Mr. Sanger, Mr. Covington, and I returned to Detroit and discussed the Goldman, Sachs offer with several associates and then submitted it to the board of directors of the Union Commerce Corporation, by whom it was approved, subject, of course, to stockholders waiving their rights to subscribe to the increased capital which would have to be provided for. Following this, the market for Union Commerce stock, which had been rather dormant, became quite active and the stock was bid up to something more than $120 per share. Meantime, Mr. Higbie returned to Detroit and came to see me. After some verbal sparring he came out with the suggestion that Keane, Higbie & Co. might be a valuable addition to the Union Commerce Corporation as an affiliate which would be able to contribute trusteeships from the companies they financed, bank accounts from industries with which they were in close relationship, and lastly as one which would contribute very substantial earning power under conditions as they then prevailed. As I remember, we had two interviews before I told Mr. Higbie that if he wished to submit a proposal I would take it up with our people and that I was sure it would be considered on its merits.

We then went into the matter of book values and earnings. As I remember, the book value of Union Commercial stock was about $52 and that of Keane, Higbie & Co. about $64 or $65 per share. During the first 6 months of the year 1929 the Union Commerce Corporation had earned about $2.50 and Keane, Higbie & Co. about $17 per share. There was a good deal of discussion, and finally Mr. Higbie proposed a trade on the basis of share for share, i.e., 100,000 shares of Union Commerce stock to be given to the shareholders of Keane, Higbie & Co. for all of the stock of that company, no cash to be involved in the transaction.

I told Mr. Higbie I would recommend the deal if the stockholders of Keane, Higbie & Co. would sell, out of the Union Commerce Corporation stock going to them, 30,000 shares to the Goldman, Sachs Trading Corporation to fulfill the terms of our tentative contract. He agreed to this and subsequently, after interviewing many of the members individually and getting universally favorable reactions, I submitted the matter to the board of directors of the Union Commerce Corporation, which in turn submitted it to the stockholders. The latter approved the transaction by waiving their rights to subscribe to the increase of capital necessary to put it through.

During the time which elapsed between the origination of negotiations and the public announcement of their completion, the news leaked out and the public's reception of it was indicated by the avidity with which it pushed the market price of Union Commerce Corporation stock up day after day until at the time the transaction was completed, the bid price of stock was $240 or $250 a share.

During the conversations which were had prior to the arrangement whereby the Union Commerce Corporation and the Guardian Group were consolidated it developed that inasmuch as the Guardian Detroit Co. had a large investment banking business which extended throughout the United States and had developed certain affiliations with a number of strong New York investment banking houses, its officers felt that a definite affiliation with a single New York house, Goldman, Sachs Co. would be distinctly disadvantageous to the Guardian Detroit Co. They felt that the ownership of such a large block of stock by Goldman, Sachs would be looked upon as giving the latter a preferred position as against other New York houses even though it did not in fact do so.

In the merger, therefore, it was made a condition that the effort should be made to reacquire the stock owned by the Goldman, Sachs Trading Corporation for distribution to Detroit and Michigan people.

Mr. Higbie consented to negotiate with the Goldman, Sachs people, and I believe made a trip to New York for that purpose. What took place at the interview I do not know except as reported by Mr. Higbie.

Inasmuch as he is to give testimony at this hearing, I would rather he would speak for himself.

Some days after Mr. Higbie told me of his trip to New York I was called on the long-distance phone from New York by Mr. Covington, who said he had had an interview with Mr. Wineberg. I told Covington I would rather he should talk with Mr. Higbie and called the latter to my office. We then called Covington, who told us he had induced Wineberg to agree to sell

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25,000 shares of the stock at $184 per share but that Wineberg wanted to keep the other 5,000 for investment.

I have no accurate remembrance of the manner in which the repurchase was accomplished but I am sure the records of Keane, Higbie & Co. and for the Guardian Detroit Co. will show.

That is the end of the statement; and I will offer it in evidence. The CHAIRMAN. Let it be admitted.

(The statement referred to, prepared by the witness, and read into the record by Mr. Pecora as appears above, was received in evidence as "Committee Exhibit No. 80, January 16, 1934.")

Mr. PECORA. When did the acquisition of Keane, Higbie & Co. by the Union Commerce Corporation take place?

Mr. BLAIR. I have sort of a rough memorandum here which indicates that it was put up to the board of directors of the Union Commerce Corporation on the 3d of September; I am not sure. Mr. PECORA. Of 1929?

Mr. BLAIR. Yes.

Mr. PECORA. And it was approved by the board?

Mr. BLAIR. Yes.

Mr. PECORA. And the acquisition took place later that month, or some time later?

Mr. BLAIR. Some time later.

Mr. PECORA. In order to effect that acquisition it was found necessary to increase the outstanding capital stock of the Union Commerce Corporation, was it not?

Mr. BLAIR. Yes, sir.

Mr. PECORA. And such an increase was effected to the extent of and by the issuance of 121,500 new shares?

Mr. BLAIR. I do not remember the amount. One hundred thousand, of course, was the amount which was received by Keane, Higbie & Co.

