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.



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 bad 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,
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.


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?

Mr. Day. I have heard it said a number of times that that was the fact.

Mr. PECORA. The public apparently got the notion, from the title of the company, namely, Libbey-Owens-Ford Glass Co., that it manufactured, among other things, glass bottles, and proceeded on the assumption that the business of the company would be considerably enhanced and made more profitable through the repeal of the eighteenth amendment. Was not that the common notion entertained by the lay public?

Mr. Day. I thought, from the number of people that have spoken about it, that it, having the name “ Owens" in it, the average person on the street, knowing that the Owens-Illinois

Mr. PECORA. The Owens-Illinois Glass Co.?

Mr. Day. The Owens-Illinois Glass Co. being a big manufacturer

Mr. PECORA. It is a big manufacturer of bottles. Mr. Day. And wonderfully administered, with profits rising all the time—that it was fair to assume that the layman in the street confused the two.

Mr. PECORA. And got the impression that the Libbey-Owens-Ford Glass Co. was also engaged in the business of manufacturing bottles, which business would be considerably enhanced and improved through the repeal of the eighteenth amendment?

Mr. Day. I think that is true.

Mr. PECORA. Whereas the fact of the matter is that it was not that kind of a company. That is, it was not engaged in the kind of a business that would necessarily be enhanced or improved through the repeal of the eighteenth amendment.

Mr. Day. That is absolutely true. The intelligentsia of the country knew that they were making an unbreakable glass, and that throughout the country there were advertisements by General Motors and aïl other outstanding motor companies that they, in their new models, or old models, had Libbey-Owens unbreakable glass. Furthermore, the backbone or the brains of our country was originating laws which made it absolutely necessary, when human life could be spared through having unbreakable glass, that that particular city, State, or section of the country use nothing but Libbey-Owens glass, Mr. PECORA. Because it was nonshatterable glass. Mr. Day. That is correct.

Mr. PECORA. But that glass was not used in the manufacture of bottles?

Mr. Day. No, sir; not in any way; according to my understanding.

Mr. PECORA. Did Redmond & Co., for the account of this pool, have or acquire any option on stock of the Libbey-Owens-Ford Glass Co. other than the one that has been put in evidence here?

Mr. DAY. Yes, sir.
Mr. PECORA. How many other such options did it have?

Mr. Day. Answering your first question, under date of June 16, written, I presume, on the stationery of Kuhn-Loeb, noting in the upper left-hand corner the name Kuhn-Loeb & Co., a letter was addressed to Redmond & Co., 48 Wall Street, signed by Kuhn-Loeb. There was a purchase made from the General Motors Corporation. I produce this letter.

The CHAIRMAN. Purchased by whom and from whom?

Mr. Day. Purchased, Mr. Chairman, along the same line as the first.

The CHAIRMAN. Was that part of the 80,000 shares?
Mr. Day. No; I think this was another.

Mr. PECORA. This was an additional option. I show you what purports to be a photostatic reproduction of the copy of the letter you have just handed to me, dated June 16, 1933. Do you recognize it as being a true and correct copy of the letter received by your firm from Kuhn-Loeb & Co., bearing that date!

Mr. Day. Unquestionably, if you say so.

Mr. PECORA. You might compare it with your copy so that you may properly authenticate it.

Ńr. DAY (after examining paper). Yes, sir.
Mr. PECORA. I offer in evidence the photostatic reproduction of it.
The CHAIRMAN. Let it be admitted.

(Copy of letter, Kuhn-Loeb & Co., to Redmond & Co., June 16, 1933, was received in evidence, marked “ Committee's Exhibit No. 71 ”, Feb. 22, 1934, and the same was subsequently read into the record by Mr. Pecora.)

Mr. PECORA. The document has been marked in evidence as “ Committee's Exhibit No. 71" and reads as follows. It is on the letterhead of Kuhn-Loeb & Co. [reading]:

JUNE 16, 1933. Messrs REDMOND & Co.,

48 Wall Street, New York, N.Y. DEAR SIRS : In accordance with previous understanding, we confirm that we have purchased for ourselves and associates 25 thousand shares of common stock, without par value, of Libbey-Owens-Ford Glass Co., an Ohio corporation, at the price of $27.50 per share flat, and that in connection with our purchase of said 25 thousand shares of said common stock we have obtained options to purchase additional shares of such common stock as follows:

Up to 25 thousand shares on or before July 12, 1933, at a price of $29 per share flat.

Up to 15 thousand shares on or before July 28, 1933, at a price of $30 per share flat.

All in accordance with letter of agreement dated June 13, 1933, between General Motors Corporation and ourselves, copy of which is enclosed.

As arranged, the Toledo Trust Co. has joined us in this purchase to the extent of 5 thousand shares, but has no interest in the options referred to above.

We confirm that the balance of the above purchase, that is, 20 thousand shares, and the options mentioned above, are for account of the associates, including you and ourselves, referred to in your letter to us of June 1, 1933, in proportion to the percentage of interest which said associates had in the purchase and options referred to in your said letter.

We understand that you will confirm to the associates, including ourselves, their respective interest in the purchase and options above referred to, so that the above mentioned 20 thousand shares and the additional 40 thousand shares covered by the present options will be handled in the same manner as the shares purchased and under option as described in your letter of June 1 to us.

If the foregoing is in accordance with your understanding will you please confirm your agreement by signing the enclosed copy of this letter? Yours very truly,

(Signed) KUHN-LOEB & Co. This means that this commitment for the purchase of 25 thousand shares from the General Motors Corporation at $27.50 per share. plus an option on 40 thousand shares at prices of $29 and $30 per share, was put into the original pool agreement.

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