The Washington times., 1933-02-27
HANDLEDPERU'S 5
BONDS THOUGH
WARNED
Baker Admits Being Informed
BY Agents of UnsatisfaC-
tory Conditions

CONTINUED from Page One)
1927, when he became vice presi-
dent, he was an assistant vice
president and that prior to this
he was in the foreign department
of the National City Company, be-
ginning in 1919. He said he was
in charge of South American cred
its for the company for a consid-
cradle period.
Pecora asked Schoepperle If
tables in the company files didn't
show that Peru had balanced it's
budget only three years in the
period between 1915 and 1924. He
said they did and admitted the
tables showed that the expendi-
lures exceeded the revenues by a
considerable amount most of the
time.
Baker was recalled to the stand
to identify report dated Febru
ary 16, 1925, signed by E. A.
Kircher, an employe in the COM
pany's foreign department. This
described Peru's internal debt"
as unsatisfactory and spoke of
arrears in interest and defaults of
a 1918 issue. 1t referred, too, to
extensive flood damages which
had done the country's economic
and financial situation no good"
He admitted this didn't sound
particularly enthusiastic"
OF Similar Tenor
Another notation, dated Decem-
ber 3, 1925, from c. w. Col7in,
foreign department employe, to
Ronald M. Byrnes, vice presl-
dent Of the company, was Of SINH
lar tenor. Colvin, it developed,
was the man who later as attor-
ney, executed the loan agreement. |
This notation, however, did point |
out that if properly safeguarded
loans to Peru would Involve no
greater risk than other loans
floated by this company"
Baker said he felt that this in
dicated, in spi,2 of references to |
unrest" and shaky credits, that |
Colvin felt the loan might be jus |
titled.
PECORA OBSERVED
"You said executives of your
company considered the credit
history in acting on loans"
eyes. We also looked over
the situation and could con-
clude that what might not
have been a good loan some
years back might in 1917, by
virtue of improvement, be then
good lOan."
Baker explained that loans of
this sort had to be considered
separately" Pecora called his at
tention to earlier testimony by
the now-reSigned chairman of the |
National City board, Charles E.
Mitchell, that 3O-year record |
was checked in connection with !
certain earlier loans. Pecora |
asked:
what were those improve
mentS' you spoke of, anyway"
The witness did not answer di-
rectly but directed Pecora to ask
the men who investigated the
peruvian situation on this ques-
ton.
Identifies Own Note
At this point Pecora produced |
from the National City Company
lilies an unsigned note, which |
Schoepperle identified as his own,
terming Peruvian loans as bad
risks" In this note, which Schoep-
perle said from its position in
the files must have been writ
ten between December %. 1925,
and July 27, 1927, one phrase
said that Peru was an adverse
moral and political risk"
Another letter written by
Byrnes, revealed that up to
within a year of the flotation of
the loan, the company did not
look favorably on a Peru loan,
Then Pecora went on:
"NOw do you find anything
in your files which give the
reason for the change in
feeling?"
Baker again directed Pecora to
ask some one who made the
Peruvian Investigations for the
company.
Prospectus Is Shown
Pecora produced the prospectus
OF sale which was issued in 1927
as the company put the Peru
securities on the market. Baker
conceded that this advertising did
not advise the investing public
OF the bad credit" record of
Peru.
do you know why this
Information was not conveyed
to the public?"
mo"
"DO you think this fair?"
eff the company thought
that conditions then justified
the loan it was fair"
But, wasn't the credit record
o part of the cOnditiOnS?"
The witness finally said:
81 think it would have been
better"
do you think that if this
information had been presented
to the public investor, he
would have bought these secur-
itieS?"
COL. PEAK TO SPEAK
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