The New York herald., 1922-02-03
|DIER RFIRMPRODIGAL,
SAYS$12,OOOCLERK'
Protests Oh Extravaganza
Did No Good, Asserts
Carl Kneass.
FIVE MEN RAN BUSINESS
Insiders Robbed President
Right and Left, Ayers
Special Agent.
S55o,OOo LOANS SOUGHT
Doubtful Mexican Property
Offered as Security Just
Before Failure.
s55o,OOo LOANS SOUGHT

! Z. Franklin Gaines, an employee OF
Il. d. DER & Co. before the brokerage
firm went into bankruptcy on jan
uary II, testified yesterday before
Alexander Gilchrist, special commits
sioner. that he believed the failure of
the concern was due to persons who
had the running Of the inside of the
business and robbed Z. D. DER left
and right, while Mr.. Dier knew little
or nothing of what was transpiring in
his firm
The investigation by Arthur Gar
field Hays of counsel for the receivers
into the insolvency Of the brokerage
house will be carried on to-day. Only
two witnesses were called yesterday
Mr.. Gaines and Carl Kneass, man
ager in the der firm until just before
its failure.
Mr.. Gaines. who said he was en-
ployed as an s'outside man. by Dier
at salary Of $500 a week. said that
at the time of the failure he was try
ing to negotiate two loans for Z. D.
DER. One OF these was for $350,000
on property of the Ell Progresso Min
ing Company, in which Mr.. DER was
personally interested, and another OF
| 5000, 900 on q building.
"Security Assets Clouded."
1t was testified that the sole asset of
the Ell Progresso Mining Company.
which had issued more than 10000
shares of stock, was a questionable title
to properties in Mexico which had been
under dispute for some time. Mr.. Gaines
admitted that to operate the mining
properties between $S,O00,00o and $4,-
100000 would have been required.
! did you tell persons buying the stock
this fact?' he was asked.
"One never tells that sort Of thing to
prospective stock clients Mr.. Gaines
replied smilingly.
According to Mr.. Gaines. scores of
complaints by persons who had bought
stock outright and had intrusted 1t to
the brokerage firm for afe keeping
! were received in the several weeks pre-
ceding the failure. Mr.. Dier told him, he
said. that if the two loans could be
obtained 1t would clarity conditions
to such an extent as to prevent the firm
that Mr.. DER personally had raised
100000 and put it into the business
just before the crash.
Five 'Insiders'' Named.
Mr.. Gaines named B. Frank Shrimp
ton. Mostyn c. H. Clinch, George w.
Gum, d. G. Raynor and Frederick An
drews as the men on ''the inside of the
business" who ran the business and
knew more about the affairs of the
brokerage concern than did Z. d. Dier.
Several of these men severed their con-
nections with the concern late last sum-
| mer.
at don't believe that Mr.. DER ever
knew the condition Of his business at
any one time since he has been in busi-
ness" Mr.. Gaines testified, in telling of
the way things were conducted at the
brokerage house.
Salaries of the highest amount were
paid and expense bills OF tremendously
large figures were sent in and o. KID.
] protested several times about this but
il did no good. Clinch threatened to
leave the business at one time unless It
was run the way he wanted It. He went
4 around and raised salaries and boosted
expense accounts considerably. / know
Of one instance In which he drew an ex-
pense account for S2,500."
! Gaines said f.. d. Dier had an elab-
orately furnished apartment at the st.
Regis. which included, among other fur
nishings. a large vault In which he kept
& varied stock OF wines and liquors.
Gaines said he had visited Mr.. Dier
there on many occasions and that the
! former lived well.
Carl Kneass testified concerning some
OF the extravagant expenditures made by
various officers OF the company He
said he had protested numerous times,
but was only in the position of a rub
Der stamp clerk" All his duties were.
Mr.. Kneass said, to see and o. X
expense and ealary lists and to stamp
them with a rubber stamp. When he
protested the size OF the salaries and
accounts, he said, he was overruled and
thus his o. X. was worthless. For these
duties he received $4,000 year.
"s2O,Ooo0 weekly saIarfcs.-
The expenses of the concern amounted
| TO far in excess of $4,000 a week. ac-
! cording to Mr.. Kneass. who said that
much was paid out In salaries alone. He
testified that large bills for paper and
advertising and printing were paid reg,i-
larly, and that private wire bills of more
| than $500 month were paid. Be-
tween $4,000 and $4,000 each was paid
In rentals for q large number of offices
throughout the country. which also
added to expenses.
Funds which were sent IN by cus-
toners in payment for stocks which were
never delivered we're used I'D In the
large expense bills which the firm was
paying. said to Mr. Knease. He also tee-
titled that E. ID. DER drew out consider
able amounts OF money just before the
failure Fred Andrews was the real
head" OF the business. even after he had
been removed from the payroll in Sep
tember, asserted Kneass. After he had
gone TO Europe and returned last cum
mer Andrews. according 10 Mr.. Kneass
was still kept on the payroll, although
not actively connected with the firm
Mr.. Knesss said he had been employed
BY the Curtis Publishing Company in an
editorial capacity In Philadelphia before
he Joined the DER concern. He protested
at various times during the questioning
that Ire had no connection with the
financial end Of the business" and was
simply an office manager. He said that