Mr. VERHELLE. Whenever they came to me I always tried to give them all the information which they asked for.

Mr. PECORA. Were those letters referred for answer to persons other than yourself as well as to yourself?

Mr. VERHELLE. Well, if they came to me I would generally answer them, and if they came to some officer of some unit-to which I believe they would be more likely to come because of some relationship that had existed, why, they were not referred to me.

Mr. PECORA. When such letters from stockholders were addressed to the Detroit Bankers Co. generally and not to any particular individual connected with the personnel of the company, would those letters be referred to you for answer?

Mr. VERHELLE. No. The normal operation was that they would go to Mr. Mark Wilson for answer, unless they were specifically addressed to me.

Mr. PECORA. Do you recall having some correspondence to which you attended on behalf of the Detroit Bankers Co., with a stockholder named R. G. Hentschell, who wrote for certain information that he did not find in the annual report of the Detroit Bankers Co. for the year 1931?

Mr. VERHELLE. No, sir.

Mr. PECORA. Well, now. I show you what purports to be a photostatic reproduction of a letter addressed to the Detroit Bankers Co. by Mr. R. G. Hentschell, under date of January 25, 1932. It was made from the original included among the files of the Detroit Bankers Co. Will you look at it and tell me if you can identify that letter as being a true and correct copy?

Mr. VERHELLE (after looking at the photostat). I do not really recall this letter.

Mr. PECORA. Well, now, probably if you will look at this document which I now hand you, it will help you to recall whether or not that letter, that you now have in your hand, was received.

Mr. VERHELLE. All right.

Mr. PECORA. I now show you for that purpose what purports to be a photostatic copy of a letter addressed to R. G. Hentschell, dated February 10, 1932, and signed, or at least this photostatic copy thereof is signed, with the initials "J. F. V." over the word "Comptroller", which I presume refers to you, doesn't it?

Mr. VERHELLE. Yes, sir. (Witness looks over both papers.) This letter signed "J. F. V." is very much my own phraseology, and while I do not recall the letter, it was undoubtedly written by myself. Mr. PECORA. Well, was it written in answer to the first letter which I showed you?

Mr. VERHELLE. I would presume that it was, unless there was some other correspondence in between those two dates, which I doubt. Mr. PECORA. Mr. Chairman, I offer these two letters in evidence, to be marked as separate exhibits.

Senator COUZENS (presiding). The two letters will be appropri ately marked as separate exhibits.

(A letter from H. G. Hentschell to Detroit Bankers Co., dated January 25, 1932, was marked "Committee Exhibit No. 91, January 25, 1934," and will be found immediately following where read by Mr. Pecora.)

(And the letter from the comptroller of the Detroit Bankers Co. to R. G. Hentschell, dated February 10, 1932, was marked "Committee Exhibit No. 92, January 25, 1934", and will be found immediately following where read by Mr. Pecora.)

Mr. PECORA. The letter from Mr. Hentschell, addressed to the Detroit Bankers Co., which has been received in evidence as Committee Exhibit No. 91 of this date, and which is on the letterhead of the Manistique Pulp & Paper Co., of Manistique, Mich., is as follows:

DETROIT BANKERS CO.,

Detroit, Mich.

MANISTIQUE PULP & PAPER CO.,
Manistique, Mich., January 25, 1932.

GENTLEMEN: I just received your annual report for the year 1931, and I would like very much to have you give me a detailed statement of income and expenditures, as there is nothing in the report that would indicate what disposition was made of the difference in the capital, surplus, and undivided profits, amounting to approximately $23,000,000 as compared to your report for the previous year.

Awaiting your early reply, I remain,

Yours truly,

(Signed) R. G. HENTSCHELL.

The second letter which has been received in evidence as Committee Exhibit No. 92, of this date, reads as follows:

Mr. R. G. HENTSCHELL,

Manistique Pulp & Paper Co., Manistique, Mich.

FEBRUARY 10, 1932.

DEAR MR. HENTSCHELL: The following is in answer to your request for information regarding the detailed statement of income and expenditures:

The statement contained in our stockholders' report pertains to the banking units of the Detroit Bankers Co. In order to simplify our operating procedure, the First Detroit Co. has been transferred from the Detroit Trust Co. to the Detroit Bankers Co. This is responsibile for the difference in the invested capital of that company on December 31, 1931. In addition, substantial reserves were set up as a guaranty against the assets of the newly consolidated First Wayne National Bank, so these became of the same general character as those of a new bank. The assets that were removed from the banking units naturally do not appear on the combined statement of the banking units.

