Evening star., 1933-10-05
STOCK UNLOADING
/. OPPORTUNITY HIT.
Pecora Questions Tracy and
/ Others on investment .
Trusts Position.
BY the Associated Press.

The suggestion that directors of in
yestment trusts were in position to
unload through them onto the public
stock in which they were interested per-
sonally was made to Senate investiga-
tors today by Ferdinand Pecora, COM
mittee counsel
He questioned E. B. Tracy, president
of several investment trusts. and Rob-
ert E. Christie, jr., a member OF Dillon,
Read & Co.. on the management of
such organizations.
Pecora pointed out several directors
in the investment trusts organized by
Dillon, Read & Co. were pro1aInent
market traders and possibly teerested
in a number of stock issues
One was Matthew c. Brp S-one Of
the biggest market operators.
Charles Hayden of Hayden, Stone &
Co, large brokerage firm, was another.
Pecora asked If it was ethical" for
people so interested in stock trading
themselves to guide the activities of an
investment trust.
Hayden "Well Posted"
"Yes," Christie insisted "Mr. Hay
den had wide knowledge and was a
we'll posted gentleman"
DO you recognize the existence Of
temptation to have the trust accept
securities in an enterprise in which
he might be interested as a pro-
moter?" Pecora asked
In any event" the witness replied,
"his recommendations would be sub
ject to check by the other directors" !"
Don't you think that placed him
under a temptation where his judg
ment might be warped?" Pecora asked
That's a question involving Mr. Hay
den's character Christie replied. L
appreciate that he has two interests,
but I don't see any conflict"
Fletcher said the directors might
trade among themselves at the eX-
pense of the public investors.
Evidence of the part played by Dill
Ion. Read & Co. in the f1otation Of
seven South American bond issues to-
falling more than sl00,OoO.0OO. now in
default, was the objective Of Senate
investigators today.
Before turning to the South Amer
ican loans, from which the banking
firm realized profits of several millions
of dollars, the investigating commit
tee recalled its officers to disclose its
pool earnings in investment trust
stocks.
Already the committee had learned
members of the firm made nearly
$7,0000 900 from selling through the
pool stock in the investment trust
which they had acquired five years
earlier for 20 cents share.
Senator Couzens, Republican. Mich
igan. directed sharp criticism at them
yesterday for engaging in pool opera
tions in the stock OF the United States
and Foreign Securities Corporation, an
investment trust formed by Dillon,
Read &, Co. in 1924.
Questioned on 1924 Sales.
With Clarence Dillon senior partner
of the banking firm, sitting between
them, Pecora questioned Christie about
sales of the stock in the United States
& Foreign Securities Corporation. the
investment trust organized by Dillon
Read in 1924.
1t was ascertained that the 10000
shares sold by the bankers outside OF
the 1900 they disposed of through the
pool were purchased by Dillon. Read g.
Co, and later sold by the firm to its
customers.
Pointing out the pool transactions
constituted 80 per cent of the total
trading in the stock, Pecora asked If
that did not serve to increase public
demand for the security.
Christie agreed 1t probably did.
Dillon. Read, to fill orders for the
stock, bought 1000 from the pool
brokers. in addition to purchasing
$4,000 from its members.
Couzens, in assailing the ethics of
partners interested said he objected
to the policy of creating a market
for the common stock when members
of the firm knew the stock was not
paying dividends
When Christie said not all members
of the firm participated in the syndi-
cate and only part of their holdings
were disposed Of, the Michigan SEN
ator replied:
You can't segregate responsibility
among members OF the firm from the
firm itself"
Glass and Pecora clashed twice. first
over the counsels method of question
ing Christie, after Christie had con-
ferred with associates before answer
ing a question.
Glass, who tangled with Pecora last
Spring in the committees inquiry into
j. P. Morgan & Co., asserted the Wit
ness has a right to get advice as
Pecora demanded to know if Christie
had to confer before answering.
Refers to Conferences.
Glass went on to say Pecora con-
ferred with his assistants in conduct
ing the questioning.
II need all the assistance I can get
from my associates and assistants IN
this task" Pecora replied.
Chairman Fletcher told Christie to
go ahead and answer the question
while Glass put in And get all the ad-
vice YOU want from your associates"
A short while later Glass asked in
what direction Pecora was taking the
inquiry and demanded that committee
members be informed of its course.
Not more than one member of the
committe knows what Mr.. Pecora is
trying to prove" the Virginian COM
planned.
Il outlined the inquiry to the sub
committee at a meeting yesterday at
tended by all but yourself, retorted
Pecora adding he did not feel he
should duplicate work by laying all evi-
dence before the committee except IN
executive session.
my understanding is superior to
your imagination" shot back Glass.
The argument became warmer and
Glass reminded Pecora Of a resolution
requiring the counsel to ADVISE the
committee of his plans.
Il did that yesterday morning,
snapped Pecora. Il was there and ]
was responsible only for my own at
tendance and no one else's."
Some other Senators put in at this
point that Glass was busy with an cleo
kicn in Virginia Yesterday and could