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And I have just received a telegram that I should like to make mention of, from Mr. Daniel J. Goriea, whose name is mentioned in that report, in which telegram he states that he was cleared by Mr. Mills early in 1932 of the items appearing therein.

And I should also like to mention the telegram, which you have read, from Dr. C. R. Davis

Mr. PECORA (interposing). Well, that is already in the record.
Mr. VERHELLE. I beg pardon; yes, that is already in.
Mr. PECORA. Yes.
Mr. VERHELLE. I have a letter that I would like to refer to if

I may.

Mr. PECORA. Go ahead.

Mr. VERHELLE. Here is a letter from Mr. Davis in which he says that he is sending me a night letter, and is enclosing copy of a letter he sent to Senators Fletcher and Couzens, and to Mr. Pecora, and in which he repeats the telegram you have already read, and he says further:

My purpose is not to cause embarrassment but to help you, if you can make it clear in your testimony that your reports are incomplete, and if upon investigation it is inaccurate, you can make public apology, because the report has now become public property, because it is not complete and accurate, and by so doing you would do yourself a world of good as well as others.

Mr. PECORA. I will now call Mr. Stone.
Mr. VERHELLE. Are you now through with me!
The CHAIRMAN. Mr. Pecora, are you excusing this witness !

Mr. Pecora. He is excused for the present time, but, Mr. Chairman, it will be necessary for Mr. Verhelle to remain during the examination of other witnesses. I should like to have him hold himself here subject to call, and on account of Mr. Verhelle's position as comptroller of the Detroit Bankers Co. it is conceivable that other officers of that company, who will be called upon to testify here, may also refer to Mr. Verhelle as authority for their information, such as was the case with Mr. Ballantyne.

The CHAIRMAN. Very well, Mr. Verhelle, you will please remain.

(Thereupon Mr. Verhelle left the stand, with the understanding that he was to remain subject to the call of the committee.)

Mr. PECORA. Mr. Chairman, will you now administer the oath to Mr. Stone?

The CHAIRMAN. Mr. Stone, will you stand, hold up your right hand, and be sworn?

You solemnly swear that you will tell the truth, the whole truth, and nothing but the truth, regarding the matters now under investigation by the committee. So help you God.

Mr. STONE. I do.

TESTIMONY OF RALPH STONE, VICE CHAIRMAN OF THE

DETROIT TRUST CO., DETROIT, MICH.

Mr. PECORA. Mr. Stone, will you please give your full name, address, and business or occupation to the committee reporter for the record ?

Mr. STONE. My name is Ralph Stone; Parkhurst Apartments, corner of Agnes and Parker Avenues, Detroit, Mich.; vice-chairman of the Detroit Trust Co.

Mr. PECORA. How long have you been connected with the Detroit Trust Co. or its predecessor?

Mr. STONE. I have been with the Detroit Trust Co. since practically the date of its organization—I think within 4 or 5 months after it was organized.

Mr. PECORA. Will you state the date of its organization and give just a very concise chronology of your connection with the company?

Mr. STONE. It was organized, I believe, in January of 1901. I came with it, I think, in May of 1901 as trust officer. I subsequently became secretary, and then vice president, and then in 1912 president, and in 1927 chairman of the board.

Mr. PECORA. Well, when did you first become a member of its board of directors?

Mr. STONE. July 12, 1905.

Mr. PECORA. And to what date did you continue to serve as a director

Mr. STONE. Until the date of the reorganization, or until the beginning of the bank holiday.

Mr. PECORA. Which was February 13, 1933 ?
Mr. STONE. February 11 or 13, 1933; yes.

Mr. PECORA. That trust company was one of the unit banks of the Detroit Bankers Co., wasn't it?

Mr. STONE. Yes.

Mr. PECORA. And when was its capital stock acquired by the Detroit Bankers Co.?

Mr. STONE. That would have been at the organization of the Detroit Bankers Co., which I believe was January 8, 1930.

Mr. PECORA. Did you become an officer or director of the Detroit Bankers Co. at the time of its organization?

Mr. STONE. Yes.

Mr. PECORA. How long did you continue as a director of that company?

Mr. STONE. Until, I suppose, the receiver was appointed for it.
Mr. PECORA. Continuously?
Mr. STONE. Yes.
Mr. PECORA. Were you also an officer of it?
Mr. STONE. No.

