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Mr. PECORA. Give us the reasons that cause you to believe it would have been out of order to have sent out any letter or information to the stockholders which would have informed them that the condition of the company at the end of the year 1931 was not as good as it was at the end of the preceding year.

Mr. VERHELLE. One very good reason was that at that particular time we felt that we were climbing the hill and getting back out with this organization; that this organization was definitely coming out of the woods.

Mr. PECORA. Was the fact that you were coming out of the woods reflected by the reduction of $23,000,000, approximately, in the capital assets of the company as compared with those capital assets in the preceding year?

Mr. VERHELLE. No, sir; not by that, but by other factors.
Mr. PECORA. Go ahead-what other factors?

Mr. VERHELLE. The first one would be, I presume the most important, the assurances which we had received that we had made a thorough job of housecleaning

Mr. PECORA. Who gave you those assurances ?
Mr. VERHELLE. The comptroller's representatives.
Mr. PECORA. Who?
Mr. VERHELLE. Mr. Leyburn.
Mr. Pecora. Did he give you those assurances ?
Mr. VERHELLE. No, sir.
Mr. PECORA. Did you hear him give them to anybody else?
Mr. VERHELLE. No, sir.

Mr. PECORA. Did you ever see those assurances from him in writing addressed to anybody?

Mr. VERHELLE. Not that I can recall, sir.

Mr. PECORA. How do you know about the giving of those assurances?

Mr. VERHELLE. Principally because I was informed of the fact that Mr. Leyburn had stated that

Mr. PECORA. Who informed you of that?
Mr. VERHELLE. Mr. John Ballantyne.
Mr. PECORA. Anyone else that you can recall ?
Mr. VERHELLE. I cannot think of anyone just at this moment.

Mr. PECORA. Didn't you know, as the comptroller of the Detroit Bankers Co. during all of this time, Mr. Verhelle, that special dividends aggregating in amount 542 million dollars had been declared by certain of the units of the holding company to enable the holding company to meet its obligations during the year 1931 ?

Mr. VERHELLE. I would like to add to that question—I will answer the question. Yes; I knew that dividends had been declared of 572 million dollars.

Mr. PECORA. Special dividends?

Mr. VERHELLE. Special dividends, so that the holding company might meet the obligations which it had incurred in connection with this $7,000,000 that has been the subject of so much discussion here.

Mr. PECORA. So long as you put it in that way, Mr. Verhelle, let me again ask you if it is not the fact, to your personal knowledge, that of those special dividends aggregating 542 million dollars, 142 million dollars was declared by the unit which paid it for the specific purpose of enabling the First National Co. to discharge an obligation of about a million and a half which it owed to the First National Bank in Detroit? Is not that the fact, to your absolute knowledge ?

Mr. VERHELLE. No, sir; it is not.

Mr. PECORA. Is not that the fact set forth in the resolution declaring that special dividend that was the subject of the examination of Mr. Long before this committee this morning, in your presence and hearing!

Mr. VERHELLE. Yes, sir.

Mr. PECORA. Why do you say that it would have been out of order to have sent out a report to the stockholders of the Detroit Bankers Co. showing that its condition at the end of the year 1931 was not as good as it was at the end of the year 1930?

Mr. VERHELLE. That question has such a broad answer that
Mr. PECORA. I do not care how broad the answer is.

Mr. VERHELLE. It would have been disastrous to do a thing of that sort, because in the first place the truth of it would have been questionable. In the second place, to make a statement of that sort would have been certainly contrary to everything that everyone was attempting to do at that time, and that is to hold up the house, the general siuation existing throughout the country.

Mr. PECORA. And in the effort to hold up the house do you think it was necessary. to keep the stockholders of the Detroit Bankers Co., which is the house, I understand, you were trying to hold up

Mr. VERHELLE. No, sir; I beg your pardon, sir. I qualified the statement and stated that the house referred to the general situation existing throughout the country.

Mr. PECORA. You said the truth of the statement to the effect that the financial condition of the Detroit Bankers Co. at the end of he year 1931 was worse than it was at the end of the year 1930, could be questioned. You yourself have admitted here this afternoon that it was the truth that at the end of the year 1931 the financial condition of the Detroit Bankers Co. and its units was not as good as it was at the end of the preceding year, so how could the truth of it be questioned?

