Mr. PECORA. Did you discuss these Ramm & Co. loans with Mr. Pletsch?

Mr. VERHELLE. No, sir.

Mr. PECORA. Do you know whether anyone connected with the bank took them up with Mr. Pletsch?

Mr. VERHELLE. I don't know, sir.

Mr. PECORA. Now, for your information, I have received the following telegram from Dr. Davis, whose loans, or discounts, rather, are referred to in this confidential memorandum of yours, and he informs me that he has sent you a telegram reading, in part, as follows:

It would be better for you and everybody else if you can tell the whole truth about your report while you are testifying.

Now, have you received any such communication from Dr. Davis? Mr. VERHELLE. I have not received that telegram. I suppose it is over at the hotel, and I haven't been over there this morning.

Mr. PECORA. Do you feel that you have not told the whole truth about Dr. Davis' discounts?

Mr. VERHELLE. I do not believe that I have really discussed them such as to say that Dr. Davis is a man of very high repute. I would have to refer back to the report in order to refresh my memory on the particular use of his name mentioned.

Mr. PECORA. Well, there is your confidential report [handing it back to the witness]. Now, go to it.

The CHAIRMAN. What is the date of your report?

Mr. PECORA. May 18, 1932.

Mr. VERHELLE. Yes, sir; May 18, 1932. In justice to Dr. C. Roy Davis, with whom I am not personally acquainted, but who is a man of very high standing, as I have indicated before, there are unquestionably circumstances in connection with these transactions that would exempt him from any actions that might in any way be interpreted as unethical or irregular. I do not know what those circumstances are at the present moment.

Senator COUZENS. How do you reach that conclusion, then?

Mr. VERHELLE. From the circumstances that surround his reputation and character.

Senator COUZENS. Is that the only reason?

Mr. VERHELLE. There is nothing in here that would definitely tie Dr. Davis himself into any of these transactions.

Senator COUZENS. Was he only a trustee, or was he acting for somebody else?

Mr. VERHELLE. I do not know that, sir; but apparently his affairs were being handled by Mr. Sweeny, and all matters pertaining to his transactions were referred directly to him and, quite apparently, handled by him. That is indicated by the address used in connection with the records pertaining to his transactions.

Senator COUZENS. And that fact, in itself, leads you to the conclusion that Mr. Davis is exonerated from all unethical practices; is that right?

Mr. VERHELLE. That together with his standing in the community. Senator COUZENS. You remember that Mr. Wiggin and Mr. Mitchell had great standing in their community at one time, so I

hardly think the committee will be impressed with that particular conclusion.

Mr. VERHELLE. Except that the full circumstances pertaining to these transactions would have to be known before any condemnation could be made of the man.

Senator COUZENS. I agree with that. I am not trying to condemn Dr. Davis. I am just trying to find out by what mental process you reach that conclusion; that is all.

The CHAIRMAN. At the time of your report, as I understand it, Dr. Davis appeared as being indebted for some commercial loans and also for mortgage loans. Is that right?

Mr. VERHELLE. I did not quite hear.

The CHAIRMAN. At the time of your report Dr. Davis appeared indebted for commercial loans and mortgage loans?

Mr. VERHELLE. Yes, sir.

The CHAIRMAN. You do not know whether he has paid those or not?

Mr. VERHELLE. I do not, sir.

The CHAIRMAN. He says, at least, that he has paid all his commercial loans and also paid the mortgage, $1,200, and got back his collateral.

Mr. VERHELLE. I do not know.

The CHAIRMAN. If that was done, that was done after your report and through the receiver, I suppose?

Mr. VERHELLE. I suppose so, sir; I do not know.

Mr. PECORA. Now, Mr. Verhelle, among the documents that you produced last week before this committee, and which included this confidential memorandum, there was a memorandum addressed by you to Mr. Wilson W. Mills, dated June 16, 1932, which has been marked for identification as exhibit no. 24 of January 25, 1934, which I now show you. Will you please look at it and tell us if you can identify it as a true and correct copy of a memorandum submitted by you on or about that date to Mr. Mills?

Mr. VERHELLE (after examining paper). Yes, sir.

Mr. PECORA. I offer it in evidence.

The CHAIRMAN. Let it be admitted.

