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yes, sir.

Mr. Pecora. I show you what purports to be photostatic copy of the annual report for the year 1931 filed with the Michigan Securities Commission by or on behalf of the Detroit Bankers Co. Will you look at it and tell me if you recognize it to be a true and corrected copy of such a report? [Handing paper to the witness.]

Mr. VERHELLE. I would say yes, sir.
Mr. PECORA. I offer it in evidence.

Senator COUZENS (presiding). It may be entered without being spread on the record.

(Copy of annual report, 1931, filed with Michigan Securities Commission by Detroit Bankers Co. was received in evidence, marked " Committee Exhibit No. 14, Jan. 25, 1934 ", and the same is not to be printed here for the reason stated above.)

Mr. PECORA. In this annual report, a copy of which has just been received in evidence as Committee's Exhibit No. 14 of this date, the following item appears (reading]: Decrease in investments $22,015,428.74. Do you notice it? Have you a copy of this report before you? Mr. VERHELLE. I was trying to see whether I had one.

Mr. PECORA. In the lower left-hand side of the front page, Mr. Verhelle.

Mr. VERHELLE. Yes, sir.

Mr. PECORA. You have every reason to believe that that was a correct item, have you not?

Mr. VERHELLE. I have every reason to believe that this is correct;

Mr. PECORA. Does that indicate to you that it was correctly reported to the Michigan Securities Commission by the Detroit Bankers Co., through the medium of this report, that during the year 1931 the company had suffered a decrease in the value of its investments amounting to $22,015,428.74?

Mr. VERHELLE. It had taken that decrease. That decrease represents the decrease that we have been discussing, as you know.

Mr. PECORA. Won't you please answer my question ? Read the question.

(The reporter read the pending question.).

Nr. VERHELLE. I would not know, sir, without studying this a bit. I am sorry. I did not make up this report, sir.

Mr. PECORA. I did not either. You were the comptroller, not I. Senator COUZENs. You are an officer of one of the new banks, are Mr. VERHELLE. I am; yes, sir. Would you please read that question again? (The reporter read as follows:) Mr. PECORA. Does that indicate to you that it was correctly reported to the Michigan Securities Commission by the Detroit Bankers Co., through the medium of this report, that during the year 1931 the company had suffered a decrease in the value of its investments amounting to $22,015,428.74?

Mr. VERHELLE. No, sir.
Mr. PECORA. What does that item indicate to you?

Mr. VERHELLE. That item would, off-hand, indicate to me that the $22,000,000 represents a reduction in invested capital of the units

you not?

owned by the Detroit Bankers Co., as differentiated from a decrease in the value of those actual securities. Inasmuch as the values of securities are not purely those of book value, these figures representing purely book value, it would not affect the actual value, and certainly did not affect the actual value as indicated by this particular figure here.

Mr. Pecora. Do you notice, Mr. Verhelle, that this item of $22,015,428.74 is denominated in this annual report filed with the Michigan Securities Commission as “decrease in investments”? You note that do you not?

Mr. VERHELLE. Yes, sir.

Mr. PECORA. Do you note further that it is one of the items appearing in the statement of profit-and-loss account shown in this report? Mr. VERHELLE. Yes, sir.

Mr. PECORA. Does not that indicate to you, looking at this report in the form in which it appears, that according to this report the Detroit Bankers Co. sustained a loss of $22,015,428.74 during the year 1931 through decrease in the value of its investments!

Mr. VERHELLE. It indicates to me that an unfortunate-
Mr. PECORA. Can you answer the question yes or no?
Mr. VERHELLE. No, sir.
Mr. PECORA. Why not?

Mr. VERHELLE. Because the figure represents, I presume, the dif. ference between the invested capital structure as of the beginning of the year, and as of the end of the year, and that figure would not and should not be considered as a loss.

Mr. PECORA. Why is it included in the profit and loss statement if it should not be regarded as a loss?

Mr. VERHELLE. That question will have to be put to Mr. Lewright.
Mr. PECORA. Why to Mr. Lewright and not to you?
Mr. VERHELLE. Because I do not know.
Mr. PECORA. You were the comptroller of the company.
Mr. VERHELLE. Yes; but the comptroller-

Mr. PECORA. And had charge of these records and accounts, didn't you?

