Mr. FORD. Guardian Detroit Union Group-well, this note may be a renewal, and this is dated in March of 1932. Mr. PECORA. It is March 9, 1932, isn't it? Mr. FORD. Yes. Mr. PECORA. Now, this first loan of yours of $1,000,000 was made. in December of 1930, and that was about a year after the Guardian Detroit Union Group, Inc., was formed, wasn't it? Mr. FORD. Yes, sir. Mr. PECORA. And the fact that it needed money at that time and should have to borrow from you in order to enable it to meet obligations it owed to interests outside the group, of which it was a unit, and that it has not been able to pay back that loan, would be some evidence, would it not, in your opinion of the unsoundness of the company? Mr. FORD. I wouldn't say so necessarily. It might. Mr. PECORA. What would it indicate? Mr. FORD. There were many other conditions at that time that were affecting the status of the company. Mr. PECORA. Well, did you press the note for payment? Mr. FORD. No, sir. Mr. PECORA. Were you asked to forbear? Mr. FORD. I do not recall. I do not think so. Mr. PECORA. Well, did you voluntarily let it drift along? Mr. FORD. Yes. Mr. PECORA. Was that because you did not want it repaid, or because you did not think it could pay it back? Mr. FORD. The reason for making that loan was to help the company, that particular company, and I did not press them to pay it back because I felt when they could pay it they would. Mr. PECORA. Well, the fact that they did not pay it back at any time would indicate that they could not pay it back, is that a fair assumption? Mr. FORD. Could not pay it back at that time it is true. Mr. PECORA. At the same time that you made to the Guardian Detroit Co. this loan of $1,000,000 in cash you also loaned them securities of a par value of $5,000,000, didn't you? Mr. FORD. Yes, sir. Mr. PECORA. And what was that done for? Mr. FORD. I understood, as I now recall, that it was for the same purpose. Mr. PECORA. Isn't it a fact that the Guardian Detroit Co. used that 5 million dollars face value of securities that you loaned to them as collateral against a loan of 41⁄2 million dollars that that bank negotiated or obtained from the Bankers Trust Co. of New York? Mr. FORD. I believe that is right. Mr. PECORA. Did you get those securities back? Mr. FORD. I beg your pardon? Mr. PECORA. I say, did you get those securites back? Mr. FORD. Well, actually I did get them back; yes. The Ford Motor Co. paid off that loan and the securities were returned, and then I satisfied the Ford Motor Co. later on, or, in other words, I repaid the Ford Motor Co. Mr. PECORA. You got them back through the medium of some one other than the borrower? Mr. FORD. Yes, sir. Mr. PECORA. That is, the Guardian Detroit Co. not paying the loan for which they put up that collateral as security with the Bankers Trust Co. of New York? Mr. FORD. Yes, sir. Mr. PECORA. Do you know the purpose for which the Guardian Detroit Co. required that loan of 41⁄2 million dollars in December of 1930? Mr. FORD. Well, I thought it was for the same purpose that they borrowed the 1 million dollars in cash. Mr. PECORA. Do you recall what the condition was of the Guardian Detroit Co. at that time? I am referring now to December of 1930. Mr. FORD. That was very shortly after the first market crash. Their portfolio consisted of securities that had depreciated very greatly and they had heavy borrowings. Mr. PECORA. Do you know Senator COUZENS (interposing). Mr. Pecora, before you go further into that let me ask Mr. Ford: You said they had heavy borrowings. What were those borrowings for? Mr. FORD. I suppose to buy securities. Senator COUZENS. That is, for the Guardian Detroit Co. to buy securities? Mr. FORD. That was a securities company, you know. Senator COUZENS. Well, you say they borrowed money from you in the first instance to buy securities? Mr. FORD. NO. They borrowed money from me to satisfy some loans outstanding and on which securities they owned had depreciated. Senator COUZENS. In other words, they borrowed in the first instance money with which to buy securities, which securities afterwards depreciated, is that it? Mr. FORD. They had loans. I do not know whether they altogether bought securities for which they borrowed money. I really could not say about that. Senator COUZENS. They would not have any other purpose for borrowing money, except to buy securities, would they? Mr. FORD. I