such loss having been sustained becoming apparent to any stockholder reading the report; is not that so?

Mr. BODMAN. I really ought not to testify on this subject without knowing more than I do about those reports, but I would think not. I think this, that the aggregate gross and net earnings of all the units of the group, before reserves for contingencies and afterwards, and also dividends paid, were shown in the report.

Mr. PECORA. Could anyone tell by reading the statement whether or not any nonbanking unit had operated at a loss?

Mr. BODMAN. Any of the statements?

Mr. PECORA. Yes.

you please?

Mr. BODMAN. Oh, I would think so. Mr. PECORA. Point it out to me, will Mr. BODMAN. I think there is one report that I know was called to your attention—at least, I think it was, before Mr. Lord was on the stand, where the operating loss of the investment companies was stated; or, I will say, the operating losses of the nonbanking units were stated.

Mr. PECORA. I do not recall that, Mr. Bodman.

Mr. BODMAN. Don't you? Well, maybe I am wrong on that.

Mr. PECORA. Were you a member of the executive committee of the board of directors of the group from the inception of the group, or only for the first 2 years!

Mr. BODMAN. The first 2 years; and while I am on that subject, may I read from a bylaw defining the duties of the chairman and executive committee?

Mr. PECORA. Surely.

Mr. BODMAN. I do not want you to get the idea that I was an operating officer in any of these companies. The duties of the chairman of the executive committee are defined as follows:

The directors shall elect a chairman of said committee

This is under the heading of executive committee

whose duty it shall be to preside at meetings thereof.

Mr. PECORA. What are the duties of the executive committee as defined by the bylaws?

Mr. BODMAN. They are to function in the interim between the meetings of the directors, with the full power of the directors. Mr. PECORA. And you as chairman

Mr. BODMAN. What I meant was that as chairman I had no operative function; I had no salary and had nothing to do with the operation of the company except to act as a director and to pass on legal questions as they were presented to me.

Mr. PECORA. Would you say that you regarded your chairmanship of the executive committee as imposing upon you merely nominal duties?

Mr. BODMAN. I would say that my duties were exactly as defined in that bylaw.

Mr. PECORA. Would you characterize them as nominal duties?

Mr. BODMAN. No; I would not say they were nominal duties. I do not think the duties of any director are nominal. I do not think they are any greater than any other director's.

Mr. PECORA. You were under annual retainer to the group to render it legal advice?

Mr. BODMAN. No; I was not.

Mr. PECORA. But you were its legal officer?

Mr. BODMAN. I was not the only one; but from time to time they would retain, and have retained, other counsel. I acted as their counsel, and I sent a bill in at the end of each year for what I felt would properly compensate me for my services.

Mr. PECORA. I notice in the annual report to the stockholders of the group

Senator COUZENS. For what year?

Mr. PECORA. 1931-that in the list of officers of the group your name is contained as counsel.

Mr. BODMAN. I have no doubt of it; but if you want to know the fact, I never was elected. No action was ever taken, so far as I can find out, to make me such. I did act as such. I have no doubt that my name appears.

Mr. PECORA. With your knowledge and consent?

Mr. BODMAN. Yes.

Mr. PECORA. And you were held out to the public as counsel for the company?

Mr. BODMAN. That is right.

Mr. PECORA. Mr. Bodman, did you know, prior to the institution of these hearings, or prior to the time when this group has a receiver appointed for it, that the group, at the end of the years 1930, 1931, and 1932, actually had a deficit?

Mr. BODMAN. After dividends?
Mr. PECORA. Yes.

Mr. BODMAN. I presume I did.

Mr. PECORA. Well, is it more than an assumption on your part? Mr. BODMAN. It is not a matter of definite recollection. The earnings of the different units were read from time to time at directors' meetings, and I have no doubt that after the payment of dividends an operating deficit was shown. I have no distinct recollection of it.

Mr. PECORA. Did you as a director approve of the declaration of dividends in amounts and at times when the result of such declaration and payment of dividends was a deficit?

Mr. BODMAN. I would not say that. I approved of all of the declarations of dividends at any meeting that I attended. I do not know whether there was a deficit or not, because the deficit was frequently not determined until the end of the year. However, that did not seem important to me, and would not today. The group was a holding company, and its investments were in these bank units and investment units, and they were the real earning power of that group.

