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Mr. Walsh. Well, it was coming out, not necessarily being sold out by the banks. I always told them to keep my loans in order and properly collateraled, and they were always properly collateraled. He asked me if I wouldn't have my stock at any forced sale transferred in the name of a nominee.

Senator COUZENS. And you transferred it in the name of a nominee so that persons wouldn't know that you were selling your stocks, was that it?

Mr. WALSH. That was the essential result; yes, sir.

Mr. PECORA. Now, Colonel Walsh, do you now regard that the purchase, so called, of these certificates of deposit, resorted to in order to enable the unit banks to eliminate from their reports these bills payable items, was actually a bona fide purchase?

Mr. Walsh. Yes, sir; I did.

Mr. PECORA. Weren't they merely expedients resorted to for a few days in some instances?

Mr. WALSH. No, sir. I do not think that is true, because funds sometimes remained there for considerable periods.

Mr. PECORA. But where funds represented by certificates of deposit were withdrawn within a day or two after the making of a report, eliminating the bills payable item, wouldn't you say that the purchase of certificates of deposit was not made in good faith but was merely an expedient?

Mr. Walsh. I think you could say they were an expedient, but I wouldn't say they were not made in good faith. I think they were made for the greatest good to the greatest number, so to speak.

Mr. PECORA. Did you ever seek any advice, legal or otherwise, from anybody as to the legality of that process and of those operations?

Mr. Walsh. No, sir.

Mr. Pecora. Now, the purchase of those certificates of deposit was, in effect, a borrowing transaction, wasn't it, when restorted to for that purpose ?

Mr. Walsh. Well, in the sense that any deposit is borrowed from a depositor. Banks are the greatest borrowers in the world. Every cent they have is either borrowed from a depositor or from the Federal Reserve bank.

Mr. PECORA. Confining yourself to the transactions in the matter of these certificates of deposit in order to eliminate items from reports of banks, weren't they in substance borrowing transactions!

Mr. WALSH. Well, as I say, they were borrowing transactions in the sense that every deposit is a borrowing transaction.

Mr. PECORA. Weren't the sale of these c.d.'s borrowing transactions in these cases, in substance?

Mr. Walsh. No; I would say it was a deposit.

Mr. PECORA. Well, was it a means by which a bank that wanted to eliminate baila payable, was put in possession of funds to enable it to do that?

Mr. Walsh. Yes, sir. But that would, of course, happen with any other deposit.

Mr. PECORA. To that extent weren't these transactions borrowing transactions ?

Mr. Walsh. I don't think they were; no, sir; except as I say any deposit is a borrowing transaction. It is an unsecured borrowing from a depositor.

Mr. PECORA. Were you familiar with this provision of the banking laws of the State of Michigan, contained in section 11932 of the laws relating to banking:

It shall be unlawful for any bank to issue its certificate of deposit for the purpose of borrowing money.

Mr. Walsh. I was not at that time, as you have read it now, but I should have been.

Mr. PECORA. I think I am through with Colonel Walsh, Mr. Chairman.

Senator CouZENS. May I ask one more question ?
Mr. WALSH. Yes, sir.

Senator Couzens. Did you ever in conversation or in writing with any of the unit banks suggest that the Guardian National Bank of Commerce or the Guardian Detroit Bank would put in a deposit to enable them to eliminate their bills payable?

Mr. Walsh. I might have, but I don't remember any particular occasion.

Senator Couzens. I am not asking whether you remember any particular occasion, but did you ever do it?

Mr. WALSH. Well, I don't remember any time that I have done it, but I might have.

Senator COUZENS. You think you might have done it, but you don't remember any specific instance; is that it?

Mr. WALSH. No, sir.

Senator COUZENS. But you don't recall whether you ever did it at all or not?

Mr. Walsh. I don't recall any such instance; no, sir.
Senator COUZENS. All right.

Mr. PECORA. I have no further questions to propound to Colonel Walsh.

The CHAIRMAN. That is all, Colonel Walsh. You are excused.
Mr. Walsh. Do you say I am excused?
The CHAIRMAN. Yes.
(Thereupon the witness was excused.)
Mr. PECORA. Is Mr. Wilkin here?
Mr. WILKIN. Yes, sir.

