Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-05-01
Suit Alleges IrreguIartiy in
Handling Special Account
for Building Trust.
DENIAL OF ACCUSATION
is MADE BY FLEMING
Action Is Filed to Recover $780,
600 for Benefit of All
Noteholders.

Alleging misuse of trust funds by the
| Riggs National Bank after the release
of trust on the Shoreham Building
by Swartzell, Rheem & Hensey Co., enc
of the noteholders today filed suit in
District Supreme Court to recover
$685., 900 from the bank for the benefit
of all the noteholders.
Immediately after the suit had been
filed Robert v. Fleming, president of
the bank, issued statement denying
there was anything in the transaction
which could impose any liability on the
bank. He asserted the banks relations
with SwartZell, Rheem e. Hensey Co.
were On "clean-cut business basis"
The petition alleges that on July 16,
1880, in order to release first trust
on the building for $2,250,000, the trus-
tees, Luther A. Swartzell and Edmund
D. Rheem, opened a special account in
the Riggs Bank "for the sole purpose
of receiving deposits in order that pay
ment be made to the noteholders under
the trust"
Claims Accounts Transferred.
In order to make full payment to the
noteholdars, it is alleg d. the trustees
borrowed S635,o00 from the bank and
deposited it in the special account on
July 16. On the same day, the petition
says, an additional deposit of $l,706.-
645.80, including a check for 1885,
635.80 from the New York Title S
Mortgage Co., tor the benefit of the
noteholders was made.
These deposits, with other funds,
brought the special account up to the
amount of the trust, whereupon, it Is
alleged. the bank notified the District
Title Co. that the special account was
of an amount aggreg ating the total
amount of the notes under the trust
then outstanding and unpaid.
Thereupon. it is alleged. the title
company, acting upon this representa-
ton of the bank. caused a release OF
the trust to be recorded.
On the same day, 1t is charged,
notwithstanding the notice to the
bank Of the purpose Of the special
fund.- the defendant transferred to the
general account of Swartzell, Rheem
& HenSey Co. the sum of S2,341 ,645. 80,
representing the total amount of the
special account created for the benefit
of the notehQlders."
On the following day, July II, ac-
ccrding to the petition, check for
$685.. 1888 was drawn on the general
account to the order of the bank in
payment of the loan of $685., 900. The
plaintiff alleges that prior to the
transfer of funds from the special to
the general account SwartZell, Rheem
g. Hensey Co. did not have a sufficient
balance in the bank to repay the Ian
and that the bank knew such bal
ance did not exist.
Agnes Lee Colby Is Plaintiff.
The suit was brought through Attor-
neys Fred B. Rhodes and Marcus Bor-
chardt by Agnes Lee Colby, administra-
trix of the estate of Mary w. Lee, who
died in jacksonville, Fla. The plaintiff
holds four notes aggregating $4,000.
In asking the court to order the bank
cial account the plaintiff says, "by rea-
son of said misuse of the trust funds,
the noteholders, including herself, have
not been paid the amounts due them
On their notes, and by reason of the
misuse of the trust funds as aforesaid
they will be unable to secure payment
CT said notes unless the special fund be
re-established and restored"
The first information relating to the
release Of the trust on the Shoreham
Building was secured from Rheem at
meeting Of the creditors of Swartzell,
Rheem & Hensey Co., now bankrupt.
The first trust, he said, was executed in
August, 1928, by Harry Wardman and
Thomas P. Bones then owners of the
property.
Immediately after the release of the
trust. he said, the property was sold by
his company to the Shoreham Invest
ment Corporation, in which Secretary
of War Patrick j. Hurley is financially
interested
Fleming's Statement.
The statement by Mr.. Fleming follows
in full:
THE transactions between this bank
and the Swartzell, Rheem & Hensey
Co., out of which the suit filed today
arose, have been submitted to the banks
counsel, who have advised us that there
was in those transactions nothing what
ever that could impose any liability on
the bank.
For many years the Swartzell,
Rheem & Hensey Co. enjoyed the con-
fidence of banking institutions and the
public in general and was numbered
among the substantial customers of this
bank. At no time was there anything
in connection with their transactions
with us which was not on clean-cut
business basis, and their financial diff
culties were as great a surprise to us
as we are sure they were to this COM
munity.
THE banks general counsel, Frank
j. Hogan, will file a complete answer
in defense of this suit, which will set
forth all the facts"