(Memorandum June 16, 1932, Verhelle to Mills, heretofore marked "Committee Exhibit No. 24 for identification, Jan. 25, 1924 ", was received in evidence, marked "Committee Exhibit No. 96, Jan. 30, 1934", and the same was subsequently read into the record by Mr. Pecora.)

Mr. VERHELLE. Mr. Pecora, could I say one thing about that confidential report before you leave it?

Mr. PECORA. Surely.

Mr. VERHELLE. I have not read that report since approximately the time I wrote it, so that I am not at all familiar with the details of those transactions. I have seen the report since, both in the hands of Mr. Gano, whose name I could not recall the other day, and your Mr. Ellis also had a copy of the report, I understand, about a month ago. The transactions are all very hazy in my mind and it is difficult for me to go into detail in connection with them.

Senator COUZENS. After the rendering of the report to Mr. Mills, did you discuss it with Mr. Mills at any time?

Mr. VERHELLE. Yes, sir.

Senator COUZENS. How late, after the issuance of the report?
Mr. VERHELLE. I would say on May 19; sir.

Senator COUZENS. The next day?

Mr. VERHELLE. The day of that letter.

Senator COUZENS. That was the last time you discussed it with Mr. Mills?

Mr. VERHELLE. To the best of my recollection it is.

Senator COUZENS. Did Mr. Mills assure you at that time that the criticisms that you made would be remedied?

Mr. VERHELLE. Well, he told me that he would review it, look into it, and handle it.

Senator COUZENS. That is the last you heard of it?

Mr. VERHELLE. Except a reference once or twice by him, but there has been no discussion of it, I would say, since May 19.

Mr. PECORA. In the forwarding letter that accompanied this confidential memorandum to Mr. Mills, which is dated May 19, 1932, you state [reading]:

In re-reading 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 given and made to certain directors. Because of your desire to have this memorandum at once I have not had the opportunity to supply the memorandums referred to. I will obtain them for you as rapidly as possible.

Did you thereafter, Mr. Verhelle, obtain those other memorandums and forward them to Mr. Mills?

Mr. VERHELLE. No, sir; I did not. That letter was written because Mr. Mills indicated that he wanted the report to be absolutely complete beyond question, and did not want to have to go back to these transactions, or to these individuals again after this report was rendered. This report was made up, and I was in error the other day when the question of the definition of examination was brought up. This report was made up during the time that an examination of the bank was being made by the National Banking Department. It was done as rapidly as I could assemble the information, and I did not want to assume the responsibility or did not want to go on record as stating that, aside from these transactions, there was nothing else that was subject to comment. I made up no further memorandums that I can recall, due to the fact that I wanted to wait and see the method in which the report was handled, so as to have some indication of the method in which the information should be furnished.

Senator COUZENS. What other directors had you given memorandums to, referred to in your letter of transmittal?

Mr. VERHELLE. I think they are covered, sir, in the officers'

minutes.

Mr. PECORA. What period of time is covered by these memorandums?

Mr. VERHELLE. I know that immediately prior to this report a memorandum was made up, which was shown to me a few days ago, or a few weeks ago, again by Mr. Gano, who was apparently checking into it, and I do not recall exactly to which officers or directors that memorandum was handed.

Mr. PECORA. Was it handed to any of the directors or officers whose acts are commented upon and criticized by you in this confidential memorandum?

Mr. VERHELLE. No, sir.

Mr. PECORA. What did you say was the date of your resignation as comptroller of the Detroit Bankers Co.?

Mr. VERHELLE. I think it was November 7.

Mr. PECORA. 1932?

Mr. VERHELLE. 1932.

Mr. PECORA. You recall that you told us that your resignation was requested by Mr. Mills, but at the time he made the request he expressed very genuine regret on his part that he had to make such a request of you?

Mr. VERHELLE. Yes, sir.

Mr. PECORA. He indicated at that time that he was not responsible for the making of the request, did he not?

Mr. VERHELLE. I would say so; yes, sir.

Mr. PECORA. He was then the chairman of the board of the bank? Mr. VERHELLE. I believe he was, sir.

Mr. PECORA. Did he say anything which led you to infer or to believe that the request for your resignation was a result, directly or indirectly, of your criticisms and comments in this confidential memorandum?

