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Mr. VERHELLE. A series of questions along that line.

Mr. PECORA. And you answered, in substance, that you had not done any such thing; that they were not criticisms?

Mr. VERHELLE. They were recommendations, criticisms, and suggestions. I believe that I elaborated on that.

Mr. PECORA. This document, which was marked as committee's exhibit no. 16 for identification yesterday, is addressed to Mr. Wilson W. Mills, chairman of the board of the First Wayne National Bank, and is dated May 18, 1932. Attached thereto is a covering letter addressed to Mr. Mills, dated May 19, 1932. Do you recali the occasion for your preparing this memorandum, which is denominated on the title page thereof as “ Private and Confidential Memorandum, Copy No. 5 "?

Mr. VERHELLE. I do, sir. Pardon me, Mr. Pecora. At this point I would like to ask for that copy, or a copy of this. I suppose this is the point where I must put it in the record.

Mr. PECORA. This is the point what?
Mr. VERHELLE. I would like to have that copy returned to me.
Mr. PECORA. Of what?
Mr. VERHELLE. Of that particular memorandum, or a copy of it.

Senator COUZENS. We will decide that after we get through with your testimony.

Mr. PECORA. I now repeat the question I asked you. What were the circumstances under which you prepared and gave to Mr. Wilson W. Mills the original of this Committee's Exhibit No. 16 for identification ?

Mr. VERHELLE. May I read that forwarding letter?
Mr. PECORA. Yes [handing a paper to the witness].

Mr. VERHELLE. There were two separate sets of circumstances.
One pertained to the forwarding letter and one set of circumstances
pertained to the report itself.
Mr. PECORA. Tell us what those circumstances were, briefly.
Senator COUZENS. Please read the forwarding letter.
Mr. VERHELLE (reading):

MAY 19, 1932. Mr. WILSON W. MILLS,

Chairman of the Board, First Wayne Bank: In rereading this memorandum I have noticed the omission of a large number of items similar to those outlined herein, some of which have been covered in memorandums and statements previously made to certain directors.

Because of your desire to have this memorandum at once, I have not bad the opportunity to supply the memorandums referred to. I will obtain them for you as rapidly as possible. Respectfully,

J. F. VERHELLE, Comptroller. This particular letter was written at the suggestion of Mr. Mills or, rather, Mr. Mills asked for a letter of transmittal or a memorandum covering the subject discussed in the memorandum in order to determine for himself as to the completeness of it. These circumstances relate to the letter of transmittal.

The report dated May 18, which it transmits, was a confidential memorandum written for the purpose of definitely not permitting anything that might be unethical or improper or might be considered out of order in connection with the activities of the personnel connected with the various units of the Detroit Bankers Co. It was

a definite attempt to clean up, one might say, or discontinue anything that might savor of an unethical practice; and I felt definitely that I would be remiss in my duties as comptroller of the Detroit Bankers Co. if I did not use my every effort toward that end. The memorandum was submitted, and I know that since that time, within just a few days ago, as a matter of fact, a representative or an investigator asked me about this memorandum, so I presume you have some of the details in connection with it.

Senator COUZENS. I observe, with reference to your transmittal letter to Mr. Mills, that there is an omission of a large number of items similar to these outlined therein. Were those omitted ones later delivered to Mr. Mills?

Mr. VERHELLE. No, sir; they were not—that is, I must qualify that: There may have been certain items there that were completed, or certain items upon which more information was furnished; but as to actually carrying out the specific wording of that memorandum I could not say that.

Senator COUZENS. You refer herein also to the fact that some of the items omitted from this report had been covered in memorandums and statements previously given and made to certain directors. Have you a record of those ?

Mr. VERHELLE. No, sir; but I believe that you people have, because it was in reference to that that someone saw me a few days ago and asked me questions connecting up those two reports.

Senator COUZENS. Was it for that reason that you submitted this report yesterday?

Mr. VERHELLE. No, sir.

Mr. PECORA. You had been asked, prior to your preparing and giving to Mr. Mills this memorandum marked "Committee Exhibit No. 16 for identification”, to make a report covering transactions between the First Wayne National Bank and certain of its officers, had you not?

Mr. VERHELLE. Yes, sir.

