Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-02-09
COUNSEL TO FIGHT
RECE|VERSH|P SUIT
Declares Smith Co. Assets
Are Sound and Force Sale
Would Hurt.

Convinced that the F. H. Smith Co.
is sound financially and that the inter-
ests Of its stock and bond holders would
be subverted rather than enhanced by
the appointment Of a receiver, Frank
q. Raichle, attorney for the company,
will 60 into court In New York Tuesday
prepared vigorously to contest the tenn
porary receivership application of the
stock and bond holders committees.
"The numberless charges and counter
charges which have been made con-
corning the Smith company since a
group of its officials were indicted in
Washington for use of the mails to
defraud," Raichle said. has resulted In
great confusion of thought regarding
Irrespective of the foundation for the
criminal charges against the officials
the financial condition of the company
convinces me that the stock and bond
holders best opportunity to realize on
their investments lies in the continued
operation Of the company. Certainly
they will lose rather than gain If a
receiver Is appointed, because the COM
pany's assets, If disposed of at forced
sale, will bring considerably less than
their true value and the loss will be
borne by the security holders.
Has Sound Assets.
at is q fact that the Smith Co. has
at this time between 100000 and
SIS, 000, 900 in securities that are sound,
reasonably liquid and unencumbered.
These assets are in the form of bonds
and other securities of issues which
HaA~ AvaA - -
subject Of criticism by the Government
or anybody else.
1.-The company has additional assets
to the extent of 100000. which are
In the form of interests in the Mad
dux chain Of hotels. The financial
worth Of these assets has been criticized,
but even If they are disregarded the
company still has its bonds and other
securities.
Against these assets there is APP
proximately 100000 in preferred
about $35o.000. of which $l25,000 is
in the form Of a bank loan not yet due.
The common stock can be disregarded
in this connection. because it is held
by the officials of the company and can
hardly be regarded as an obligation.
Liquidation Means Loss.
obviously, the creditors have only
one chance Of realizing on their in
vestments and that is through these
assets. If they are liquidated by a re-
ceiver the creditors will get little or
nothing. II the company is left alone
it may pull through.
THE company has been criticized for
using profits from the sale of bonds,
which normally would go to the stock
holders, to pay the interest on the
bonds. However, if the interest was
not paid the company would become
insolvent and the stockholders would
lose all instead of part.
Looking at the situation from all
angles, 1t is not perfect, but 1t might
be great deal worse. Therefore, I am
going to fight the appointment of a re-
ceiver and I think ! am going to be
successful.
"It has been suggested to me that
the personnel Of the company's board Of
directors should. be changed so that it
would be above reproach. Without GO
ing into the question Of whether any
change Is desirable, it Is apparent that
no business man is going to enroll him
self on the board Of a company against
which receivership suits are pending
When these suits are disposed of some
such change may be made. Until that
time we are going ahead without max
ing any further changes in the compo-
sition of the company. I am going to
| insist on an early trial of the New York
receivership case and when 1t is held
the fur is going to ny.
1T is not true that the Smith Co.
has made any overtures to the lawyers
prosecuting the receiVership suits