Mr. PECORA. Were you a member of any of the committees of the board of directors of the Detroit Bankers Co.?

Mr. STONE. I think not; I do not recall any.

The CHAIRMAN. What kind of business did the trust company do? Did it do a commercial banking business?

Mr. STONE. No, sir. Under the laws of Michigan, it was limited to trust business, and it took deposits on certificates of deposit, but it could not transact either a commercial- or savings-bank business.

Mr. PECORA. When I asked you if you were a director I meant a trustee of the Detroit Trust Co.

Mr. STONE. I was a director of it. There are no trustees. Mr. PECORA. You were one of the 12 original so-called “trustees” of the Detroit Bankers Co., were you not?

Mr. STONE. Do you refer to the voting trust?
Mr. PECORA. Yes.
Mr. STONE. Yes, sir.

Mr. PECORA. And those 12 men have been referred to here as the founders, so to speak, of the Detroit Bankers Co. Do you consider that a proper characterization of them!

Mr. STONE. I do not know as you would call them the founders of it. I think stockholders and directors of all the various units were interested in this organization. They were what was called or what properly should be called the organization committee made up of the principal officers of the four banks and the Trust Co.

Mr. Pecora. From the time that you became, back in 1921, a trust officer of the Detroit Trust Co. have you given much study and consideration to the duties and functions and the growth and development of trust companies generally?

Mr. STONE. I think so; yes, sir.

Mr. Pecora. On one occasion you delivered a speech, did you not, at the thirteenth annual banquet of the trust division of the American Bankers Association held in New York City on February 18, 1932?

Mr. STONE. Yes, sir.

Mr. Pecora. I have a pamphlet here purporting to give the text of the speech in full. Will you look at it and tell me if it does?

Mr. STONE. Yes.

Mr. PECORA. I ask that it be marked in evidence, but not spread on the minutes, because of its length.

The CHAIRMAN. It may be marked.

(The pamphlet referred to and identified by the witness, entitled " The Growth of the Trust Institution", was received in evidence and marked " Committee Exhibit No. 101, January 30, 1934.")

The CHAIRMAN. What was the capital of your trust company, Mr. Stone?

Mr. STONE. $3,000,000. Do you refer to it at the present time?

The CHAIRMAN. How many shares, and what was the par value of the stock ?

Mr. STONE. As a trust company, 30,000 shares, $100 par value.

Mr. PECORA. Among other things, in this address that you delivered in February 1932, I find the following statement [reading) :

According to the latest compilation made by the trust division of the trust companies and trust departments of State banks and according to the latest annual report of the Comptroller of the Currency, dated October 31, 1931, of trust departments of national banks, there are now approximately 5,000 trust institutions in the United States. They are divided about equally between State institutions and national institutions.

You also said in the same paragraph (reading]: I think it is fair to say that the State banks and trust companies of the country are engaged in trust business to a greater extent than are the national banks. It may safely be said that more than four ifths of the invested capital of all the banks and trust companies of the country, both State and National, are interested in the successful conduct of the trust business.

I assume, Mr. Stone, that you had made some research and compiled, as result thereof, the data which you embody in this statement?

Mr. STONE. Yes, sir.

Mr. PECORA. According to another statement in this address of yours, you regard it as the most important and, at the same time, the most difficult of the duties of trust companies that of the investment of trust funds!

Mr. STONE. Yes.
Mr. PECORA. And that is still your opinion, of course ?
Mr. STONE. Yes.
Senator COUZENS. Was that gained from experience ?
Mr. STONE. It was.

Mr. PECORA. I find also this statement in your address to the trust division of the American Bankers Association (reading]:

Puzzled and perplexed by the difficulties involved in the selection of investments, individuals and even individual trustees are coming in vast numbers to the trust institutions as a haven of refuge. This has led to the establishment by the trust institutions of the trust-investment department, headed by an expert investment officer, with elaborate statistical and research equipment and personnel, supervised by the trust committee made up of directors and senior officers, and with final authority in the approval of investments vested in the executive committee of the directors of the company or bank.

I assume that statement is also based upon your experience of many years' standing?

