Evening star., 1936-08-03
SABBATH TO PUSH
BANKRUPTCY ACT
Bill Designed to Correct
Reorganization Abuses
Disclosed by Probers.
BY WILL p. KENNEDY.


The dean of the House, Chairman
SABBATH of the Select Committee to In
vestigate Real Estate and Bondholders
Reorganizations. in the coming session
of Congress will press for action as
an emergency measure the bill to
amend the bankruptcy act, to correct
abuses disclosed by that committee. A
favorable report on that bill was made
for the House Judiciary Committee
by Representative Walter Chandler of
Tennessee a few days before Con-
gress adjourned.
The bill, which is favored by all six
members Of the committee. is directed
especially against such evils as were
disclosed in a study of the financing
and reorganization of certain Wash
ington properties-the Wardman
properties. the Mayflower Hotel, the
Shoreham Hotel and the La Sale
Apartment building-which occupy an
important place in the latest report
of the committee. Regarding the
Wardman properties, the report said:
I'm this reorganization may be found
practically every abuse prevalent In
reorganizations. 1t may be cited as a
model of all prevalent trickery in the
real estate bond racket"
Briefly, this bill seeks to prevent loss
Of assets and excessive charges in
connection with certain reorganiza-
tions. compositions and extensions
and to aid the district courts in ad-
ministration. Chairman SABBATH says:
Were We to permit these deplorable
conditions to continue, they viii cost
bondholders and security holders bill
lions of dollars. To end such condi-
tions for all time and to bring about
the much-needed remedies. and to
eliminate the criminal dissipation OF
the property rights of the owners of
securities. We feel 1t our duty to urge
this bill for action early in the COM
ing session"
Some Evils Lessened.
The committee was successful in
bringing about some abatement of the
evils disclosed in its voluminous in
vestigations and hearings through
recommendations to the Attorney
Generals Office, the Post Office De-
partment, the Bureau of Internal Rev.
enue and local prosecuting officers.
The supplemental report of the COM
mittee issued just before Congress ad-
journed emphasized that disclosures
indicate gross fraud and dishonesty
and apparent tax evasion, warranting
the scrutiny of the Department of
Justice and the Bureau of Internal
Revenue" 1t also says that the COM
mittee has uncovered "the great
racket of fleeing and robbing some
100000 of the most deserving citi-
zens of this Nation Of approximately
$40. .000. .000, 900. They invested in So
called gold bonds and real estate Sc
curities. not wishing to gamble or
speculate with their life savings. They
must be protected"
A year ago the Sabath committee
pointed out that upwards of s1O,-
600 100000 of real estate securities
had been unloaded. often by shame
full Misrepresentation of bond houses
and deceptive advice of counsel. This
was exclusive of large amount of
participating certificates in guaranteed
mortgages. the guarantee of which
has proven worthless. These bonds
and securities were in many instances
purchased by thrifty American citi-
zens, in good faith, believing they
were amply secured, especially rely
ing on the guarantees of presumably
responsible guaranty companies"
The other members of the SABBATH
committee, who, after two years of
intensive investigation, helped to draft
this bill, are Representatives Claude
A. Fuller of Arkansas, Thomas OMal-
ley of Wisconsin, Martin j. Kennedy
of New York. Francis D. Culkin of
New York and Everett M. Dirksen Of
Illinois. The latter two are Repub-
licans, the others Democrats.