Grand Forks herald. [volume] (Grand Forks, N.D.) 1916-1955, 1921-02-03
Fact Brought Out That He
Issue d Two Cashiers
Note. For $2,o0o,ooO,
Gave Them To The Indus
trial Commission Which In
Turn Sent Them Back To
The Bank.

The Bank.
..(By Staff Correspondent
Bismarck, N. D.. Feb. s.-Informa-
ton as to how and when the, Bank
of North Dakota acquired it's $2,0O0,- !
600 Of capital was sought today from
+. w. Cathro, manager of the bank,
when he appeared as a witness before |
the house audit committee.
vi After long debate of questions
and answers between Mr.. Cathro and
Francis Murphy, attorney \ for the
committee. the substance Of the facts
brought out, was that Mr.. Cathro
drew cashiers checks on the Bank
of North Dakota. for $2,000,000 and
gave it to the industrial commission
in payment for $2,000,000 worth OF
state bonds. The industrial commits
sion then endorsed the checks and
sent them back to the bank and that
they thus became the banks capital.
Only Paper Transaction.
In other words, as result of the
requirement OF this $4,000 capital
by the bank there was no actual addi-
tional money brought, into the bank,
the transaction being one on paper
only.
Dakota to hypothecate $1,200,000 OIL
the Bank Of North Dakota series Of
bonds was called into question by the
attorneys for the committee In the
examination Of the manager.
Mr.. Cathro was asked TO point out
in the law which created the Bank of
North Dakota the specific section un-
der which the bank and the Industrial
commission claimed the right to put
up these bonds as collateral security
for a loan. !
He claimed the authority under the
provisions Of section 2 of the law
which provided that the Bank of
North Dakota in the conduct Of, its
business might do the same acts as
any other banking institution might
perform excepting as restricted in
this act"
His attention was then directed to
the specific restriction which this act
! placed upon the disposition Of the
hank funds, which act was read by
Mr. Murphy to the witness as fol-
lows: .,.'5f, :. =
Section 6, chapter 147, laws 1919.
The bank shall be open and shall pro-
ceed to do business whenever there
shall be delivered to the industrial
commission bonds in the sum of $2,-
100000 and such funds secured by the
q. u egbtiatinn and sale Of such bends
y bank. S's$f,,
Mr.. Cathro admitted that this sec
ton was followed only partially,
but ass the testimony quoted above
shows no actual funds were secured
by the negotiation and, sale of the
bonds the entire affair being practical
ly only paper transaction, Wnicn
brought in no additional funds.
Mr.. Cathro was the second witness
called to the witness stand when the
committee convened this morning, the
1irst being H. A. Paddock. whose re-
fusal under the orders OF the indus
trial comm: :sson to produce the min
utes Of, the commission brought the
hearing Tuesday to an abrupt close.
On his resumption of the witness
stand this morning Mr.. Paddock was
! i'm. .ed .ately asked If he had the MN
utes with him. Before answering he
attempted to read the supplementary
order issued last night by the indus
,rial commission and at the same time
demanded to know by what authority
n letter demanding the production
Of the minutes had been sent to him
Tuesday afternoon. BY majority
vote of the audit committee, Mr.
paddocks desire TOR informatlon was
refused and he was instructed to an
swer the question put to MIN oy MI
Murphy.
Had Book.
Paddock then admitted that the
hook of minutes was in the room. lie
brought it out to the witness stand
on condition that it should not leave
Ms uossession Under the direction
of Mir. Murphy several excerpts from
the minutes We're read. Iney coH-
,aincd reports on the following:
The appointment of J. Il. Waters
and r.. W. Cathro AS manager and al
,cctnr genes al Of the Bank of North
Th, order for the leasing OF q
nu: ding for the Bank OF North Da'
lo,a in Bismarck.
Statement of the policy Of the Bank
,r north Dakota; resolution authorlz
inp the issuance OF the Bank ol Sor'i
naknia bond series.
resolutions selling the bonds to tht
p,nk of North Dakota and turning
Tho check given by the hank IN pay
wont hack to the Bank of North Da
kota as capital. 3. x1,-
s.3 Resolution approving tne actlo1l o.
rs NJ CathrD in negotiating q loan o.
", 81 900. 600 secured By sl.20o,0oo o
5$$ the bank series bonds. Z.
h. resolution approving the paymen
81 Of F. A. Pixies salary, by the 6ank .
VII North Dakota. ~ ,oSn
4 y. Resolution OF December "; 'I9EV
ordering the Bank Of North Dakota tt
4 discontinue nOnOTHiS SliS>n'7. - =
IS Tics. etc. when all funds were NOT pe
ing doSosited in the Bank or Nor,f
Resoiution OF January -, 1921, In
str,Icting the Equitable Audit com
IS nany Of Fargo to make such. an audl
nf the Bank Of North Dakota as Woult
IN make il possible to check accuracy 9
a. audit made by the Bishop Brissmal
e .SCo. Mr.. Paddock wasrthen excused
Il with thanks.
" Iemkc Makes Demand.
IL. ". Cathro was then called 10 TN
witness stand. William Lemke enter
cd his usual demand that he be recog
nized as counsel for the state, ana MI
3 I'm In answer to questions by Mr.. MUIR
nhv. the witness stated that he ma.
beer been engaged in the banking bushes
at Bott.neau, N. D.. being associate
with W. H. Mcintosh: had been ap
nointed director general OF the Ban
Of North Dakota in April l9ls. .. IN =
had taken up his duties In July, .Sis 80
that he had become manager OF u.
bank on Mr. Waters retirement y
April. 1920. =. N
g. He then gave testimony % 70 ~
a,yision 81 the bank into departmentt
IL 4 n RI nY