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Mr. PECORA. I didn't ask you anything about that.
Mr. BALLANTYNE. To supervise; yes.

Mr. PECORA. Didn't you understand that you were paid a salary of $50,000 a year, when you became president of the Detroit Bankers Co., to compensate you for services that you would be expected to discharge as its president?

Mr. BALLANTYNE. Yes.

Mr. PECORA. And among those services was the supervision, as chief executive officer of the company, of its business activities and affairs?

Mr. BALLANTYNE. Yes.

Mr. PECORA. In the discharge of those services did you learn currently during the year 1931, or that portion of it in which you were president of the company, whether or not the business of the company was more prosperous than it had been during the preceding year of 1930?

Mr. BALLANTYNE. All I learned, Mr. Pecora, was what was furnished by the officers, as I said before, and these figures were given to me by the officers through Mr. Verhelle. It would be impossible for any one man to have overlooked all the units of that bank—quite impossible. We had to depend on our officers. Is that a fair answer?

Mr. PECORA. And the principal officer was the president. Mr. BALLANTYNE. Yes; and he was to receive the reports of those officers. He had to accept them as accurate.

Mr. PECORA. I am not talking about any figures.
Mr. BALLANTYNE. No?

Mr. PECORA. I am talking about the general business of the company during the year 1931, when you were a director of it for the entire year and president of it from May until the end of the year.

Mr. BALLANTYNE. Yes.

Mr. PECORA. Did you, as such director and as such president, acquire knowledge at first hand of the business affairs of the company which enabled you to determine whether or not its business for that year was more prosperous or profitable than it had been for the year 1930?

Mr. BALLANTYNE. As a matter of fact, I do not know that I can. I did not have any suspicion that there was anything different than what was reported here in these reports. I do not know now.

Mr. PECORA. As president Mr. BALLANTYNE. The president is not Mr. PECORA. As president of the company and its chief executive officer from May until December 31, 1931, couldn't you tell ?

Mr. BALLANTYNE. There are a number of things

Mr. PECORA. Couldn't you tell whether or not the company was operating more profitably than it had been during the preceding year?

Mr. BALLANTYNE. No.
Mr. PECORA. You did not know that!
Mr. BALLANTYNE. No.
Mr. PECORA. You had no means of knowing it?
Mr. BALLANTYNE. Only by the information furnished me.
Mr. PECORA. And only by that information?

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Mr. BALLANTYNE. Surely.

Mr. Pecora. And that information merely consisted of accounting statements and figures?

Mr. BALLANTYNE. Yes.

Mr. PECORA. Did you believe, when you got out this annual report to the stockholders of the company for the year 1931, that during the year 1931 the company's business had been more profitable than it had been in the preceding year?

Mr. BALLANTYNE. I believed every word that was in that report. Mr. PECORA. In this report did you mean to say, in substance or effect, that the business of the company for 1931 had been more profitable than its business for the year 1930?

Mr. BALLANTYNE. I meant exactly what was said there.

Mr. PECORA. Did you mean, in saying what you did say in the report, to convey the impression to the stockholders that, according to your knowledge and belief, the company's business in 1931 had been more profitable than its business in 1930?

Mr. BALLANTYNE. I know that during that year-I think the First National Bank's deposits increased about $30,000,000.

Mr. PECORA. I am not talking about the First National Bank's deposits, and I am not talking about the deposits of any unit bank. I am talking about the business of the separate entity known as the Detroit Bankers Co., of which you were president.

Mr. BALLANTYNE. I have got to confine my answer to the facts, that the idea I had generally of that statement was that it was correct.

Mr. PECORA. What statement are you now referring to?

Mr. BALLANTYNE. That the results of the operations were equal to $4.14 a share, and that the net operating revenues for the next year were $7,450,000, equal to $4.21 a share.

Mr. PECORA. And that the earnings for 1930 were equal to $4.14 a share, is that right?

Mr. BALLANTYNE. Yes.
Mr. PECORA. That is what you stated to the stockholders?
Mr. BALLANTYNE. Yes.

Mr. PECORA. In saying that to the stockholders did you mean to convey the belief, opinion, or impression that for the year 1931, the company's business was more profitable than it had been for 1930 ?

Mr. BALLANTYNE. I will answer that question by saying I was given the facts. What I mean is, that I didn't know, myself. I do not suppose there are two statements made by presidents of banks that convey the same language. I might have been anxious to put my best foot forward, I don't know, because times were so difficult. But I had no question at all at the time this report was made, as to the fact that the bank was in a sound condition.

