Evening star., 1933-06-30
KUHN, LOEB ASSETS.
CUT ALMOST HALF
Balance Sheet for 1882 Given
Senate Probers Shows
Big Reduction.
Continued From First Page.

the Pennroad Railroad issue would nave
been too burdensome charge on the
corporation.
Then the financial advice you gave
simply boiled down to issue common
stock instead of bonds or preferred
stock?" Pecora asked.
No" Kahn replied. I'VE told them
not to have an underwriting. but to &c
ahead and take chance and We were
sure they would not get stuck"
Kahn displayed wide knowledge OF
details of the Pennroad organization in
describing the negotiations between his
firm and Pennsylvania officials.
Desirability Of Expanding.
He said it was emphasized in prelim-
insry discussions the desirability Of ex-
panding the Pennsylvania system and
making sure strategic lines did not fall
into hands that would damage the in
terests of the Pennsylvania"
Pecora asked if there was discussion
OF avoiding regulation by the Interstate
Commerce Commission.
Il could not say" Kahn replied, add
ing that result undoubtedly was accom-
plished
Kahn said the only road he remem-
bered being mentioned as a desirable
purchase was the Detroit. Toledo &
ironton. which the corporation later
bought from Henry Ford.
Moral Responsibility.
Pecora asked if Kuhn, Loeb. when
called upon for advice, would not have
preferred to know what use was to be
made of the money raised by the Penn
road Corporation.
If there was a moral responsibility
for us. yes" Kahn replied. adding, I'VE
wanted our name left out and the
stockholders of the Pennsylvania Rail-
road to determine themselves whether
they wanted to exchange equities for
equities
Asked why the Pennsylvania could
not have acquired the same railroads
as it did under the Pennroad Corpora
ton through its subsidiary, the Penn
sylvania Co., Kahn said the road was
unwilling to part with any of its stocks
held by that company and I'VE advised
them against issuing any bonds involv.
ing a fixed charge"
Pecora referred to the acquisition by
the Pennsylvania Co. of the Wabash
and Lehigh Valley. recently upheld by
Federal Circuit Court, despite the claim
of the Interstate Commerce Commission
that it violated the Clayton act.
Shouldn't Have Been Burdened.
Kahn said the mere fact that they
we're bought made it necessary the
Pennsylvania Co. should not have been
buroened further"
Chairman Fletcher asked If the Penn
road Corporation was not formed to
escape the sort Of objection" made by
the Interstate Commerce Commission
to purchase of other lines.
You may be entirely right in these
motives, but I don't know whether these
motives existed" Kahn said, adding.
I'VE wouldn't consent to it organizing
the Pennroad) if it involved a fixed
charge"
If the Pennsylvania came to us and
suggested the Pennroad issue bonds to
the public. we would have said. We
are sorry, but We can not consent to
90 that and our advice would be as
it was"
Profit on Transaction.
Pecora asked for the total profits OF
the banking firm in connection with
the Pennroad Corporation.
Kahn said the only fee was sl5l2,-
500 for underwriting a second issue OF
stock in the corporation late in 1929.
In addition, he said, profit OF
So, 7O1 900 was made from options given
to it on the first issue. He explained
the option was exercised on only the
first two of the four blocks.
Kuhn. Loeb made S797,000 from sale
of its block of stock in the first issue,
Kahn added and it made 1891 900 from
managing the syndicate which sold the
issue.
Pecora called attention to later un-
derWriting profit Of s69,9O0, and said:
SO your total compensation from
July to December, 1929, was nearly
five and one-half millions?"
Yes" Kahn agreed.
Received Commission.
Pecora brought out that Kuhn. Loeb
received 1927 1897 commission in the &C
euisltion by the Pennroad Corporation
Of the Canton Co. and roughly" $40.
900 in acquisition of stock in the New
York. New Haven & Hartford.
so you realized profits Of about
IS $40 900 altogether" Pecora asked.
That is approximately correct" Kahn
said
Saying Pennroad got s133Coo,O 900 for
its stocks, Pecora asked If the loss to
investors was not "a little over $780,
100000"
4 don't believe that is quite correct"
Kahn replied.
"A great many investors did sell
when stocks were higher There would
be such loss If all investors held their
stock to the present day.
Pecora developed testimony that
Kuhn, Loeb exercised options only on
the first two blocks of 1885, 900 Pennroad
corporation shares, the first block be-
ing purchased at SIG share when
the market price was s28.75 and the
second at SIT when the market was
$2975.
Had Gone Short.
Had your firm gone short in this
stock?" Pecora asked.
We had traded in the stock and
sold portions of the first 1885, 900 against
the option" Kahn replied.
Pecora then pointed out Kuhn. Loeb
realized over $5,O00,000 profit In six
months time.
No one was more surprised than
we Kahn replied.
Turning to the acquisition by the
Pennroad of the Pittsburgh & West
Virginia, Pecora asked Kahn If he knew
Taplin.
times"
Pecora said he wanted to question
Taplin about the acquisition of the
Pittsburgh g. West Virginia by the
Pennroad at Sl70 a share when the
market price was between S110-$l41.
Pecora inquired into acquisition Il
the Canton Co. Of Baltimore for $500
q share plus cost and commission.
Kahn said the sale was effected In
July, 1929, and the late Kuhn, Loeb
partner. Mortimer Schiff. took the Can
ton owners to the Pennroad to dis
cuss it.
Kahn said the Canton stock was
owned at the time by the Colgates OF
Baltimore and it was unlikely that II
was q listed stock.
Produces Client List.
Turning suddenly from its investiga'
ton of why Kahn did not pay income
- V0 tNA a.