Evening star. [volume] (Washington, D.C.) 1854-1972, 1956-10-12
Cites FuIse Dutu
On Stock Sale of
Coastal Finance
BY FRANCIS P. DOUGLAS

A Government hearing exam
liner ruled today that there were
grave irregularities and a willful
disregard of honesty in connec-
ton with the sale of 100000 in
stock of the Coastal Finance Co.
Hearing Examiner James G.
lEwell of the Securities and Ex-
change Commission rejected as
mot entitled to any weight" the
contention that Frank B. Bush
did not know of the irregulari-
ties and misleading statements
in the circular offering the
stock. Mr.. Bush was president
Iof Coastal.
The examiner recommended
that the company's exemption
from a full registration of the
stock under the SEC Act be
permanently suspended. The
stock was sold in August, 1855.
Bush "Stood to Profit"
The examiners ruling said
Mr.. Bush stood to profit from
the false information in the
stock circular.
I Mr.. Ewell said there was no
evidence at the hearing held by
him that any individuals except
Mr.. Bush who were involved
directly or indirectly in the ir-
Irregularities found, received any
benefit therefrom, other than
the hope of future reward at
the hands of Capitals manage
ment." He continued:
i Bush, though, because, of his
substantial stock ownership, po-
ISition of control and perquisites
of Office. stood to profit directly
from the company's expan-
sion which, of course, had
been promoted and facilitated by
the falsely optimistic financial
information contained in the of.
fering circular"
Trustees Run Business
The Coastal company operated
Ia dozen small loan Offices, some
of them in Silver Spring, Ia
koma Park, Arlington, Alexan-
dria and Baltimore. The BUSH
ness is now being conducted by
la trustee appointed by the
United States District Court at
Baltimore. The court has Or
dered reorganization plan to
be filed by october 20.
Mr.. Ewell's recommended de-
cision goes to the SEC. The
commissioners will make a final
determination.
i Mr.. Ewell said the record re-
veals "a sorry parade of human
frailty." He said the gravity and
willfullness of the circumstances
leave no alternative but to make
the recommendation he did.
FICTITIOUS Loans
Mr.. Ewell cited testimony that
fictitious loans were discovered
by accountants in the Arlington
office of the company August l6,
1855. There was also testimony,
the examiner said. that irregu-
Ilarities existed in IL of the IL
offices of the company.
Mr.. Ewell said the testimony
established that Mr.. Bush knew
.Iof the Irregularities at least two
weeks before the August 5 date
of the circular offering the stock.
Furthermore, the examiner said,
the evidence justifies the infer
ence that he had knowledge of
them almost from their incep-
ton in the fall of 1854.
/ Mr.. Bush is described as going
to extreme lengths to dress UP
the financial report Of the COM
lpany and boost the reported in
come"
In Business 80 Years
Mr.. Bush had been in the
small loan business for 80 years,
Mr.. Ewell said. Mr.. Bush's tes-
Itimony indicated complete famil-
iarity with all phases OF the
business. the examiner said. add
ing:
Thus his denial OF any
knowledge Of the Irregularities
that had taken place for more
than six months in his organiza-
ton is simply not believable."
Mr.. Bush was criticized also
for failing to disclose that he was
trustee for $4,000 in stock Of
the company owned by Mrs.
Virginia Dallam. Mrs. Dallam
lis the wife Of John w. Dallam,
then deputy administrator for
Small Loan Companies in Mary
land.
The company's firm OF ac-
countants also was criticized as
negligent in failing to make an
adequate examination Of the ac-
counts. It was also stated that
the accountants certificate 10
the company's financial state
IL a.