Evening star., 1934-07-22
CHARGE OLD GROUP
SEEKS TO REGAIN
MAYFLOWER HOTEL
Senators ASSalI Reap
praiSaI Methods OF Bank.
ing Houses in Report.
$4,000 FEE TO EACH
OF 3 RECEIVERS SCORED
Care by Bankruptcy Court Urged
to Protect Already De-
frauded Bondholders."

The mortgage banking houses that
reinanced the Msy1ower Hotel In
1928. after having it 'reappraised at
twice its value" were charged with
seeking now to regain control of the
property in a preliminary report yes
terday by Senate subcommittee
which expressed the hope" that the
bankruptcy court supervising any re-
organization would exercise great
care to protect the already defrauded
bondholders.
This report of the subcommittee OF
the Senate District Committee, which
investigated a proposed plan for re-
organizing and retinancing the prop
erty. also criticized the three receiv-
ers-John Lewis Smith. Rush Holland
and j. Miller Kenyon--for attempting
to justify fees of $4,000 a year each.
One Receiver Sufficient.
"The appointment of three receiv-
ers was unnecessary" the report said,
and one diligent receiver, with the
aid OF counsel, could have performed
all the duties shown to have been
performed by the three" The prac-
tice OF appointing more than one re-
ceiyer for a bankrupt property has
been widely condemned as unneces-
sarily increasing the loss that must
ultimately be taken by the security
holders.
The receivers for the Mayfiowel
oh ,.tffI
porting to the court that they had
given practically their entire time to
the operation OF the hotel for more
than two years, although their teSti-
mony before the subcommittee indi-
Gated they arrived at the hote
around 1890 to ii am, and, after
having hnched, left the hotel about
2 pm"
Bond Houses Excoriated.
Business methods of Halsey. Stuart
a Co, and the American Bond &
Mortgage Co. the house which f1oat.
ed the refinaneing bond issue. were
excoriated in the report, prepared By
Assistant Corporation Counsel ElwooC
Seal at the instruction OF the sub
committee. Seal served as specia
counsel 10 the subcommitte during
the investigation.
The American Bond & Mortgage
Co. was charged with perpetrating q
"palpable fraud" upon the Mayfiowel
Hotel Co., and especially upon the
unstlspecting bondholders, by payins
debt TO the company in its own pre-
ferred stock and then insisting thai
refund be made in cash.
Those responsible for such action:
should have been indicted and vigor-
ously prosecuted" the report declared
A considerable portion OF the l6-
page report was devoted to denun-
citation of the use of inflated apprais-
ais Tor Tefinancing purposes.
Attack Property Appraisal.
1t was charged that Harry Ward
man, local builder, personally signed
an appraisal fixing the value OF the
entire property at $4,000, 900, al
though another man actually mad,
the appraisal for him" This ap.
PAAA'AAS S'PlOSSNhy W lAAs Wai hiHdAA
was widely circulated III advertising
the bonds for sale.
In connection with the appraisal by
Wardman and one of the land only
by John l.. Weaver of Weaver Bros
Inc, the report said: The committee
finds that the property appraised al
more than $4,000, 900 was in truth
and in fact not worth more than hall
OF that amount In many instances
these bonds, based upon a false ap-
praisal, were sold to widows, orphan;
and to persons with trust funds
The subcommittee, composed of Sen
ators Kean, Republican, of New Jersey
and Reynolds, Democrat, Of North
Carolina. calls upon the Commissioner:
to exercise the power granted them in
the act Of Congress Of July |, 1892
and license all persons engaged in the
business of appraising property values
1t said, however, that 1t felt the re-
cent public hearings already have
been productive Of good results and
that because of the many advantages
already accorded the bondholders, its
efforts have not been in vain.
The proposed plan of reorganiZa ton
the subcommittee declared, was first
conceived by Leonard Stanley, an EN-
ploye OF ialSey, Stuart IL Co. Inc
Continued Oh page column 81.
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