Mr. PECORA. For instance, you mentioned Mr. Elisha Walker, of Kuhn, Loeb & Co.

Mr. DAY. Yes, sir.

Mr. PECORA. And you mentioned one of the partners of Lehman Bros.

Mr. DAY. Yes, sir.

Mr. PECORA. And yourself.

Mr. DAY. Yes, sir.

Mr. PECORA. And I think one other gentleman. Now, there must have been conferences prior to the time when you gentlemen went to the Libbey-Owens Securities Corporation and negotiated for this option, at which you met, discussed the matter, and agreed to form the pool, and tried to obtain the options. Isn't that so?

Mr. DAY. I think that is so, as far as it goes, and naturally, anything you say is so, but what I was trying to make clear was that I did not think, as an illustration, that all the pool members, or syndicate members rather, did go. I mean that I have no recollection of ever seeing Mr. Chrysler there, for instance, and I have no recollection of seeing Mr. Kennedy there.

Mr. PECORA. You have mentioned the names of three or four individuals who did that.

Mr. DAY. Yes, sir.

Mr. PECORA. Those three or four individuals, before they presented themselves to the officers of the Libbey-Owens Securities Corporation, must have met and had conferences among themselves, I take it.

Mr. DAY. They did.

Mr. PECORA. In which they finally determined to organize this pool and to try to obtain this option from the Libbey-Owens Securities Corporation.

Mr. DAY. There is no question about that. I recollect endless meetings.

Mr. PECORA. Who took the initiative in calling together those conferences?

Mr. DAY. (The witness pauses as if trying to recall the matter.) Mr. PECORA. You see what I am trying to get at, Mr. Day, isMr. DAY (interposing). I appreciate it, and I am trying to give the information, and was just trying to recall it.

Mr. PECORA (continuing). What I am trying to do is to get the genesis of this pool.

Mr. DAY. Yes; and I appreciate exactly what you want, and in my limited vocabulary am trying to get together language to convey to you exactly what I believe you want.

Mr. PECORA. All right. Please do so.

Mr. DAY. I think I was the originator of the idea that this stock was ridiculously undervalued. And I think I conveyed that idea, as I remember it, to Mr. Elisha Walker, of Kuhn, Loeb & Co.; and I think through Mr. Elisha Walker, as my recollection of it now is, through his former association and connection and his knowledge of the ramifications of this investment trust, and his close acquaintanceship with the gentlemen who were in that trust, may be said to have been the one who was the father of the origination of the syndicate to liquidate this loan for those gentlemen.

Mr. PECORA. To liquidate a loan for the investment trust called Libbey-Owens Securities Corporation?

Mr. DAY. Yes, sir.

Mr. PECORA. That is, somebody had knowledge of the fact that the Libbey-Owens Securities Corporation had a loan which was maturing, and conceived the idea of approaching them with a view to taking off their hands this large block of Libbey-Owens-Ford Glass Co. stock. Is that right?

Mr. DAY. That is correct.

Mr. PECORA. And Mr. Walker engineered the details of the transactions or negotiations with the Libbey-Owens Securities Corporation?

Mr. DAY. I think so.

Senator COUZENS. I suppose the idea was conceived in altruism. Mr. DAY. Well, Senator Couzens, very few of these things are, but this one happened to be that, to have an altruistic note in the results. Mr. PECORA. Mr. Day, you very frankly said on yesterday before this committee that the pool was organized avowedly for the purpose of redistributing the stock that you hoped to get under option at higher prices and hence at a profit.

Mr. DAY. That is correct, sir.

Mr. PECORA. And that is what most pools are organized for.

Mr. DAY. I believe so. I have always heard that they were. I do not know what a pool means, and I do not think anybody else does; nevertheless, that is certainly the conception of anything of the kind. Mr. PECORA. Well, it is quite singular that no one knows what the meaning of a "pool" is, and yet lots of persons are willing to discuss pools very freely in a manner that indicates some understanding of the term.

Mr. DAY. Well, I have been there a very short time, but have heard men who have been there for as long as 25 years attempt to tell what a pool is, and yet when they got all through with their statement I did not know what it was.

The CHAIRMAN. This was not a new issue of stock, was it? This was old stock held by this investment trust.

