New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1914-07-15
SMALL STORES GOT
Cash FOR CLAFLlN
Credit of Subsidiaries
Supplied Funds tor
Parent House.
NEW DEVELOPMENT
MAKES TANGLE WORSE
supposed Bills Receivable for
Merchandise Prove Merely
Accommo dation Paper.

II developed yesterday that, instead
Of the stores owned by John Clau'n
individually leaning heavily on the H.
b. Clafin Company for financial sup
pori. in some instances at least, the
credit Of the smaller houses was USED
20 secure funds for the parent house,
through the issuance of notes in the
name of the subsidiaries, made paya-
BILE 70. Endorsed by and sold by the H.
b. Clafin Company.
This became public through the ;es-
,imony Of Charles J. Kelley, president
Of the Hennessy Corporation, operat-
inc stores in Butte and Anaconda,
Mont, in receivership proceedings, IN
which Kelley testified that the first
knowledge he had that large amounts
of the corporations paper were IN eN-
istence was when he was called on BY
a Butte bank to pay $4,000. Suost-
auently, he swore, he learned from
New York that the total paper out
standing in the name of the company
was Sl,690,00O.
This was followed by the admission
Of bankers handling the Clsfiin sltua-
ton that large amount Of the So
called Ciafin receivables were of the
same kind as the Hennessy paper. 1t
was explained that the treasurer OF
each of the twenty eight Clafiin prl-
vately controlled stores had his office
in New York, that these men had the
right to sign paper in the name of the
companies they represented, and thst
the notes in question, signed by two
officers of the several companies and
sold for value to purchaser, were
valid claims against the companies in
whose name they were made, even
though they were accommodation paper
and the company never received the
money.
Claflin Issues Statement.
For John ClaAin. Gould & Wilkie,
mis- personal counsel, issued this state
ment last evening:
The notes of the retail stores in
dorsed by the n. B. Clahin Company
were issued by companies of which |
am the sole owner. These notes were
in every instance executed by duly
authorized officer Of the company which
made such notes, and are valid out
standing Z igations of such company
Each Of companies was financed
n New York. ard the local officials of
each company were charged only with
the obligation Of carrying on the retail
operations of the company and keeping
the records of such operations, which
we're sent TO me at New York.
JOHN CLAFLIN."
There was nothing irregular about
Heiley's not knowing of the existence
Of these notes." said one of the law
-ers engaged in working out the Olaf
lin tangle, "for Kelley, though he may
have been president of the company,
really was only the selling man. His
lob was to sell goods and, according
20 al accounts, he knew how TO do
that The company was Claims; the
financing was done here. When the
store needed goods, the goods were
sent: when il needed money, it was
forthcoming from this centre. Those
who signed the notes had a perfect
right TO do So
Kelley Was Surprised.
Kelley in his testimony said the
stores he managed we're doing a splen-
did business, with assets of $4,000. 900
and indebtedness Of less than $780,
OG0 so far as he knew. After the
notice from the Butte banks that il
held some of the company's notes, he
was advised by telegram from New
York, he said, to have the corpora
ton placed in the hands of receiver.
He could not see why an absolutely
sound corporation should be placed in
receivers hands.
After two days" he said, 81 learned
that the treasurer of the company, who
lives ia New York, had issued notes
for 81 $50 900 and presumably had dis
posed of them for cash. All l can see
for US to do is TO try to pay the notes. "
This is not the first animation the
bankers have had that much of the
ClaAin paper they supposed represent
cd bills receivable for merchandise was
in effect accommodation paper.
The existence of this accommodation
paper of many of the stores promises
10 make serious trouble for those who
are charged with the work of rehAbili-
tating TIE Clahin fabric if possible.
Naturally, the creditors of the stores
who furnished the goods will demand
as large a part of their claims as pos
sible. The creditors of the II. B. Olaf
lin Company who have merchandise
claims may also demand that the re-
ceivers press the claims against others
for collection.
To reconcile the various interests is
not the least of the big tasks confront
ing Messrs. Juillisrd and Martindale.