Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-11-26
RHEEM TEST|F|ES
ON FIRMS FAILURE
Tells Story of investment
House Crash in Personal
Bankruptcy Trial.

The story Of the failure of Swartzell,
Rheem & Hensey Co., which resulted in
the loss of several million dollars to
Washington investors. was told yester-
day by Edmund D. Rheem. former ex-
ecutive head Of the lone man" mort
gage-banking house.
Testifying in personal bankruptcy
proceedings against him in District Su-
preme Court, Rheem described how his
flrm loaded with millions of dollars in
frozen assets, cracked when local bank
demanded payment of notes aggregat-
ing 100000, and finally went under
despite strenuous last-minute efforts by
him to raise cash to tide it over.
Seek Personal Funds.
Rheem was brought to the court
mouse from Lorton, where he Is serving
a Seven-year sentence on a charge
growing out of the failure of his firm.
Investors who lost money when the firm
went under are seeking to have him
thrown into bankruptcy so his personal
assets may be made available in pay
ment of their claims.
Il was taken sick in the middle of last
January" Rheem said, land had to stay
nome. One morning. while was con-
hned to my bed, j. Newton Brewer, an
assistant, came to me and said the
Washington Loan & Trust Co. had dis
covered the security for some 5000 400
OF our notes held by them in their trust
department had been released. He told
me the bank insisted on having a check
Tor the full amount or substitute notes
by the following morning.
sent Brewer back to the office with
instructions to remove from the vaults
nrst mortgage notes on the Shoreham
Hotel in that amount and turn them
over to the bank. These notes BELONGED
to customers of the firm, who had left
them with us for safekeeping. In my
opinion this was legitimate, as the COM
pany repurchaSed the notes from the
holders. BY that I mean a credit for
the face value of the securities was
given each holder on our books, and we
intended to give them other notes In
the same amount. The bankruptcy in
tervened before this could be done.
Payment Demanded.
Il returned to the office on the
Thursday prior to January IS, 1881. the
GATE OF the bankruptcy. That day two
boys from the Washington Loan and
Trust Co. came to my ONCE. Each had
suit case filled with notes. The bank
wanted all OF these notes paid at once,
N-AS~ASSStA oOAAiC Va were nOL vet
due. They aggregated in value several
hundred thousand dollars; I don't re-
member the exact amount.
of course, I went right down to
the bank to talk the matter over. The
ofhcials there were polite but firm; they
wanted payment at once. My firm
didn't have the money available and
couldn't pay. The bank then advised
me they were writing a letter to each
holder, setting forth the facts. They
very CONSIDERABLY gave me an opportu-
nifty to write a letter, offering to re-
place the notes with others which had
not been released, which would reach
the note owners at the same time.
This was done.
Finally, however, the situation mar
rowed down to this: Our assets were
frozen, our creditors were demanding
payment and We didn't have the money
to pay them. Bankruptcy was the only
recourse. Twenty-four hours before the
time of filing, sat down with my at
torney, Leon Tobriner, and We drafted
the petition"
He said that up to the latter part of
1880 he considered himself worth Gin
the neighborhood of $4,000, 000."
Justice F. D. Let's announced he
would hear final arguments In the case
Tuesday at 2 o'clock.