Mr. PECORA. One hundred thousand of those new shares were issued to the stockholders of Keane, Higbie & Co. for all of the capital stock of Keane, Higbie & Co., which also amounted to 100,000 shares?

Mr. BLAIR. Yes.

Mr. PECORA. The par value of the Union Commerce Corporation stock was

Mr. BLAIR. At that time it was $20; and Keane & Higbie was $10. Mr. PECORA. And the par value of the Keane, Higbie & Co. stock was $10?

Mr. BLAIR. Yes, sir.

Mr. PECORA. Can you recall any other facts or circumstances involving the acquisition of Keane, Higbie & Co. by Union Commerce Corporation than those set forth in your prepared statement which has been received in evidence as " Committee's Exhibit No. 80"?

Mr. BLAIR. I cannot, except that I have here, as I said, a rough memorandum, which apparently was made at the time, of the profits of Keane, Higbie & Co. for the first 6 months of 1929.

Mr. PECORA. I show you what purports to be a photostatic copy of a letter bearing your signature as president of the Union Commerce Corporation, addressed to the stockholders of the Union Commerce Corporation, dated Detroit, Mich., August 21, 1929. Will you look at it and tell me if you recognize it to be a true and correct copy

of such a letter which you as president of the Union Commerce Corporation at that time caused to be addressed to the stockholders of that corporation?

Mr. BLAIR. I do not remember it, but I have no doubt of it. Mr. PECORA. You recognize the signature of Frank W. Blair as being your signature?

Mr. BLAIR. Yes.

Mr. PECORA. I offer it in evidence.

The CHAIRMAN. Let it be admitted and entered on the record.

(Photostatic copy of letter dated Aug. 21, 1929, from Frank W. Blair to the stockholders of the Union Commerce Corporation was received in evidence, marked "Committee's Exhibit No. 81, January 16, 1934.")

Mr. PECORA. The letter written on the letterhead of the Union Commerce Corporation, received in evidence as "Committee's Exhibit No. 81", reads as follows [reading]:

To accomplish the above and also to make provision for taking over other institutions from time to time, if such course may seem desirable, the authorized capital stock of the company should be substantially increased.

Your company has also made tentative arrangements to take over the following banks on bases of exchange which are believed to be advantageous for us in each case, namely, the Union Joint Stock Land Bank of Detroit, Union State Bank of Dearborn, Bank of Commerce of Dearborn, Trenton State Bank of Trenton and Jefferson Savings Bank of Grosse Pointe Park. To make these transactions possible and others of a similar character, it is necessary that your Board of Directors should have authority to make exchanges from our unissued capital for the stock of the institution to be acquired without first securing waivers from our stockholders. We are accordingly asking the stockholders to confer upon the Board of Directors authority for so issuing stock in the case of the acquisition of banks and trust companies, but in the case of other corporations only with the approval of a majority of the stockholders.

A notice of the special meeting of the stockholders to be held September 10th for the purpose of taking the necessary corporate action is herewith enclosed in proper legal form. We also enclose a form of proxy and waiver, which latter, it it meets with your approval, should be promptly executed and returned in the enclosed stamped envelope. Your prompt attention will be personally appreciated by the undersigned.

FRANK W. BLAIR, President.

COMMITTEE EXHIBIT No. 81

UNION COMMERCE CORPORATION,
Detroit, Mich., August 21, 1929.

To the Stockholders of the Union Commerce Corporation: With no small pleasure and gratification, we beg to lay before you certain plans, which we believe will add greatly to the growth and prosperity of your company.

A financial group such as ours to be thoroughly rounded out must be equipped to handle stock issues and underwritings. To this end we have made arrangements for the affiliation with our company of Keane, Higbee & Company, one of the foremost financial houses in this section of the country, by the exchange of stock of that company for stock of the Union Commerce Corporation on a share for share basis. Both from the standpoint of book value and earning power, this exchange is presently advantageous to the Union Commerce Corporation and its potential advantages for the future are very apparent. The immediate response of our stock in the market to the rumors and final announcement of this prospective affiliation are sufficient indication as to how it is regarded in financial circles.

In order to have stock available to make this exchange, it is desired that the stockholders of the Union Commerce Corporation waive their subscription rights thereto. The officers of the constituent companies have agreed to do so as have also the directors insofar as the latter have been seen. There is no doubt in my mind that they will all waive.

Mr. PECORA. I show you what purports to be a photostatic copy of a letter referred to in committee's Exhibit No. 81 as the accompanying or enclosed letter. Will you look at it and tell me if you recognize it to be a true and correct copy of such an enclosure which accompanied the letter marked in evidence as "Committee's Exhibit No. 81?"

Mr. BLAIR. I do not remember it, but I think it is correct; I have no doubt about it whatever.

Mr. PECORA. I offer it in evidence.

The CHAIRMAN. Let it be admitted and entered in the record. (Photostatic copy of letter dated August 21, 1929, on letterhead of Union Commerce Corporation, signed by John N. Stalker, Secretary, and addressed to the stockholders of the Union Commerce Corporation, was received in evidence, marked "Committee Exhibit No. 82, January 16, 1934.")

