Evening star., 1933-06-07

rangement whereby the Chesapeake
Corporation was to acquite 5000
shares of c. 81 o. common from the
Vaness Co.
Van Sweringen said the General"
Securities Corporation entered the pic
ture" in connection with this deal
He testified that the Geneva Secur-
tiles Corporation was formed in May.
1927. and its chief purpose was to effect
the exchange of securities between the
Chesa peake Corporation and the Vaness
Co. by which the latter transferred
255 900 shares of Chesapeake 81 Ohio
to the Chesapeake Corporation in re-
turn for capital stock in the latter.
Pecora asked why the exchange
wasn't direct between the Vaness. Co.
and the Chesapeake Corporation.
Reading from a record before him,
Van Sweringen said in part that Geneva
Securities Corporation was set up to cf-
fectuate the deal ito avail of income
exemption provided by Congress in con-
nection with corporate reorganization" :"
He said the same thing was response
BILE for the formation of the Geneva
Securities Corporation later in connec-
ton with the set UP of the Allegheny
Corporation.
when the Vaness c. & o. stock was
transferred to the Chesapeake Corpora
tion on May 10, 1927, 1t actually was
worth more than when acquired?"
Pecora asked.
"1 would have to refer to market
quotations"
Il am informed that on May 10, 1927
Chesapeake & Ohio common was quoted
around SITS" Pecora said. Assuming
that is right, If the Vaness company
1, \ lrz% IL L.,
reaped a handsome profit?"
Questioned on Tax Evasion.
Van Sweringen said that would de-
pend on the cost to the Vaness Co
He said the Vaness Co. got 382. 500
shares OF Geneva Securities Corporation
stocks for its 5000 shares of Chesa-
peake & Ohio stock
Van Sweringen said the 500 900
shares of Chesapeake g. Ohio stock re-
ceived by the Chesapeake Corporation
was taken on the books of the Chesa-
peake Corporation at s1o4,850, 900 or
STATS a share, "the lowest quoted
market price on May 10, 1927"
"If you had sold there would have
been a big profit?" Pecora asked
That's like saying if the dog hadn't
stopped running he would have caught
the rabbit"
If there had been a straight sale
by the Vaness Co. to the Chesapeake
Corporation, there would have been a
big profit?"
I'VE didn't do it that way"
THAT profit would have been a tax
able proft?"
I'm not apt about that" Van Swer-
ingen said and turned to confer with
his counsel, F. H. CHM.
IF there had been profit It would
have been taxable" he then said
Wasn't the purpose of the Geneva
Securities Corporation to evade-by
lawful means-this tax?" Pecora
pressed.
1T seemed the economic way of
handling it, Van Sweringen replied.
why was it the economical way?"
Pecora asked.
The other way would have cost
more" Van Sweringen said.
Why would the other way have cos.
more?" Pecora inquired. Wasn't it be-
cause the Vaness Co would have to pay
a tax on its profits otherwise?"
Van Sweringen said he already hac
acknowledged that the transaction was
formed to take advantage of income tax
exemption.
we did it according to the law,
think" he said,
"Oh, it was legal enough" Pecors
said.
The income tax squabble took nearly
half the committees time yesterday,
leaving only few hours for question
ing 0. p van Sweringen. who proved
the most forgetful witness the COM
mittee has had
While Morgan and other partners in
the banking house sweltered in the hot
committee room, Pecora struggled with
Van Sweringen without success.
The famous railroad owner an
swered 81 don't recall" or Il don't re-
member" to almost all of Pecora's
questions, finally drawing rebuke
from Senator Barkley, Democrat, Of
Kentucky, who was presiding.
1T seems incredible that a man of
as large affairs as yours could have so
little information about them," the
Kentucky Senator said sharply.
II don't want to depend on guess
work" Van Sweringen replied About
all he remembered during the day was
that he and his associates received
from Morgan & Co. two loans totaling
almost sac, ZOO, 900, on october 81, 1890
From the minutes of the Vaness
company, a Van Sweringen holding
company, Pecora learned that little
more than $1l,000,000 was borrowed
from various banks between late 1928
and early 1925, but the witness said
he could not remember what the big
sum was used for
Pecora asked II Van Sweringen had
not been complimented before the In
terstate Commerce Commission for his
fine memory.
IT don't recall that" the Cleveland
operator replied. Il don't try to use
my mind as memory tablet"