Mr. VERHELLE. This particular report was prepared by the treasurer of the company, who had really charge of the preparation of

Mr. PECORA. I thought you said before that the data embodied in this report were furnished by subordinates of yours, and you looked them over.

Mr. VERHELLE. I generally did; yes, sir.
Mr. PECORA. Did you in this instance?
Mr. VERHELLE. I would not be sure, sir.

Mr. PECORA. Let us see if I an refresh your recollection further or by other means as to the amount of loss it was estimated the Detroit Bankers Co. sustained during the year 1931, to your knowledge. Do you recall submitting a memorandum to Mr. Ballantyne sometime in March 1932 that contained a reference to the losses estimated sometime during the preceding year?

Mr. VERHELLE. No, sir.

Mr. PECORA. I show you what purports to be a photostatic reproduction of such memorandum, dated March 7, 1932, and addressed to

this report.

Mr. John Ballantyne, signed by the comptroller, having the initials “ J.F.V." at the end of the memorandum on the left-hand side. Tell me if you recognize it to be a true and correct copy of a memorandum which you prepared and gave to Mr. Ballantyne on that date.

Senator CouZENS. That appears to be one of the memorandums that was not extracted from the files of the Detroit Bankers Co.

Mr. VERHELLE. I seriously doubt if I sent that memorandum, sir, for the reason that I am in the habit of initialing my copies.

Mr. PECORA. Who prepared that?
Mr. VERHELLE. I dictated this.
Mr. PECORA. I offer it in evidence.
Senator Couzens (presiding). It may be entered.

(Memorandum Mar. 7, 1932, Verhelle to Ballantyne, was received in evidence and marked “ Committee's Exhibit No. 15, Jan. 25, 1934.")

Senator COUZENS. Did you ever have any conferences with any representatives of the Department of Justice about the records of the Detroit Bankers Co.?

Mr. VERHELLE. Yes, sir. They have been over to see me a number of times requesting information as to where they could locate certain information.

Senator Couzens. What have you told them during those conferences ?

Mr. VERHELLE. I have told them that I left the Detroit Bankers Co. before the general smash-up in February, and I have generally pointed out to them where I would go to procure the particular type of information they were looking for, and that the files were left absolutely intact at the time I left there; that all of the information that belonged in those files was there; that is, all the information that should be there, and that belonged to the Detroit Bankers Co., was in those files at the time I left there.

Senator COUZENS. What other would be in the files that did not belong to the Detroit Bankers Co.?

Mr. VERHELLE. What other information would be in the files which did not belong to the Detroit Bankers Co.?

Senator COUZENS. Yes.
Mr. VERHELLE. Oh, I do not know that there would be anything.

Senator COUZENs. You qualified your statement awhile ago that everything was in the files of the Detroit Bankers that should have been there.

Mr. VERHELLE. I did not mean to qualify it with that interpretation at all, Senator.

Senator COUZENS. That is what you said. Now, in discussing this matter with any of the Department of Justice representatives, was there any question raised as to the memorandums of criticism that you sent to the several units?

Mr. VERHELLE. Yes, sir. On numerous occasions they asked for copies of this and copies of that, and I believe that a great many times I did not operate those files

Senator COUZENS. You did not what?

Mr. VERHELLE. I did not operate the files, of course, but the party who operated them at that time went over there, and I think they found a considerable quantity of the material which they were looking for.

Senator COUZENS. In the discussions with these representatives of the Department of Justice, did you tell them at any time the kind of communications that you had sent to the unit banks belonging to the Detroit Bankers Co.?

Mr. VERHELLE. I may have. I don't specifically recall.

Senator COUZENS. You say you don't specifically recall. Do you recall any instances where you commented to Department of Justice representatives, on the kind of statements that you had sent to the several banking units?

Mr. VERHELLE. Yes; I think I did on numerous occasions. I think I just did it here on yesterday. It seems to me the question came up- and it is indicative particularly of the type of question that has been asked on numerous occasions—they asked me if I had any idea, asked me here yesterday, as to where they might find a certain letter that I spoke to them about, or that they had spoken to me about, regarding the $750,000 in connection with the Pontiac bank. They said they had a wire from the man out there and wanted to know just where they should look for it.