The CHAIRMAN. Please come forward to the committee table, stand, hold up your right hand, and be sworn: You solemnly swear that you will tell the truth, the whole truth, and nothing but the truth, regarding the matters now under investigation by the committee. So help you God.

Mr. WILKIN. I do.

TESTIMONY OF HERBERT R. WILKIN, DETROIT, MICH.

The CHAIRMAN. Please state your name, place of residence, and business.

Mr. WILKIx. My name is Herbert R. Wilkin, 9120 East Jefferson Avenue, Detroit, Mich. I am, I suppose, a bank liquidator.

Mr. PECORA. Mr. Wilkin, what is at present your business or occupation ?

Mr. Wilkix. I beg pardon, Mr. Pecora ?

Mr. PECORA. What is at the present time your business or occupation?

Mr. Wilkix. I am liquidating the Highland Park State Bank and am also employed by Governor Groesbeck, the receiver for the Guardian Detroit Union Group.

Mr. PECORA. You are employed by him as such receiver in what capacity and to do what kind of work!

Mr. Wilkin. Liquidating those companies that have been spoken about here, as to securities and investments.

The CHAIRMAN. Would you call it the work of a conservator?
Mr. WILKIN. No, he is the receiver.

Mr. PECORA. He has employed you to assist him in the work of liquidation?

Mr. WILKIN. Yes, sir.

Mr. PECORA. Prior to the receivership of the Group Co., were you connected with the Group Co. as an officer, director, or otherwise?

Mr. WILKIx. Yes, sir. I was executive vice president of the Guardian Detroit Union Group.

Mr. PECORA. Were you a director of it?
Mr. WILKIN. Yes, sir.
Mr. PECORA. When did you first become a director of it?
Mr. WILKIN. I think in 1931.
Mr. PECORA. Do you remember what month?
Mr. Wilkin. It was around September.

Mr. PECORA. Were you also a member of any committee of the board of that bank, or of the group, rather?

Mr. Wilkin. Yes, sir; I was a member of-well, I beg pardon, it was in 1930 that I was elected a director, and in 1931 I became a member of the executive committee.

Mr. PECORA. At the time you became a director in 1930, or I mean after that time, did you continue to serve as a director until the receivership was ordered?

Mr. WILKIN. Yes, sir.

Mr. PECORA. And also from the time when you became a member of the executive committee of the board of the group, did you continue to serve as a member of the executive committee until the company was placed in receivership?

Mr. WILKIN. Yes, sir; I did.

Mr. Pecora. Were you also connected in any capacity with any banking unit of the group!

Mr. WILKIN. Latterly I was connected with the Union Guardian Trust Co.

Mr. PECORA. In what capacity?
Mr. WILKIN. As a vice president.
Mr. PECORA. From that time on until when?

Mr. WILKIN. I believe I was elected a vice president in October of 1932 and I continued until the bank holiday.

Mr. Pecora. Were you also an officer or director of any other banking unit of the group?

Mr. WILKIN. I was a director of the First National Bank of Kalamazoo and also of the City National Bank of Battle Creek.

Mr. PECORA. You heard the testimony Colonel Walsh gave here in the last half hour, did you?

Mr. Wilkin. Yes, sir.

Mr. PECORA. You heard the testimony he gave concerning the process by which the Union Industrial Trust & Savings Bank of Flint, which was one of the unit banks of the group, wiped out bills payable amounting to $1,800,000 as of December 31, 1931, did you?

Mr. Wilkin. I did; yes, sir.
Mr. PECORA. Do you know anything about that transaction?
Mr. WILKIN. I know all about it.
Mr. PECORA. Tell us all about it then.

