General journal and statement of condition of Union Guardian Trust Co., Detroit, Mich., Feb. 11, 1933-Continued General journal and statement of condition of Union Guardim Trust Co., Detroit, Mich., Feb. 11, 1933-Continued Northern Trust Co., Chicago, Illinois. Guaranty Trust Co., New York, New York. Totals.. Debit $2,879.61 410, 953. 78 STOCK EXCHANGE PRACTICES THURSDAY, JANUARY 18, 1934 UNITED STATES SENATE, SUBCOMMITTEE OF THE COMMITTEE The subcommittee met at 10 a.m. pursuant to adjournment on yesterday, in room no. 301, of the Senate Office Building, Senator Duncan U. Fletcher presiding. Present: Senators Fletcher (chairman), Adams, Townsend, and Couzens. Present also: Ferdinand Pecora, counsel to the committee; Julius Silver and David Saperstein, associate counsel to the committee; and Frank J. Meehan, chief statistician to the committee. The CHAIRMAN. The subcommittee will come to order, please. I see that Mr. Mott has resumed the witness seat at the committee table. TESTIMONY OF CHARLES S. MOTT, FLINT, MICH.-Resumed Mr. PECORA. Mr. Mott Mr. MOTT (interposing). Mr. Pecora, may I correct my last answer? Mr. PECORA. Yes. Mr. MoTT. Due to the confusion I forgot for the moment. I did make a demand on Mr. Covington for payment in October. Mr. PECORA. In October of 1933? Mr. MOTT. In October of 1933; yes; a written demand. Mr. MOTT. I haven't it here. Mr. PECORA. Is it in the form of a letter? Mr. MOTT. Yes. Mr. PECORA. What reply did you get to it? Mr. MOTT. That he was unable to make payment at this time. Mr. PECORA. When were the interest installments due and payable on the note? Mr. MOTT. The note did not specify. The note simply specified that it was a demand note. Mr. PECORA. Will you produce the note if you have it, Mr. Mott? Mr. MOTT. I have it right here. Mr. PECORA. All right. Mr. MOTT. Here it is. 4887 Mr. PECORA, A collateraled note produced by the witness. I will read into the record, it being an original demand note, I do not think the committee reporter should mark it as an exhibit. [Reading:] DETROIT, MICH., December 14, 1933. On demand after date I promise to pay to C. S. Mott, or order two hundred and forty thousand and no/100 dollars, at the Guardian National Bank of Commerce, Detroit, Mich. Value rereived. With 6 percent interest per annum from date. HARRY S. COVINGTON. Then there is a marginal notation on the face of the note, reading as follows: Collateraled by 30,000 shares of Guardian Detroit Union Group, Inc., stock. No endorsements of any kind appear on the note. I now return the note to you, Mr. Mott. Mr. MOTT. I thank you. The CHAIRMAN. Do you still have the collateral, Mr. Mott? The CHAIRMAN. And you still have it? Mr. MoTT. Yes; it is right here. The CHAIRMAN. All right. Mr. PECORA. Have you the stock certificates that were the subject of this transaction? Mr. Morr. Yes. Here it is. Mr. PECORA. The certificate produced by the witness was issued by the Guardian Detroit Union Group, Inc., to Harry S. Covington, for 30,000 shares of the capital stock of the Group. Senator COUZENS. Does it state the par value of the stock! Mr. PECORA. It has a par value of $20 a share. I should like to read for the purpose of the record the following description which is printed on the back of the stock certificate: Article 9 of articles of association: The holders of stock of this corpora tion shall be individually and severally liable (in proportion to the number of shares of its stock held by them respectively) for any statutory liability imposed upon this corporation by reason of its ownership of shares of the capital stock of any bank or trust company, and the stockholders of this corporation, by the acceptance of their certificates of stock of this corporation, severally agree that such liability may be enforced in the manner that statutory liability may now or hereafter be enforceable against stockholders of banks or trust companies under the laws of the United States or the State of Michigan. A list of the stockholders of this corporation shall be filed with the banking commissioner of Michigan and the Comptroller of the Currency whenever requested by either of these officers. This corporation reserves and shall have the right from time to time, upon affirmative vote of three fourths of its directors, to issue and dispose of all or any of its unissued or increased stock for the purpose of acquiring stock of banks, trust companies, and other corporations, without offering to the stockholders of this corporation for subscription any of the stock so to be disposed of, The certificate is endorsed in blank by Harry S. Covington under date of December 14, 1932. Now, Mr. Mott, will you tell me in whose handwriting appears the filled-in matter on the face of the note that you received from Mr. Covington and which has been read into the record? Mr. Morr. That is Mr. Covington's handwriting, I believe. At least, I believe it is. He handed me the note. I do not remember that I saw him make the note out. Mr. PECORA. In whose handwriting is the date reading " December 14, 1932", which appears on the back of the certificate of stock that you have produced here and which appears directly over the endorsement of Harry S. Covington? Mr. MorT. Really, not being a handwriting expert, I hardly feel that I would be very well qualified to answer that question. If it was similar to Mr. Covington's handwriting, I would suppose he wrote it. Mr. PECORA. It does not appear to be similar to Mr. Covington's handwriting, does it? Mr. MOTT. No. But Mr. Covington is here and Mr. Covington can probably swear to who did put it in there, and when. Mr. PECORA. That date, reading "December 14, 1933 ", is not in your handwriting, is it? Mr. Morr. No. I will swear to that. Mr. PECORA. All right. Now, Mr. Mott, did you have more than one conversation with Mr. Covington about your selling to him these 30,000 shares of stock before you sold them to him? Mr. MOTT. Possibly twice. Mr. PECORA. How far apart were the two conversations? Mr. MOTT. Not very far apart. It would be a matter of days or so. Mr. PECORA. Well, now, was it at the first conversation that Mr. Covington expressed to you a desire to purchase a substantial block of shares of the group stock? Mr. MOTT. As far as I recollect; yes. Mr. PECORA. And did Mr. Covington say anything to you at that time, that you now recall, other than the fact that he wanted to acquire a large block of stock of the group? Mr. MOTT. Well, he told me of his interest in the institution, his confidence in it, and that an ownership of a larger block of stock would enable him to speak with more authority in the bank as a larger stockholder. Mr. PECORA. Did you think that his ownership of a larger number of shares of stock of the group would reenforce or enhance his authority as an officer of the bank? Mr. Morr. I felt very sure that it would; and I felt that it would be a very good thing for the other stockholders, including myself, in regard to the value of the stock that we held. Mr. PECORA. Well, now, Mr. Mott, when did Mr. Covington first speak to you about his desire to acquire a larger block of stock of the group: or, I mean, when he first spoke to you, did he say how large a block he would like to acquire? Mr. Morr. I do not know whether it was the first or the second time. It was one of the times that he mentioned it; yes. Mr. PECORA. How large a quantity of stock did he indicate, if it was the first or the second time that he spoke to you on the subject, that he wanted to acquire? Mr. MOTT. He said anything up to 30,000 shares. Mr. PECORA. Did he specify that number, 30,000 shares? Mr. MOTT. He did. Mr. PECORA. Did he tell you whether or not he had made any effort up to that time to increase his holdings of stock of the group? |