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Mr. LONGLEY. They were in that condition when I took hold of it, as that report, of course, indicates.
Mr. PECORA. Do you recall that shortly after Mr. Hudson, the State examiner, completed this examination, he and Mr. M. C. Taylor, deputy commissioner of banking for the State of Michigan, attended a conference with a number of the directors of the trust company with regard to the condition of the trust company and the losses to be written off ?
Mr. LONGLEY. What date was that? Mr. PECORA. Well, it was some time shortly after the completion of this examination.
Mr. LONGLEY. Oh. This same examination?
Mr. PECORA. Were you one of the directors with whom that conference was held by Mr. Hudson, the examiner, and Mr. Taylor, deputy_banking commissioner?
Mr. LONGLEY. Yes.
Mr. PECORA. What was the substance of the discussion in that conference?
Mr. LOXGLEY. These write-offs and estimated losses.
Mr. PECORA. What write-offs were agreed upon should be made? Do you remember the aggregate amount?
Mr. LONGLEY. It was finally determined by the Department that we should write off somewhere around 342 million dollars.
Mr. PECORA. How was that accomplished ?
Mr. LONGLEY. The officers wrote off those items, picking out what they considered, with the banking department, were the losses that should be written down and out of the books.
Mr. PECORA. Was it in order to enable the trust company to make these write-offs of about 31/2 million dollars that the trust company about that time obtained a loan of 31/2 million dollars from the Board ?
Mr. LONGLEY. Yes—well, no; the loan was made to the group.
Senator COUZENS. Was that the only State bank examination that was made while you were president of the Trust Co.?
Mr. LOXGLEY. I think there was one-let me see [After referring to data.] Yes; I guess that is right; that was the only one.
Senator Couzens. The only examination made while you were president?
Mr. LONGLEY. Yes; that is the only one.
Mr. PECORA. Do you know a corporation called the Congress Corporation ?
Mr. LONGLEY. I know of it.
Mr, LONGLEY. I do not know; I never saw the documents in connection with that company.
I know that these assets that were lifted out of the Trust Co. were sold to the Congress Corporation.
Mr. PECORA. By the group?
Mr. LONGLEY. No; by the trust company itself; and I am assuming that the function of the Congress Corporation at that time was for the purpose of taking these assets that were written off.
Mr. PECORA. In other words, the Congress Corporation was used, to speak in the vernacular, as a sort of “dumping ground” for the bad assets that were taken out of the trust company, was it not?
Mr. LONGLEY. Well, they took those assets of the trust company. What else they took I do not know, because I was not connected with the Congress Corporation.
Mr. PECORA. You were connected with the group, were you not? Mr. LONGLEY. Yes.
Mr. PECORA. And that was all done at the instance of the group and in furtherance of the group's policy?
Mr. LONGLEY. That is right; but I would not like to try to tell you what the business of the Congress Corporation was, because I do not believe I ever found out, even by hearsay. I know they took those assets.
Mr. PECORA. As a director of the group, were you not kept posted or informed currently as to the activities of business transactions of the group?
Mr. LONGLEY. Yes.
Mr. PECORA. In that fashion did you not learn the uses and purposes to which the Congress Corporation was being applied by the group? Mr. LONGLEY. In a general way; yes. Mr. PECORA. And what were they, in a general way?
Mr. LONGLEY. I do not remember having any particular business with the Congress Corporation brought to my attention other than these things that had to do with the Trust Co.
Mr. PECORA. With your Trust Co.!
Mr. LONGLEY. I suppose I was not particularly attentive and was not interested in anything except what had to do with the Trust Co. at that time, so far as the Congress Corporation was concerned.
Mr. PECORA. During the year 1932 did the board of directors of the Trust Co. appoint an examining committee to make an examination of the Trust Co., as of December 13, 1932!
Mr. LONGLEY. Yes.
Mr. PECORA. Did that examining committee make a report of its examination ?
Mr. LoxcLey. Yes; after the holiday was concluded.
Mr. PECORA. Do you remember who the members of that examining committee of the board were?
