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Mr. PECORA. Well, now, had the question of ownership been cleared up in the year 1931 ?

Mr. VERHELLE. The question of ownership had been cleared up, but there was a decided reluctance on the part of the Group Co. to deal with it as a unit of the Detroit Bankers Co., and I am not certain as to whether I should include the year 1931, but I doubt whether during the year 1931 they dealt with it at all.

Mr. PECORA. You mean that it was not regarded even during the year 1931 as a unit of the Detroit Bankers Co.?

Mr. VERHELLE. Insofar as I can recall; yes. I may be off on my dates so far as the latter part of the year is concerned, but I think not.

Mr. PECORA. When, for the first time, did the Detroit Bankers Co. regard the First National Co. as one of its units?

Mr. VERHELLE. I would be unable to give an approximation of the date as to when, but it seems to me that date would be some time at the beginning of 1932 or the end of 1931, I mean when it was taken up for discussion.

Mr. PECORA. Well, when was it first regarded as a unit of the Detroit Bankers Co. by that company?

Mr. VERHELLE. I recall that a legal opinion was rendered approximately in January, I am sure it was after January 1 of 1931. Any. how, it was during the month of January, in which the question of ownership of that company was outlined by the attorneys; and among the questions raised in this opinion, or I know among the facts set forth, was that to the effect that the stock was trusteed under the agreement of 1919, and that a certain group of trustees had control and jurisdiction over the management of this company, or the voting of the stock, or something to that effect, and-well, that is about all I can remember of that opinion.

Mr. PECORA. You still haven't told us when the Detroit Bankers Co. first regarded the First National Co. as a unit which it owned.

Mr. VERHELLE. Well, I would have to look back at the statement of the Detroit Bankers Co: At one time the company was set up on the books of the Detroit Bankers Co., and it was at that time that we first so regarded it.

Mr. PECORA. When was that?
Mr. VERHELLE. I could not recall the exact month.
Mr. PECORA. What year was it?

Mr. VERHELLE. It was either the latter part of 1931 or the early part of 1932. That is my recollection of it.

Mr. PECORA. Now, what other nonbanking units were owned or controlled by the Detroit Bankers Co. during the year 1931 ?

Mr. VERHELLE. There were affiliated with the Detroit Bankers Co., in addition to the banking units and in addition to the First National Co., to which we have just referred, the Detroit Co., owned in its entirety by the Detroit Trust Co. Incidentally, I may say that that chart is wrong-no; that chart is correct, because that says as of February, as I believe is shown on there. The Detroit Co. was owned by the Detroit Trust Co. The First Detroit Co. was owned in part by the Detroit Co. and in part by the First National Co. The Detroit Bankers Safe Deposit Co. was owned by the Detroit Bankers Co. Well, it is also in the list and you regard that as State bank minority holdings, as affiliated with the Detroit Bankers Co.,

which were all owned by the First National Co., later known as the “Assets Realization Co. That is all that I can recall. And I think that is all, too.

Mr. PECORA. Now, in the annual report to stockholders of the Detroit Bankers Co. for the year 1931 there appears what is called :

Combined statement of condition of the banking units at the close of business December 31, 1931.

As you will notice by referring to the report. Why wasn't there included in this combined or consolidated statement of condition the condition of the nonbanking units of the Detroit Bankers Co. in this annual report?

Mr. VERHELLE. I will have to take them one at a time.
Mr. PECORA. All right.

Mr. VERHELLE. The Detroit Co. was already carried in the statement of the Detroit Trust Co., in that all of its capital stock was owned by them. And, incidentally, Mr. Pecora, I forgot to mention a couple of affiliates, and I would like now to correct my former answer.

Mr. PECORA. All right.

Mr. VERHELLE. There were also in existence the First National Bank Building Co. I may be off a little on my title there.

Mr. PECORA. You might look at the chart.

Mr. VERHELLE. And the First National Garage Co._The Detroit Co., as I have already said, was owned entirely by the Detroit Trust Co., and therefore was included in the financial statement of the Detroit Trust Co. The First Detroit Co. was owned in part, 70 percent, by the (witness hesitates for a moment)-by either the Detroit Trust Co. or the Detroit Co. It will come to me in a minute. The other 30 percent was owned by the First National Co. The First National Bank Building Co. was an operating company, carried on the books of the First National Bank; and the First National Garage Co. was an operating company, either carried on the books of the First National Bank or of the First National Building Co., and I do not recall which at this time. And the First Detroit Co., 70 percent of it was carried on the books of the Detroit Trust Co., I believe. The Detroit Bankers Safe Deposit Co. was a separate corporation, with a capital of $100,000, and owned by the Detroit Bankers Co. I believe that covers them all.