Mr. DAY. No, sir; it was not new stock.

Mr. PECORA. Someone has suggested that a pool is something in which the public gets drowned. [Laughter.]

Mr. DAY. Well, I have heard that the word "gigilo " has been applied to jiggling, and that people get drowned in it, perhaps both. Mr. PECORA. You mean jiggling in the market?

Mr. DAY. Yes.

Mr. PECORA. Now, as a matter of fact, did this pool-and I will continue to call it a "pool" because it is the popular term.

Mr. DAY. All right.

The CHAIRMAN. Let me ask you first right there: Do you know the amount of this loan that was to be taken up?

Mr. DAY. Mr. Chairman, I don't know. It was purely hearsay, and I have never seen the figures. I have heard it discussed a great many times.

Mr. PECORA. I notice, Mr. Day, that in the correspondence which passed between your firm and Kuhn, Loeb & Co., and which has been offered in evidence here this morning, there is no mention made

of any margin which Kuhn, Loeb & Co. as a participant in the pool, or syndicate, was required to put up. Is that true also of the other participants?

Mr. DAY (after getting a paper from Mr. Gibson). I think, Mr. Pecora, on the second page, breaking in there, you will find:

And it is understood that to the extent to which we in our absolute discretion shall exercise such options, such purchases shall be proportionately for your account, and that you will promptly make payment on our call for the shares so purchased for you.

Mr. PECORA. Now, Mr. Day, were the letters that were sent to the other pool participants by your firm similar in form to this one marked "Committee Exhibit No. 68 ", and which was sent to Kuhn, Loeb & Co., except for such details as would indicate the extent of the particular participation?

Mr. DAY. Yes, sir; that is as I stated it to you.

Mr. PECORA. That was the form of the letter that was used?
Mr. DAY. Yes, sir.

Mr. PECORA. Now, were any members of the pool actually called upon during the life of the operations and trading by the pool under this option, required to put up any cash as a matter of fact? Mr. DAY. No, sir.

Mr. PECORA. And what was that due to, and what circumstances or facts were present during the life of the pool which rendered it unnecessary for any pool participant to actually put up any cash during the pool operations, although the pool closed with a profit of close to $400,000, and traded in over 1,000,000 shares of the stock? Mr. DAY. Will you let me get that record?

Mr. PECORA. All right.

Mr. DAY. Rather than have a repetition of the statement here, may I have Mr. Gibson give this information to you, as he holds all the papers on the matter?

Mr. PECORA. Yes. And suppose we now have Mr. Gibson sworn. The CHAIRMAN. Mr. Gibson, please stand, hold up your right hand, and be sworn:

You solemnly swear that you will tell the truth, the whole truth, and nothing but the truth, regarding the matters now under investigation by the committee. So help you God.

Mr. GIBSON. I do.

TESTIMONY OF FRANK J. GIBSON, AUDITOR OF REDMOND & CO., NEW YORK CITY

Mr. PECORA. Mr. Gibson, please give your full name for the record.

Mr. GIBSON. Frank J. Gibson.

Mr. PECORA. Where do you live?

Mr. GIBSON. New York City.

Mr. PECORA. Well, New York City is not a small place, and that address would be rather indefinite.

Mr. GIBSON. 1501 Undercliff Avenue.

Senator COUZENS. What is your occupation?

Mr. GIBSON. Auditor with Redmond & Co.

Mr. PECORA. How long have you been connected with the brokerage firm of Redmond & Co.?

Mr. GIBSON. Seven years.

Mr. PECORA. Now, can you answer the question which I last addressed to Mr. Day and which in the interest of conserving time he has referred to you to answer?

Mr. GIBSON. I can.

Mr. PECORA. Will you please proceed to do so?

Mr. GIBSON. At the end of the first day—

Mr. PECORA (interposing). Do you mean the first day of the life

of this option?

Mr. GIBSON. Yes, sir.

Mr. PECORA. And that was when, June 1, 1933?

Mr. GIBSON. June 2, according to our books, and we are always one day late in posting.

Mr. PECORA. All right. Go ahead.

Mr. GIBSON. The account had a net short position in it of approximately 40,000 shares.

