Evening star., 1933-03-02
MERGER PROFITS
OF BANK PROBED
Director of Company Had
Secret Interest, National
City Officer Testifies.
BY the Associated Press.


the Nichols and Shepperd Co., makers
of farm equipment, at Battle Greek,
Mich. had a secret interest in profits
to be made by the National City Co. of
New York in putting through a merger
involving the former.
The witness being questioned was
Stanley A. Russell, a vice president Of
the National City Co.
Charles E. Mitchell, former chairman
Of the board Of the National City Bank
OF New York, had preceded him.
At the time of the incorporation, Rus
sell said, Garrard B. winston, director
and counsel of the National City Co.,
was president of the Oliver Farm Equip
ment Co. and he himself was vice
president.
Explains $1,939,144 Loan.
Pecora then brought out testimony
that the Nichols g. Shepperd Co. had
been granted loan Of 81, ,939, ia by the
National City Bank on January 81,
Explaining the Nichols & shepperd
loan, Russell said that company during
the progress Of the negotiations was
building an extension to its plant and
needed to retire some notes.
In view Of the approaching consoli-
dation, he explained. it was decided to
float the temporary loan from the bank
rather than to raise the money by is
suing additional stock.
Russell went through a long and de-
tailed explanation of the set-up Of the
Oliver Farm Equipment Co. He said in
addition to stock that went to the par
companies, 9,325. $50 in cash
went to the Oliver Chilled Plow Works,
How about your company" Pecora
Russell said the City Co. agreed to
buy 100000 shares Of prior preferred
stock In the new firm, 31,02l Of con-
vertible preferred stock and 10,O14
shares Of common stock in addition to
options to buy an additional $4,000
shares Of common.
What did you pay for that?" Pecora
wanted to know
"s2o,s25,652 in cash." Russell told
him.
He testified the National Republic Co.
of Chicago and Starring, identified as a
director of the Nichols & Shepperd Co,
got an interest in the new company.
Starrtng's share was tx per cent.
He got that because he got the
business for you, in other words he
put you onto the deal?" Pecora In
quired.
Fees are paid quite frequently" Rus
sell replied. He added, however, that
this did not come out of the profits. !"
Russell added that the National Re-
public Co. got is per cent.
TO make up for profits they would
have made as bankers for Nichols and
Shepperd?" Pecora inquired.
We'll, yes," Russell said. "It was a
friendly recognition of their position. /"
rs that a common practice?"
Sure"
Questioned on Salary.
The hearing opened with Senator
Brookhart, Republican, of Iowa, cues
tioning Mitchell about the salary of
George E. Roberts, vice president of
the National City Bank
Mitchell said he was not certain but
thought it was about S25,000 a year
How much additional Roberts received
in bonuses, he said, he could not tell
off-hand.
Brookhart remarked that Roberts,
through a son, controls a big news
paper out in Fort Dodge, Iowa"
THAT paper has very strongly advo-
Gated reduction Of Government sal
aries," he said.
Bank Affiliate Opposed.
Ferdinand Pecora. the committee
counsel, asked Mitchell when he had
seen an opinion by F. w. Lehman,
former solicitor general, which said
formation of the National City Co. by
the National City Bank, in 1911, was
violation of the national banking act.
The opinion, or memorandum, was
given to George w. Wickersham. for
mer Attorney General, in 1911 and was
not made public until last year. y
II think I saw it at one time, "
Mitchell replied, "but my memory of
it is very vague. could not say def
nitely when or where"
Mitchell said the time he saw the
as May 10, 1892, when Senator Glass,
Democrat, of Virginia, put it in the
Congressional Record.
II had heard there was such an opin-
ion many years ago." he added.
Fails to Find Opinion.
Mitchell said he had been advised
the secretary Of the company had
searched its files for copy of the
opinion and had been unable to 10
cate one.
The next witness was Russell, who
has charge of the National City Co. In
dustrial and public utility financing.
In response to questions, Russell told
of the National City Co.'S part In bring
ing about q merger Of three firms max
ing agricultural machinery and imple-
ments.
Russell named them as the Nichols &
Shepperd Co. Of Battle Greek, Mich.
the oliver Chilled Plow Works, South
bend, Ind, and the Hart Parr Co..
Charles City, w. Va.
Gas I recall" Russell said, IN. B
Starring of the Battle Greek firm first
suggested the consolidation to u.s.
"Your real purpose in participating
was to make some money for the Ma
tional City Coz"
why certainly"
Russell said the new firm was in
corporated in Delaware as the "Oliver
Farm Equipment Co."
Other Witnesses Called.
Among other witnesses called today
were M. j. Meehan, member Of the
New York brokerage firm Of M. ]. Nee
han & Co.
Last year the committee heard the
Meehan company had participated In
1929 in a syndicate in Radio Corpora
ton of America common stock, which
netted profits Of s3,217,570.
Meehan's firm was a specialist In
Radio stock and the committee was
told it had violated exchange regula-
tions by participating in the syndicate
Meehan sailed for Europe Just before
the investigation began last May.
Others on the list were Stanley A.
Russell and Joseph P. Ripley, past presi-
dents of the National City Co., invest
ment affiliate of the National City Bank
and Ronald ByrneS, former National
City Co. vice president.
An affable but firm mo" was the
answer Of Richard Whitney, president
of the New York Stock Exchange, to
suggestions yesterday for changing the
way the huge market place functions
His views were expressed to the COM
mittee after 1t had received testimony
that a $4,000 loan had gone from
National City Co. funds to John Ram
sey, general manager Of the Port Of
New York Authority.
Ramsey was said to have borrowed
the money after the National City Co