Evening star., 1941-04-13
Receivership Suit
Against Loan Firm
Charges Big Loss
Munipulutions Charged
In Action Naming Is
Companies, J Persons

SOmPonleS, TeISOhS
Financial operations of the South
eastern Industrial Bankers, Inc,
parent company of IA loan firms
operating in Washington, Virginia,
Maryland and West Virginia. may
cost the group about half a million
dollars, District Court was told
yesterday by group of stockhold-
ers who filed suit asking that the
corporation and nine afflliates be
placed in receivership.
The suit, asserting that the al
legged manipulations have held the
attention of the Securities g. Ex-
change Commission for some time,
charges Southeastern Industrial
Bankers. Inc, 1407 K street NV,
with fraud. mismanagement and
misapplication of funds. In addi-
ton to naming 25 corporations as
defendants, the action also cites
seven individuals.
Receivers were asked for South
eastern Industrial Bankers, Inc;
Southeastern Industrial Investment
Co., Washington Industrial Loan
Co, Southeastern Discount Corp,
Radio Cab, Inc; Mckee Auto Serv-
ice, Inc; City Motors. Inc; Rown
Gaines Outdoor Advertising Co.,
Capital Management Corp. and
Household Furniture Co.
AccOuntings Asked.
An accounting also is asked in the
affairs of the ANNAPOLIS Industrial
Loan Co., Frederick Industrial Loan
Co., City Industrial Savings & Loan
Co, Bethesda Industrial Savings g.
Loan Co., Silver Spring Industrial
Savings & Loan Co., Hagerstown In
dustrial Savings e. Loan Corp,
Southeastern Industrial Loan Corp,
Southeastern Loan Cos, Waynes-
boro and Covington, Va: South
eastern Small Loan Co., Clarksburg
Loan Co, Southeastern Finance
Corp, Southeastern Savings & Loan
Co, Vinton Construction Co., and
Capital Casualty Co.
Individual defendants are Clifton
M. and Lewis Eisele, brothers, presi-
dent and treasurer, respectively, of
the Southeastern Industrial Bank
erS, and five associates. Arthur
Eisele, son of Lewis Eisele; Charles r.
Wilson, Harry J. Donoghue, Ernest
A. Hough and Arnold B. Mckee.
Filed by Edmund D. Campbell, for
the firm of Douglas, Obear & Camp
bell, the suit lists as plaintiffs T.
Watkins Fugate. G. w. Mohler,
George Moses, Thomas T. Farriss
and J. Ashby Armistead, all stock
holders, of Roanoke, Va, or that
vicinity.
Loans Cited in Action.
Officers of Southeastern Industrial
Bankers are accused of having used
10 per cent of the assets of the loan
companies for business" loans to
other companies in which they had
a personal interest. Many of the
loans, the court was informed, were
unsecured and will result in "irre-
parable" losses.
The action stated that from evil
dence submitted to the S. E. c.,
"the system as whole will sustain
loss in the ultimate collection of
the aforesaid loans in excess of
S500,000." 1t is averred that many
loans that have been made to affili-
ated concerns are long past due
and no real effort is being made to
collect"
1t is further charged that some
Of the companies involved are in
solvent, but that officers of the
parent organization and their as
sociates have been drawing annual
salaries aggregating approximately
100000.
Stock Sales Charged.
Officers of the Southeastern In
dustrial Bankers are accused of SELL
ing the public stock in the subsi-
diaries for a commission of more
than 100000, payable to the South
eastern Investment Co., in which
the officers allegedly owned all the
stock.
The suit alleges that Clifton and
Lewis Eisele "are now actually en-
gagged in an attempt to effect a
so-called refinancing of said obli-
cation by having the debtor cor
porations and their affiliates issue
income bonds for substantial part
of their Indebtedness, which obliga-
tions are to be payable only from
a sinking fund created from their
respective earnings, if any"
The court was told that the
plaintiffs "are advised that these
so-called income bonds are merely
a device by which the Eiseles and
their associates have attempted to
defer substantial portions of the in
debtedness of the Eisele-owned or
controlled corporations to the
Southeastern system, so that the
respective amounts of such in
debtedness will be payable only from
the respective earnings of the debtor
companies"
Exhibits Submitted.
The stockholders said they were
submitting exhibits tending to show
that the Southeastern Industrial
Bankers and its affiliated loan COM
panies 'have made loans to Radio
Cab, Inc, and other affiliated con-