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Mr. PECORA. What is Mr. Schwartzhaupt's full name?
Mr. PORTER. Emil.

Mr. PECORA. Are there any members of any stock brokerage firms that are also members of either one of those two syndicates?

Mr. PORTER. There was no member in that syndicate that I have just mentioned.

Mr. PECORA. When was that syndicate that you last mentioned formed?

Mr. PORTER. All that I have, sir, is a statement that was handed to me by the man that handled that, which shows the purchases and sales and the distribution, and the first purchase was in July.

Mr. PECORA. Of 1932?

Mr. PORTER. Of 1932; and it was concluded in August of 1932. It only lasted for 2 months.

Mr. PECORA. Wasn't there another syndicate formed also in July 1932 that included yourself, Mr. Loosby?

Mr. PORTER. Yes, sir.
Mr. PECORA, Mr. Elisha Walker?
Mr. PORTER. Yes, sir.
Mr. PECORA. Mr. L. W. James?
Mr. PORTER. Yes, sir.

Mr. PECORA. Mr. James was a special partner of the firm of Red-mond & Co., wasn't he, at that time?

Mr. PORTER. I don't really know, sir.

Mr. Day. There seems to be a difference of opinion. I did not think he was. My brother partners tell me he was not.

Mr. PORTER. I did not really know, sir.

Mr. PECORA. And in that syndicate to which I am now referring was there an attorney named Loucks?

Mr. PORTER. Yes, sir.
Mr. PECORA. W. B. Loucks, also a participant ?
Mr. PORTER. Yes, sir.

Mr. PECORA. Mr. Porter, on general principles do you think it is good practice and ethical and sound practice for officers and directors of a corporation to become members of syndicates to trade in the stock of their own company?

Mr. PORTER. Of their own company?
Mr. PECORA. Yes; to their own personal profit?
Mr. PORTER. I don't think it is unethical to-

Mr. PECORA. You don't think it is unethical for officers and directors of a company to do that?

Mr. PORTER. Not necessarily, sir; no. I know very few people that are interested in companies that are stockholders that do not buy and sell in

Mr. Pecora. Buying and selling individually might be one thing

Mr. PORTER. Yes.

Mr. PECORA. But forming a syndicate to trade in the stock is another thing, isn't it?

Mr. PORTER. These two syndicates were not formed for the purpose of trading in the stock. The first syndicate referred to was formed by a group of individuals who were all stockholders of the company who believed that the price of the stock was very low, and we

thought that an acquisition of some shares would result in a profit and would probably help the market.

Mr. PECORA. In the operations of that syndicate did not the syndicate both buy and sell in order to enable its members to distribute the stock that they wanted to distribute at a profit!

Mr. PORTER. It so happens, sir, that this syndicate purchased 3,900 shares, and it commenced the purchase of those shares on July 26, July 27, and on August 4 it completed them. And it so happens that they had not sold a single share that they bought in the whole 3,900 and that they began after the acquisition—I am not quite correct, almost correct-they made one purchase apparently afterwards. But the bulk, almost the entire purchase in that syndicate, was made before any selling started, and then it was all sold out. In other words, it was bought at 21, 22, and 20, and it was sold at 22, 24, and 25, and it resulted in a profit to me and it was divided equally among the seven people, $1,400.

Mr. PECORA. How about the other syndicate? What was the extent of the trading done by the other syndicate ?

Mr. PORTER. That I was not at all familiar with, but I have been given since a statement of it. I was not apprised what they were doing, and I have heard it began on July 25 and it started by purchasing apparently two or three thousand shares at 18 to 20.

Mr. PECORA. Now, just give us the total amount of trading done

by it.

Mr. PORTER. I don't know that I can do that, sir. It resulted in a profit to me of $2,300.

Mr. PECORA. How many shares did they trade in?

Mr. PORTER. It is not added up here, sir. There were quite a few shares.

Mr. PECORA. Eighteen thousand eight hundred shares, wasn't it? Mr. PORTER. If that is what that adds up; yes, sir.

Mr. PECORA. Now let us go to the year 1933. Did any of the officers and directors of your corporation in the year 1933 become members of or participants in any syndicates which traded in the stock of the corporation?

Mr. PORTER. No, sir; not as far as I know.
Mr. PECORA. Not so far as you know?
Mr. PORTER. No.

Mr. PECORA. During the year 1933 did your corporation give to anyone options on its common capital stock?

Mr. PORTER. We gave an option to William B. Levis and his associates for 12,000 shares in connection with the purchase of 40,000 shares which he made.