Mr. VERHELLE. He stated at the time that it was not.

Mr. PECORA. Did he state why the request for your resignation was made?

Mr. VERHELLE. I believe that I said something to the effect that probably this report had some connection with it, and that he, quite naturally, denied that. I think he said something to the effect that it had nothing to do with it.

Mr. PECORA. Did he tell you any reason why the request for your resignation was made?

Mr. VERHELLE. I have some recollection to the effect that it was due to the state of mind, or something else, of certain of the officers. Mr. PECORA. Which officers?

Mr. VERHELLE. He did not say, and I did not press him on that point.

Mr. PECORA. Your own feeling was that the request for your resignation was due, in whole or in part, to the criticisms you made in this confidential memorandum?

Mr. VERHELLE. I would say in part; yes, sir.

Mr. PECORA. It appears that Mr. Ballantyne presented his resignation as president and director of the Detroit Bankers Co. at a meeting of the board of directors of that company held on May 17, 1932, effective as of May 31, 1932. The date of the presentation of his resignation precedes the date of your confidential memorandum or report to Mr. Mills by 1 day.

Mr. VERHELLE. I believe you have the wrong date, sir.

Mr. PECORA. NO; I am reading the date from a photostatic copy of the minutes of the meeting of the board of directors of the Detroit Bankers Co. held on May 17, 1932, and the entry in the minutes of the meeting pertaining thereto reads completely as follows [reading]:

Resignation of John Ballantyne. The resignation of Mr. Ballantyne as president and director of the Detroit Bankers Co. was presented, read, and ordered filed. Upon motion made, seconded, and unanimously adopted, the resignation was accepted with regret, effective as of May 31, 1932.

Incidentally, let me say that at the same meeting of the board of directors the resignation of Mr. Mark A. Wilson, as vice president of the Detroit Bankers Co. was presented, and on motion unanimously accepted, effective forthwith.

At the same time, and at the same meeting, it appears from the minutes thereof that the resignation of D. Dwight Douglas, as vice president and director of the Detroit Bankers Co., was also presented and, on motion, accepted, effective forthwith.

Also, at the same meeting, the resignation of Mr. Fred J. Robinson as a director of the Detroit Bankers Co. was presented and, on motion, accepted, effective forthwith.

Senator COUZENS. Are there any other resignations?

Mr. PECORA. I think that is all at this meeting.

This confidential report, I believe you testified last week, was given also to Mr. Ballantyne, that is, a copy of it, at the same time you gave a copy of it to Mr. Mills. Do you know whether or not the resignation of Mr. Ballantyne was prompted in any way by any of the conditions disclosed by you in this confidential memorandum? Mr. VERHELLE. I would say definitely that it was not, sir.

Mr. PECORA. Why would you say definitely it was not that Mr. Ballantyne's resignation was not in any way influenced by this confidential memorandum of yours or by the conditions you disclosed in it? Before you answer the question, let me remind you of the testimony Mr. Ballantyne gave here last Friday afternoon, to the effect that at the time he resigned he felt that he could not stay in the bank any longer and retain his self-respect. You heard him testify to that effect, did you not?

Mr. VERHELLE. Yes, sir.

The CHAIRMAN. Do you know why he resigned? You say he did not resign on that account. Why did he resign, if you know?

Mr. VERHELLE. Well, I am sorry-Mr. Ballantyne, I thought, answered that question certainly much better than I could possibly hope to.

The CHAIRMAN. If you do not know, just say you do not know and let us go on. If you do know, state it. That is all.

Mr. VERHELLE. I do not know anything else than he stated here, sir. The CHAIRMAN. You do not know what?

Mr. VERHELLE. I do not know of any other reasons than the reasons he has outlined here.

Mr. PECORA. Mr. Verhelle, the memorandum which you addressed to Mr. Mills on June 16, 1932, and which has been received in evidence here this morning as Committee's Exhibit No. 96, reads as follows [reading]:

It is recommended that $600,000 be transferred from the current period profit account to the reserve for contingencies account before the next call.

Respectfully,

J. F. V., Comptroller.

What was the reason for that recommendation of yours? Mr. VERHELLE. I probably felt that the reserve account should be bolstered up, and that there were undivided profits there at least to