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Mr. PORTER. I do not think so; no, sir. I may say in connection with this matter that the board has an executive committee of which I am not chairman. At that time it consisted of Mr. Loosby, Mr. Jones, and Mr. Banks was a member of it, and Mr. Callahan, who is since dead.

Mr. PECORA. That was the Mr. Callahan connected with the Chase?

Mr. PORTER. Frank Callahan, originally of Rushmore, Bisbee & Stern, first on our board and later with Chase. He was on our board for many years, but he is dead.

And I discussed with the executive committee in great detail just what we were doing from time to time. This was not an arbitrary transaction.

Mr. PECORA. Do the minutes of the executive committee of the board

Mr. PORTER. No.
Mr. PECORA. Show any such discussions or show any report-
Mr. PORTER. No, sir.
Mr. PECORA. Being made to the executive committee
Mr. PORTER. No.
Mr. PECORA. Of the giving of these puts and calls?
Mr. PORTER. No, sir.
The CHAIRMAN. Was the corportion paying dividends then?
Mr. PORTER. When we sold this stock, sir?
The CHAIRMAN. Yes.

Mr. PORTER. No, sir. No, sir; we were paying dividends some 2 years, but we had stopped.

The CHAIRMAN. You seemed to have been in very fine condition. You were able to loan a couple of million dollars to brokers, and all that, at a good rate of interest, and now you seemed to need capital. What had happened to the company?

Mr. PORTER. Well, I will try to explain again, Mr. Chairman. You see, we were possessed of a lot of assets that we received in a reorganization, and we had all these debts. It was quite a close thing by the reorganization managers as to whether they would liquidate this company as a result of the receivership or whether they would go forward with it and give this preferred stock on their debts. And it was our first purpose during the early years of managing this company to try to work out those creditors. By the sale of this alcohol company we succeeded in doing so, and that paid all of the original creditors off really with interest.

Now, we were still possessed of this whisky company, which, of course, had great potential value, which we held during all these years, and we had it, Mr. Chairman, when we sold the alcohol company and had what appears like a great deal of cash-it was a great deal of cash, a couple of million dollars—and it was at that time that we made the investment in this stock.

Now, you see, events moved rather rapidly from 1929 and when we got into 1932 we were in this general financial situation the country was in and we were also beginning to come to the point where we saw repeal coming where we needed capital. The thing developed very rapidly. That perhaps answers your inquiry.

Mr. PECORA. In connection with the giving of these puts and cails that you have testified about, do you know whether any of them were given or assigned to the brokerage firm of Wright & Sexton?

Mr. PORTER. I do now; sir. I don't think I did at the time.

Mr. PECORA. Mr. Porter, the stock of the National Distillers Products Corporation was during all this period of time covered by your testimony listed on the New York Stock Exchange, was it not? Mr. PORTER. From the beginning; yes, sir.

Mr. PECORA. From the beginning. These puts and calls are in reality forms of options, are they not?

Mr. PORTER. That is what we really call them; sir, yes. They were options.

Mr. Pecora. They are options?
Mr. PORTER. Are options; yes, sir.

Mr. PECORA. Were the giving of these options in the form of these puts and calls reported to the New York Stock Exchange!

Mr. PORTER. No, sir.
Mr. PECORA. At any time?
Mr. PORTER. No, sir.

Mr. PECORA. Isn't it required of corporations whose securities are listed on the board of that exchange that they report to the exchange the giving of such options?

Mr. PORTER. No; it was not at that time, sir. It is now, I believe. It was not at that time.

Mr. Pecora. Have you before you a copy of the application made to the New York Stock Exchange by or on behalf of the National Distillers Products Corporation, dated February 8, 1932, for an initial listing of preferred stock and an additional listing of common stock?

Mr. PORTER. November 8; yes, sir.
Mr. PECORA. No; February 8, 1932. It bears the serial no. A-9880.
Mr. PORTER. Yes, sir.
Mr. PECORA. Do you have it before you?
Mr. PORTER. Yes, sir.

Mr. Pecora. Will you turn to page 7 thereof? The page number is on the top of the page, Mr. Porter.

Mr. PORTER. Oh, yes, sir.