Mr. PECORA. Have you a copy of the option given to Mr. Levis? Mr. PORTER. Yes, sir. Mr. PECORA. Will you product it, please? (Mr. Porter searched for document.) Mr. PECORA. While you are looking for it let me ask how many options all told were given by the company on its common stock during the year 1933!

Mr. PORTER. That was the sole one.
Mr. Pecora. Will you produce the copy of it if you can?
Mr. PORTER. We are trying to find it, sir.

Mr. PECORA. Let me show you what purports to be a copy

Mr. PORTER (interposing). Yes, sir; here it is [handing document to Mr. Pecora].

Mr. PECORA. I offer in evidence the copy of the option produced by the witness.

The CHAIRMAN. Let it be admitted.

(Letter dated Apr. 28, 1933, from National Distillers Products Corporation to William B. Levis was thereupon designated “Committee Exhibit No. 74, Feb. 22, 1934 ", and the same appears in the record in full immediately following, where read by Mr. Pecora.)

Mr. PECORA. It is received in evidence as committee exhibit no. 74, and reads as follows:

APRIL 28, 1933. Mr. WILLIAM E. LEVIS,

965 Wall Street, Toledo, Ohio. DEAR MR. LEVIS : We hereby confirm the sale to you of 20,000 shares of common stock of National Distillers Products Corporation, as and when listed by the New York Stock Exchange, and on forty-eight hours' notice to you at your office, 965 Wall Street, Toledo, Ohio, at $25 a share, purchase price payable on delivery of stock to you. As these 20,000 shares are part of the new issue of 200,000 shares just authorized at the stockholders' meeting on April 19th, delivery will have to be delayed until we are able to consummate certain details in connection with listing arrangements on the New York Stock Exchange which Counsul advises us cannot be completed until about May 11th. Therefore, we agree to make delivery as soon as possible after these arrangements are completed, and in no event later than 30 days from date.

It is understood in connection with this sale that it is the intent of the Corporation to issue to its present stockholders warrants covering the right to subscribe to additional stock on the basis of one share for each ten shares now held and that these warrants will not apply to the 20,000 shares covered by this agreement.

This sale is made with the understanding that you and one of your associates, to be selected by you with our approval, will be elected Directors of our Company.

In consideration of this purchase, we also grant you an option to purchase additional common stock of our Company to the extent of 12,000 shares good for 90 days from date of delivery of the 20,000 shares above referred to at a price of $27.50 per share. Upon acceptance of said option by notice to National Distillers Products Corporation at its office, 52 William Street, New York, N.Y., the stock, if not then listed, shall be immediately listed and delivered as soon as possible on forty-eight hours' notice to you at your office, 965 Wall Street, Toledo, Ohio, and payment therefor shall be made against delivery of said stock. Very truly yours,

NATIONAL DISTILLERS PRODUCTS CORPORATION,

By SETON PORTER, President. Accepted by:

WM. E. LEVIS. At about the same time as this option was given to Mr. Levis did your corporation enter into any agreement with the Illinois Glass Consolidated Corporation, of Alton, Ill., to sell to it 10,000 shares of common stock of your corporation at $25 per share!

Mr. PORTER. The same date?
Mr. PECORA. Yes.
Mr. PORTER. Yes, sir.

Mr. PECORA. I show you what purports to be a photostatic reproduction of a letter addressed by you as president of your company to the Illinois Glass Consolidated Corporation, dated April 28. 1933, and I ask you if that is a true and correct copy of the letter evidencing the fact of the sale you have just testified to?

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

(Letter dated April 28, 1933, from Seton Porter, president National Distillers Products Corporation, to Illinois Glass Consolidated Corporation, was thereupon designated “ Committee Exhibit No. 75, February 22, 1934 ", and the same appears in the record immediately following, where read by Mr. Pecora.)

Mr. PECORA. The document has been received in evidence as committee exhibit no. 75, and reads as follows: The ILLINOIS GLASS CONSOLIDATED CORPORATION,

APRIL 28, 1933.

Alton, Iii. GENTLEMEN : We hereby confirm the same to you of 10,000 shares of the common stock of National Distillers Products Corporation, as and when listed by the New York Stock Exchange, on 48 hours' notice to you at the office of your President, Mr. William E. Levis, 965 Wall Street, Toledo, Ohio, at $25 per share, purchase price payable on delivery of stock to you.

As these 10,000 shares are part of the new issue of 200,000 shares authorized at the stockholders' meeting on April 19th, delivery will have to be delayed until we are able to consummate certain details in connection with listing arrangements on the New York Stock Exchange which counsel advises us can not be completed until about May 11th. Therefore, we agree to make delivery as soon as possible after these arrangements are completed and in no event later than 30 days from date.