Mr. PECORA. After the issuance of the 1931 report to stockholders of the Detroit Bankers Co., did any stockholders indicate that they wanted, or communicate with the company requesting, additional information ?

Mr. VERHELLE. Oh, I would say there were quite a number who asked for information about various phases.

Mr. PECORA. Were their letters answered and the information which they sought given to them?

Mr. VERHELLE. I believe so. I do not recall any specific instances, but these things, of course, come up from time to time; and, quite naturally, they are liable to go to any one of 4,000 people for their information and, of course, would be very hard to answer.

Mr. PECORA. Was it consistently the policy of the Detroit Bankers Co. to answer such letters from stockholders, and to give to such stockholders the information requested by them in their letters?

Mr. VERHELLE. Whenever they came to me I always tried to give them all the information which they asked for.

Mr. PECORA. Were those letters referred for answer to persons other than yourself as well as to yourself!

Mr. VERHELLE. Well, if they came to me I would generally answer them, and if they came to some officer of some unit-to which I believe they would be more likely to come because of some relationship that had existed, why, they were not referred to me.

Mr. PECORA. When such letters from stockholders were addressed to the Detroit Bankers Co. generally and not to any particular individual connected with the personnel of the company, would those letters be referred to you for answer?

Mr. VERHELLE. No. The normal operation was that they would go to Mr. Mark Wilson for answer, unless they were specifically addressed to me.

Mr. PECORA. Do you recall having some correspondence to which you attended on behalf of the Detroit Bankers Co., with a stockholder named R. G. Hentschell, who wrote for certain information that he did not find in the annual report of the Detroit Bankers Co. for the year 1931 ?

Mr. VERHELLE. No, sir.

Mr. PECORA. Well, now. I show you what purports to be a photostatic reproduction of a letter addressed to the Detroit Bankers Co. by Mr. R. G. Hentschell, under date of January 25, 1932. It was made from the original included among the files of the Detroit Bankers Co. Will you look at it and tell me if you can identify that letter as being a true and correct copy?

Mr. VERHELLE (after looking at the photostat). I do not really recall this letter.

Mr. PECORA. Well, now, probably if you will look at this document which I now hand you, it will help you to recall whether or not that letter, that you now have in your hand, was received.

Mr. VERHELLE. All right.

Mr. PECORA. I now show you for that purpose what purports to be a photostatic copy of a letter addressed to R. G. Hentschell, dated February 10, 1932, and signed, or at least this photostatic copy thereof is signed, with the initials “ J. F. V." over the word “Comptroller", which I presume refers to you, doesn't it?

Mr. VERHELLE. Yes, sir. (Witness looks over both papers.) This letter signed “J. F. V.” is very much my own phraseology, and while I do not recall the letter, it was undoubtedly written by myself.

Mr. PECORA. Well, was it written in answer to the first letter which I showed you?

Mr. VERHELLE. I would presume that it was, unless there was some other correspondence in between those two dates, which I doubt.

Mr. PECORA. Mr. Chairman, I offer these two letters in evidence, to be marked as separate exhibits.

Senator COUZENS (presiding). The two letters will be appropriately marked as separate exhibits.

(A letter from H. G. Hentschell to Detroit Bankers Co., dated January 25, 1932, was marked " Committee Exhibit No. 91, January 25, 1937,” and will be found immediately following where read by Mr. Pecora.)

(And the letter from the comptroller of the Detroit Bankers Co. to R. G. Hentschell, dated February 10, 1932, was marked “ Committee Exhibit No. 92, January 25, 1934 ", and will be found immediately following where read by Mr. Pecora.)

Mr. PECORA. The letter from Mr. Hentschell, addressed to the Detroit Bankers Co., which has been received in evidence as Committee Exhibit No. 91 of this date, and which is on the letterhead of the Manistique Pulp & Paper Co., of Manistique, Mich., is as follows:

MANISTIQUE PULP & PAPER Co.,

Manistique, Mich., January 25, 1932. DETROIT BANKERS Co.,

Detroit, Mich. GENTLEMEN : I just received your annual report for the year 1931, and I would like very much to have you give me a detailed statement of income and expenditures, as there is nothing in the report that would indicate what disposition was made of the difference in the capital, surplus, and undivided profits, amounting to approximately $23,000,000 as compared to your report for the previous year. Awaiting your early reply, I remain, Yours truly,