Mr. PECORA. And this report or memorandum was prepared by you in response to that request or those directions that you received from Mr. Mills, was it not? Perhaps if I read from the report which is dated May 18, 1932, addressed to Mr. Mills, which was embodied in this memorandum, the first paragraph thereof, it will refresh your recollection. You say as follows:

In accordance with your direction I am sending you a report covering transactions between the bank and certain of its officers which have been the subject of conferences between you and Mr. Ballantyne.

Mr. VERHELLE. I do not know whether I received the instructions or whether the directions came from Mr. Mills. I do not recall that. I do not recall just who they came from at this time.

Mr. PECORA. In this communication addressed to Mr. Mills you say that you address it in accordance “ with your direction.”

Mr. VERHELLE. He may have directed someone to direct me.

Mr. PECORA, This memorandum concerns itself primarily with a report covering transactions between the First Wayne National Bank and its predecessor institutions and certain of its officers, does it not?

Mr. VERHELLE. I assume that is the way it is worded here.

Mr. PECORA. You referred in an answer that you made a few minutes ago to Senator Couzens' question, to unethical practices. What did you mean by that? You said something about there having been unethical practices that you wanted to clean up and that you felt it was your duty as comptroller to give your conscientious devotion to the task-or that is the substance of what you said in answer to Senator Couzens' question, as I recall it.

Mr. VERHELLE. Yes, sir.
Mr. PECORA. What did you mean by that?

Mr. VERHELLE. The practices as covered in that report appear to me to be questionable from an ethical standpoint.

Mr. PECORA. And they were practices relating to loans made by the bank either to certain of its officers or upon the recommendation and with the approval of certain of the officers of the bank?

Mr. VERHELLE. There is a various miscellaneous assortment of items in there of miscellaneous types and descriptions, sir.

Mr. PECORA. This memorandum is a document of 48 typewritten pages, and I do not want to burden this record nor your examination with any detailed survey of it; but tell us briefly, in order to make a short cut to the subject, the general nature of these practices that you regard as unethical.

Mr. VERHELLE. The subject matter contained in this report was the result of a review of the records of the various departments or units by myself,

personally. Mr. PECORA. That report concerns itself with the First Wayne National Bank, does it not?

Mr. VERHELLE. Not entirely, sir. The First Wayne National Bank, of course, was

Mr. PECORA. Or the predecessor banks?
Mr. VERHELLE. I believe so; yes, sir; in the main, yes, sir.

Mr. PECORA. Apparently, either Mr. Mills or Mr. Ballentine, or perhaps both, prior to your making this review of those records of the bank which constitute the basis of this report to Mr. Mills, had discussed with you the matter of making a survey or complete review of certain loan accounts existing in the bank and with which certain of the officers of the bank were connected in various manners?

Mr. VEBHELLE. Mr. Ballantine had indicated to me that he wanted everything handled properly-not in so many words, but I knew definitely that that was his primary consideration; and as a result, I verbally stated some of the questions I had in my mind, and my recollection is that I was asked to put it in writing, and as a result there is this specific report.

I did not quite complete my former answer, sir, to the previous question. I had based this entire report on the records, as I said, examined by myself, and I did not go any further in connection with this investigation than that point, because I believed that it was not up to me to do so, and that I had completed my end of the transaction by substantially calling it to the attention of the management.

Mr. PECORA. Do you mean by that, that having been asked by either Mr. Ballantyne or Mr. Mills to review certain loan accounts in the bank with which certain officers of the bank were connected, you made that review, prepared and submitted that report to Mr.

Mills, and by so doing considered that you had fairly discharged the duty which was imposed upon you?

Mr. VERHELLE. Taking out one premise in your question, that I had been asked to review certain loan accounts I had not been asked to review any certain loan accounts.

Mr. PECORA. Were you asked to review all of the loan accounts of the bank?

Mr. VERHELLE. No.

Mr. PECORA. Were you asked to review any particular loan accounts?

Mr. VERHELLE. No, sir.
Mr. PECORA. What were you asked to review!

Mr. VERHELLE. I would say that I reviewed whatever I thought was the proper thing to review to cover the particular point that has been discussed here.

Mr. PECORA. What was that point—unethical practices?
Mr. VERHELLE. Yes.
Mr. Pecora. Unethical practices on the part of officers of the bank!
Mr. VERHELLE. I would say so.

Mr. PECORA, Mr. Chairman, I offer that memorandum or report, which has been marked " Committee's Exhibit No. 16 for Identification", in evidence; but in view of its voluminous character I do not think it is necessary to spread it in full upon the minutes of the hearing.

