Evening star., 1939-01-27
Fidelity Is Solvent,
Special Master
Tells Court
Judge Urged to Dismiss
Reeeivership Petition
Filed by Nine
By the Associated Press.

By the Associated Press.
WHEELING, w. Va, Jan. PA
special master told Federal Judge
William E. Baker yesterday the
Fidelity Investment Association, in
vestment loan firm with offices in So
cities, was solvent and urged him to
dismiss a receivership petition filed
by nine investment contract pur-
chasers.
Judge Baker, who had requested
the report to determine further
action on the petition, indicated he
probably would give his decision
within a week.
The special master, Charles P.
Mead of Wheeling, who was named
by the court as an impartial arbi-
ter" said Today investigation by
auditors and opposing counsel
showed the firms finances were
sound.
Petitioner Joins Plea.
Sidney M. Heilbron, counsel for
the receivership petitioners, asserted
the report also showed the associa-
ton was well managed" He
pointed out that he, as member of
the Auditing Committee, joined in
the recommendation for dismissal
of the petition
Edward Lamb of Toledo, Ohio,
counsel for an intervenor, later filed
an exception to the report. because
the "sound-value theory" rather
than the market or actual value
of underlying securities" had been
used in determining the associa-
tion's standing.
The report said that checks were
being prepared for contract holders
who requested the CASH surrender
value of their contracts or loans.
The petition was filed by Pennsyl-
vania purchasers of the association S
contracts last December 10, after
the Federal Securities Commission
cited the 28-year-old firm for fraud
ulent practices. The association de-
MED the S. E. G. charges, but agreed
to an injunction in a Michigan
District Court to prohibit the prac-
tices.
General Fund Is 'TLifeblood."
The 56-page report by the Audit
ing Committee said that in the as
sociation's general fund, termed the
"lifeblood" OF the organization, as
sets exceeded liabilities. exclusive of
capital stock, by s1,313,38611.
The general fund, the report
added, "is fund upon which the
soundness and solvency of which
depends the ability of the associa-
ton to make good, when necessary,
such deficits as and when they may
arise in the respective contract
funds"
The securities In the general fund,
the report said. were bonds and COM
mon stocks of municipalities. rail-
roads, public utilities, industrials and
other corporations and preferred
stocks in public utilities and in
dustrials.
Three Subsidiaries.
The report disclosed that Fidelity
had three wholly owned subsid-
iaries, Fidel Association Of New
York, Inc, whose operations are
61AllA4dA W UAAC pal Civ VI
except that it issues investment
bonds instead of investment con-
tracts, and the PAUL. Co. and Mars
ton Corp, which hold and operate
real estate and securities. The Mar
tetta Co. is subsidiary of the PAUL
and Marston organizations and was
formed to hold certain real estate.
The report said the net operating
profit for 1888 was s89,86810, and
after deductions for life insurance
premiums, contributions to contract
funds and other expenses there re-
mained net profit of $3,49897.
1t showed the association controls
assets of s38, 1873 1927 SO in all funds
and all subsidiaries except Fidel As
sociation. Fidel controls assets of
$2,720,764.55.
The report said the practice of
withdrawal of cash belonging to
one fund for the use and benefit of
another fund was discontinued dur
ing the month of December, 1885,"
and that separate bank accounts
have been and are now being kept
for each individual fund"