Mr. PECORA. Now, do you mean by that that on June 2, the day after this option was given to the pool by the Libbey-Owens Securities Corporation, the account had sold against that option to the extent of 40,000 shares?

Mr. GIBSON. Net.

Mr. PECORA. That is, it had both bought and sold, but it had a short position of 40,000 shares on June 2.

Mr. GIBSON. It had sold 40,000 shares in excess of its purchases. Mr. PECORA. Which was a short position against the option? Mr. GIBSON. Yes, sir.

Mr. PECORA. Did that short position give a profit to the pool under the option?

Mr. GIBSON. Yes, sir.

Mr. PECORA. Of how much? You can give us the approximate figure if you have it.

Mr. GIBSON. I know that the original take-down price is $26.50, and I can tell approximately by looking at the sales prices.

Mr. PECORA. Yes.

Mr. GIBSON. That will be close enough for your purposes.

Mr. PECORA. Surely. That is why I asked for the approximate

amount.

Mr. GIBSON. I will say roughly $100,000.

Mr. PECORA. From that time on was the trading conducted on behalf of this pool under this option of a character that enabled the pool to make such profits as to cause it to take down the stock under this option and pay for it out of the proceeds of the sales it had already made against the option?

Mr. GIBSON. That is right.

Mr. PECORA. And that is the way it operated throughout?
Mr. GIBSON. Yes, sir.

Mr. PECORA. Hence it was never necessary at any time for the pool, or any of its participants, to put up a single penny, is that right? Mr. GIBSON. That is right.

Mr. PECORA. The moneys that they used to draw down stock under the option were moneys that they had made currently in the market through their trading in the stock against the option.

Mr. GIBSON. Not moneys that they had made; moneys that they received as the proceeds of sales.

Mr. PECORA. Yes.

Mr. GIBSON. A portion of that was money made.

Mr. PECORA. That is the way this pool operated throughout its entire life.

Mr. GIBSON. That is right.

The CHAIRMAN. Who was the manager?

Mr. PECORA. I think Mr. Day testified that Redmond & Co. were the managers of the pool. Is that so?

Mr. DAY. That is correct.

Senator KEAN. I would like to ask some questions. The market is not such, in the ordinary case, that a pool can operate without spending a lot of its own money before it takes down the option. That is true, is it not?

The CHAIRMAN. They did not have to do it in this case.

Senator KEAN. No; but there was a great market because they believed that the eighteenth amendment was going to be repealed.

Mr. PECORA. Senator, the evidence yesterday was that the market prior to the formation of this pool account was very inactive, and on the first day after they obtained the option the pool bought and sold to an extent that left them 40,000 shares short against the option. Senator KEAN. The other side of the thing, as I know the market, is this. The market for all alcohol stocks or whisky stocks, or stocks involving in any way drinks, was a very broad market, and a market in which people were speculating in that kind of stocks.

Mr. PECORA. That is not the evidence with regard to this particular security, the Libbey-Owens-Ford Glass Co.

Senator KEAN. I am trying to get into the record what I happen to know, and that was the reason for the question.

Mr. PECORA. The evidence here yesterday was to the effect that this particular stock, namely, the common stock of the LibbeyOwens-Ford Glass Co., was very inactive up to the time of the formation of this pool and the operation of the trading under this option.

TESTIMONY OF HENRY MASON DAY-Resumed

Mr. PECORA. Now, Mr. Day, let me ask you this. This stock, the Libbey-Owens-Ford Glass Co. stock, was commonly known as one of the "repeal stocks ", was it not?

Mr. DAY. By the average person who never took the trouble to look up what its business was.

Mr. PECORA. That is just what I am coming to. It was commonly known as a "repeal stock ", in the belief by those who regarded it as a repeal stock, that the company did a kind of business that it was assumed would be made considerably more profitable through the repeal of the eighteenth amendment. Is not that so?

Mr. DAY. It is a rather hard question to answer the layman's mind. Of course, the Libbey-Owens-Ford Glass Co., as I understand it-I have tried to study it does not make a bottle of any kind.

Mr. PECORA. And to that extent the public had a wrong impression concerning this stock being properly a repeal stock, in the sense in which that term was used. Don't you know that to be a fact?