Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-02-01
Jury IS EXPECTED
TO PROBE FAILURE
OF SWARTzELL CO.
Justice Department Agents
Preparing Report on Books
of Mortgage Firm.
SECRETARY HURLEY ONE
OF SHOREHAM OWNERS
Cabinet Member Says Only Ex-
pense He Faces Is in In
Sailing Partitions.

| The DlStrlct grand jury is expected
this week to begin an investigation of
the affairs of Swartzell, Rheem &
Hensey, mortgage banking house, which
went into the hands of receivers sew
eral days ago, it was learned yesterday.
Whether the grand jury will inquire
into some particular phase of the COM
pany's activities, or whether it will
make a general investigation was not
disclosed, 1t is expected, however, that
the inquisitorial body will make a
thorough study of the complaints made
to the receivers by persons holding Sc
curities sold through the bankrupt con-
Germ.
1t was also disclosed yesterday that
Secretary of War Patrick j. Hurley is
part-owner of the Shoreham Building,
financed originally through the mort
gage house. The receivers for the mort
gage house yesterday said the first
mortgage on the Shoreham had been
released.
The building is nominally owned by
the Shoreham Building Investment Co.,
of which Secretary Hurley said he was
shareholder.
Secretary Hurley told The Star last
night the only possible loss he faced
was the expense of installing partitions
which Swartzell, Rheem & HenSey had
agreed to put in, but was now unable
to do because of their bankrupt condi-
ton. He said title company had been
paid to search the records and had
guaranteed a clear title to the property.
Robert McKeever, secretary of the
owning corporation, said the original
mortgage had been paid and released,
but that the funds were deposited in a
local bank in trust for the note holders.
If the money Is still on deposit, it was
pointed 1T, the holders of the notes do
not face any loss.
It was learned authoritatively that
the expert accountants of the Depart
ment of Justice, who have been examin-
ing the company's books, have COM
pleted their initial investigation and
are preparing report for submission to
Nugent Dodos, Assistant Attorney Gen.
eral 1t is believed this report viii
reach Mr.. Dodds early in the week.
Requested by Rover.
The Justice Department investigation
was made at the request of United
States Attorney Leo A. Rover, who said
he had received reliable information of
possible law violations growing out of
the conduct OF the company's affairs"
The study was made by Charles T.
Malone and E. J. Armbruster, account
ants with the rank of special agents of
the Bureau of Investigation. They are
working under Mr.. Dodds and Assistant
United States Attorney Neil Burkin-
shaw.
An outside" investigation has been
in the hands of Special Agents Louis
Loebl and Aaron W. jacobson, the
nature of which has not been disclosed.
It was announced yesterday by
Julius Peyser, who is serving jointly
with Henry P. Blair as receiver for
the mortgage banking house, that the
Hurley Wright Building, at Eighteenth
street and Pennsylvania avenue, prob
ably will be taken over by the receivers
this week This property was dis
posed of by Secretary Hurley in con-
necticn with the purchase of the Shore
ham building. ---------
Property in Good Shape.
Mr.. Peyser said he had not been
able to identify the present owner of
the building and that it was being taken
over merely as precautionary measure.
He said he thought the property was in
excellent shape financially
Mr.. Peyser also suggested the pos
sibility that note holders who were not
paid when the mortgages were released
may be able to- recover from the title
companies involved, If the companies
gave warranties of good title. He said
he believed this had been done by
some out-of-town concerns, but that
he did not know of any local title COM
pany that gave such guarantee.
The receivers yesterday reiterated
their warning to note holders not TO
part with their securities at this time
They also urged the note holders on
each project to form committees to act
in concert for their own protection.
We will help. and give them all
possible information toward this end,
Mr. Peyser declared.
The receivers said the liabilities of
the company may not be so large as
first suspected. 1t was pointed out that
in some instances the existence of
duplicate receipts for the same note
have been discovered.
Seven Mortgages Released.
I'm other words" it is explained, 1--WE
have found cases where, although the
company apparently has two notes for
$500 outstanding. there is, in fact. but
one such note. We do not yet know to
what extent the duplication of receipts
prevails, but it may result in a decided
reduction of the firms liabilities when
fully disclosed
Mr.. Peyser said that mortgages had
been released on the following proper
ties financed by Swartzell Rheem g.
Hensey:
The Tomlinson, Broadmoor, West
chester, Shoreham Building and three
smaller properties" He said he did
not know the names of the latter
1t was said the question of whether
the makers of the mortgages could now
be held liable for the notes outstanding
depended upon the Interpretation of
the clause which made the mortgages
payable at the Office of Swartzell
Rheem g. Hensey This clause appeared