Mr. PECORA. Now, as a bank director, Mr. Ford, and as a business man, do you think it was an ethical method of enhancing the appearance, or improving the appearance of the bank's condition by making a temporary deposit and withdrawing it shortly after the first of the year?

Mr. FORD. Well

Mr. COLUMBO. You don't know that it was done.

Mr. PECORA. Mr. Columbo, won't you let me get Mr. Ford's opinions?

Mr. COLUMBO. Well, I was trying to refresh his recollection.

Mr. PECORA. You cannot refresh the witness' recollection concerning an opinion, which was what I was calling for at the moment, can you?

Mr. COLUMBO. Yes.

Mr. PECORA. You say you can?

Mr. COLUMBO. Well, I cannot if you object to it.

Mr. PECORA. What was that?

Mr. COLUMBO. I say I won't if you don't want me to do it.

Mr. PECORA. I have no objection to your aiding the witness with any facts. But when I call for his opinions I want the witness to give me his opinions.

Mr. COLUMBO. Well, I want him given the facts on which he may base an opinion.

Mr. PECORA. The facts are already admitted, namely, that temporary deposits were made over the end of the year in order to enable unit banks to show an increase of deposits. I am asking Mr. Ford for his opinion as to whether or not, as a bank director and as a business man, he thinks that is a fair and ethical method.

Mr. FORD. Perhaps not. I do not remember the circumstances under which the requests were made.

Mr. PECORA. Haven't you already indicated that you knew what the circumstances were, namely, to enable the bank to show an increased amount of deposits at the end of the year?

Mr. FORD. That is quite possible, yes.

Mr. PECORA. And do you consider that an ethical and fair practice? Mr. FORD. NO; I don't suppose it is. I don't really know about that.

Mr. PECORA. Do you know why you did it?

Mr. FORD. No, sir.

Mr. PECORA. While I am on this subject I will depart for a moment or two from loans that you made to the group or any of the units of the group and ask you this question: Do you recall a transaction had in December of 1932 in which the Ford Motor Co. purchased from the Guaranty Trust Co. of New York, United States Treasury 1-year notes of the face amount of $7,500,000?

Mr. FORD. The Ford Motor Co. purchased them, do you mean? Mr. PECORA. Yes.

Mr. FORD. No, sir; I do not recall it. It is quite possible that we did, though.

Mr. PECORA. Purchased them as of December 31, 1932, and sold them on January 3, 1933.

Mr. FORD. It is quite possible, but I don't know.

Mr. PECORA. What was the reason for that transaction?

Mr. FORD. I do not remember that specific transaction, but I know the purpose for converting cash into bonds at the end of the

year.

Mr. PECORA. Well, tell us what it was.

Mr. FORD. We wanted to show less cash on our annual statement which would be published in Massachusetts later on in the spring. We wanted to show more diversification of our intangible assets.

Mr. PECORA. Did you also want to avoid the payment of the tax levied under the laws of the State of Michigan on those cash assets? Mr. FORD. There is no tax levied on them.

Mr. PECORA. Are you sure of that?

Mr. FORD. Quite sure. And I know that that had nothing to do with it, and there was no tax matter involved. Or that is my understanding of it. Am I wrong about that?

Mr. PECORA. You better ask your counsel as to that.

Mr. FORD (after inquiring of Mr. Columbo, and Mr. Columbo conferring with Mr. Longley). Well, counsel states that we have an opinion from the Attorney General of Michigan on that point, that there is no tax involved.

Mr. PECORA. What do you mean, that you have an opinion there was no tax involved?

Mr. FORD. Well, apparently we have not paid the tax.

Mr. PECORA. You did not pay a tax on the cash that you converted into bonds, into Government bonds, is that what you mean?

Mr. FORD. What would the tax be paid on?

Mr. PECORA. A personal property tax under the laws of the State of Michigan.

Mr. FORD. Yes, that is true, but it is my understanding there was no tax-saving involved in this transaction.

Senator COUZENS. In other words, the cash that you had left over after purchasing those Government bonds, was tax-exempt, is that what you mean?

Mr. COLUMBO. That is right.

Senator COUZENS. That is your understanding?

Mr. FORD. I understand that there is no tax involved in a transaction of that kind.

Senator COUZENS. I wasn't talking about the transaction.

Mr. FORD. Well, it was trying to convert cash into that type of securities.

Senator COUZENS. I understand that, but if I understand Mr. Pecora's question the implication is that you purchased those bonds for the purpose of avoiding payment of a tax on the cash you had on hand.

Mr. FORD. Well,-

Senator COUZENS (continuing). But that was not the purpose, and that was not accomplished, is that your answer?

Mr. FORD. I do not think there was any tax-saving involved.
Senator COUZENS. I think that is correct, Mr. Pecora.