Senator COUZENS. It was marked for identification yesterday.
Mr. PECORA. I am now offering it in evidence.
Senator COUZENS. It may be received.

Mr. PECORA. I will ask the witness some questions about it, so that it will not be necessary to put it all in the record.

(The document referred to, heretofore marked for identification as Committee's Exhibit No. 16, was received in evidence, marked “ Committee Exhibit No. 95, Jan. 26, 1934”; and the same will not appear in full in the record.)

Mr. PECORA. The document has been marked in evidence as Exhibit No. 95 of this date; and in this report or memorandum marked “ Committee's Exhibit No. 95" in evidence, among other things you say as follows (reading):

In accordance with your direction I am sending you a report covering transactions between the bank and certain of its officers which have been the subject of conferences between you and Mr. Ballantyne.

There are undoubtedly other details which will appear upon a more complete review.

Because of the officers named, it did not appear to me to be advisable to proceed further until the matter was reviewed by you.

The individuals concerned are as follows: John E. Bodde, Donald H. Sweeny, Gilbert H. Beasley, Sidney J. Dowding, Elvin G. Krebs, Arnott H. Moody, Rupert Pletsch, John H. Rooks, Alfred T. Wilson, F. E. Morrison, Mason Borgman, D. M. Irwin, Theodore F. Torney, Daniel J. Gonion (River Rouge), and Henry Rochrig (Wyandotte).

What was the reason for your saying in this report, as follows? [Reading:]

Because of the officers named it did not appear to me to be desirable to pro ceed further until the matter was reviewed by you.

Mr. VERHELLE. Because that was my opinion, sir.
Mr. PECORA. What is that?

Mr. VERHELLE. Because that was my opinion at the time.

Mr. PECORA. Why did you not consider it advisable to proceed until there had been a review by Mr. Mills?

Mr. VERHELLE. I was an officer of the Detroit Bankers Co., not an officer of the First Wayne National Bank.

Mr. PECORA. The Detroit Bankers Co. virtually owned all the capital stock of this bank, and as such it had a legitimate interest to inquire into the operation of the bank, did it not?

Mr. VERHELLE. Yes, sir.

Mr. PECORA. What I am trying to get at, Mr. Verhelle, is the reason why you said in this report, at the very outset, that, because of the officers named, it did not appear to you to be advisable to proceed further until the matter was reviewed by Mr. Mills, who then was the chairman of the board of the bank itself.

Mr. VERHELLE. Would he not be the proper person to whom to report that, sir?

Mr. PECORA. Apparently Mr. Mills had already asked you to inquire into these things that you have referred to as unethical conduct of practice and which affected officers of the bank, and, having been assigned that task by Mr. Mills, you proceeded to fulfill it as indicated by this report purporting to be a report of your examination of these so-called unethical practices. Why did you not proceed further?

Mr. VERHELLE. Because it was a matter on which I wanted his advice.

Mr. PECORA. After that statement in this report appears the following [reading]:

The following is therefore only an outline, and indicates the nature of the transactions which it is believed are irregular. The outline is not complete, but does cover some transactions of each of the individuals whose actions have been brought to my attention. This memorandum does not cover ordinary errors or negligence in connection with the handling of loans, the type of which you are, it is believed, familiar with. It should also be understood that no accusations are being made, but that the items contained herein are being recorded only on specific instructions in accordance with the records of the bank and in line with my responsibility as chairman of the Detroit Bankers Co.

A cursory investigation has revealed the fact that the majority of mortgages made through the First Wayne National Bank, involving either officers or employees, have had but few principal payments. These mortgages are heavily concentrated within a certain group of individuals, particularly those who are or have been directly or indirectly connected with the making of the mortgage. Of $1,100,000 of mortgages that are in the names of officers or employees $486.000 appear to be the liability of 27 such individuals. This total involves 115 mortgages.

You found that to be a fact as the result of your cursory investigation, did you not?

Mr. VERHELLE. Yes, sir.
Mr. PECORA. You say further in this report to Mr. Mills (reading]:

It appears further that the officers and employees that have become involved are principally officers and employees that have been connected with the Delray branch, i.e., Messrs. Moody, Sweeny, Krebs, and Torney and certain officers and employees of the Peoples State Bank, principally Mason Bergman.

You found that to be the fact, too, I presume?
Mr. VERBELLE. Yes, sir.
Mr. Pecort. You said also as follows in this report [reading]:

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