Mr. PECORA. Under the caption of “ agreements”, isn't it set forth in this application that the National Distillers Products Corporation agrees with the New York Exchange as follows, among other things:

To notify the stock exchange promptly in the event of issuance of options or warrants to purchase stock otherwise than (a) pro rata to stockholders, (b) to officers and employees under general employee stock-purchase plan, (c) firm offers of stock to be taken en bloc within 4 months from date of such offer, of the number of shares covered by such options, of their terms and of the time in which they may be exercised, and of any subsequent changes therein or thereafter, to include this information together with like information, as to any options in existence at the time of approval of this application, so long as said options are outstanding, in all annual financial reports furnished to stockholders and in all formal published reports.

Do you find that provision that I have read from this application? Mr. PORTER. Yes, sir.

Mr. Pecora. These puts and calls that you have testified to were given subsequent to February 8, 1932, weren't they?

Mr. PORTER. Yes, sir.
Mr. PECORA. They were not reported to the Stock Exchange?
Mr. PORTER. No, sir.
Mr. PECORA. Under this agreement on the part of your company
Mr. PORTER. Not so required, sir.
Mr. PECORA. What is that?
Mr. PORTER. Not so required, as I understand it, because they are
exempted under (c) there, are they not, within 4 months?

Mr. Pecora. Do you consider puts and calls firm offers of stock!
Mr. PORTER. Options. Options is a firm offer, isn't it, sir?
Mr. PECORA. No; a firm offer would not be an option.

Mr. PORTER. Firm offers, I would certainly think, sir-I am not a lawyer, but I would certainly think that an option was a firm offer. It could not be any more firm. We agreed to sell it at a certain price on a certain date, didn't we?

Mr. PECORA. According to that definition of the term “option” there is no difference between an option and a firm offer.

Mr. PORTER. No; I would not think there was.

Mr. PECORA. Don't you consider that under a firm offer there is a definite commitment?

Mr. PORTER. Yes.
Mr. PECORA. In the case of an option there is not?

Mr. PORTER. There certainly is a definite commitment if we agree to deliver certain shares. That is what we do under an option. The other fellow does not obligate himself, but we do.

Mr. PECORA. That is what distinguishes an option from a firm offer, doesn't it, the fact that the other party, the party to whom the option was given, is not obligated, whereas under a firm offer he is obligated to take the stock?

Mr. PORTER. I do not mean to disagree with you, sir, as a lawyer on a legal point, but I would not so understand it.

Mr. Pecora. As a matter of fact, did the optionees, or persons to whom these puts and calls were given, exercise their options under the puts and calls in all instances?

Mr. PORTER. No, sir.
Mr. PECORA. Doesn't that indicate that they were not firm offers ?

Mr. PORTER. A firm offer from us, sir, is what I understand. In any event, sir, we did not report them, and we understood that we did not have to. The rule is entirely changed now, sir, and we do have to report any such things.

Mr. PECORA. What is that?

Mr. PORTER. That is a totally different rule now, and I specifically do understand that we would have to report any such transactions now to the stock exchange.

Mr. Pecora. It is a rule and regulation of the stock exchange? Mr. PORTER. Yes, sir.

Mr. PECORA. But under this application agreement you agreed to do that very thing, didn't you?

Mr. PORTER. No; the rule is now quite different from that, sir. As I understand, what happens in these listing applications, you sign what they put on at that time. You do not come under their new rules necessarily until you sign again, as a matter of fact. We have since signed and since agreed to a different rule from this.

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Mr. PECORA. Mr. Porter, isn't it a fact that when your corporation filed this listing application with the New York Stock Exchange

Mr. PORTER (interposing). We agreed to that

Mr. PECORA. You entered into the covenants and agreements that are set forth in the listing application itself?

Mr. PORTER. Yes, sir.

Mr. PECORA. And those agreements include that which I read to you from page 7 of the listing application?

Mr. PORTER. Yes, sir.

Mr. PECORA. Now, will you tell the committee at what prices, compared with market prices, these puts and calls were given?

Mr. PORTER. These options, without going into each one, were given at approximately the market or slightly in excess of the market and stepped up, I think, in all the seven instances. I am saying that is approximately.

