The Waterbury Democrat., 1938-12-14
INVERSION ING.
 OFFICERS HELD
fContinued from Page D

Preliminary questions concerning Identification and their ages were answered by counsel prior to the arraignment.
 Immediately following the hear ing Coster and Dietrich repaired to an adjoining room where they con- ferred privately.
 Their attorneys left to resume appearance at a superior court trial which they interrupted to at- tend the arraignment, and Kauf- man and Fitch stayed at the Cos ter home.
 It was understood the latter would accompany the two officials to New Haven for the bond posting,
 Coster Looks HI
 Coster, 53-year-old president of the concern since 1926, showed evident signs of his illness. He had been under the care of heart spe- cialist since last Thursday when the company filed a voluntary pe- tition at New York for reorgan- ization under the Chandler Act.
 Neither official has made any public statement since the start of the investigation, nor have they &C., ceded to demands of the board of directors to resign.
 Their counsel, likewise, have avoided any comment on the in- veStigation and arrests.
 Samuel Reich, U. s. cnmmis- sioner here, disqualified himself to preside at today's arraignment be- cause of his association with the ac- cused officials and Alcorn was ap- pointed to sit at the hearing.
 Treasurer To Report
 New York, Dec. 14--(UP)-The treasurer of McKesson and Robbins, Inc, appears at the attorney gen. erals office today to make public the first inside details of the com- pany's plikht.
 He is Julian F. Thompson who testified last week before com- mittee of the New York Stock Ex- change after trading had been sus- pended in the company,s stock. His testimony then was private but published accounts of it disclosed that he had investigated for his own satisfaction the crude drugs department, which had the short age, and was convinced that it was a blind for stock trading rather than an agency for handling the company'S supplies. The shortages amazingly included five stocked warehouses that were listed on the books but cannot be found.
 Assistant Attorney General Am prose V. Mccall is holding an open hearing on the company,s failure one of five Investigations now under way.
 F. Donald Coster, president of the company, and George E. Dietrich, as- sistant treasurer in charge of the crude drugs department, surrendered to federal officers at Bridgeport, Conn, today by their attorney, Sam uel Reich.
 Arrests Ordered Yesterday
 Their arrest, along with that of George Vernard, Montreal agent for the company, was ordered yesterday by United States Commissioner Gar rett w. Cotter here on request of Hector J. Dowd of the securities and exchange commission. The charge was based on the alleged filing of false financial information with the SEC. The penalty is two years im- prisonment and a $l0,000 fine.
 Reich is u. s, commissioner at Bridgeport. He disqualified himself because he was counsel for the men. They were to be srraigned before Commissioner Robert Alcorn at New Haven. Reich aaid Coster was sick in bed at his home in Fairfield, how ever. and 1t might be necessary to arraign him at his bedside.
 Although they have declined com ment on the situation, both Goster and Dietrich expressed at least pas siye defiance to the company's board of directors, which had given them until yesterday noon to resign. Since they failed to comply, the board will meet Monday to oust them.
 VeFnard Unreported
 Vernard was unreported. He had been expected to testisfy at the att torney generals office yesterday but two federal agents waited there all day in vain fo rhim. The missing warehouses were supposed to have been in Canada. Vernard's company, W. w. Smith and O., Inc, of Mon treal, handled McKesson Robbins Canadian sales.
 Thompson had testified at the stock exchange that the crude drugs department was under Coster's di- rect supervision, with Dietrich in charge of details.
 Three witnesses at the attorney generals hearing cast some light on the company's affairs yesterday.
 John J. Jenkins, President Coster's brother er-in-law, said he had worked at odd jobs and had had precari- ous income for eight years, although he had brokerage account that re- turned him $139.135 last year. He said that Coster really owned the ac- count and had taken the money. Mccall obtained an order tieing up the account. He had previously tied up a $100,0O0 account in Mrs. Coster's name.
 Harold Spear, who specialized in McKesson and Robbins stock on the exchange, said he had been given limited discretion in trading for both accounts, and that Coster directed that discretion.
 Didn't Know Enough
 Albert R. Ritts, accountant for Price, Warehouse and company, who has been in charge of outside audits of McKesson and Robbins business since 1929, said he doubted whether either Coster or Dietrich knew enough about auditing to have cov- cred up the shortages, possibly over years.
 It was charged that auditors had been deceived by forged Dun and Bradstreet' reports showing ware house affairs in order.
 These investigations were proceed