Evening star., 1933-10-03
HUGE PROFIT Barred
IN DILLON INQUIRY
Witness Reveals Company
I Paid 20 Cents for Stock
That Sold at $72.
Continued From First Page.)

'SDlltlAuCh Tioil AiAoe o6Sp
had mo means whatsoever and merely
was ssed as part of the legal machinery
in setting up the company. He ex-
planned use of Olcott was lust legal
procedure worked out by the lawyers.
While the witness listened unper-
turbed in the Senate caucus room.
Chairman Fletcher of the committee
remarked
1T was just a process by which Dill
Ion, Read & Co. worked out contract
with Dillon, Read g. Co."
Senator Adams Democrat of Col
orado, lawyer. interjected facetiouSly
that I'VE lawyers have got to have these
things
II suppose it was just to make it look
difficult" Dillon contributed. adding he
did not see why the procedure was used.
Earlier in his testimony. he had up
held investment trusts, explaining the
small investor dealing individually can't
get the proper diVersification.
In the case of the United States and
Foreign Investment Corporation, the
risk was spread over large field
That company has been in operation
for eight years and has been success
full paying the public per cent
through good times and bad," Dillon
said
At the outset of Dillon's testimony
Senator Couzens, Republican, of Mich
lgan, wanted to know what the public
gained by transfer of the Dodge Bros.
Co. through the banking house several
years ago.
Dillon. who had said he owned a ma
1ority of the stock in his firm, contend
ed the automobile concern was on a
"sounder basis" when it was owned by
the public rather than family
Isn't what you call owned by the
public really myth" inquired Chair
man Fletcher
mo" Dillon replied
Crowd Grows Gradually.
Although few persons were on hand
when the hearing opened, the crowd
gradually was augmented.
Pecora asked if control of a COM
pany whose stock was widely spread
was not usually in the hands OF few
holding small percentage of the stock
Dillon replied stockholders usually
left control in the hands of manage
ment. but always retained the potential
power to change management.
The committee counsel recalled that
O. P. Van Sweringen of Cleveland testi-
fled IS per cent was enough stock to
obtain control of railroad management
Agrees With Pecora.
Dillon agreed that far less than a
majority of stock" frequently controlled
management.
Il shouldn't like the job of lining up
the small stockholders to oust COM
pany management" he said smilingly
Ia reply to a question from Senator
Adams
Before testimony began Pecora had
been given free rein by the Senators
after he had explained to them in
closed session what course he proposed
to pursue.
More than a quorum of the Investi-
eating Committee gathered for the
executive session. including Chairman
Fletcher. Senators CouZens and Adams
and Norbeck Republican Of South Da-
kota; Townsend. Republican of Della
ware. and Goldsborough, Republican Of
Maryland
Principals in the inquiry were slow
to arrive Some Of the minor officials
of Dillon. Read g. Co. were the first to
arrive, followed by Pecoras staff
The subpoenaed witnesses. however
were late. They included, in addition
to Dillon, Robert E. Christie, jr.. and
r. o, Hayward. partners Of the firm.
Will Recess for Series.
Fletcher said the committee would
sit daily from 10 to l and 2 to 4, but
would recess in the afternoon for
world series games in W. shington
Dillon testified his firm was organized
in 1920 as copartnership and be-
came Joint stock association in 1922,
under the laws of New York. He dis
closed he held between $4,000 and
IA mn with luo of e1
Dillon was prompted now and again
by Christie. a fellow partner, sitting
next to him.
D Hon said his firm did not accept
demand deposits, as I'VE have no USE
full employment of srr', deposits"
IT'S why 1 call our business an IN
vestment securities business" he added.
I'VE don't make commercial loans
and our business is confined to invest
ment securities"
Describes Business.
Speaking quietly. he described his
FIRMS business as investment banking.
as distinguished from commercial bank
ing. doing a longterm. as opposed to
short-term, credit business.
Dillon explained his firm previously
had accepted deposits. but had been
abandoning it gradually for some time.
Pecora pointed out at the end of 1927,
Dillon, Read & Co. had demand de-
posits amounting to S5,250907 and
asked why this substantial business had
been abandoned.
Dillon said that sum represented IT
accounts
In 1923, he added, there were seven !
accounts with "a million and a quarter |
and in 1929 the same number with a
total of $4,000 600"
In 1880 only one account was left |
and there are now none.
The banker said this business was |
abandoned because the money was |
found to serve no useful purpose.
In Scores of Companies.
Pecora offered evidence that part
ners Of Dillon, Read g. Co are direc- /
tors or officers of more than score Of !
companies whose securities were sold
to the public
He put in the record another list of
companies in which other employees
of the firm are directors or officers !
The first list included:
Goodyear Tire & Rubber Co. Loew's. ;
Inc: Warner Co. United States g. For !
eign Securities Corporation and United !
States and International Securities Cor !
poration. /
The latter two are investment trusts, !
which are to be investigated by the !
committee.
The second list included the National
Cash Register Co. and a number of
foreign and less-known domestic cor
porations.