Evening star., 1935-02-04
REYNOLDS SCORES
MAYFLOWER CASE
RULING BY COURT
Supreme Bench Failed to
Wait for Senate Probe
to End.
PROMISE TO HOLD UP
DECISION REPORTED
Two Proposals for Amendment of
Bankruptcy Act Are Studied
by Committee.

Action of the District Supreme Court
in deciding the Mayf1ower Hotel bank
ruptcy case without waiting for COM
pletion of senatorial investigation
Of the hotels financing was impliedly
criticized today by Senator Reynolds,
Democrat, Of North Carolina, as the
Senate committee resumed its in
quiry.
AS the. hearing opened. Senator
Reynolds read the following state
ment:
The disposition of the hotel has
been pending before the Supreme
Court of the District. The Judge was
furnished with copy of our findings.
So far as We can ascertain, he him.
self made no investigation into the
facts. The findings of the committee
are entitled, under a decision Of the
Supreme Court, to great respect.
Orders Passed Week Ago.
"The matter was still pending in
court when the present session of
Congress convened. Senator King
communicated with the Judge before
whom the case was pending and he
tells me that he secured a promise
that the matter should be held until
TINS investigation was completed,
However, a week ago, he passed GER
tain orders more or less final.
1T is proposed to introduce a bill
to amend the bankruptcy act so that
1t will be impossible for a court to
give erect or treat as valid any de-
post agreement secured by brokers
who have sold securities to an amount
greatly beyond the value of the prop
erty as is the case here.
1T is expected that additional and
valuable proof will be submitted on
the hearing now to be resumed"
Decision Rendered by Let's.
The decision referred to was rem
dered by Associate Justice F. Dickin-
son Let's after protracted hearing,
in which all interested parties were
given opportunity to be heard.
Two specific proposals for amending
the bankruptcy act were considered by
the committee.
First OF these was a suggestion that
no stock house which has been instru-
mental in selling bonds or other
securities above the proper value of
the property should be allowed to
organize bondholders' protective COM
mittees or take the leading part i'll
reorganization activities.
Second vas the suggestion that a
house of issue be compelled to turn
over to legitimately interested parties
lists of bond and stock holders.
Harness First Witness,
Forest Harness, special assistant to
the Attorney General and active for
several years in investigating stock
and mail fraud cases, was the first
witness before the committee today.
Harness retraced for the committee
the financing activities of local inter-
ests connected with the Mayflower, of
the American Bond & Mortgage Co.
and of HalSey Stuart & Co.. all of
whom were active in handling secur-
tiles of the local hotel.
Asked by Senator Reynolds for his
opinion on the two possible amend
mentS, Harness declared he believed
the first one would be very much ain
the public interests" Concerning the
second proposal, he warned the COM
mittee that the rights and valuable
property of legitimate stock houses
should not be jeopardized in order to
force the hands Of those who follow
shady practices.
He pointed out that lists of bond
holders are often of great value to
companies which have compiled them
and might be turned to illigitimate
use If their publication is forced. AS
a compromise he suggested legislation
be framed so that bondholders them
selves could have access to the names
Of other bondholders, but that the
lists should be protected from general
dissemination.
Low Second Witness.
Joseph Low, counsel for a minority
group of first mortgage bondholders,
was the second witness. Mr.. Low also
reviewed past litigation and financing
operations in connection with the
hotel Asked for his opinion on the
two proposals made for reorganization
or sale of the hotel, Mr.. Low declared
he favored the reorganization plan
only because the offered sale price
was not high enough. He said the
value of the property is approximately
S5,5O0,000 as compared to the pur-
chase offer of $4,000,000. The margin
of $1,50O,0OO, he said, should be sal
vaged if possible.
Others attending the hearing in
cluded Paul Lesh, counsel for the Ma
jority BondholderS' Committee. In
connection with the committees sug-
gestion that bondholders' lists should
be made public, Lesh countered with
a proposal that the records Of the In
ternal Revenue Bureau be made avail
able upon court order to supply such
information.
In addition to Senator Reynolds,
Senator Carey, Republican, of Wyo-
ming, attended the hearing today.