Mr. VERHELLE. Because my admission was based upon facts now in my possession, since the closing of this bank, whereas I referred to that statement as of the end of that particular year, and the knowledge then in my possession.

Mr. PECORA. You know now that the knowledge in your possession enables you to assert that the financial condition of the company at the end of 1931 was worse than it was at the end of the preceding year, do you not? Mr. VERHELLE. The knowledge now in my possession; yes, sir.

Mr. PECORA. Did you not have substantially that same knowledge when you gave Mr. Ballantyne the figures that were embodied by him in his annual report to the stockholders for the year 1931 ?

Mr. VERHELLE. No, sir.

Mr. PECORA. Didn't you have knowledge at that time that the capital assets of the Detroit Bankers Co. had been reduced by over 23 million dollars at the end of 1931, from what they were at the end of 1930 ?

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Mr. VERHELLE. From what they were listed at in the figures that were on the books of these different units.

Mr. PECORA. And didn't that indicate a worse financial condition than existed at the end of the year 1930?

Mr. VERHELLE. Not in itself, sir.

Mr. PECORA. You said it would have been disastrous to have told the stockholders of the group that the financial condition of the company at the end of 1931 was worse than it had been the year before. That would have been disastrous to whom?

Mr. VERHELLE. To the whole country; and furthermore, it would have been a very questionable item, a very questionable statement, because we had the rather very definite feeling that we had there one of the very strongest banks in the country.

Senator COUZENS. Why did you write down your assets about 19 million dollars at that time?

Mr. VERHELLE. In order to state them at conservative values, in order that the assets might in some measure represent the figures which were covered by the statement.

Senator COUZENS. That being the fact, then, that showed the difference between the end of 1930 and the end of 1931, did it not!

Mr. VERHELLE. No, sir.
Mr. PECORA. Were the figures false at the end of 1930, then?
Mr. VERHELLE. No, sir.

Senator COUZENS. Why did you write down 19 million dollars in that period of years if both figures were true

Mr. VERHELLE. It is purely a question of judgment as to the value at which an asset should be stated in a report.

Senator COUZENS. But your judgment was that the value of the assets at the end of 1931 was some 19 million dollars less than it was in 1930, is that true?

Mr. VERHELLE. Than reflected in the figures
Senator COUZENS. Is that true, that your judgment was
Mr. VERHELLE. I did not quite understand your question.

Senator COUZENS. You said these assets were valued as a matter of judgment, and your judgment was that at the end of 1931 the assets were worth some 19 million dollars less than they were at the end of 1930. Is that true?

Mr. VERHELLE. Than various examiners might have thought they were worth at the end of 1930.

Senator Couzens. You gave these figures to Mr. Ballantyne. What did you think? Did you agree with the examiners?

Mr. VERHELLE. I believe in substance I did, substantially.

Senator COUZENS. Then your answer to my question is yes, that you thought the assets were worth some 19 million dollars less at the end of 1931 than they were at the end of 1930.

Mr. VERHELLE. No, sir; it is not.

Senator COUZENS. You had better read your testimony over, because you are falsifying, and subject to contempt of the Senate.

Mr. VERHELLE. I do not understand your question, sir, then, if that is the case.

Senator COUZENS. You at one time said that you were in substantial agreement with the examiners, and therefore you wrote down the assets at the end of 1931 some 19 million dollars less than they were in 1930, at the end of 1930. I asked you if that was not in substantial agreement with your judgment, and you said yes. Then I asked whether or not, in your judgment, the assets were not worth some 19 million dollars less at the end of 1931 than they were worth in 1930, and you said no.

Mr. VERHELLE. Your question, as I understood it, was just a trifle different than it is worded now.

Senator COUZENS. Well, take it as I have worded it now, then.
Mr. VERHELLE. Than they were in 1930, on the books of those units.
Senator COUZENS. Yes.
Mr. VERHELLE. The answer is yes, they were.
Senator COUZENS. They were worth less?

Mr. VERHELLE. They were worth substantially less than they were worth according to the figures represented. Senator COUZENS. Yes;

and those figures were in accordance with your judgment.