Mr. PECORA. The letter received in evidence as "Committee's Exhibit No. 82" is written on the letterhead of the Union Commerce Corporation, and reads as follows-it seems to be a printed copy [reading]:

COMMITTEE EXHIBIT No. 82

UNION COMMERCE CORPORATION

DETROIT, MICH., August 21, 1929.

To the stockholders of the Union Commerce Corporation:

By order of the Board of Directors of this corporation, a special meeting of the stockholders of the Union Commerce Corporation will be held in the Directors' Room of the Union Trust Company, on the Sixth Floor of the Union Trust Building, Detroit, Michigan, on the 10th day of September, 1929, at oneo'clock p.m., Eastern Standard Time, on said day.

This meeting is called for the following purposes:

(1) To consider and act upon recommendation of the Board of Directors of this corporation to amend the corporation's Certificate of Incorporation by striking out all of Article Fourth thereof and inserting in lieu thereof a new Article Fourth to be and to read as follows:

"Fourth: The amount of the total authorized Capital Stock of this corporation is Twenty-Five Million Dollars ($25,000,000.00), divided into One Million Two Hundred Fifty Thousand (1,250,000) shares of the par value of Twenty Dollars ($20.00) each.

"No stockholder of this corporation shall have any preemptive or preferential right of subscription to any share of any stock of this corporation or to any obligations convertible into stock of this corporation, except as herein provided, and this corporation reserves, and shall have the right from time to time, upon the affirmative vote of a majority of all of its directors, to issue and dispose of all or any of its unissued or increased stock for the purpose of acquiring stock of banks or trust companies without offering to the stockholders of this corporation for subscription any stock so to be issued and disposed of. This corporation further reserves and shall have the right, from time to time, if recommended by the affirmative vote of a majority of all of its Directors, upon the affirmative vote of a majority in amount of its stockholders, to issue and dispose of all or any part of its unissued or increased stock for the purpose of acquiring the capital stock of corporations other than banks or trust companies without offering to the stockholders of this corporation for subscription any of the stock so to be issued and disposed of." and to call in all outstanding certificates of stock for cancellation and to issue and deliver to the holders thereof new certificates of stock containing statement of the revised capitalization of the corporation and other endorsements defining the stockholders' rights.

(2) To present to the stockholders of this corporation for ratification and approval, the matter of the acquisition, by this corporation, of the capital stock of Keane, Higbie & Company of Detroit, Michigan, from its stockholders,

or at least seventy-five percent (75%) of said capital stock, by the exchange of one share of the capital stock of this corporation, having a par value of Twenty Dollars ($20.00) for one share of the capital stock of Keane, Higbie & Company, having a par value of Ten Dollars ($10.00) and to secure the waiver by the stockholders of this corporation of the special right to subscribe for the stock of this corporation required in effecting such exchange.

If you are unable to be present in person, will you please promptly sign and return the enclosed proxy and waiver.

Yours respectfully,

JOHN N. STALKER, Secretary.

Now, on September 10, 1929, the stockholders, at the meeting called for and referred to in this letter, approved the acquisition of the Keane, Higbie & Co. stock on a share-for-share exchange basis? Mr. BLAIR. I believe they did.

Mr. PECORA. And that exchange was thereupon effected?

Mr. BLAIR. Yes.

Mr. PECORA. Who were the stockholders of Keane, Higbie & Co. at that time?

Mr. BLAIR. I do not think I can say.

Mr. PECORA. Do you recall the names of any of the largest in dividual stockholders of Keane, Higbie & Co. at that time?

Mr. BLAIR. Mr. Higbie was by far the largest stockholder; I am sure of that.

Mr. PECORA. Do you recall the extent of his holdings of Keane, Higbie & Co. stock at that time?

Mr. BLAIR. No, but I am quite sure it was much more than half. Mr. PECORA. He was a large majority stockholder?

Mr. BLAIR. Yes, sir.

Mr. PECORA. Mr. Higbie was also one of the officers of Keane, Higbie & Co at that time, was he not, or a director?

Mr. BLAIR. He was either president or chairman; I have forgotten which.

Mr. PECORA. The first time it was proposed to you as the executive head of the Union Commerce Corporation that that corporation acquire Keane, Higbie & Co. was when you were having breakfast at the Hotel Biltmore in New York City, some time in the summer of 1929?

Mr. BLAIR. Yes.

Mr. PECORA. You had gone to New York on that occasion to confer with representatives of Goldman-Sachs & Co.?

Mr. BLAIR. Yes.

Mr. PECORA. Goldman-Sachs & Co. had indicated to you previously its desire to acquire something like 30,000 shares of the capital stock of the Union Commerce Corporation?

Mr. BLAIR. Yes.

Mr. PECORA. Did the Union Commerce Corporation at that time have authority to issue those 30,000 shares?

Mr. BLAIR. It did not.

Mr. PECORA. Did you tell that to the representatives of GoldmanSachs & Co. ?

Mr. BLAIR. Certainly.

Mr. PECORA. What specific offer did Goldman-Sachs & Co. make to you for those 30,000 shares?

Mr. BLAIR. $120 a share.