New-York tribune., 1921-06-18

Senator a Director and
Newton Named Counsel
by Corporation Under
Inquiry by Unterniyer
Fire Insurance
Ring in Buffalo
Lumber Price Fixing
and Plaster Combine
Revealed by Committee
From, a Staff Correspondent

BUFFALO, June 17.--A mortgage
loan corporation with which Attorne,
General Charles D. Newton and United
States Senator James w. Wadswortl
lr., OF New York, are associated was
one of the chief subjects OF investi.
cation before the Lockwood committee
on housing here to-day.
According to the testimony this firm
demanded bonus of 20 per cent or
second mortgage loans in addition tc
the regular 6 per cent interest. Pros.
pectuses of the concern submitted ir
evidence promised minimum profits Of
20 and 80 per cent to investors with
perfect safety"
Attorney General Newton is named
as general counsel Of the corporation
and is listed with Senator Wadsworth
a.rong the directors. The Senate,
Joined the firm only two weeks ago.
Fire Insurance Inquiry
The committee also found a fire in,
surance combine in this part of the
state which was monopolizing the. field
in manner similar to the operations
of the New York Fire Insurance Ex-
change. Following grilling by Sam.
uel Untermyer, chief counsel to the
committee, the manager of the organ
ization promised that the members
would eliminate the Objectionable
practices and would agree to all the
amendm ents decided upon between the
committee and the New York Fire In
: surance Exchange.
After exposing a lumber dealers
state and local price-fxing organiza-
tion and disclosing that the control OF
the mining, manufacturing, wholesaling
and retailing of gypsum anu plaster
in the East was in the hands of one
man, MIR. Untermyer closed the ses-
sions of the committee here with a
summary of the work accomplished.
The committee is to resume it's sessions
in in New York City Wednesday morning
and will continue until the following
Saturday, when Mr. Untermyers sails
for Europe. 1t is understood that the
Investigation will be taken up again
in the fall.
The name of the mortgage loan con-
corn examined by the committee with
which Attorney General Newton and
Senator Wadsworth are connected is
the Frontier Mortgage Corporation, of
Euffalo. A company known as the
Smoot Corporation, according to the
evidence, has been organized to sell
stock in the mortgage firm. The offices
which most of it's activities have been
confined, according to witnesses, since
May 23, 1920, when it was organized.
The testimony in connection with
the matter was obtained. through Ed
ward ii. Hunt, secretary of the From
tier Corporation. He said ne was also
secretary and treasurer of the stock
selling corporation. The authorized
capital of the Frontier company he
testified, was S5,0o0,OO0, but that the
issued capital was about $S7s,OOO The
firm rarely dealt in first mortgages,
he said, the primary business being
second mortgages. Its president is
Michael +. Dehrenberg jr., and among
its directors, besides Messrs Newton
and Wadswosth, according to the tes-
timony, are number of very distin-
guished gentlemen" Since it's organ.
ization Hunt said the corporation has
loaned money on from 1876 to 150 mort
cages, all second mortgages but one.
Prospectuses which Mr.. Untermyer
read into the record said in part:
Whenever the mortgage corporation
parts with $1,000 it usually gets a
'AAAi. AuiA VI TljGoo i'i tuOI tEdS6 iIIl-
mediately.
Furthermore, interest is computed
on the $1,000 face value, giving the
mortgage company interest on the
profits. America to-day is five million
homes short. Buffalo needs at least
5000 homes this year. The need for
this financing is overwhelming. The
Fro ntier Mortgage Corporation is now
handling only fraction of the business
presented to it daily and it can hope
to take but small part of the bust
ness offered, and on account of the
size of the business it is always in
the position Of selecting the cream of
the mortgages offered"
The prospectus then went on to saw
that "ths profits in the mortgage bust
ness are exceptional. To be conserv-
ative, the estimated minimum profit is
30 per cent, accomplished with perfect
safety" Hunt said that the 80 should
have been 20, and that it crept into
some of the prospectuses as q typo
graphical error. The prospectuses
said, too. that the discount for first
Continued on next paee)