Mr. VERHELLE. For 1930? No, sir. I had nothing to do with that.

Senattor COUZENS. I am talking about 1931.

Mr. VERHELLE. In 1931 I substantially agreed with the figures of the examiners.

Senator COUZENS. So that, in effect, you substantially agree that the assets at the end of December 1931 were worth some 19 million dollars less than they were December 30, 1930?

Mr. VERHELLE. Not than they were worth in 1930.
Senator COUZENS. Than they were valued at.

Mr. VERHELLE. Than they had been carried on the books at in 1930.

Senator COUZENS. Yes.
Mr. VERHELLE. Yes, sir.

Mr. PECORA. Mr. Verhelle, was any estimate made by anybody connected with the Detroit Bankers Co. at any time during the year 1931 of the approximate amount of the losses that had been sustained due to various causes, including depreciation of value of securities?

Mr. VERHELLE. Including what? Will you read the last part of that question ?

(The reporter read the pending question.)
Mr. VERHELLE. 1932, you said ?
Mr. PECORA. No; I said 1931. The stenographer has it right.
Mr. VERHELLE. I believe I made such an estimate.

Mr. PECORA. What was the amount of the estimate of those losses which you made?

Mr. VERHELLE. I think it was substantially in accordance with the examiner's estimate.

Mr. PECORA. What was the amount?
Mr. VERHELLE. I do not recall the amount, sir.

Senator COUZENS. Can you estimate it?' Can you estimate the amount?

Mr. VERHELLE. I would have to base it on the amount which the examiner reported.

Mr. PECORA. What examiner are you referring to?
Mr. VERHELLE. All the examiners, I should say.
Mr. PECORA. What examiners are you referring to now?

Mr. VERHELLE. The national banking department examiners andwell, the thing would be very hazy on my part, because it involved a large number

of examiners, and these examinations involved a large number of units.

Mr. PECORA. You mean by the examiners, the gentlemen who examined for the Comptroller of the Currency, the national bank units, and the gentlemen who examined for the State Banking Commissioner of Michigan, the State bank units!

Mr. VERHELLE. Yes, plus, probably, some of our own examiners.

Mr. PECORA. See if you can recall approximately the amount of the losses that were estimated in the year 1931 to have been sustained, whether it be your independent estimate or whether it be your estimate in agreement with the estimates of these examiners that you speak of.

Mr. VERHELLE. I am sorry, sir, but I could not do that.

Mr. PECORA. You could not do it. Let us see if I cannot refresh your recollection a bit. You know, do you not, that it was legally required of the Detroit Bankers Co., under the laws of the State of Michigan, to file with the Michigan Securities Commission an annual report? Mr. VERHELLE. Yes, sir.

Mr. PECORA. And you know that such an annual report was filed for the year 1931 ?

Mr. VERHELLE. Yes, sir.
Mr. PECORA. In behalf of the Detroit Bankers Co.?
Mr. VERHELLE. Yes, sir.
Mr. PECORA. Did you prepare that report?

Mr. VERHELLE. I did not personally prepare it, sir, but it was prepared in the Detroit Bankers Co. by one of the men there.

Mr. PECORA. Did you have anything to do with the preparation or furnishing of the data embodied in that report?

Mr. VERHELLE. Personally!
Mr. PECORA. Yes.
Mr. VERHELLE. I seriously doubt it, sir.
Mr. PECORA. You seriously doubt whether you did or not?

Mr. VERHELLE. Whether I personally furnished any data in connection with the preparation of that report. I presume it was made out by just going through the books.

Mr. PECORA. By your subordinates?
Mr. VERHELLE. I presume so.
Mr. PECORA. Without any approval by you?

Mr. VERHELLE. I probably looked at it to see if it was substantially correct, although I am not certain of that. It would depend upon what report you are speaking of, which year. Mr. PECORA. I am speaking of the year 1931, and I have so stated.

Mr. VERHELLE. I think that the 1931 report was prepared by the treasurer of the company, if it is in writing. I can tell

Senator Couzens. Were those figures taken from the books of the Bankers Co.?

Mr. VERHELLE. Yes, sir.

Senator COUZENS. You had charge of the books as comptroller, did you not? !

Mr. VERHELLE. Yes, sir.

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