Mr. PECORA. I am not talking now about that

Mr. BALLANTYNE (continuing). Well, that the earnings for the year before were just about the same. I had no means of knowing otherwise. Mr. Pecora, I had absolutely no means of knowing otherwise. The mere fact of being president does not make a man a wizard. You have to depend upon figures and facts as furnished to you by the officers of the various banks.

Senator COUZENS. Mr. Ballantyne, you have read very many financial statements, have you not?

Mr. BALLANTYNE. Oh, yes.

Senator COUZENS. For how many years have you read financial statements ?

Mr. BALLANTYNE. How many?
Senator COUZENS. Yes.
Mr. BALLANTYNE. Oh, I could not say.
Senator COUZENS. Can't you answer as to that?
Mr. BALLANTYNE. Of course I can't answer that question.

Senator COUZENS. Do you mean to say that you cannot answer that question?

Mr. BALLANTYNE. How many financial statements I have read ?

Senator COUZENS. Oh, no. For how many years have you read financial statements, was my question.

Mr. BALLANTYNE. Oh! For upwards of 40 years.

Senator COUZENS. Well, if you were handed this statement as a stockholder of the Detroit Bankers Co., and not as an officer, and you read in the report that in 1930 the company earned $4.14 a share and in 1931 earned $4.21 a share, you would know enough to know that that implied at least a better showing in 1931 than in 1930, wouldn't you?

Mr. PECORA. What is the answer to that question, Mr. Ballantyne ? Mr. BALLANTYNE. He ought to know what?

Mr. PECORA. Mr. Ballantyne, if you would only listen to the questions as propounded instead of engaging in conversation with Mr. Verhelle while questions are being put to you, you would know what each question is.

Mr. BALLANTYNE. Mr. Pecora, I have one ear that I cannot hear out of.

Mr. PECORA. Suppose you devote that one ear to the questioner and not to hearing what Mr. Verhelle is whispering to you.

Mr. BALLANTYNE. All right.

Mr. PECORA. Now, will you please answer Senator Couzens' question?

Mr. BALLANTYNE. What was it?

Senator Couzens. The committee reporter will read the question to you.

(Thereupon the question was read as follows:) Senator COUZENS. Well, if you were handed this statement as a stockholder of the Detroit Bankers Co., and not as an officer, and you read in the report that in 1930 the company earned $4.14 a share and in 1931 earned $4.21 share, you would know enough to know that that implied at least a better showing in 1931 than in 1930, wouldn't you?

Mr. BALLANTYNE. Oh, yes.

Mr. PECORA. Now, I show you a printed document entitled “Annual Report to Stockholders, 1930, Detroit Bankers Co., Detroit."

Will you please look at it and tell me if you recognize it to be a true and correct copy of the annual report submitted to the stockholders of the Detroit Bankers Co. for the year 1930 by and in behalf of the company?

Mr. BALLANTYNE (after looking at the printed report). Oh, yes; that is undoubtedly it.

Mr. PECORA. Mr. Chairman, I offer it in evidence, but inasmuch as it is quite voluminous it need not be printed in the record.

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me.

Senator COUZENS (presiding). The printed annual report will be received and marked by the committee reporter as an exhibit, but not to be entered on the record.

(The annual report to stockholders for the year 1930 of the Detroit Bankers Co. was marked " Committee Exhibit No. 10, Jan. 25, 1934", and will be kept with the records of the

subcommittee, but not printed in the hearings.)

Mr. PECORA. The report for 1930, which has been marked in evidence as Committee Exhibit No. 10” of this date. I now have before

Mr. Ballantyne, have you before you a duplicate copy of this annual report?

Mr. BALLANTYNE. Yes.

Mr. PECORA. Will you turn to the double page in the middle of it, entitled “ Consolidated Statement of Condition of the Units of the Detroit Bankers Co. at the close of business, December 31, 1930”?

Mr. BALLANTYNE. All right.

Mr. PECORA. Now, have you before you a duplicate copy of the printed annual report to the stockholders of the Detroit Bankers Co. for the year 1931, a copy of which has been marked in evidence as “ Committee Exhibit No. 9", as of January 24, 1934 ?

Mr. BALLANTYNE. Yes, sir.

