Evening star., 1936-07-28
INVESTMENT QUIZ
HIT BY WITNESS
Securities Board Violates
Constitution, Groves
Says in Statement.
Ly the Associated Press.

Ly the Associated Press.
A witness at the Securities Commis-
sion's investigation of investment
trusts and companies told the COM
mission today 1t was violating the
Constitution Of the United states In
proceeding with this hearing"
The witness-Wallace Groves, New
York and Baltimore hpancier-waS
called to elaborate upon testimony
yesterday regarding o series OF mil
lion-dollar deals in the stocks Of two
investment companies of which he
was director.
David Schenker. commission coun-
sci, contended Groves marked up O
100000 profit through the transac-
tions, but the witness contended his
profit was not that large.
Files Statement.
As he took the stand today Groves
filed a prepared statement saying he
had consulted with counsel regarding
a suit brought in Federal District
Court here yesterday to prevent the
commission from compelling attend
ance of certain witnesses or obtaining
certain records.
II am advised by such counsel"
Groves said. that in their opinion
the Securities and Exchange Commits
sion is without power or authority 80
to hold this public hearing In relation
to investment companies or invest
ment trusts"
Groves added, however, that 'irre-
spective of my legal rights, guaranteed
to me by the Constitution, he was de-
sirous of being Constructive and
helpful" and. therefore, would proceed
with his testimony.
Effort to Halt Hearing Fails.
An unsuccessful effort to halt the
commissions inquiry at its outset was
made in the Federal District Court
here yesterday by F. T. Fisher of New
York, stockholder In the Equity
Corp. Of New York. Judge Oscar
Luhring refused TO issue q temporary
restraining order which he requested,
but ordered the commission to show
cause at hearing August why an
injunction against the hearing should
not be issued.
AS the commission opened public
hearings yesterday. Groves testified
about million-dolla deals in the stocks
of Interstate Equities Corp. of New
York, and Chain and General Esui-
ties. Inc, of Boston.
He challenged contentious of Schen-
ker, that he had made $500, 900
profit without putting up a nickel" of
his own money, declaring that Schen-
ker did not figure in all the costs in
connection with the transactions.
Alleged Deals Traced.
With Groves testifying he could not
remember several activities outlined
by Schenker, the latter traced what
he said were the financiers large.
scale operations in investment stocks
in 1891.
After acquiring $4,000 shares Of
Interstate with borrowed money,
schenker said, Groves procured about
100000 from the company to ac-
quire SOC, 900 shares Of Chain 81 Cen
eral Equities, which gave him control
OF the latter company.
The commission attorney said Groves
then caused the election of several
new directors of Chain g. General
Equities and, few hours later, these
directors decided to buy his stock in
Interstate at q profit to him Of about
100000.
Groves said he did not attend the
directors meeting at which it was de-
cided to buy the stock and added:
The purchase of that stock was very
carefully considered and it is my un-
derstanding the directors thought 1t
was sought at q fair price"
Groves took the stand after Edward
r. Tinker, former president Of Inter-
state, had testified about that COM
pany's activities between 1929 and
1892. During this period, Schenker
said, assets shrank from $25 900 900 to
s4,45o.ooo. but Tinker denied this was
q loss"