Mr. LONGLEY. I remember some of them; I do not know that I can tell you all; but Mr. George Klein and Mr. Walker and others. Have you a copy of it! That will show.
Mr. PECORA. Do you recall that Mr. Clarkson Wormer was chairman of the examining committee?
Mr. LONGLEY. I do not know that he was on that committee. He made a report on real estate.
Mr. PECORA. I show you what purports to be a photostatic copy of the report of this examining committee of the Union Guardian Trust Co. as of December 13, 1932, which report is signed on March 10, 1932. Will you look at it and tell me if you recognize it to be a true and correct copy of such report?
Mr. Longley. This would appear to be, from what I remember of it. If you took it from the records, I will assume so.
Mr. PECORA. It was so taken from the records. I offer it in evidence; but in view of its voluminous character I do not think it necessary at this time, at least, to spread it in full on the minutes. I wish to make references to portions of the text thereof from time to time.
Senator COUZENS. The same may be admitted, but not printed in the record. Just mark it as an exhibit.
(Photostatic copy of report of examining committee of Union Guardian Trust Co. as of Dec. 13, 1932, was received in evidence, marked “ Committee Exhibit No. 92, Jan. 17, 1934.")
Mr. LONGLEY. Mr. Pecora, I do not find Mr. Wormer's name on the committee. I wonder if he was not just a member of the subcommittee that this committee appointed to examine real estate?
Mr. PECORA. I understand the original was signed by him as chairman of the committee.
Mr. LONGLEY. On page 2 of this report which is marked Exhibit 92” I find this [reading]:
Partly as a matter of expediency and partly as a method of obtaining the most accurate information, the committee that is, the examining committeeauthorized its chairman to appoint a subcommittee of directors to examine real-estate mortgages and land contracts owned by the Trust Co. The following subcommittee was accordingly appointed :
And it names Mr. Wormer, Mr. Trowbridge, Mr. Deming, Dr. George R. Andrews, Mr. Alger Sheldon; and none of those gentlemen seem to be on the committee itself. So apparently they were directors taken from elsewhere and not on that committee.
Mr. PECORA. Let me read the following from the report_just received in evidence and marked " Committee Exhibit No. 92." reading from pages 4 and 5 thereof
Senator Couzens. Have you a record of who signed that report, before you start to read that?
Mr. ÞECORA. Yes, sir; Mr. Wormer.
Mr. LONGLEY. I think you are mistaken, Mr. Pecora, on that. He signed that subcommittee report that is attached, I believe. I think all of the members of the committee signed this examination.
Mr. PECORA. The only name that appears on this copy is Mr. Wormer, Jr.
Mr. LONGLEY. No.
Mr. PECORA. Unless I have overlooked something. The report is signed by William K. Muir, H. B. Hoyt, Robert Oakland, George B. Russell, George H. Klein, C. H. Murphy, Fred C. Austin, and H. H. Walker.
Mr. LONGLEY. That is right. That is the committee. The subcommittee report is attached as an exhibit.
Mr. PECORA. The subcommittee report is the one signed by Mr. Wormer?
Mr. LONGLEY. That is right; and that is the report on the real estate.
Mr. PECORA. Now, reading from pages 4 and 5 of the report [reading]:
The assets referred to in the foregoing have been classified in four columns, “Good ”, “ Slow", “ Doubtful ”, and “Loss ” (Except bonds and securities, land contracts and real estate, which only appear in “Good” and “Loss”). Detailed schedules accompany the report, with the exception of items classified 100 percent good. These are not listed. Items marked " Slow" are considered by the committee to be eventually good. " Doubtful " does not indicate a probable 100 percent loss of the total in the column. No doubt many of such items will eventually pay out, at least in part, and in some cases perhaps substantially. A 50 percent reserve is later recommended. The committee feels that there is a definite loss which should be charged off of items in the loss column.
