Evening star., 1931-12-12
Secretary Says He Bought
Structure in Belief Note
Holders Were Paid.
ACTION WOULD RESTORE
TRUST FOR s2,25o, 900
Cabinet Member Called as Witness
After Buying Property From
Rheem Firm.

Secretary Of War Patrick j. Hurley
testified in District Supreme Court to-
day that he acted in utmost good faith
when he purchased the Shoreham Office
Building, Fifteenth and H streets, from
the Swartzell, Rheem & HenSey Co.
He was called as a witness in a suit
before Justice F. D. Let's to reinstate
trust on the building for $2,250, 900,
which was released at the time of the
sale without payment to the holders
Of notes under the trust
Secretary Hurley said he purchased
the building in the belief that all of
the note holders had been paid in ac-
cordance with the terms of the deed of
trust.
Source of Big Loss.
The Shoreham Building was the
source of one of the greatest single
losses sustained by investors in Swart-
zeL, Rheem e. HenSey Co. securities.
After negotiations for the sale had been
completed, the trust was released by
Edmund D. Rheem and Luther A.
SWartzell. The terms of the deed
provided that the trust could be re-
leased after it had been paid in full
at the Offices of Swartzell, Rheem &
HenSey.
Many of the holders of the $2,250,00o
of trust notes said they never received
the money they had invested. Rheem,
however, said several months ago that
they had been paid through reinvest-
ments Of the money received by his
company.
Secretary Hurley said the building
was purchased by himself and Joseph l.
Cromwell, Oklahoma millionaire, in
July, 1890. The deal was effected
through the Shoreham Investment Co.,
Mr.. Hurley said, half of the stock of
that corporation being owned by Mr.
Cromwell and the balance by himself
and his wife. He said the Shoreham
Building was purchased by trading his
s740 900 equity in the Hurley Wright
Building and an additional cash con-
Sideration.
Put Up s150,000 Cash.
At the time the Shoreham Building
was refinanced in connection with the
sale, Mr.. Hurley said, the Shoreham IN
vestment Co. was requested to advance
$l50,000. This was done, he said, de-
spite the fact that Swartzell, Rheem &
Hensey Co. had previously agreed to re-
finance the property without cost to the
purchaser.
II didn't like this" he testified, "be-
cause 1t was not in accordance with the
original agreement. However, Mr.. Cronl-
well was anxious to leave the city and I
agreed to advance the money. Each of
us, Mr.. Cromwell and I, put up S75, 1000,
making the total necessary"
Mr. Hurley said he and MIR. Crom-
well got certificate of title to the
building from the District Title & IN
surance Co. at cost of s2,250.
He was questioned at some length
about a meeting between himself,
Rheem and others on the evening of
July Is, the day prior to the closing of
the deal. He said Rheem told him he
had arranged to secure all the money
necessary for the payment of the So
100000 mortgage, with accrued interest
and other costs.
Didn't Inquire Into Source.
Il didn't ask Rheem where or how
he was going to get this money" Mr..
Hurley said. IT knew of the splendid
reputation of his firm and had no rea-
son whatsoever at that time to believe
there was anything irregular in the
transaction. I learned later, however,
that he got part of this money from
the Riggs National Bank"
Rheem borrowed $685., 900 from the
Riggs Bank on July 16. He opened
special deposit account in the bank ia
the name of Mr.. Swartzell and himself
as trustee of the mortgage. This account
was designated as being for the benefit
Of noteholders under the deed of trust on
the Shoreham Building Subsequently,
in suit brought by some of the note
Continued on Page 2, Column A.