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Mr. PECORA. Was that construed by you as meaning that no publicity should be given to the fact of such write-off to the stockholders of the company!
Mr. VERHELLE. Oh, there was publicity.
Mr. PECORA. Was that construed by you as meaning that no publicity in the annual report to the stockholders should be given to the fact of this write-off!
Mr. VERHELLE. I indicated that as one of the reasons that would come to my mind now-there are probably others—as to the factors that would have entered into a consideration of whether or not that figure should have been quoted in the stockholders' report.
Senator COUZENS. And yet you said when that report was issued it had all been published in the press about these large write-offs !
Mr. VERHELLE. Yes.
Mr. PECORA. What was there to worry about if it had already been published!
Mr. VERHELLE. Why continuously dwell upon it?
Senator COUZENS. The committee will adjourn until 10 o'clock tomorrow morning.
Mr. PECORA. You return then, Mr. Verhelle, and Mr. Ballantyne too, and the other witnesses under subpena report.
(Whereupon, at 4:25 p.m., the committee adjourned until 10 a.m. of the following day.)
FRIDAY, JANUARY 26, 1934
UNITED STATES SENATE,
SUBCOMMITTEE OF THE
Washington, D.C. The subcommittee met at 10 a.m., pursuant to adjournment on yesterday, in Room No. 301 of the Senate Office Building, Senator Duncan U. Fletcher presiding.
Present: Senator Fletcher (chairman), Adams, Townsend, and Couzens.
Present also: Ferdinand Pecora, counsel to the committee; Julius Silver and David Saperstein, associate counsel to the committee; and Frank J. Meehan, chief statistician to the committee; Thomas G. Long, attorney for witnesses summoned in connection with Detroit Bankers Co.; Clifford B. Longley, attorney for John Ballantyne.
Senator Couzens (presiding). The subcommittee will please come to order.
Mr. PECORA. Will you resume the stand, Mr. Verhelle.
TESTIMONY OF JOSEPH F. VERHELLE, GROSSE POINTE,
Mr. PECORA. Mr. Verhelle, you testified on yesterday that the text of the annual report to stockholders of the Detroit Bankers Co. for the year 1931, marked in evidence “ Committee Exhibit No. 9, January 24, 1934", was substantially your phraseology. Now, is that equally true of the annual report sent out to stockholders of that company for the year 1930, a copy of which has been received in evidence here as committee exhibit no. 10 as of January 25, 1934 ?
Mr. VERHELLE. In 1930 I was requested to prepare an annual report-and, you understand, this is to the best of my recollectionAnd I submitted various forms. My recollection is that a committee was appointed to prepare an annual report, and that finally, after various forms and ideas of a report were submitted to that committee, Mr. Mark Wilson brought to me the ideas of that committee, or the ideas of Mr. Haass, who was not on the committee, but he, I definitely recall, had something to do with the preparation of that report; and that thereupon the ideas that were presented to me were incorporated in a text, by myself, which was then turned over and marked up, and I suppose two or three or perhaps half a dozen copies of that text were submitted in various ways, with changes and additions, but just as to where they originated I would be unable to recall at this particular moment. But the result was the report that you have, sir.
Mr. PECORA. After the various revisions were made by members of that committee you have referred to, would you say that the report for 1930 as actually issued is substantially in accordance with the report which you originally prepared ?
Mr. VERHELLE. Oh, hardly.
Mr. VERHELLE. Hardly. I recall preparing a very short report, of about one page, and of preparing a very lengthly affair consisting of a very large number of pages, with the notion that from that could be selected pretty much the particular material that was to go into this report.
Mr. PECORA. Well
Mr. VERHELLE (continuing). The ideas were returned to me and I remember, in writing it, I combined it.
Mr. PECORA. Then, is the text of the report for 1930 your phraseology?
Mr. VERHELLE. With a large number of changes, I suppose in grammar and
Mr. PECORA (interposing). Made by persons other than yourself? Mr. VERHELLE. Yes, sir.
Mr. PECORA. The substance of the text is your phraseology as contained in the 1930 report, is it?
Mr. VERHELLE. I think Mr. Mark Wilson would be able to determine that better than I would, because it seems to me at one stage of the preparation of this report I received typewritten copies or something of the kind, particular excerpts, possibly of things I had written in the original drafts, plus the material added.
Mr. PECORA. I notice in the annual report for 1930 that the consolidated statement of condition, which appears upon the central double page portion of the report, is entitled:
Consolidated statement of condition of the units of the Detroit Bankers Co. at the close of business December 31, 1930.
Does that purport to include all the units of the Detroit Bankers Co. or only the banking units?
Mr. VERHELLE. Well, outside of one company, which was not then on the books of the Detroit Bankers Co. but which later on, in January of 1931 a legal opinion was obtained, and which company was subsequently set up on the books of the Detroit Bankers Co. at $1, the banking units were the only companies then owned directly by the Detroit Bankers Co.
Mr. PECORA. Which is the company to which you have just referred?
Mr. VERHELLE. The First National Co.
Mr. PECORA. The First National Co. was an investment affiliate of the First National Bank, was it?
Mr. VERHELLE. Yes.
Mr. VERHELLE. No; there were certain legal ramifications in connection with the First National Co. that made it rather difficult to determine just where the ownership and control lay.
Mr. PECORA. Who held its capital stock?
Mr. VERHELLE. It was endorsed on the certificates of the First National Bank.
Mr. PECORA. That is to say, a certificate of stock of the First National Bank carried with it a proportionate interest of the capital stock of the First National Co.?
Mr. VERHELLE. Yes, sir.
Mr. PECORA. And no stock of the First National Bank could be sold without having joined, in the sale or transfer of that stock, a proportionate interest in the capital stock of the First National Co.
Mr. VERHELLE. It appears to me that there was some question about that particular point.
Mr. PECORA. Well, was that question ever determined?
Mr. PECORA. Yes. Now, who owned all of the capital stock of the First National Bank in Detroit on and after the incorporation of the Detroit Bankers Co.?
Mr. VERHELLE. The majority of the stock, that is, the great majority of it—with the exception of a few outstanding shares, that might have been as much as well, there were very few, and I don't know whether it was the one mentioned here the other day, 31 shares, or not, but it was a very small number at any rate-all but that small portion was exchanged and was owned by the Detroit Bankers Co.
Mr. PECORA. So that through that ownership the Detroit Bankers Co. also owned the First National Co.?
Mr. VERHELLE. As later determined; yes.
Mr. PECORA. In this consolidated statement of condition of the units of the Detroit Bankers Co. as embodied in the annual report for 1930 to the stockholders of the Detroit Bankers Co., is there included a statement of condition of the First National Co. as of December 31, 1930?
Mr. VERHELLE. No, sir.
Mr. VERHELLE. Because the ownership was undetermined at that time, and I think furthermore it was felt that there was no particular point in carrying in that this matter, as its value did not add to the value of the Detroit Bankers Co., and it was not at that time carried on the books of the Detroit Bankers Co., to the best of my recollection,
Mr. PECORA. Well, wasn't it regarded as a unit of the Detroit Bankers Co. during the year 1930?
Mr. VERHELLE. There was quite a question about that in the minds of a number of the directors.
Mr. PECORA. Wasn't it regarded and dealt with as a unit of the Detroit Bankers Co. that year!
Mr. VERHELLE. No, sir.
Mr. PECORA. Was it dealt with as a unit over which the Detroit Bankers Co. had no ownership?
Mr. VERHELLE. Yes, sir.