Mr. PECORA. Now, I show you what purports to be a copy of a letter addressed to your corporation by Redmond & Co. under date of February 15, 1932. Will you look at it and tell me if you recognize it as one of the options that you have testified to was given to Redmond & Co.?

Mr. PORTER (after examining document). Yes, sir.
Mr. PECORA. I offer it in evidence.
The CHAIRMAN. Let it be admitted.

(Letter dated Feb. 15, 1932, from Redmond & Co. to National Distillers Products Corporation was thereupon designated “Committee Exhibit No. 72, Feb. 22, 1934 ", and appears in the record in full immediately following, where read by Mr. Pecora.)

Mr. PECORA. The document has been received in evidence as committee exhibit no. 72 and reads as follows; it is on the letterhead of Redmond & Co. [reading]:

FEBRUARY 15, 1932. NATIONAL DISTILLERS PRODUCTS CORPORATION,

And so forth.
Attention Seton Porter, Esq.

GENTLEMEN: This will confirm that you have this day given to Redmond and Co. a put to you at 2142 dollars per share good for thirty days from this date on 2,500 shares of the common stock of the National Distillers Products Corporation which may be exercised in part or in whole by notifying the office of the National Distillers Products Corporation, 52 William Street, 24 hours in advance, with the exception that upon the last day the put may be exercised without notice.

We also confirm that you have today given us a call good for 30 days from this date on 4,000 shares of the common stock of the National Distillers Products Corporation in the following amounts at the following prices:

500 shares at $22 per share.
500 shares at $22.50 per share.
500 shares at $23 per share.
500 shares at $23.50 a share.
500 shares at $24 a share.
500 shares at $24.50 a share.
500 shares at $25 a share.

500 shares at $25.50 per share. It is understood that this call may be exercised in part or in whole upon 24 hours' notice at the office of the National Distillers Products Corporation, 52 William Street, with the exception that upon the last day a call may be exercised without notice.

We are sending you this letter in original and duplicate original, and for the completion of our records request that you sign the original duplicate and return it to us at your convenience. Very truly yours,

(Signed) REDMOND & Co. Accepted :

NATIONAL DISTILLERS PRODUCTS CORPORATION. Now, I show you another letter or copy of a letter addressed to Redmond & Co. by yourself, as president of the National Distillers Products Corporation, dated May 3, 1932. Will you look at it and tell me if you recognize it to be a true and correct copy of a letter sent by you in behalf of your corporation to Redmond & Co. on or about the date which it bears?

Mr. PORTER (after examining document). Yes, sir. Mr. PECORA. I offer it in evidence. The CHAIRMAN. Let it be admitted. (Letter dated May 3, 1932, from Seton Porter, president National Distillers Products Corporation, to Redmond & Co., was thereupon designated “ Committee Exhibit No. 73, Feb. 22, 1934 ", and the same appears in the record in full immediately following where read by Mr. Pecora.)

Mr. PECORA. The document has been received in evidence as committee exhibit no. 73 and reads as follows, on the letterhead of National Distillers Products Corporation (reading :]

MAY 3, 1932. Reclmond & Co.

And so forth.
Attention Ur. Mason Day.

Gentlemen : We confirm that we have today given you put to us for 1,500 shares of National Distillers Products Corporation common stock at $18 per share and a call on 2500 shares as follows:

500 shares at 19 500 shares at 1912 500 shares at 20 500 shares at 21 500 shares at 22 all good for sixty days from this date.

It is understood that the above put or call may be exercised in part or in whole upon 24 hours' notice to us at our office, with the exception that upon the last day a put or call may be exercised without notice.

If the foregoing properly confirms our understanding, please write us to such effect. Very truly yours,

(Signed) SETON PORTER, President. Now, Mr. Porter, I assumed that you understand how persons operating under the form of options known as “puts and calls” operate under them?

Mr. PORTER. How they do?
Mr. PECORA. Yes.

Mr. PORTER. Well, I think so. I don't know that I am clear about it.

The CHAIRMAN. We cannot hear you, Mr. Porter.
Mr. PORTER. Yes, sir.

Mr. Pecora. In effect, the bolder of the option, namely, Redmond & Co., under this last option, marked" Exhibit No. 73”, was given the right to put or sell to your corporation 1,500 shares

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