Mr. PECORA. Did you help prepare or give any advice in connection with the preparation of the annual reports that were filed with the Michigan Securities Commission by the group?

Mr. BODMAN. I did not. I never saw them until they were presented at this hearing.

Mr. PECORA. You knew that the Michigan statute required the filing of such reports with the securities commission?

Mr. BODMAN. I did. I assumed they were sent in, if I thought about it; but I was not consulted, neither did I see them.

Mr. PECORA. You had nothing to do with the preparation of them?

Mr. BODMAN. No.

Mr. PECORA. And you did not know that such reports were filed, or the substance or contents of any such reports, until the evidence relating thereto was brought out before this committee?

Mr. BODMAN. If I thought about it at all I would have assumed they were filed; but the first time I ever saw them was when they were presented here.

Mr. PECORA. Was that the first time you learned anything about the substance of those reports?

Mr. BODMAN. What do you mean by the substance?

Mr. PECORA. The contents, the general showing indicated by the reports.

Mr. BODMAN. I would not say that. I think those reports were in accordance with facts, that after the end of the year the deficits shown in there after the payment of dividends had arisen.

Mr. PECORA. You have read the annual reports sent out by the group to its stockholders?

Mr. BODMAN. Yes.

Mr. PECORA. Would you say that one reading those annual reports would get a true picture, an accurate picture, of the financial condition of the group?

Mr. BODMAN. I think he would. I think he could very easily, because I think the essential facts are there.

Mr. PECORA. Was the essential fact that in each of the years 1930, 1931. and 1932 the group operated at a loss or deficit set forth in any way, shape, or form in any of the annual reports for those years?

Mr. BODMAN. You are talking about the group or the Group Co.? Mr. PECORA. The Group Co.

Mr. BODMAN. That makes quite a difference.

Mr. PECORA. Whenever I refer to the group I am referring to the Group Corporation, known as the "Guardian Detroit Union Group, Inc."

Mr. BODMAN. No; I do not remember that there was anything in any of those reports that specifically stated that.

it.

Mr. PECORA. Or that indicated that?

Mr. BODMAN. Yes; I think it might very reasonably have indicated

Mr. PECORA. Show me a single statement embodied in any annual report issued by the group from which the reader would learn or could learn that the group had operated at a deficit in that year.

Mr. BODMAN. Without further study of those reports I really could not answer that question.

Mr. PECORA. You say that during the past month you have had these annual reports scanned by somebody?

Mr. BODMAN. Yes. We have discussed them, Mr. Lord and I as indicated, but I think he could testify to it much better than I could.

Mr. PECORA. Mr. Bodman, did you ever have occasion to make any comments to Mr. Lord or any other executive officer or officers of the Group Co. with regard to the lack of information given out even

to the directors of the group at meetings of the board with respect to the financial condition of the Group Co.?

Mr. BODMAN. Unless you can refresh my recollection about it I could not answer that.

Mr. PECORA. Let me see if this serves to refresh your recollection. I show you what purports to be a photostatic reproduction of a socalled Intra-Group Memorandum" dated August 27, 1931, addressed by you to Mr. Robert O. Lord on the subject of executive committee meeeting. Will you look at it and tell me if you recognize it to be a true and correct copy of such a memorandum sent by you to Mr. Lord on or about the date which it bears?

Mr. BODMAN. Yes; this is my signature, and I have no doubt of it. I had entirely forgotten it, but I have no doubt that I wrote it. Mr. PECORA. I offer it in evidence.

The CHAIRMAN. Let it be admitted.

(Photostatic copy of Intra-Group Memorandum dated August 27, 1931, to Mr. Robert O. Lord and signed by Mr. Henry E. Bodman, was received in evidence, marked "Committee Exhibit No. 97, Jan. 19, 1934.")

Mr. PECORA. The document which has been received in evidence as committee's exhibit no. 97 of this date, reads as follows. It is on the letterhead of the Guardian Detroit Union Group, Inc., and is entitled "Intra-Group Memorandum," addressed to Mr. Robert O. Lord, from Mr. Henry E. Bodman; subject, "Executive Committee Meeting", dated August 27, 1931 [reading]:

I think an improvement can be made in the manner of submitting information as to earnings and condition of the companies in the group. At the last meeting Mr. Patterson read a long list of figures which are difficult to retain and which leave a very indefinite picture of what they represent. After these figures are read there is lacking a general summarizing comment upon the condition of the companies in the group. I would suggest, therefore, that such statements as are to be presented be typewritten and that each attending member have a copy (which he will surrender before leaving the meeting and the premises) and that after an opportunity has been presented to examine these figures you should comment upon the figures and upon the condition of the group as a whole, with special emphasis upon such units as need special comment, and that you would submit any suggestions which occur to you as to the condition and earnings of the various companies, and lay before the meeting any suggestions that you think might be profitable to discuss.