Mr. WILKIN. Well, we were called—that is, our bank was called, on the phone, and I was the operating head of the Union Industrial Bank at that time. Our funds were transferred by telephone from Detroit. We were called and told there was a credit of $600,000 placed in our account, or that it would be placed in our account, at the Guardian

Mr. PECORA (interposing). Who told you that? Mr. Wilkin. I cannot say, but it was a call in the regular course of business. So we reduced our bills payable by $600,000 with this money upon our books. Well, then, when we got the statement of the bank on the day after the first of January, this $600,000 deposit had not gone to our credit. So I immediately tried to get in touch with Patterson, who was the vice president of the group, and the one they told me had arranged this credit. That was at the time that the National Bank of Commerce and the Guardian Detroit Bank consolidated, over that year end. But I could not get Patterson. So I got a fellow by the name of—well, he was a vice president anyway, in charge of the bank's accounts there. So later on in the day he called me and told me that due to the press of the consolidation they had not got this credit through, and to just cancel that transaction. So that is the story about the $600,000,

Mr. Pecora. Well, what was the rest of the story, about the $1,800,000 bills payable that were taken up at that time?

Mr. WILKINS. "Oh, no, Mr. Pecora. Bills payable were not eliminated at all at that time. They still showed 11/2 million dollars bills payable after that entry.

Mr. PECORA. I show you photostatic reproductions of certain documents, four in number. Will you look at them and tell us if they relate to this transaction, involving this certificate of deposit of $600,000 you have just alluded to?

Mr. WILKIN. All right.
Mr. PECORA. I am handing them to you to look at.

Mr. WILKIN (after looking at the papers). I would say they did, Mr. Pecora, although it is not my writing.

Mr. PECORA. What did you say?
Mr. Wilkin. It is not my writing, but I would say that is correct.

Mr. Pecora. Will you just keep them for a moment as I want to refer to them.

Mr. WilKIN. All right.

Mr. PECORA. Of what records or documents are these photostatic reproductions ?

Mr. WILKIN. They are reproductions of items in the files of the Union Industrial Bank at Flint.

The CHAIRMAN. What kind of items? Certificates of deposit and so on?

Mr. WILKIN. No, sir. These are debit and credit slips.
Mr. PECORA. All four of them?
Mr. WILKIN. Yes, sir.

Mr. PECORA. Mr. Chairman, I offer them in evidence, and ask they may be marked by consecutive numbers as separate exhibits.

The CHAIRMAN. Let them be admitted and made a part of the record.

(The four photostats were marked as follows: “ Committee Exhibit No. 98, Jan. 19, 1934"; " Committee Exhibit No. 99, Jan. 19, 1934”; “ Committee Exhibit No. 100, Jan. 19, 1934”; “ Committee Exhibit No. 101, Jan. 19, 1934” and are as follows:)

COMMITTEE EXHIBIT No. 98, JANUARY 19, 1934

ÚxioX INDUSTRIAL TRUST AND SAVINGS BANK,

Flint, Michigan, Date December 31, 1931. Debit Guardian Detroit Bank. In payment of C.D. issued today, $600,000.00.

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UNION INDUʻSTRIAL TRUST AND SAVINGS BANK,

Flint, Michigan, Date December 31, 1931. Credit Demand Crdt. Written, $600,000.00.

COMMITTEE EXHIBIT No. 100, JANUARY 19, 1934

Date December 31, 1931. Debit bills pa vable. Partial payment to Guardian Detroit Bank to apply on our notes, $600,000.00.

('OMMITTEE EXHIBIT' No. 101. JANUARY 17, 1934,

L'nion INDUSTRIAL Trust And Savings Bank,

Flint, Michigan. Date, December 31, 1931. Credit Guard am Detroit Bank Applied on our note, $60,000.00.

Mr. Wilkin. Mr. Pecora, I might say, or I should like to say, that I have a memorandum here that I procured from the Guardian Bank, which is in the files of the Industrial Bank, in the Guardian.

Mr. PECORA. Will you show it to me?
Mr. WILKIN. Yes, sir.

Mr. PECORA. Mr. Wilkin, the memorandum you have produced was made by whom?

Mr. WILKIN. Jacobs was his name.
Mr. PECORA. W. P. Jacobs ?
Mr. WILKIN. Yes, sir.
Mr. PECORA. Who was he?

Mr. WILKIN. He was the vice president in charge of banks and bankers matters in the National Bank of Commerce.

Mr. PECORA. When did this memorandum come into your possession?

Mr. Wilkin. I would say 60 days ago.

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