The Waterbury Democrat., 1938-12-20

4OL COLukulSSlOIlS O11 SdlcS WHICH tLleSe corporations supposedly made for that department.
 Mythical Mail Address
 The mythical w. w. Smith & Company, merely a mailing address operated by Arthur Musica, alias George Vernard, drew large sums from time to time as commissions supposedly for selling millions of dollars worth of McKesson & Rob- bins products to firms throughout the world. Dewey said that the biggest of all such payments -$389,- 46l-was made ironically on Oct. 28, 1929, the day of the stock market crash preceding the depression.
 The gun smuggling aspects of the Swindle still were vague. Frederic Wingersky, Boston lawyer and vice. president in charge of law and labor relations for McKesson & Robbins. testified at the state attorney gen. erals office that in May, 1888 Coster- -Musica had called him to his office and had him draw up con- tract for the sale of 100000 Lee- Enfield army rifles and 100000, ,000 rounds of ammunition to an un- named foreign power. He said the sale never was made, and he did not know where Coster-M -Musica ex- pected to get that many army rifles.
 Tried to Deal In Arms
 HROAHoIny1 coid hnyrYaUoT f1ot If appeared certain Coster -Musica had actually tried to deal in arms and munitions, and this was further borne out last night when Alfred R. Shrigley, Mexican consul at Boston informed federal agents that agents of Coster-Musica had tried to sell Lee-Enfield rifles to his government through him, in 1887. Shrigley fur nished U. s. District Attorney John J. Canavan with the names of men who approached him as agents for Coster- -Musica.
 There also was evidence, of an undisclosed nature, that Coster-Mu- sica had smuggled arms to Bolivia for its war with Paraguay, and that he had shipped arms to Loyalist Spain in crates labeled milk of magneSia."
 Refutes Directors
 These developments tended to re- flute a theory of some McKesSon & Robbins directors that Coster-M -Musica had actually not engaged in the arms business, but had pretended to do so in order to have an alibi if and when it was discovered that his crude drugs department was a shell, possessing none of the assets credited to it. These directors be- lieve that Coster-M Musica had been prepared to tell them, when they became inquisitive, that the depart ment was doing a lucrative business for the company in contraband, and for that reason its real nature had to be concealed.
 The questioning of directors was expected to bring out for t5e first time, how their ex-convict presi- dent had won their confidence to the extent of staying of an inveSti- gation from the time the firm was incorporated in 1928, and how he had duped the Smartest Wall street financiers who backed him with loans of $2O,000, 900 and floated $16,- 100000 worth of his securities.
 Master Mind Defended
 Samuel Reich, ster-Musica's counsel, said yesterday that the master mind" had done nothing worse than write up the assets Of the corporation $18,000,000 and that the rest of the operations were in- tended only to cover this imitation.
 The crude drugs department was credited with about one-eighth of the company's $86, ,500,000 assets. The fact that it had no assets was con- cealed year after year by recording it on the books as having showed a profit, which was always left within the department. The money sup posedly was going into accumulat- ing supplies.
 The company was placed today in charge of Charles F. Michaels, exec uative vice president. He was one of two trustees appointed by federal court in receivership proceedings, but resigned because of a possible conflict of interests. The other trus- tee, William J. Wardell, arranged with the court last night to make Michaels chief executive assistant in charge of operations, with Wardell remaining as the lone trustee.
 Insight of Structure
 In an attendant statement Mi chaels traced the history of his as- scciations with the company, and gave a brief insight of its corporate structure. He also disclosed that he was one of the heaviest paper losers in the $35, ,000,00 decline in McKes- son and Robbins securities since the New York Exchange suspended trading in them. He and his family hold 34,000 shares of preferred stock, which was quoted at $46 share be- fore the suspension, and has now declined to $750 share in over- the-counter trading. On that basis, Michaels' holdings declined from $1,564,000 to $255,0
 Michaels said he had been in the wholesale drugs business since 1886. He inherited Langley and Michaels, founded by his father, resident of San Francisco, in 1850.
 Becomes Subsidiary
 In 1928, he said, he became sub- Sidiary of McKesson and Robbins, exchanging stock in his own com pany for that of the new firm. Many other wholesalers throughout the country did the same thing, he said. Coster- -Musica had bought McKesson and Robbins in 1926, with $1, 100000 that he had borrowed from two Connecticut banks, and he had organized the nation wide chain of wholesale firms two years later on an additional $20,0O0,000 borrowed in Wall street.
 It was not until 1884 that the were incorporated into the main company, during recapi- talization, with Wall street floating more securities.
 The other brothers involved, be- sides Vernard-Musica, were George Musica, alias George s. Dietrich, who was in charge of details of the crude drugs department, and Rob-