Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-10-29
SMITH CO. PETITION
REFUSAL is ASKED
Government Requests Court
to Sustain Subpoenas Call
ing for Records.
Continued From First Page)

license to sell STOCK through It's agents
in Ohio. Pennsylvania, Indiana. Mime
sofa and New York it organized an ex-
tensive mail order business to sell stock
in those States.
That extremely high appraisals OF
Smith properties have been circulated
through the mails, and that the APP
praisalS have been made by the firm Of
Ford, Bacon 81 Davis of New York City
under such circumstances that an in
vestigation by the grand jury Is called
for
That the company has offered its pre-
ferred stock at par when unknown to
the prospective purchaser, it was being
offered in Washington for as low as
10 per cent of the par value.
Paid Salaries Of $4,000.
That the funds of the corporation
have been dissipated by payments of
yearly salaries as great as 100000 to
Pitts and Henry in addition to large
nearly all of the common stock. so
that revenue for preferred stockhold-
ers are greatly diminished
That the company bought the Ham,
ilton Hotel at foreclosure sale for
approximately $l,300,000. only after
Pitts had offered several creditors "a
consideration" to refrain from bidding
at the sale.
That soon after buying the Hamilton
Hotel property for 81 100000, in spite
of the fact that the hotel had gone
through two bankruptcies, the company
made 1t the purported security for a
bond issue Of 100000, of which ST.
100000 worth was sold to the public.
After reviewing In detail some of the
methods by which the F. H. Smith Co.
managed its financing ventures, the re-
port summarizes as follows:
I'm each instance, as above suggested.
the corporations that issued the bonds
were creatures of the F. H. Smith Co.
and its officers above named. Also the
trustees to whom the mortgages were
made securing those bond issues were
either Pitts or Henry, personally or COR
F. H. Smith Co. Thus, the mortRagors,
the mortgages and the corporation
that advertised and sold the bonds were
practically Identical"
Accepted Gratuities.
In another section the report de-
clared: 1T was common practice for
those officers who had control of the
awarding of the contracts to Surrepti-
tiously demand and receive from some
one OF the bidding contractors personal
ae6AC6dthl6' AL Hidlly
stances. $4,000 or more, in considera-
ton of their acceptance of that con-
tractors bid"
The report contains copy alleged to
be letter to member of the firm of
attorneys retained for a short period by
the F. H. Smith Co, from the treasurer
of the Robertson Construction
Co., Offering to pay lin consideration of
the services rendered by you in assist
ing us to secure through the F. H.
Smith Co., the contract for the erection
Of an apartment house in Pittsburgh, we
agree to pay to you the sum of s35, 900,
letter contains description Of the in
stallments in which the money was to
have been paid.
The report also discusses the meet
ing of the board of directors at which
they are said to have decided to sell
stock through the mails in the States
where their agents had been refused
licenses to operate. This meeting, the
report says, was held on December 10,
1927 and was attended by Representa-
tives Zihlman, Crissenger, Pitts, Henry,
Edwards and Ezra Gould.
Hotel Report Made.
Alleged manipulations concerning the
Hamilton Hotel. bankruptcy of which
has already been made the basis of an
indictment for perjury returned against
Pitts, are covered at length in the re-
port.
The report asserts that holders of a
81 900 900 bond issue on second mort
gage lost all but about per cent of
their money on foreclosure in 1925.
when many creditors were requested by
Pitts to refrain from bidding ct the
sale and were promised a consideration
SO to refrain"
Shortly thereafter, the report con-
tinues, title was transferred from the
Hamilton Hotel Corporation to another
subsidiary of the Smith company. Four
months after this transfer, according
to the report, the hotel corporation
was adjudged bankrupt, and the claim
was advanced that the books of ac-
count could not be found and the rec
ord claims were entirely lost.
Further transfers of the property
through other Smith subscribers result
ed on December 10, 1928, in the is
suance of a $1050.000 mortgage. At
this point the report comments as fol-
lows:
Thus the Hamilton Hotel property
the operation of which had been the
subject of two bankruptcies, and which
had been purchased by Pitts and his
associates at the aforementioned fore
closure sale for approximately l,30O,-
600. was made and now is the pur-
ported security for bond issues in the
aggregate sum of $4,000 ,0O0-of which
bonds $2,600,000 were sold to the pub
lice"
The time of the sale Of the last
81 ,0500 900 bonds, purporting to be Sc
cured by this property, the report says.
an appraisal of the property by Ford,
Bacon and Davis to the effect that the
property and equipment was worth
more than 100000, was extensively
circulated through the mails.
THE circumstances under which this
and other appraisals were made by the
New York company merit the investi-
CATION OF the grand jury" the report
states.
In addition to the Hamilton Hotel,
the following properties, which have
at some time been under the control
OF the F.. H. Smith Co. or its subsid-
iaries, are taken up in the report and
the manner in which they were financed
thoroughly discussed.
The Cavalier Apartment Hotel at $500
Fourteenth street, Washington: the
Fairfax Apartment Hotel in Pittsburgh,
Pa, and the Law and Finance Build
ing. also in Pittsburgh.
The report closes with a description
OF sale of preferred stocks" Of the COM
pany during the last two years, and an
assertion that the documents and rec
ords of the company should be made
available to the grand jury investiga-
ton.
Conclusion Of Report.
The report says:
During the past two years, preferred
stock of the F. H. Smith Co. has been
continually advertised, offered and sold
to the public. in an aggregate sum of
several million dollars. Representations
were made to the effect that the aver
age net earnings of the company were
more than tIuicn tina ax,aniixat 1acIliirad