Evening star., 1934-05-20
BONDS USE TO BUY
MAYF[0WERHOTEL
HELD SCANDAL0US
Group of First Mortgage
Holders Petition Court
to Ban Proposal.
D. c. MAN REPRESENTS
25e PERSONS, HE SAYS
Charges Bondholders Were I'm
properly Enticed Into De-
posting Bonds.

Charging that the proposed reor-
ganization of the Mayflower Hotel is
assuming proportions of a national
scandal" a representative of a. group
of flrst-mortgage bondholders yester-
day asked the District Supreme Court
to prevent the use of any deposited
bonds in purchasing the property OF
consummating the plan of reorgan-
ization.
The bonds allegedly have been de-
posted by the original holders with
three committees - the Henderson
Hazelwood and Folger Committees
In the past committees of this sort
have used deposited bonds as part OF
the purchase price in buying in prop
critics at public sales.
Petition Is Filed.
The present petition was filed by
Harold H. Shaller, 1924 K street
through Attorney Joseph Low. Smaller
says he represents 259 holders OF
hrst-mortgage bonds aggregatine
1888 800. There are approximately
5000 bondholders scattered through
out the country.
The petition charges that the two
largest committees are composed oi
non -bondholders under the direction
of the original banking interests
Halsey-Stuart Co., and the American
Bond & Mortgage Co.
1t is alleged many of the bond.
holders were improperly enticed into
depositing their bonds and that the
method prescribed for dissenting te
the reorganization plan is ingenious.
ly confusing and too technical fol
the average bondholder to under
stand" It is also asserted that many
protests against the reorganization
have been ignored by the committees
for all practical purposes.
Improper Use Charged.
"In effect" it was alleged, "the de.
posted bonds are being used by the
committees contrary to the wishes OF
the rightful owners to purchase the
property at a forced sale, and then
to deprive the bondholders of theil
real valuable interest in the prop.
erty."
This situation" according to the
petition, lis assuming proportions OF
a national scandal and is so shocking
as to call for the interposition of the
chancellor in preventing this in
equitable ravishment of its hapless
wards"
The public sale of the hotel was
recently set by court order for June
10. The sale was ordered after there
had been a default in the S7,500, ,00O
first mortgage.
Favors Gibson Resolution.
When the Senate District Commit
tee holds its next regular meeting, a
subcommittee will recommend passage
of the Gibson resolution, which seeks
an investigation into the financing OF
the Mayflower. This was made known
yesterday by Senator Reynolds OF
North Carolina, who. with Senator
Kean of New Jersey, comprise the
subcommittee.
The date for the next meeting OF
the District Committee has not been
fixed. Senator King, chairman OF the
committee. is considering whether the
Senate should act on the resolution,
or whether the committee, if it ap-
proves. could proceed with an inquiry
under It's general authority to hold
hearings in connection with legisIa-
ton. This question probably will be
determined when the subcommittee
brings the resolution to the attention
of the committee. One of the ques-
tions on which the Gibson resolution
seeks information is whether a pro-
posed reorganization is in the interest
of the security holders.