(Signed) R. G. HENTSCHELL. The second letter which has been received in evidence as Committee Exhibit No. 92, of this date, reads as follows:

FEBRUARY 10, 1932. Mr. R. G. HENTSCHELL,

Manistique Pulp & Paper Co., Manistique, Mich. DEAR MR. HENTSCHELL: The following is in answer to your request for information regarding the detailed statement of income and expenditures :

The statement contained in our stockholders' report pertains to the banking units of the Detroit Bankers Co. In order to simplify our operating procedure, the First Detroit Co. has been transferred from the Detroit Trust Co. to the Detroit Bankers Co. This is responsibile for the difference in the invested capital of that company on December 31, 1931. In addition, substantial reserves were set up as a guaranty against the assets of the newly consolidated First Wayne National Bank, so these became of the same general character as those of a new bank. The assets that were removed from the banking units naturally do not appear on the combined statement of the banking units.

A detailed statement of income and expenditures such as you ask for would involve a very great amount of work and in itself would have to be supported by a great deal of statistical data. Of course, all of these items are carried separately for each unit and only those figures are consolidated which will assist us in our operations. We have tried, in the report, to briefly cover the results of our operations of the past year.

If there are any specific details which interest you, we will be glad to furnish information concerning them. Yours very truly,

J. F. V., Comptroller. Well, now, Mr. Verhelle, you will observe that the information which was sought by this stockholder, named Hentschell, was not given to him by your reply letter of February 10, 1932, which I have just read, do you not?

Mr. VERHELLE. It would be difficult to determine just exactly what was .wanted there due to the peculiarity that existed in connection with the-well, my voice is rather bad, Mr. Pecora.

Mr. PECORA. Just keep that microphone that is on the table ahead of you and talk normally. You do not have to talk right into it.

Senator Couzens (presiding). Just sit back of the microphone and talk normally.

175541--34—PT 11-11

Mr. V'ERHELLE. I will ask the committee reporter to read so much, of my answer as I have already given.

(The answer as given was read as follows:) Mr. VERHELLE. It would be difficult to determine just exactly what was wanted there due to the peculiarity that existed in connection with the

Mr. VERHELLE. Existing in connection with the operation of the Detroit Bankers Co., which was operating on a basis so that its expenditures and income were identical.

The statistical data referred to would involve a complete statement of the actual operations of the Detroit Bankers Co., and it was my belief, I presume, at that time, that this particular stockholder was in reality requesting the income and expense detail regarding the banking units; that is, those covered by the report, and that would have been an immense task to provide.

Mr. PECORA. Don't you see that in his letter of January 25, 1932, the stockholder stated, or rather called your attention to the fact that in the report which he had received from the Detroit Bankers Co. for the year 1931, to quote from his letter [reading]:

There is nothing in the report that would indicate what disposition was made of the difference in capital, surplus, and undivided profits amounting to approximately 23 million dollars as compared to your report for the previous year.

Would it have required a mass of that statistical data to have told that by far the greater part of this 23-million-dollar reduction in the capital assets of the company was due to the setting up of these reserves during the year 1931, that were considerably the subject of your testimony yesterday!

Mr. VERHELLE. I thought that I had really answered that question there, sir. Maybe I am mistaken.

Mr. Pecora. Here is the way you answered it in your reply letter of February 10, 1932 [reading] :

The statement contained in our stockholders' report pertains to the banking unit of the Detroit Bankers Co. In order to simplify our operating procedure the First Detroit Co. has been transferred from the Detroit Trust Co. to the Detroit Bankers Co. This is responsible for the difference in invested capital of that company on December 31, 1931,

In that statement you were not referring to the difference in the invested capital of the Detroit Bankers Co., were you?

Mr. VERHELLE. No, sir.

Mr. PECORA. You were referring to the difference in invested capital of one of the banking units of the Detroit Bankers Co.?

Mr. VERHELLE. Yes, sir.

Mr. PECORA. You say further in your reply letter to Mr. Hentschell (reading] :

In addition substantial reserves were set up as a guarantee against the assets of the newly consolidated First Wayne National Bank, so these became of the same general character as those of a new bank.

That did not give him the explanation or the information which he sought, did it?

Mr. VERHELLE. It would depend to some extent, sir, on who Mr. Hentschell was.

Mr. PECORA. Mr. Hentschell was apparently a stockholder of the Detroit Bankers Co., and wrote for information which he felt he

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