Mr. STONE. Yes, sir.
Mr. PECORA. You also said as follows in your address [reading]:

It is difficult to conceive that greater care than is given by this system could be used in safeguarding the interests of the creators and beneficiaries of trusts. This in itself is sufficient warrant for the existence of the trust institution and an insurance of its continuance as an important and necessary part of the financial structure of the country.

I assume that that observation or statement was also based upon your experience and best belief?

Mr. STONE. I should say so.

Mr. PECORA. I also find the following statement in your address [reading]:

The trust institution is managed by men of integrity and honor who are actuated in their dealings with the trust clients by the same high ethical principles as are lawyers in dealing with their clients.

Senator COUZENS. What lawyers!
Mr. PECORA. Is that based on your experience ?
Mr. STONE. I will say so; yes.
Mr. PECORA. Did you intend that as a compliment to trust officers?
Mr. STONE. Also to the lawyers.

Mr. PECORA. I also find the following statement in your address [reading]:

I can say to you, gentlemen, out of 37 years' experience as a trust officer with the benefit and, I may also say, with the very great pleasure of personal and intimate contact with hundreds of officers of trust institutions throughout the country, that he is a type of man of the highest character, of unquesioned mental and moral integrity, whose conduct is guided by ethical principles just as rigid and severe as those of any profession, and who deals with his clients with a full and sympathetic understanding of their troubles and needs. In serving and advising his clients he is not influenced in the slightest degree by the compensation which his employer receives. It cannot be said that he is so influenced any more than it can be said of the members of the two great professions, medicine and law; and it cannot be truthfully said of them.

That observation also, I take it, was based upon your 37 years of experience as a trust officer?

Mr. STONE. Yes. Mr. PECORA. I find this also in your address (reading]: The life of the trust official runs the whole gamut of human experience having to do with the problems of every known form of property and every kind of

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business and occupation, of tragedy, pathos, and comedy. His relation with his clients is a very personal and intimate one, similar to that of the doctor and lawyer, for the administration of property and the disposition of income from it is inseparably bound up with family and living problems and personal relations generally.

That also was based upon your experience ?
Mr. STONE. Yes, sir.

Mr. Pecora. I find the following as what might be called the peroration of your address. Speaking of the trust officer you say as follows (reading]:

His work calls for the exercise not only of good judgment but of patience and tact, for the trust official comes into contact with wives, children, and other dependents bereft of those upon whom they have implicitly relied for means of support, advice, and comfort. That he has succeeded in his difficult task is evidenced by the rapid growth and development of the trust institution. Finally, the success of the trust institution and its position in the community is built upon the confidence of the public in it. That confidence can be won only by the strictest observance of the rules of right conduct, by absolute adherence to the highest ideals in the conduct of the trust relation with its clients by its directors, officers, and employees. The trust institution's best asset is not measured by the figures showing in its balance sheet. The reputation for honesty, fair dealing, skill in managing the property placed in its charge, and faithfulness to the interests entrusted to it is its most valuable possession. To maintain such a reputation is the important and constant effort of the trust institution. It is peculiarly American. Its history is remarkably free from losses to its clients, and its future is in the hands of men who are devoted to their calling and who realize the sacred character of the trust reposed in them.

And I assume that those sentiments were based upon your years of experience as a trust officer?

Mr. STONE. Yes.

Mr. PECORA. Now, let me go back to your statement in your address in which you said [reading]:

In serving and advising his clients he is not influenced in the slightest by the compensation which his employer receives.

By "employer”, of course, in that statement, you mean the trust company?

Mr. STONE. Yes.

Mr. PECORA. The Detroit Trust Co. had many trusts given to it to administer, did it not?

Mr. STONE. Yes.
Mr. PECORA. In the many years of its existence!
Mr. STONE. Yes.

Mr. PECORA. And these trusts included those in which widows and orphans were the principal beneficiaries?

Mr. STONE. Yes.

Mr. PECORA. And the company also had many clients and customers who came to it for advice with regard to the matter of investing funds?

Mr. STONE. Yes, sir. Mr. PECORA. In rendering those services would you say, as a result of your personal knowledge and experience as an officer of the Detroit Trust Co., that its trust officers, in serving their clients and administering various trusts reposed in them, were not influenced in the slightest by the compensation which the trust company received for its services ?

Mr. STONE. Yes.

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