Evening star., 1938-12-11
MtKesson Drug Stock
May Be 18 Million
Short, Witness Says
Wife of Concerns Head
Restrained From Usino
$100, 900 Account

N~SNt tSsuSo sVsu SSuS
100000 Account
BACKGROUND
McKesson & Robbins, Inc,
giant wholesaler, distributor and
manufacturer of drugs, filed
petition Thursday In Federal
Court to reorganise under the
neD Chandler Bankruptcy Act.
This ,pas done after priuate in
DeStiqdtion of the crude drugs
department by one OF the firms
directors disclosed 1Dhat he called
Fantastic" financial state OF
affairs.
BY the Associated Press.
NEW YORK, Dec. 1o-Mrs. Carol
E. Coster was temporarily restrained
today from using her 100000 bro
kerage account as State Attorney
General John j. Bennett, jr., inves-
tigating the financial affairs of Nc
Kesson & Robbins, Inc, $87 900 900
drug concern headed by her hus-
band, heard testimony that the COM
pany's estimates of crude drugs IN
stock might be $4,000, 900 too high.
The restraining order, signed by
Supreme Court Justice Aron Steuer
on the application of Assistant At
torney General Joseph F. Ruggieri,
requires Mrs. Coster and her hus-
band, DR.. Donald Coster. and her
broker, Steiner, Rouse & Co., to ap-
pear in court December 10 with all
books and records relating to the
inquiry into McKesson & Robbins.
w. l.. Cummings, a director, de-
scribed the financial affairs of the
company as fantastic" in a state
ment to New York Stock Exchange
committee.
Funds Source Suspect.
Mr.. Ruggieri, applying for the
restraining order presented to JUS
tice Steuer an affidavit, which said,
In part:
THE deponent has reason to be-
lieve that by reason of the
practices (of the McKesson & Rob-
bins Coz resulting in tremendous
losses to the public, that she MRS.
Coster) is in all probability in pos
session of funds, which, in the in
vestigation, may be traced as funds
derived from such prac-
tices ="
The two witnesses heard at to-
days hearing, conducted by Assist
ant Attorney General Ambrose V.
Mccall, were Albert B. Ritts, chief
accountant for the auditing firm of
Price, Waterhouse & Co., and George
Rowbothan, a partner in the audit
ing firm.
Mr.. Ritts said his examination of
the financial standing of McKesson
& Robbins year ago showed assets
of $87.1S2 765, but added that "of
that figure at least $18,000,OO0 is
Subject to question.
Items May Be Nom Existent.
Such a markup in assets, he said,
would result from the listing of $l0,-
100000 In crude drug stock inventory
and 90, ,000,0 900 in accounts receivable,
both items which may be non-exist-
ent, officials of the firm told the
stock exchange inquiry. Coster had
direct supervision of the crude drugs
department.
The company's records, many of
them now believed to be incorrect,
showed most of the crude drug in
ventory was held in warehouses in
Canada and other parts of the Brit
ish Empire by w. w. Smith & Co.,
English commission brokers, who
acted as agents for McKesson g.
Robbins.
Mr.. Ritts testified he relied on
what he believed to be genuine Dun
6 Bradstreet reports on the financial
condition of w. w. Smith & Co., as
basis for estimating the assets
as bona fide.
Reports Called Forgeries.
These reports, described yesterday
by Dun and Bradstreets president,
Arthur D. Whiteside, as forgeries,
were sent to him, Mr.. Ritts said, by
George Dietrich, assistant treasurer
OF the McKesSon & Robbins Co., who
was In charge Of the crude stock
department under Coster's super
vision.
"How was 1t possible to deceive
you?" asked Mr.. Mccall.
The bills of lading, the shipping
advices and other records which we
examined must have been false
Mr.. Ritts said.
He and other examiners for Price,
Waterhouse g. Co., he testified, had
received communications from
Manning e. Co. in Montreal, con-
firming alleged deposits with that
concern by the Smith concern.
There seems now to be a question
As to whether Manning. & Co.
exists" he said.
Paid for Doing Nothing.
Mr.. Ritts said that according to
the McKesson & Robbins records,
the Smith Co. was paid a fat fee of
$4,000 a year, plus a three-quarters
of per cent commission for execut-
ing selling orders for McKesson
q Robbins. In 1887, he said. pay
ments to the English firm amounted
to about $l50,OO0. He added he had
seen Cancelled checks for those pay
ments.
The Smith Co., Mr.. Mccall re-
marked, appeared to have been paid
for doing nothing.
TT looks that way" Mr.. Ritts
nodded.
Capt. Reifsnider 10 Head