A detailed statement of income and expenditures such as you ask for would involve a very great amount of work and in itself would have to be supported by a great deal of statistical data. Of course, all of these items are carried separately for each unit and only those figures are consolidated which will assist us in our operations. We have tried, in the report, to briefly cover the results of our operations of the past year.

If there are any specific details which interest you, we will be glad to furnish information concerning them.

Yours very truly,

J. F. V., Comptroller.

Well, now, Mr. Verhelle, you will observe that the information which was sought by this stockholder, named Hentschell, was not given to him by your reply letter of February 10, 1932, which I have just read, do you not?

Mr. VERHELLE. It would be difficult to determine just exactly what was wanted there due to the peculiarity that existed in connection with the-well, my voice is rather bad, Mr. Pecora.

Mr. PECORA. Just keep that microphone that is on the table ahead of you and talk normally. You do not have to talk right into it. Senator COUZENS (presiding). Just sit back of the microphone and talk normally.

175541-34-PT 11-11

Mr. VERHELLE. I will ask the committee reporter to read so much of my answer as I have already given.

(The answer as given was read as follows:)

Mr. VERHELLE. It would be difficult to determine just exactly what was wanted there due to the peculiarity that existed in connection with the

Mr. VERHELLE. Existing in connection with the operation of the Detroit Bankers Co., which was operating on a basis so that its expenditures and income were identical.

The statistical data referred to would involve a complete statement of the actual operations of the Detroit Bankers Co., and it was my belief, I presume, at that time, that this particular stockholder was in reality requesting the income and expense detail regarding the banking units; that is, those covered by the report, and that would have been an immense task to provide.

Mr. PECORA. Don't you see that in his letter of January 25, 1932, the stockholder stated, or rather called your attention to the fact that in the report which he had received from the Detroit Bankers Co. for the year 1931, to quote from his letter [reading]:

There is nothing in the report that would indicate what disposition was made of the difference in capital, surplus, and undivided profits amounting to approximately 23 million dollars as compared to your report for the previous

year.

Would it have required a mass of that statistical data to have told that by far the greater part of this 23-million-dollar reduction in the capital assets of the company was due to the setting up of these reserves during the year 1931, that were considerably the subject of your testimony yesterday?

Mr. VERHELLE. I thought that I had really answered that question there, sir. Maybe I am mistaken.

Mr. PECORA. Here is the way you answered it in your reply letter of February 10, 1932 [reading]:

The statement contained in our stockholders' report pertains to the banking unit of the Detroit Bankers Co. In order to simplify our operating procedure the First Detroit Co. has been transferred from the Detroit Trust Co. to the Detroit Bankers Co. This is responsible for the difference in invested capital of that company on December 31, 1931.

In that statement you were not referring to the difference in the invested capital of the Detroit Bankers Co., were you?

Mr. VERHELLE. No, sir.

Mr. PECORA. You were referring to the difference in invested capital of one of the banking units of the Detroit Bankers Co.! Mr. VERHELLE. Yes, sir.

Mr. PECORA. You say further in your reply letter to Mr. Hentschell [reading]:

In addition substantial reserves were set up as a guarantee against the assets of the newly consolidated First Wayne National Bank, so these became of the same general character as those of a new bank.

That did not give him the explanation or the information which he sought, did it?

Mr. VERHELLE. It would depend to some extent, sir, on who Mr. Hentschell was.

Mr. PECORA. Mr. Hentschell was apparently a stockholder of the Detroit Bankers Co., and wrote for information which he felt he

did not get from the annual report of that company for the year 1931, which he had received.

Mr. VERHELLE. It was quite apparent from his letter that he had not only that statement, but the one before it, or another statement, at least, that indicated that reducion in the capital structure.

Mr. PECORA. He wanted to know what was responsible for that reduction, did he not?

Mr. VERHELLE. And in that report, or in both those reports, there were included individual statements of the individual units. My recollection is that if you total up all the units you will arrive at this combined statement. So, therefore, the explanation lay in two units, that is, the First Wayne Bank and the Detroit Trust Co.

Mr. PECORA. That did not explain the reason for the reduction of approximately 23 million dollars in the capital assets of the Detroit Bankers Co. in 1 year's time, did it?

