Mr. PECORA (interposing). Just wait one minute. I think we will administer the oath to you.

Senator COUZENS (presiding). 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. VERHELLE. I do.

TESTIMONY OF JOSEPH F. VERHELLE, GROSSE POINTE, MICH., SENIOR OFFICER OF THE MANUFACTURERS NATIONAL BANK OF DETROIT

Mr. PECORA. Please state your name, residence, and occupation. Mr. VERHELLE. My name is Joseph F. Verhelle; 1331 Three Mile Drive, Grosse Pointe, Mich.; I am senior officer of the Manufacturers National Bank of Detroit.

Mr. PECORA. Were you connected with the Detroit Bankers Co. in any capacity heretofore?

Mr. VERHELLE. I was connected as comptroller from February 29, 1930, until the beginning of November of 1932. This statement, while it was put out before I had anything to do with the Detroit Bankers Co., yet in answer to your question I will say, the Detroit Co. was owned by the Detroit Trust Co., and that ownership of the First National Bank was very much in doubt.

Mr. PECORA. Well, why were not the balance sheets of these two companies included in the consolidated balance sheet embodied in committee exhibit no. 7?

Mr. VERHELLE. I cannot answer for this one, but it was embodied in future statements, and I can answer for those. I presume the question is the same in both cases, so that my answer to the latter statement will take care of this one. The balance sheet of the Detroit Co., if it had been included in later statements, would have been misleading inasmuch as it was owned and the value of it already included in the assets of the Detroit Trust Co. The theory upon which this statement was published was that the stockholders were being informed on the holdings of the Group Co. There were two ways to publish a balance sheet: One was, to show a balance sheet of the Detroit Bankers Co., merely indicating that they held so many shares of this stock, and so many shares of something else, against which they had outstanding a certain amount of their own stock. That would have been a rather meaningless statement, because after all it was the statements behind that stock that were presumed to amount to anything. And the Detroit Co. was already included, insofar as its value was concerned, and the First National Co. being worthless, were not included in subsequent balance sheets.

Mr. PECORA. All right. Now I will resume my examination of Mr. Ballantyne.

TESTIMONY OF JOHN BALLANTYNE-Resumed

Mr. PECORA. Now, Mr. Ballantyne, before I asked you to identify the chart, which has since been marked in evidence as "Committee Exhibit No. 6", I started to question you on the subject of whether or

not the five original unit banks of the holding company were permitted to carry on as they had been carried on and conducted immediately prior to their acquisition by the Detroit Bankers Co. ?

Mr. BALLANTYNE. Oh, no.

Mr. PECORA. They were not?

Mr. BALLANTYNE. Not when they were consolidated.

not.

Of course

Mr. PECORA. What changes or departures were made after they had been acquired by the Detroit Bankers Co.?

Mr. BALLANTYNE. The Peninsular Co. and the Bank of Michigan joined in the consolidation with the People's Wayne County Bank. I, however, was asked to go over to the First National Bank as chairman of the board, which I did. I think those were all the banks that were changed.

Mr. PECORA. I am not asking about changes effected by mergers, acquisitions, or consolidations. My question was directed particularly to the proposition of whether or not the banking units of the holding company were permitted to conduct their respective business affairs in the same manner in which they had been conducted prior to their acquisition by the holding company.

Mr. BALLANTYNE. Of course, when the acquisition took place, when that consoliation took place, those banks were closed. As to the principal banking officers of the Bank of Michigan and the Peninsular State Bank, those banks were closed.

Senator COUZENS. I think there is a misunderstanding here. Mr. BALLANTYNE. It may be that I have misunderstood it. Senator COUZENS. How long after the organization of the Detroit Bankers Co. was it before this consolidation took place? Mr. BALLANTYNE. I would have to look that up.

Mr. VERHELLE. It was 4 months.

Senator COUZENS. Mr. Pecora's question, Mr. Ballantyne, was confined to those 4 months before the consolidation.

Mr. BALLANTYNE. Oh. Yes; there was no pressure there that I know of.