Senator COUZENS. Did they tell you they could not find it in the files of the Detroit Bankers Co.?

Mr. VERHELLE. I think they did. Of course, there is one thing about the files of the Detroit Bankers Co., as I have indicated before: Approximately at the time I left there, and before that, the duties of persons with the Detroit Bankers Co. were materially changed, and the material, I understand and believe, was in large measure turned over to the particular individuals to whom those duties were assigned. There is a very considerable, or a large amount of that, of course.

Senator COUZENS. Do you mean that the memorandum which you had prepared, or the memoranda which you had prepared for the several units, copies of which you kept and placed in the files of the Detroit Bankers Co., were taken out of the files and delivered to someone else who had charge of the work? Is that what I am to understand from you?

Mr. VERHELLE. "Well, I presume they would have removed them and taken them over to the particular places where they were working. But I could not tell you that. I would not know that, because I left there, severed my connection, and whatever happened to those files was not my affair.

Senator COUżENS. You have no record anywhere of these memoranda that you addressed to the several units?

Mr. VERHELLE. Well, there were literally hundreds of them, and, of course, I have no record of them. I just dictated one after another.

Senator COUZENS. In other words, there were hundreds of criticisms sent to those several units, and you filed them as you wrote them; is that true?

Mr. VERHELLE. Well, the term “ criticisms ” is not entirely in order.

Senator COUZENS. Well, what were they, if they were not criticisms?

Mr. VERHELLE. Well, criticisms and suggestions, or suggestions for changes, or things of that sort. You might term them recommendations of various kinds.

Senator COUZENS. Have you any of those in your possession?
Mr. VERHELLE. I have some; yes, sir.
Senator COUZENS. Where are they?
Mr. VERHELLE. I have some right here.

Senator COUZENS. Is that the only place where you have them,
right here?
Mr. VERHELLE. I believe it is; yes, sir.
Senator COUZENS. And you have none anywhere else?
(Witness shakes his head.)
Senator Couzens. Is your answer no?
Mr. VERHELLE. Yes, sir.
Senator COUZENS. Will you submit to us those that you have here?

(The witness turns to his package of papers, looks at them, and then turns toward the attorney, Mr. Longley.)

Senator COUZENS. Do you have to get legal advice as to whether or not you will submit those papers ?

Mr. VERHELLE. Well, I should like to ask a question, sir.

Senator COUZENS. Well, we desire them now, and if a subpena is necessary we will issue one.

Mr. PECORA. Mr. Chairman, Mr. Verhelle is on the stand, and no subpena is necessary.

Senator CouZENS (presiding). Then please submit them to the committee.

Mr. VERHELLE. These are copies, of course. [Handing to Mr. Pecora two files of papers].

Senator COUZENS. In other words, these are copies that you took out of the files of the Detroit Bankers Co., are they?

Mr. VERHELLE. No, sir. Senator Couzens. Then where did you get these copies ? Mr. VERHELLE. They were copies I made for myself, more or less. They were extra copies, I know that.

Senator COUZENS. When you made these extra copies what did you do with them?

Mr. VERHELLE. I stuck them in one corner of my desk, I believe.

Senator COUZENS. And then when you left the Detroit Bankers Co. you took them with you, is that correct?

(The witness turns to look through some other papers.)

Nr. PECORA. Mr. Verhelle, there is a question pending that has been addressed to you. Did you hear it?

Mr. VERHELLE. Well, I am trying to recall, sir. I wouldn't say that I took them with me at that time, sir.

Senator Couzens. Then when did you take them?

Mr. VERHELLE. Well, some of them at one time and some at another time,

Senator COUZENS. After you left the service of the Detroit Bankers Co. ?

Mr. VERHELLE. No; before I left the service.
Senator COUZENS. Ís that all that you have in your possession?
Mr. VERHELLE. I have another file here.
Senator Couzens. Will you submit that to Mr. Pecora ?

Mr. VERHELLE. Here it is. [Handing to Mr. Pecora what seemed to be a bound volume.]

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