Mr. VERHELLE. It was all covered by the units that follow that consolidated statement.

Mr. PECORA. All followed by what? I did not hear that answer. (The reporter read the last answer of the witness.)

Mr. VERHELLE. That is, Mr. Hentschell may have been someone who knew and could analyze the statement. I would judge that from the very letterhead. I do not know what position he signed on there. Maybe it is on the top of the letterhead.

Mr. PECORA. He did not sign any position. The letterhead does not carry his name as an officer of the Manistique Pulp & Paper Co. Mr. VERHELLE. If he is an officer, he would be able to analyze statements rather well, so that he would naturally look at the various units to determine where the decrease came about. To some stockholders you have to give one type of explanation; and to others you can give a shorter explanation, depending upon the type of people they are, I presume.

Mr. PECORA. You did not know the type of person that Mr. Hentschell was, did you?

Mr. VERHELLE. If there is an indication on there that he is an officer of that company

Mr. PECORA. There is not any such indication on his letter to the

company.

Mr. VERHELLE. I recall that name. I have a notion that he is an officer of the Manistique Pulp & Paper Co.

Mr. PECORA. But Mr. Hentschell asked specifically to be informed-and I will quote from his letter again [reading]:

What disposition was made of the difference in the capital surplus and undivided profits amounting to approximately $23,000,000, as compared to your report for the previous year.

He was not given that information in your reply letter, was he? Mr. VERHELLE. Well, I think he was, sir; but I do not know just how I would answer it any other way.

Mr. PECORA. Point out in your reply letter to him any statement which informed Mr. Hentschell as to the disposition that was made of the $23,000,000, approximately, that he referred to in his letter. [Handing paper to the witness.]

Mr. VERHELLE. It becomes necessary, of course, to take into consideration his entire letter, a part of which asked for an income

and expense statement of the company, and the very question itself indicated that he was not familiar with the general make-up or set-up of the organization. The particular drop in the invested capital to which he refers was made up by setting up substantial reserves as a guarantee against the assets of the newly consolidated Wayne National Bank, which is included in this letter, together with the reduction in the capital structure of the Detroit Trust Co. through the removal of the First Detroit Co. from its books.

Mr. PECORA. Mr. Verhelle, those items do not account for a $23,000,000 reduction, do they?

Mr. VERHELLE. I would have to check up, sir?

Mr. PECORA. You know that they do not, without checking up, do you not?

Mr. VERHELLE. I really do not.

Mr. PECORA. Was not that $23,000,000 reduction due, substantially, to the losses and write-offs made during the year 1931, as appears from the annual report filed by the Detroit Bankers Co. with the Michigan Securities Commission, showing a decrease in investment values of over $22,000,000?

Mr. VERHELLE. That figure is taken right off this report, sir.
Mr. PECORA. What report?

Mr. VEBHELLE. Right off the same record from which this report is made up.

Mr. PECORA. He did not have a copy of the report filed with the Michigan Securities Commission, did he?

Mr. VERHELLE. That did not enter into the discussion.

Mr. PECORA. The fact is that the $23,000,000 to which Mr. Hentschell refers in his letter, and about which he sought information, represented approximately the amount of the write-offs or reserves due to decrease in the invested capital, as shown by the annual report filed with the Michigan Securities Commission; is that not true!

Mr. VERHELLE. Those are the same figures he was inquiring about. becuse the invested capital, as shown in the report to the Michigan Securities Commission, the one that was up for discussion here yesterday, is the statement of the Detroit Bankers Co. from which it was taken. It carries the value of the surplus account, which is nothing but the invested capital of these units set up on that statement. In other words, the books are continuously adjusted so as to reflect the invested capital of these units, because there is no other value at which they could logically be carried.

Mr. PECORA. I know, but why was not Mr. Hentschell given the information that he asked for?

Mr. VERHELLE. I will just answer the question-I have answered that question. You have questioned it, so I was just trying to figure out here if that difference was not made up in those two units. [After examining papers.] Yes, sir. The difference between the two reports is to be found by referring to the First Wayne National Bank as against the 2 old banks, and also referring to the Detroit Trust Co. statements in the 2 statements I have referred to. The drop in the First National, just as I have figured it here-unless I am in error is $17,000,000 of the $23,000,000, and the balance of it is in the Detroit Trust Co.