Evening star., 1933-02-16

THE EVENING
utilities Investment Corporation FL
nance Committee in July, 1929. in
which Samuel insult, ST., as chairman.
told of issuing $4,000 shares of the
Shenandoah Corp, $4,000 shares in an
other insult company and 1000 shares
Ito take care of certain people"
i don't know what that means"
insult said.
Was your father under obligation
them?" Pecora asked
mo. not in that sense" insult said.
Was he supporting members Of his
| family at the expense of this corpora
| tion?"
mo, sir"
WAS it the usual thing at these
meetings to take care Of certain
| people?"
Might Write to Father.
mo, sir, I take it that means the
, corporation didn't put up the money
and the other people got the stock. Part
/ of the subscription was assigned"
/ How can We find out the reason for
! taking care of certain people," Pecora
| pursued.
Il can write him Unsull. sr.) and
| find out, the witness said. The senior
insult Is In Greece to avoid extradition
on larceny charges.
Pecora then called John F. O'Keefe.
former private secretary to insult,
senior, to the stand
OKeefe said he could only recollect
| the transaction vaguely, as Pecora
rraccad for no i6a,,titu IF HrartQin
people"
| Was there any reason for not max
! ing the minutes show who these certain
people were?" Pecora asked.
Il don't think So" O'Keefe replied.
Questioned on Returns.
insult was recalled to the stand and
asked by Brookhart about the income
tax returns.
The witness said the insult Utility
Investment Co. issued stock dividends
of $5,05l, 900 in 1890.
THAT would still leave about $6,000,-
600 on which the tax should have been
paid" Brcokhart added.
insult said his father conferred with
Mr.. Young in December, 1881.
Pecora then called Young to the
stand.
Young said the General Electric Co.
had many business connections with the
insult companies and had made loan
to one Of the insult companies on De-
cember %, 1881.
Young said insult offered to deposit
collateral bearing market value 40
per cent in excess of the amount of the
loan and would undertake to keep the
collateral at this margin during the
life Of the loan" He added that three
bankers had been asked if they would
approve the loan, and it was made.
Says insult Signed Notes.
After detailing the collateral put up
Young said, ''Insull signed the notes"
Questioned about a conference he had
with msull in February 1882, Young
said the utilities executive told him he
had been trying to arrange "Standstill
agreement" for his bank loans whereby
they all would be extended to definite
date
Young explained insult was afraid If
the loans matured, bankruptcy would
follow soon and the banks with earlier
maturity would obtain an advantage
over the others.
Young said he talked with New York
bankers and found they felt If they
agreed to stand-still agreement they
should be better informed.
Conferred With insult.
He said he went to Chicago to discuss
the situation with insult and attended
meeting in insults Office at which
were present representatives of all the
principal banks of Chicago.
Young said he explained the situa-
ton and suggested selection of some
one to keep the New York banks IN
formed.
There was long discussion to find
some one in Chicago not connected as
an officer with the banks or the insult
companies to serve in that capacity,
Young said, and finally Arthur Ander-
son, of Arthur Anderson & Co., public
auditors, was selected.
Later, in March or April, insult
| came on and reviewed the situation
again" he said. I'm this conference it
developed that there was no money
available In a particular company to
| meet maturities.
"The question arose as to whether
the banks would assent to transfer of
funds by companies that had cash, to
companies facing maturities," he said.
"As a result, 1t seemed to me the
| transfer of funds could not be longer
justified without prejudicing some OF
the lenders"
Banks Loaned S50,000,000.
Young estimated the amount of loans
by the New York banks to insult COM
panies at S50.000,000.
The witness said a Mr. Brown of the
First National Bank in Chicago ana
Abner 8. Stiiwell of the Continental
/ Bank & Trust Co. of Illinois came to-
| New York later and agreed the wise
course" was receivership.
Young said he was more concerned
with "tlie effect on business OF the col
lapse OF the insult companies than he
was with the $1,000, 600 loan" s.1s
Anything that would impair the
! credit of the insult companies would
| impair its buying power, and 1t was one
| of the best customers OF General Elec-
| trio" he added.
! Young expressed the opinion that In
| sull was 'very largely victim OF the
complicated structure which got beyond
! his control-competent as he was"
Denies Realizing Profits"
insult testified yesterday that mem
berS of the family were allowed, under
/ a contract, to buy stocks in an invest
ment trust for S25,000,000 less than
| their market price. insult said the pa
/ per profits" were never realized.
The testimony developed that insult
| Utility Investments. Inc, was formed
/ in the latter part Of December, 1928.
| Its stock was listed on the Chicago
Exchange January IT, 1929, and sold
at $50 a share, later rising to $l49 be-
| fore the crash Of 1929.
! On the same day the stock was listed
the contract was signed. 1t gave Sam
uel insult. sr. his wife, his son and
Martin insult, a brother, 1,214,000
shares of the stock, or an option on
them, for Sl1,730,000.
/ At the price prevailing on the eX-
change that day the stock was worth
. 6,42o, 900, and many times that with
| in few months.