could not say. I wouldn't think so. Mr. PECORA. Mr. Ford, have you the receipt given to you by the Guardian Detroit Co. for this $5,000,000 face value of bonds that you loaned to it in December of 1930? Mr. FORD. Yes, sir. Mr. PECORA. I show you what purports to be a photostatic reproduction of such receipt. Will you please look at it and tell me if you recognize it to be a true and correct copy thereof? It is the top document in that file of papers I am handing over to you. Mr. FORD (after having his attorney, Mr. Columbo, read the phostatic copy, while the witness held his own paper). That is correct. Mr. PECORA. I offer it in evidence, Mr. Chairman. Senator CouZENS. Let it be received. (A receipt dated Dec. 11, 1930, from the Guardian Detroit Co. for 5 million dollars of securities loaned by Mr. Ford, was marked "Committee Exhibit No. 69, Jan. 11, 1934", and will be found immediately following where read by Mr. Pecora.) Mr. PECORA. The document received as committee Exhibit No. 69 of this date, reads as follows: Guardian Detroit Company acknowledges receipt from Edsel B. Ford of municipal bonds of the par value of ($5,000,000) as listed and described in the attached photostatic copies of safe keeping receipts. These bonds have been loaned to the undersigned GUARDIAN DETROIT COMPANY in order that that company may use the same as collateral to secure loans made or which may be made by the GUARDIAN DETROIT COMPANY and/or KEANE, HIGBIE & COMPANY. All or any part of such bonds shall be returned by the undersigned GUARDIAN DETROIT COMPANY to EDSEL B. FORD upon demand. If any of these bonds are used to secure loans of either of these Companies at banks or trust companies not in the Guardian Group, the proceeds of such loans must be used to pay or reduce loans at Guardian banks or trust companies. It is expressly understood that all principal and interest collected on such bonds by said GUARDIAN DETROIT COMPANY shall be paid immediately upon receipt thereof, to the said EDSEL B. FORD. Dated December 11, 1930. GUARDIAN DETROIT COMPANY, Its Vice President. Now, Mr. Ford, do you know whether or not this loan of 41⁄2 million dollars that was procured by the Guardian Detroit Co. from the Bankers Trust Co. of New York was used by the Guardian Detroit Co. to pay or reduce loans it had in banks belonging to the group? Mr. FORD. No, sir; I do not know that. Mr. PECORA. Now, Mr. Ford, I show you what purports to be a photostatic reproduction of the note for 1 million dollars given to you under date of March 9, 1932, and which I understand was the final renewal note for the 1 million dollar loan that you made on December 11, 1930, to the Guardian Detroit Co. Will you look at it and tell me if you recognize it to be a true and correct copy of such note, together with the endorsements thereon? Mr. FORD (comparing photostat with his own paper by the aid of his attorney, Mr. Columbo). That is right. Mr. PECORA. I offer it in evidence. Senator COUZENS (presiding). Let it be received. (A note dated Mar. 9, 1932 for 1 million dollars at 6 months payable to the order of R. O. Lord, agent, by the Guardian Detroit Co. was marked "Committee Exhibit No. 70, Jan. 11, 1934", and will be found immediately following where read by Mr. Pecora.) Mr. PECORA. I will read the note, as follows: $1,000,000.00 DETROIT, MICHIGAN, March 9, 1932. Six months after date we promise to pay to R. O. Lord, agent, or order, one million dollars at GUARDIAN NATIONAL BANK OF COMMERCE. Value received with 5 percent interest per annum payable monthly. Countersigned by R. C. Huelsman. GUARDIAN DETROIT COMPANY By F. W. PRITCHARD Treasurer. And the endorsements thereon are as follows: GUARDIAN DETROIT UNION GROUP, INC. By C. H. HABERKORN, Secretary. R. O. LORD, Agent. Now, for whom was Mr. Lord acting as agent in this transaction? Mr. FORD (after talking with his counsel, Mr. Columbo). The Guardian Detroit Group Co. Mr. PECORA. Do you mean the Guardian Detroit Union Group, Inc.? Mr. FORD. I would think so. Mr. PECORA. Do you know what was done by the Guardian Detroit Co. with the loan of 4%1⁄2 million dollars that it obtained in December of 1930 from the Bankers Trust Co. of New York, what use was made of the proceeds of that loan? Mr. FORD. I do not recall. Mr. PECORA. What was that answer? Mr. FORD. I do not recall. Mr. PECORA. Well, do you know, or did you ever know? Mr. FORD. I