Evening star., 1933-07-01
PR0BERS TO TRACE
SOURCE OF STOCK
Frank E. TapIin Called to Ex.
plain Sale to Pennroad
- at Huge Profit.
CONTINUED From First Page.)


special stock issues in which clients were
invited to participate at cost Names of
the clients were not revealed.
Taplin was asked to appear Thurs
day. along with H. H. Lee. president
of Pennroad. and A. J. County, vice
president of the Pennsylvania Railroad
and an officer of Pennroad.
The Pennroad's list of preferred buy
ers, revealed yesterday. contained the
names of individuals who. like Kuhn.
Loeb and stockholders of the Pennsyl-
vania Railroad. were permitted to buy
blocks of Pennroad stock at SIS when
the market price was $25 and above.
Bought Directly.
Among those permitted 20 buy direct
1y from Pennload at the cost price
were Eugene G. Grace, 1900 shares;
H. E. Lewis. 1900: John T. Dorrance,
5000; DreXel & Co. Philadelphia af-
flliate of j. P. Morgan g. Co. 5000;
Philadelphia National Co. 5000.
Pecora placed the list in the record
after reading letter from Pennroad
to Kuhn. Loeb asking permission to
withhold stock allotted to the bankers
IN order to- satisfy the special clients.
We offered to the persons on our
special list a little less than 24,000
shares as an allotment on a SubScrip-
tion Of 92,788." the letter said.
The majority on the list from whom
We have heard have accepted our allot-
ment. There are probably 10 objectors,
one of whom threatens suit: one or
two others indicate that they sold the
stock in anticipation Of receiving it,
and, of course, will lose money in full
filling their contracts.
Mr.. County GA. J. County, has said
he has received comments from sew
eral people who are supposed to be
friends of ours, on the list, which leads
him to believe that if We do not fulfill
our original contract with these people
we will never hear the last Of it."
Bid for Good Will
Asked to explain the preferred list,
Lee said it was list of men Ito whom
I had offered stock in event all offered
under the original issue of over 5,0O0,-
600 was not taken by stockholders of
the Pennsylvania.
He agreed with Pecora that the names
were suggested by directors Of the Penn
sylvania and was an attempt to estab-
lish good will.
Asked why some had threatened suit,
Lee said they were afraid We would
not carry out our offer"
Were there any suits?" asked Chair
man Fletcher.
No Lee replied.
He added that the stock offered to
stockholders of the Pennsylvania at
the time was mot moving with very
great celebrity" and Pennroad wanted, to
be sure that all the stock was dis
tributed.
Pecora questioned Lee at length about
the purchase of 222,900 shares of stock
in the Pittsburgh & West Virginia
from Taplin for almost s38 000,0 900. r
The witness said he could not remem-
Der who Taplin's associates were and
did not recall the market price Of the
stock at the time.
A little later he said it was around
sl40 when his company paid sl70 for
1t. Lee said he had consented to the
control of the line.
.3 Per Cent Of Stock.
He said the purchase represented 70
per cent of the stock and Pecora asked
him why it was not confined to 81 per
cent when the price was so far above
the market price.
The company was In good shape
and the stock was paying dividends" ;"
Lee said.
Weren't those factors represented
In the market price
Il don't know"
Lee testified Taplin had been lent
Sl,950000 by the corporation in June
and that the negotiations for the pur-
chase of the stock from him started
about that time
He said he could not recall whether
the loan was made to permit Taplin to
purchase the stock for sale to Penn
road
The loan was paid off when the cor
poration paid Taplin the first install
ment on its purchase of stock.
Lee testified negotiations with Taplin
were handled by county.
Lee said he could not recall details
surrounding acquisition by Pennroad of
over 10000 shares of Seaboard Air
Line
Pecora brought out that a year after
this acquisition the Seaboard went into
receivership and said four or five years
before the sale of stock earnings of the
road had been declining steadily
Lee said that before the acquisition,
the Seaboard had changed its financial
'set-up" with the approval of the In
terstate Commerce Commission.
PecOra Complains.
He said Pennroad planned originally
only to buy l25,000 shares through
syndicate managed by Dillon, Read &
Co. but there was break in the market
and the company was unable to sell
to stockholders.
Pecora expressed dissatisfaction at
Lees failure to reply TO many questions
and at one point Senator Barkley, DEM
ocrat. of Kentucky asked him if he were
only a figure head" in the Pennroad.
Il have always considered myself the
real president" Lee replied.
Lee agreed with Pecora that the cor
poration had made mistake" in pay
ing IS 600 for a membership in the
Bloomfield Country Club of Detroit held
by President Franklin of the Detroit,
Toledo e. Ironton, which road was ac-
quired by the Pennroad. Records priced
the membership at around $3.50.
What benefit did the shareholders
get out of that?" asked Pecora.
None Lee replied. That was
mistake on our part. 1t should have
been bought by the D., T. &. l.
Why should it have been bought by
any one but Franklin himseif?" asked
Fletcher.
It's the usual practice OF corpora
tions." Lee said.
The Kuhn. Loeb profit exhibit showed
the firm netted S13.373, ,480 from bonds
during l927-3l totaling 81 .637 50z 900.
and s3.259,982 from stock issues totaling
5,305. .001 shares.
Net profits for the firm from stock
and bond issues managed by others in
the same five-year period were about
$2,500000.
- issues in Default.
Another exhibit showed bond issues
now in default which Kuhn. Loeb man
aged, totalling Is. The f:At included
issues in default at any time during the
1@e-year period They totalled approx
1nately $3.50, 900 900 and except for 500
600 900 in Chilean Bank Bends and
S3l 900 600 in moving picture company
securities. were railroad issues.
Still another exhibit disclosed part