Mr. PECORA. After the acquisition of those banking units, or unit banks, by the holding company, were the officers and directors of each unit bank permitted to conduct and direct the operations, activities, business, and policies of their respective banks?

Mr. BALLANTYNE. In a general way I would say they were.

Mr. PECORA. Was their control and direction interfered with or modified or changed in any way by the officers, trustees, or directors of the Detroit Bankers Co.?

Mr. BALLANTYNE. I cannot think of any way in which they were interfered with.

Mr. PECORA. Well, now, after the acquisition of those unit banks by the holding company, did any representatives of the holding company sit in at meetings of boards of directors of such unit banks? Mr. BALLANTYNE. Not when you talk of the unit banks. Are you referring to the five?

Mr. PECORA. I mean all the unit banks which either at the outset or subsequently or eventually were acquired in whole or in part by the holding company, which was the Detroit Bankers Co.

Mr. BALLANTYNE. Well, now, I think there might have been one or two cases, but I could not name them, where representation was had on the boards.

Mr. PECORA. Let me call your attention, Mr. Ballantyne, to the following resolution that appears to have been adopted by the board of directors of the Detroit Bankers Co. at a meeting of that board held on December 23, 1930, at which the following directors were present according to the minutes of that meeting, a photostatic copy of which I have before me.

Mr. BALLANTYNE. All right.

Mr. PECORA. There are shown as being present the followingnamed gentlemen: John Ballantyne, William T. Barbour, John R. Bodde. McPherson Browning, Herbert L. Chittenden, Julius H. Haass, D. Dwight Douglas, T. W. P. Livingstone, Wesson Seyburn, Ralph Stone, and Mark A. Wilson.

The resolution I have reference to reads as follows, being under the caption "Authority to vote stock at annual meeting of the subsidiaries":

In connection with the annual meetings of the stockholders of the various units of the Detroit Bankers Co. to be held in January of 1931, Mr. Chittenden offered and moved the adoption of the following resolution:

"Resolved, That the following several individuals be, and they are hereby, authorized to attend the respective annual meetings of stockholders set opposite their respective names, to be held at such date, time, and place in January of 1931, as is fixed by the bylaws of the various institutions:

"First National Bank in Detroit, John Ballantyne; Detroit Trust Co., Ralph Stone; Peoples Wayne County Bank of Detroit, Julius H. Haass; Peoples Wayne County Bank of Hamtramck, J. C. Friedel; Peoples Wayne County Bank, Highland Park, Henry A. Haigh; Peoples Wayne County Bank, Dearborn, William H. McClenahen; Peoples Wayne County Bank, Wyandotte, Henry Roehring; Peoples Wayne County Bank, Ecorse, Ignatius J. Saliotte; Peoples Wayne County Bank, River Rouge, A. H. Moody; Grosse Pointe Savings Bank, Grosse Pointe, Frank W. Hubbard; River Rouge Savings Bank, River Rouge, H. C. Barrett; Detroit Co., Lawrence K. Butler.

"And they and each of them are fully authorized and empowered to vote at such meetings, respectively, and any adjournments thereof, the shares of stock owned by this company in said banks, respectively, upon the election of directors and upon any other motion or resolution and the transaction of any other business which may be presented to or may come before said meetings respectively." The motion being duly seconded, the resolution was adopted.

Mr. BALLANTYNE. I recall that.

Mr. PECORA. Now, that indicated that certain directors of the Detroit Bankers Co. were designated to represent the companyMr. BALLANTYNE. Not only the directors but

Mr. PECORA (Continuing). Wait a minute to represent the company at annual meetings of stockholders of the unit banks. Mr. BALLANTYNE. Yes.

Mr. PECORA. And to vote.

Mr. BALLANTYNE. Certain directors of the holding company and certain directors of the banks. You named some there that were not directors of the holding company at all.

Mr. PECORA. I know that.

Mr. BALLANTYNE. But the voting power was with the holding group.

Senator COUZENS. In the reading of that list it appears that some of those gentlemen were on the boards of the unit banks and some were also on the board of the Detroit Bankers Co.