Evening star., 1934-07-22
.MAYFLOWERPROBE
REPORT IS READY
Senate Subcommittee
Charges Old Group Seeks to
Regain Control of Hotel.

Continued From First Page)
and that this firm was designated as
the depository. The same company.
together with the American Bond a.
Mortgage Co, sponsored and sold the
mortgage bonds issued on the hotel
Again Seek to Gain Control.
There is ample testimony before
the committee" the report declared,
TO warrant it in finding that the
same interests that controlled the ho-
tel in 1928 again seek to gain control.
The HalSey, Stuart or New York
group was brought into being by
Leonard l.. Stenley, an employe of
Halsey, Stuart & Co, Inc. The plan
Of reorganization was first conceived
by him, and Halsey, Stuart & Co,
Inc, was designated as the deposit
tory. Beckman, Bogue a. Clark, New
York lawyers, are counsel for this
group and were also attorneys for the
Wardman Bondholders' Committee.
The bondholders' lists as hereinbefore
stated, were in the possession of Hal
sey, Stuart & Co. Inc. and 1t became
an easy matter and a great tempta-
ton for them to gain control of the
situation to the great detriment of
the already -defrauded bondholderS.
Had the plan of reorganization, as
suggested by the committees, been
carried out, what are now firSt-trust
securities would have become second
trust security. Counsel for the Bond
holders Committee admitted that
these new Second-trust bonds would
not sell for par. consequently there is
no doubt but what the holders of this
paper might be persuaded that their
security was of questionable value and
allow themselves to be tempted to sell
the security for less than its value
rather than run the risk of being
subjected to other nefarious schemes
designed to finally relieve them Of all
their interests"
Two Separate Appraisals.
when the first and second trust
bonds were issued in 1923, amounting
to $500, 900 and So, 900, respect
property, both real and personal" the
report said. There were two sep
arate appraisers used by the May
flower Hotel Co. One, John L. Weaver,
of Weaver Bros, Inc, Washington, D.
c., appraised the land only. A circu-
lar issued in 1928, when the bonds
were being offered to the public gen.
orally, stated that Mr.. Weaver valued
the land at 1854, ,240. The same cir
cular also stated that one Harry
Wardman, also of Washington, D. c..
had appraised the land, buildings and
furnishings at $l6 100000.
Upon examination of Mr.. Wardman,
it was ascertained that a member of
the firm of Wardman Co., James
D. Hobbs, actually made the ap-
praisal, and not Mr.. Wardman, al
though he personally signed the ap-
praisal. Mr. Hobbs, like Mr.. Weaver,
was unable to point out any land in
the vicinity that approximated such
high value. The witness Hobbs did
not inquire into the cost of the hotel
from the standpoint of materials fur
nished nor the labor supplied, nor was
he able to recall the price paid for
land in the vicinity nor did he know
what the land had sold for in 1925,
when it was first acquired by the
Mayf1ower Hotel.
Property OvervaIued.
THAT the property, both real and
personal, was overvalued was proved
beyond a peradventure of a doubt.
THE committee finds that the value
placed upon the land by Mr.. Weaver
and the values placed upon the land,
building and furnishings by Mr.. Hobbs
were placed without proper study or
with a view of boosting the property
beyond its actual value, and for the
specific purpose of permitting those
financing the property to sell its bonds
throughout the country to unsuspect-
ing persons.
THE committee finds that the
property appraised at more than
$12,000,000 was in truth and in
fact, not worth more than half of that
amount. In many instances, these
bonds, based upon a false appraisal,
were sold to widows, orphans and to
persons with trust funds"
The subcommittee said the appoint
ment of three receivers was unneceS-
sary and that one "diligent" receiver, |
with the aid of counsel, could have
performed all of the duties shown to
have been performed by the three.
Statement Not Borne Out.
'In one Of the reports of the re-
ceivers filed in court criticizing the
reorganization plan," the subcommit-
tee declared, the receivers stated
therein that they had given prac-
tically their entire time to the oper-
alton for more than two years. The
testimony of the receivers before the
committe does not bear out the state
mentS made by them to the court, but |
their testimony, on the contrary in
dlcates that in most instances they |
arrived at the hotel around 1880 to
IL o'clock in the morning, and, after
having lunched, left the hotel about |
2 pm.
The receivers have already ap- |
piled for and received on account |
of fees $37,500 each and they are
asking for fees, which if granted, will
net each receiver $4,000 per year, or, |
if stated in terms OF interest, per
cent per annum on 81 10000 In ad- |!
dition to the fees, the receivers have |
been accustomed to receive their |
lunches at the hotel, gratis"
The receivers attempted to justify