Mr. COLUMBO. There is no tax on intangibles in Michigan, Mr. Pecora.

Mr. PECORA. What is the opinion from the Attorney General that vou have referred to, Mr. Ford? Will you produce it now?

Mr. FORD (after consulting Mr. Columbe). I have no copy here.

Mr. PECORA. Have you been advised by your counsel that moneys belonging to the Ford Motor Co. and standing to its credit at the end of the year are not taxable under the personal property tax laws of the State of Michigan?

Mr. FORD. Yes.

Mr. PECORA. Which counsel is giving you that advice?

Mr. FORD. Mr. Columbo.

Mr. PECORA. Have you gotten similar advice from Mr. Longley? Mr. FORD. Yes, sir.

Mr. PECORA. Well, was it the practice or custom of your company to take funds it had on deposit in any of those banks in Detroit and purchase Government bonds with them and resell those bonds a few days after the first of the ensuing year? That is, to make purchases as of the end of the tax year and resell those securities within 2 or 3 days thereafter?

Mr. FORD. That was done.

Mr. PECORA. What did you say that it was done for?

Mr. FORD. To show diversification in our annual statement which we filed with the Secretary of State of Massachusetts, so that we did not show as much cash on the annual statement.

Mr. PECORA. To what extent was that practiced?

Mr. FORD. I could not say.

Mr. PECORA. That is, how much every year, at the end of the year, was drawn out from bank deposit accounts

Mr. FORD (interposing). I could not tell you.

Mr. PECORA (Continuing). For the purchase of Government securities and a resale of those Government securities within 2 or 3 days thereafter.

Mr. FORD. I could not say. It varied from year to year I expect, but I have no idea of the amount.

Mr. PECORA. Well, now, you said you wanted to show diversification in some report that you had to file in the State of Massachusetts. Mr. FORD. Yes, sir.

Mr. PECORA. Did you consider that cash on hand or in bank was not a good asset?

Mr. FORD. No, sir. It was just a question of not showing as much cash on hand, because they usually made a big statement in the papers about it, and we did not care about that.

Senator COUZENS. Do you recall what was the largest amount that you purchased with security bonds to effect the purpose?

Mr. FORD. I haven't any idea, Senator. Mr. Craig has all that information.

Mr. PECORA. Who is Mr. B. J. Craig?

Mr. FORD. He is the secretary and assistant treasurer of the company, Ford Motor Co.

Mr. PECORA. I show you what purports to be a photostatic reproduction of a letter addressed to Mr. Craig as Secretary of Ford Motor Co., by the Vice President and Cashier of the Guardian National Bank of Commerce of Detroit, bearing date December 22, 1932. Will you look at it and tell me if you know it to be a true and correct copy of such a letter sent to Mr. Craig, secretary of the Ford Motor Co.?

Mr. FORD (after perusing document). I don't recall ever having seen that letter, sir.

Mr. PECORA. Do you question the authenticity of this copy of the letter?

Mr. FORD. No, sir.

Mr. PECORA. I may say that we obtained it from files of the Guardian National Bank of Commerce of Detroit.

Mr. FORD. Yes.

Mr. PECORA. I offer it in evidence.

Senator CouZENS. The same will be entered in the record.

(Photostat of a letter on letterhead of Guardian National Bank of Commerce of Detroit, dated Dec. 22, 1932, from Vice President and Cashier to B. J. Craig, Secretary Ford Motor Co., Dearborn, Mich., was thereupon designated "Committee Exhibit No. 71, Jan. 11, 1934," and same appears in full immediately following, were read by Mr. Pecora.)

Mr. PECORA. The letter received in evidence as committee's exhibit no. 71 of this date reads as follows, on the letterhead of the Guardian National Bank of Commerce of Detroit [reading]:

Mr. B. J. CRAIG,

Secretary Ford Motor Company,

Dearborn, Michigan.

DECEMBER 22, 1932.

DEAR MR. CRAIG: In accordance with arrangements made with you today, we hereby confirm sale to you of $7,500,000 par value U.S. Treasury Certificates 4% of Series TD 1933 dated December 15, 1932, maturing December 15, 1933, at 100.40625 ($7,530,468.75) plus accrued interest ($2,472.53) and enclose confirmation showing the amount which will be due in payment.

We understand that this transaction is to be as of December 31, 1932, and further, that you authorize us to charge your Treasurer's demand account, carried on our books, on that date in the amount of $7,532,941.28, with the further understanding that if your Treasurer's demand account does not have sufficient balance to cover this charge we may transfer from your Treasurer's savings account a sufficient amount to cover it.