may have known, but I don't now recall. That is the loan that was obtained from Mr. PECORA (interposing). That was a loan obtained on the collateral that you loaned to the Guardian Detroit Co. Mr. FORD. I am only assuming, or at least I thought they were used for satisfying loans made to the Guardian Detroit Co. by banks, on which the collateral had become reduced. Mr. PECORA. But you don't know what was actually done with the proceeds of the loan, do you? Mr. FORD. No; I do not. Mr. PECORA. Now, Mr. Ford, were there occasions when requests were made of the Ford Motor Co., or of you individually, to make special and temporary deposits in any one of the unit banks of the Group, in order to-well, to make a special or temporary deposit, first? Mr. FORD. There may have been. Mr. PECORA. In how many instances was that done? Mr. FORD. Oh, I have no idea. Mr. PECORA. In many instances? Mr. FORD. Those requests would undoubtedly go through Mr. Craig, who was assistant treasurer. I do not recall any request ever having been made directly to me, but there might have been. Mr. PECORA. Do you know the purpose for the making of those temporary deposits? Mr. FORD. I suppose to show increased deposits in their state ments. Mr. PECORA. That is, in the annual statements? Mr. FORD. I am not sure. Mr. PECORA. Do you know the largest individual special or temporary deposit of that kind made in any one of the unit banks by you or your company? Mr. FORD. The actual amount? Mr. PECORA. Yes. Mr. FORD. No, sir. Mr. PECORA. As a bank director-and you were a bank director, weren't you? Mr. FORD. Yes, sir. Mr. PECORA. In how many banks were you a director? Mr. FORD. When? Mr. PECORA. During the years 1930, 1931, and 1932. Mr. FORD. The National Bank of Commerce until it was consolidated afterwards with the Guardian National Bank of Commerce of Detroit. Mr. PECORA. Now, as a bank director, Mr. Ford, and as a business man, do you think it was an ethical method of enhancing the appearance, or improving the appearance of the bank's condition by making a temporary deposit and withdrawing it shortly after the first of the year? Mr. FORD. Well Mr. COLUMBO. You don't know that it was done. Mr. PECORA. Mr. Columbo, won't you let me get Mr. Ford's opinions? Mr. COLUMBO. Well, I was trying to refresh his recollection. Mr. PECORA. You cannot refresh the witness' recollection concerning an opinion, which was what I was calling for at the moment, can you? Mr. COLUMBO. Yes. Mr. PECORA. You say you can? Mr. COLUMBO. Well, I cannot if you object to it. Mr. PECORA. What was that? Mr. COLUMBO. I say I won't if you don't want me to do it. Mr. PECORA. I have no objection to your aiding the witness with any facts. But when I call for his opinions I want the witness to give me his opinions. Mr. COLUMBо. Well, I want him given the facts on which he may base an opinion. Mr. PECORA. The facts are already admitted, namely, that temporary deposits were made over the end of the year in order to enable unit banks to show an increase of deposits. I am asking Mr. Ford for his opinion as to whether or not, as a bank director and as a business man, he thinks that is a fair and ethical method. Mr. FORD. Perhaps not. I do not remember the circumstances under which the requests were made. Mr. PECORA. Haven't you already indicated that you knew what the circumstances were, namely, to enable the bank to show an increased amount of deposits at the end of the year? Mr. FORD. That is quite possible, yes. Mr. PECORA. And do you consider that an ethical and fair practice? Mr. FORD. No; I don't suppose it is. I don't really know about that. Mr. PECORA. Do you know why you did it? Mr. FORD. No, sir. Mr. PECORA. While I am on this subject I will depart for a moment or two from loans that you made to the group or any of the units of the group and ask you this question: Do you recall a transaction had in December of 1932 in which the Ford Motor Co. purchased from the Guaranty Trust Co. of New York, United States Treasury 1-year notes of the face amount of $7,500,000? Mr. FORD. The Ford Motor Co. purchased them, do you mean? Mr. PECORA. Yes. Mr. FORD. No, sir; I do not recall it. It is quite possible that we did, though. Mr. PECORA. Purchased them as of December 31, 1932, and sold them on January 3, 1933. Mr. FORD. It is quite possible, but I don't know. Mr. PECORA. What was the reason for that transaction? |