I do not mean this as a criticism, but I have a feeling that the meetings are rather pointless, because the matters are thrown on the table in haphazard fashion and no formal report is made by any of the group officers. I am not sure in just how much detail these reports should be made, but I am certain there should be some such report. After the last meeting two of the members of the committee called my attention to the fact that there never had been submitted, either to the board of directors or to the executive commitee, a satement of the Group Co. showing its income and expenses or how its funds were invested. I think this is very unfortunate, and I wish at the next meeting such a statement would be submitted in writing. This report, I think, should be in the form of a balance sheet and an income and expense account for, say, the first 6 months of 1931, and a statement made as to how the earnings are invested. We should, I think, bear in mind that there are members of the group who are not in touch with the situation in Detroit and who should go away from these meetings feeling that they have had a picture presented to them in such a way that they can go back to their associates feeling that they are informed. I think that a statement of the affairs of Keane, Higbie & Co. and the Guardian Detroit Co. should also be reported on regularly. These are matters concerning everybody in the group. It is unfortunate to have our associates learn of important situations indirectly, They are entitled to have these matters brought to their attention by the officers direct.

I would be glad at your convenience to sit down and discuss with you and Mr. Patterson the form in which this information should be submitted. I am certain we can improve the impression which these meetings create in the minds of those who attend. I do not think it is sufficient to advise the attending members that all of the information on any subject is available and open to inspection. Fundamental and important things should be prepared in advance and presented, and the members should not be expected to dig things out for themselves. I have reference in this connection particularly to the inquiry Mr. Morley made in reference to the Group Co. After the meeting he stated that he would dislike very much to be put on the stand and to be made to admit that he never had seen a statement of the Group Co.'s income and operating expenses. You will recall he asked for this information, and the reply was that all of the figures were available to anyone who was interested. As above stated, I do not think that is sufficient.

Please regard the foregoing as a suggestion intended to be constructive and not critical.

Mr. BODMAN. That is correct.

HENRY E. BODMAN.

Mr. PECORA. You felt that there was enough justification in the facts to warrant the criticism or suggestion that you embodied in this memorandum that you addressed to Mr. Lord?

Mr. BODMAN. I felt exactly as I expressed myself in that letter. Mr. PECORA. Had that been a growing feeling or impression on your part that had accumulated over a period of time?

Mr. BODMAN. I cannot say that it had been a growing feeling. Mr. Patterson read a great many figures and they were difficult to retain.

Mr. PECORA. Had the practice followed by the officers in giving reports and information to members of the board of directors and members of the executive committee of the board of directors at the meetings of those boards, respectively, which you complained of in this memorandum, been the practice that had been followed and observed from the inception up to the time you wrote this memorandum in August 1931?

Mr. BODMAN. I would say so.

Mr. PECORA. If that is the case, do you recall ever having called the attention of Mr. Lord to the unwisdom of this practice prior to the date of this memorandum, exhibit no. 97?

Mr. BODMAN. No; I do not recall having called his attention to it, nor anybody else, prior to that date.

Mr. PECORA. Do you know what was done, if anything, to correct the things that you complained of or criticized in this memorandum? Mr. BODMAN. What is the date of that?

Mr. PECORA. August 27, 1931.

Mr. BODMAN. I think, beginning in 1932-my recollection may be a little hazy about this, but my recollection is that beginning in 1932, and possibly prior thereto, there were printed or written figures. Instead of having them read, they were prepared.

Senator ADAMS. Mr. Chairman, I do not believe the general counsel needs coaching on the witness stand as to what was done.

Mr. BODMAN. No, sir.

Mr. HENRY E. BODMAN, Jr. I have some facts that I was going to tell him.

Senator ADAMS. You are not on the stand, sir.

Mr. HENRY E. BODMAN, Jr. I beg your pardon.