Since the date as of which this examination is made you have listened to the president's report covering the result of the Trust Co.'s business in the year 1932 in which it was stated that late in December the Group made provision for “lifting out” about 342 million dollars of questionable assets. Explaining more in detail, this figure represented what we consider to be fair charge-off items as determined by the officers of this company and of the Group company, and these were sold at face value to the Congress Corporation, a holding company wholly owned by the Group company, the consideration being the cancelation of the Trust Co.'s liability on a like amount of certificates of deposit owned by the Ford interests "
And so forth.
Mr. Longley, you referred in your testimony this forenoon, among other things, to the withdrawal by the Trust Co. from deposit accounts which it maintained in various other banks of sums aggregating a little more than 31,2 million dollars, which withdrawals you said were in cash, and the cash was placed in the vaults of the com
Mr. LONGLEY. Yes; after the holiday.
Mr. PECORA. Can you tell this committee what disposition was made of any of the cash so withdrawn and stored in the vaults of the Trust Co.?
Mr. LONGLEY. Well, what was not paid to the trust depositors is still there, I suppose.
Mr. PECORA. What trust depositors received any payment therefrom?
Mr. LONGLEY. I have no idea, without seeing the records. The A fund depositors that are on the records of the company, and who applied, undoubtedly were paid something; but I do not know who they were, now, without referring again to the books.
Mr. Pecora. Do you know how much of the 312 million dollars approximately was so paid out?
Mr. LONGLEY. I have not the slightest idea. I think, probably no more than normal.
Mr. PECORA. What would be normal?
Mr. LONGLEY. Well, that account maintained itself around between 4 and 6 millions. I think probably that account maintained itself eren after the holiday; I don't know; I am just guessing, but I would suppose so.
Senator COUZENS. From the time of the closing of the Trust Co. to the time of the appointment of the conservator, you have had no access to the records?
Mr. LONGLEY. No, sir; I have not. I think I can get information by calling Mr. Harris. He probably would give it to me. Whenever I have asked him for information I have received it.
Senator COUZENS. That is, the conservator has no objection to giving you access to the records he has in his possession ?
Mr. LONGLEY. He has not turned me loose in the records, but whenever I have asked questions he has given me information.
Senator COCZENS. I think the committee would like to have a record of the withdrawals of those A funds from the time the three million and odd dollars was withdrawn from banks and placed in the vaults, up to the time of the appointment of the conservator, if you can get that information.
Mr. LOXGLEY. Would you like me to get it by mail?
Senator COTZENS. Well, I think if you can get by telephone we would like it better-or by wire.
Mr. LONGLEY. I will try to, Senator.
Mr. PECORA. Mr. Longlev, do you recall a meeting of the executive committee of the board of directors of the Union Guardian Trust Co. which was held on February 23, 1933 ?
Mr. LONGLEY. Not just by that description; no. Mr. PECORA. Do you recall a meeting at which took place the adoption of the following resolution, according to the minute book [reading]:
Resolred, That the officers be and they hereby are directed to withdraw all funds held by depositaries in Chicago for the account of and on behalf of this company;
2. Resolved, That anticipated requrements for disbursement of trust accounts for 30 days be withdrawn from the depositaries of the bank in cash and held in the vaults of the bank ;
Further resolred. That 90 percent of the balance then on deposit be withdrawn and invested in short-term United States Government obligations, preferably Treasury bills or retained in cash or both.
Further resolved, That the balance on deposit after such withdrawals be carried on deposit in the New York and Pittsburgh depositaries of the company or withdrawn at any time, held in cash or invested in short-term obligations of the United States Government, preferably Treasury bills.
The officers and directors are to do all things necessary to carry the foregoing into effect.
Resolved, That the officers be and they are hereby authorized to conduct the fiduciary business of the company (with a very considerable degree of freedom of action), provided that in so doing the company's debtor and creditor relationships and its own status as regards assets and liabilities are not affected.
Mr. LOXGLEY. Yes; I remember that meeting.
Mr. Pecora. You attended the meeting as a member of the executive committee of the board?
Mr. LONGLEY. I am not certain. Does it show that I attended it.
Mr. PECORA. We have not the minute book here. I have only certain extracts.
Mr. LOXGLEY. I am not sure I attended it, but I am familiar with the adoption of that resolution.