Mr. PECORA. Will you turn in that printed annual report to the pages captioned " Combined statement of condition of banking units at the close of business, December 31, 1931 ”?

Mr. BALLANTYNE. Yes.

Mr. PECORA. What was the capital stock of the Detroit Bankers Co. as of December 31, 1930, as shown in the consolidated statement of condition included in that report marked " Exhibit No. 10”?

Mr. BALLANTYNE. The capital stock is shown as $26,960,000.

Mr. PECORA. And what was the surplus of the company as shown by that statement? Mr. BALLANTYNE. It was $47,650,000.

Mr. PECORA. And what was the amount of the undivided profits as therein shown?

Mr. BALLANTYNE. It was $17,218,000.

Mr. PECORA. As a matter of fact, it is shown as $17,218,579.71, isn't it?

Mr. BALLANTYNE. Yes.

Mr. PECORA. And what is shown therein to be the total capital, surplus, and undivided profits of the units of the Detroit Bankers Co. as of December 31, 1930?

Mr. BALLANTYNE. It is shown as seventeen million, three hundred thousand

Mr. PECORA (interposing). No. Give me the aggregate capital and surplus.

Mr. BALLANTYNE. It is shown as $91,828,579.01.

Mr. PECORA. What was the capital stock as shown in the annual report to the stockholders as of December 31, 1931 ?

Mr. BALLANTYNE. It is shown as $29,410,000.

Mr. PECORA. And what was the amount of the surplus shown as of that date?

Mr. BALLANTYNE. It is $29,190,000.

Mr. PECORA. What was the amount of the undivided profits shown therein ?

Mr. BALLANTYNE. It is $9,857,000.
Mr. PECORA. It is $9,859,000, isn't it?
Mr. BALLANTYNE. Yes; it is $9,859,912.03.

Mr. PECORA. And the total capital, surplus, and undivided profits as of December 31, 1931, was how much?

Mr. BALLANTYNE. It was $68,459,912.03.

Mr. PECORA. Now, how much less was the total capital, surplus, and undivided profits as of December 31, 1931, than it was as of December 31, 1930?

Mr. BALLANTYNE. It was $23,368,660.98.
Mr. PECORA. That figure is $22,368,666.98, isn't it?
Mr. BALLANTYNE. It is, as I make it, $23,368,666.98, I think.
Mr. PECORA. You say it is $23,000,000?
Mr. BALLANTYNE. Yes.
Mr. PECORA. All right. It is $23,368,666.98, is that right, now?
Mr. BALLANTYNE. Yes.

Mr. PECORA. In other words, as a result of the business transacted by the Detroit Bankers Co. and its various units during the year, 1931, its capital, surplus, and undivided profits on December 31, 1931, were $23,368,666.98 less than they were on December 31,1930?

Mr. BALLANTYNE. Yes.
Mr. PECORA. What was that reduction due to?

Mr. BALLANTYNE. Why, it was due to cleaning house under the auspices of the Federal authorities. It was not due to losses made in 1 year by any manner of means. I desired in my report-well, the first report I made was in June of 1931, which, by the way, was made on figures compiled, as I say again, by Mr. Verhelle. I wanted to have honest assets back of the figures that were to be shown there. And we had an examination made of the allied units, the Peoples Wayne Bank, and the First National Bank, under the jurisdiction of Mr. Verhelle and Mr. Hopkins, and they themselves dictated what they thought should be taken out of those banks. But by no means did it represent the year's losses. It was the background of many years, and in addition as a result of depreciation. But these figures, I give you my word for it, Mr. Pecora, were furnished to me, and in the matter of that consolidation which was effected under my advice, it was for only one purpose, yes, Mr. Pecora, for one and only one purpose, in order to make an honest statement.

Mr. PECORA. What consolidation are you now referring to ?

Mr. BALLANTYNE. Of the Peoples Wayne Bank and the First National Bank. That was made just prior to this last statement.

Mr. PECORA. I am not asking you anything about that consolidation now.

Mr. BALLANTYNE. Well, you asked me

Mr. PECORA (interposing). I cannot understand why you continue to drag that matter into your answer.

Mr. BALLANTYNE. It may be that I misunderstood your question. You asked me the reason for the difference in these figures, and I am giving it to you.

Mr. PECORA. The reason was that during the year 1931 the Detroit Bankers Co. and its units wrote off losses that had been incurred to the extent of the greater part of this $23,000,000, wasn't it?

Mr. BALLANTYNE. More than that.

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