We also understand that you have agreed to resell these certificates to us on January 3, 1933 at 100.40625 ($7,530,468.75) plus accrued interest ($2,936.10) and we enclose confirmation showing the amount ($7,533,404.85) which will be due to you in payment thereof, and, in accordance with your instructions, we will credit to your Treasurer's demand account, on that date, with the further understanding that we will charge your Treasurer's demand account and credit your Treasurer's savings account with the same amount, if any, which we will have been required to transfer on December 31, 1932, as hereabove provided for. As explained to you during our discussion of this matter, in Mr. Judson's office today, the Guaranty Trust Company of New York, through whom we are purchasing these securities, has requested that they be furnished a letter from the Ford Motor Company relative to our agreement to purchase from them and their agreement to sell to us on December 31, 1932, the above-mentioned bonds,_said letter also consenting to and authorizing the pledging to the Guaranty Trust Company of the bonds as collateral security for the payment of the Guardian National Bank of Commerce of Detroit Cashier's check, payable to the Guaranty Trust Company, which we purchased with your funds and forwarded to them and which would not clear for payment through the Detroit branch of the Chicago Federal Reserve Bank until Tuesday, January 3rd.

A copy of the proposed letter, together with a copy of the proposed agreement, was handed to you today and we would appreciate it, very much, if you will issue such a letter direct to the Guaranty Trust Company, advising us that you have done so or, if you desire, forward the letter together with the exhibit direct to us and we will forward it to New York.

With the exception of this letter and exhibit, as requested by the Guaranty Trust Company, the mechanical operations in this transaction are identical with the method used last year in the handling of a similar matter for your company. As we must close this arrangement in New York at the earliest possible time, we would appreciate your acknowledgement and acceptance of this program. Very truly yours,

Signed by "E. S. Burns, Vice President and Cashier."

Now I show you what purports to be a photostatic copy of a letter addressed by Ford Motor Co., B. J. Craig, Secretary and Assistant Treasurer, to the Guaranty Trust Co. of New York, dated December 28, 1932, and apparently written in pursuance of the suggestion contained in the letter marked "Committee's Exhibit No. 71" as of this date. Will you please look at it and tell me if you recognize it to be a true and correct copy of such a letter written by your company to the Guaranty Trust Co. of New York?

Mr. FORD (after perusing letter). What was the question?

Mr. PECORA. Do you recognize that as a true and correct copy? Mr. FORD. I have never seen that letter.

Mr. PECORA. Do you doubt the authenticity of it?

Mr. FORD. No, sir.

Mr. PECORA. I offer it in evidence.

Senator COUZENS (presiding). The same will be entered in the record.

(Photostat of copy of letter on letterhead of Ford Motor Co., dated Dec. 28, 1932, from Ford Motor Co. by B. J. Craig, Secretary and Assistant Treasurer, to Guaranty Trust Co. of New York, was thereupon designated "Committee Exhibit No. 72, January 11, 1934," and same appears immediately following, where read by Mr. Pecora.)

Mr. PECORA. Mr. Colombo, with regard to any of these letters the witness may have identified, any advice you can give to impeach the authenticity of any of these documents, we will be glad to get from you and we will amend the record accordingly.

Mr. COLOMBO. I reserve the right to object.

Mr. PECORA. There is no such right.

Mr. COLOMBO. I thought I could make one.

Mr. PECORA. The letter is marked "Committee's Exhibit No. 72 of this date," and reads as follows, on the letterhead of the Ford Motor Co., Rouge Plant, Dearborn, Mich. [reading]:

GUARANTY TRUST COMPANY OF NEW YORK,

140 Broadway, New Zork, N. Y.

DECEMBER 28, 1932.

DEAR SIRS: We have examined and approved the proposed form of agreement to be made between yourselves and Guardian National Bank of Commerce of Detroit, a copy of which is annexed hereto as Exhibit A, with respect to the purchase by said Guardian National Bank of Commerce of Detroit from you of $7,500,000 principal amount of U.S. Treasury One year 3/4% notes dated December 15th, 1932.

We hereby advise you that we consent to and authorize the pledge with yourselves of said $7,500,000.00 principal amount of U.S. Treasury Notes as collateral security for the payment to you of the Cashier's Check of Guardian National Bank of Commerce of Detroit, all in the manner referred to in said agreement. Yours very truly,

FORD MOTOR COMPANY,
B. J. CRAIG,

Secretary and Assistant Treasurer.

I show you what purports to be a photostatic reproduction of a letter addressed by the Guaranty Trust Co. of New York to Mr. Elbert S. Burns, vice president and cashier of the Guardian National Bank of Commerce, Detroit, Mich., dated as of December 29, 1932, referring to the letter from the Ford Motor Co. marked "Committee's Exhibit No. 72." Will you look at it, Mr. Ford, and tell us if you know anything about it?

Mr. FORD (after perusing document). No, sir.