connected with the Group, is he not?
Mr. LORD. Yes.

Mr. PECORA. Do you recognize the initialing on the lower righthand corner of that typewritten statement as the initials of Mr. Mr. LORD. He is here; I can ask him. Mr. PECORA. Will you show it to Mr. Ubank and ask him if he confirms those figures?

Mr. LORD (after conferring). He does.
Mr. PECORA. I offer it in evidence.

Ubank?

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The CHAIRMAN. Let it be admitted.

(Typewritten statement showing amounts of dividends declared by various bank units of the Group during the years 1929, 1930, 1931. and 1932, respectively, was received in evidence, marked " Committee Exhibit No. 32, Dec. 20, 1933.")

Mr. PECORA. The exhibit which has been received in evidence as Committee's Exhibit No. 32 of this date shows that during the year 1929 certain of the unit banks of the Group paid to the Group divi. dends aggregating $886,104; that during the year 1930 such banks paid to the Group dividends aggregating $5,000,866.60; that during the year 1931 the unit banks, or some of them, paid in the aggregate to the Group dividends amounting to $3,194,093.49; that during the calendar year 1932 unit banks paid dividends aggregating $663,000, making a total paid to the Group by the unit banks for all of the calendar years 1930, 1931, and 1932, and for the last month or so of 1929, dividends aggregating $9,744,064.09; and that during the year 1933 a dividend of $15,625 was paid to the Group by the Second National Bank & Trust Co. of Saginaw, and that a dividend of $30,000 was paid to the Group by the Highland Park State Bank, the total of which two amounts is $45,625, which should be added to the total already stated of $9,744,064.09.

I show you another typewritten statement entitled “Guardian Detroit Union Group, Inc., Summary of Cash Dividends." Will you look at it and tell me if the figures shown thereon correctly set forth the cash dividends paid out by the Group for the periods of time specified therein, which commence with the 20th of June 1929 ?

Mr. LORD. I assume it is correct. I recognize Mr. Ubank's signature on it.

Mr. PECORA. Mr. Ubank has confirmed the correctness of it, has he not?

Mr. LORD. He has initialed it.
Mr. PECORA. I offer it in evidence.
The CHAIRMAN. Let it be admitted.

(The typewritten statement referred to, entitled “Guardian Detroit Union Group, Inc., Summary of Cash Dividends", was received in evidence, marked " Committee Exhibit No. 33, Dec. 20, 1933.")

Mr. PECORA. The paper which has just been received in evidence as exhibit 33 of this date shows total cash dividends paid by Guardian Detroit Union Group, Inc., beginning with June 20, 1929, and ending on March 25, 1932, the sums aggregating $9.293,639.90.

When was the last cash dividend declared by the Group? It was in March, 1932, was it not!

Mr. Lord. It was paid April 1, 1932.
Mr. PECORA. For the first quarter of 1932?
Mr. LORD. Yes.
Mr. PECORA. And that was the last cash dividend?
Mr. LORD. A 25-cent dividend.
Mr. PECORA. Why were dividends discontinued after that time?

Mr. LORD. Because it was felt wiser to conserve the resources of the institution.

Mr. PECORA. Now I will ask you another question, Mr. Lord. Who prepared the annual reports that were sent to the stockholders of the Group?

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