It is understood in connection with this sale that it is the intention of the Corporation to issue to its present stockholders warrants covering the right to subscribe to additional stock on the basis of 1 share for each 10 shares now held and these warrants will not apply to the 10,000 shares covered by this agreement. Very truly yours,

NATIONAL DISTILLERS PRODUCTS CORPORATION,

By SETON PORTER, President. Accepted by:

ILLINOIS GLASS CONSOLIDATED CORPORATION,

By WILLIAM E. LEVIS. Did your corporation on this same date, April 28, 1933, also make a firm sale of 10,000 shares of its common stock to Redmond & Co. at $25 a share?

Mr. PORTER. Yes, sir.
Mr. PECORA. I show you what

purports to be a photostatic reproduction of a letter addressed to Redmond & Co. by you as president of the National Distillers Products Corporation dated April 28, 1933. Will you please look at it and tell me if it is a true and correct copy of the letter evidencing such sale? Mr. PORTER (after examining document). Yes, sir. Mr. PECORA. I offer it in evidence. The CHAIRMAN. Let it be admitted.

(Letter dated Apr. 28, 1933, from Seaton Porter, President National Distillers Products Corporation, to Redmond & Co., was thereupon designated " Committee Exhibit No. 76, Feb. 22, 1934," and the same appears in the record in full immediately following where read by Mr. Decora.)

Mr. PECORA. The letter has been received in evidence as committee exhibit no. 76, and reads as follows:

APRIL 28, 1933. 48 Wall Street, New York, N.Y. GENTLEMEN : We hereby confirm the sale to you of ten thousand (10,000) shares of common stock of National Distillers Products Corporation, as and

175541—34-PT 147

REDMOND & Co.,

when listed by the New York Stock Exchange and on forty-eight hours' notice to you at your main office, 48 Wall Street, New York, N.Y., at $25 a share, the purchase price payable on delivery of the stock to you.

As these 10,000 shares are part of the new issue of 200,000 shares just authorized at the stockholders' meeting on April 19th, delivery will have to be delayed until we are able to complete certain details in connection with listing arrangements on the New York Stock Exchange which counsel advises us cannot be completed until about May 11th. Therefore, we agree to make delivery as soon as possible after these arrangements are completed and in any event not later than thirty days from date.

It is understood in connection with this sale that it is the intent of the corporation to issue to its present stockholders warrants covering the right to subscribe to additional stock on the basis of one share for each ten shares now held and that these warrants will not apply to the ten thousand shares covered by this agreement. We understand that you have given an option to purchase these shares to Mr. William E. Levis on behalf of himself and his associates. Very truly yours,

NATIONAL DISTILLERS PRODUCTS CORPORATION,

By SETON PORTER, President. Accepted by:

REDMOND & COMPANY,

By MASON DAY. Mr. Porter, referring to the option for 12,000 shares mentioned in the letter to Mr. William E. Levis of April 28, 1953, which has been received in evidence as exhibit no. 74, will you tell us whether or not your corporation reported to the New York Stock Exchange the granting of that option?

Mr. PORTER. We reported it on I think May 18. [After conferring with associates.] I think it was May 18.

Mr. PECORA. Did you report it to the stock exchange?
Mr. PORTER. We sent a letter to the stockholders on May 18.

Mr. PECORA. No; to the stock exchange, New York Stock Exchange?

Mr. PORTER. Certainly a letter was sent to all stockholders on May 18.

Mr. PECORA. No; I am asking you if the giving of this option for 12,000 shares referred to in the letter to Mr. Levis of April 28, 1933, which has been marked in evidence as committee exhibit no. 74, was reported to the New York Stock Exchange by or on behalf of your corporation.

Mr. PORTER. It was not reported at that time; no, sir.
Mr. PECORA. When was it reported ?

Mr. PORTER. I think officially reported when we applied for the listing on May 25. It was reported

Mr. PECORA. Oh, aren't you mistaken about that?
Mr. PORTER. I may be, sir.

Mr. PECORA. Well, you better look up your records on that between now and the reconvening of the committee after recess.

Mr. PORTER. Right.
The CHAIRMAN. The committee will take a recess until half past 2.

(Accordingly, at 1:06 p.m., a recess was taken until 2:30 p.m. of the same day.)

AFTERNOON SESSION The committee resumed at 2:30 p.m. on the expiration of the recess.

The CHAIRMAN. The committee will resume. I believe Mr. Porter is on the stand.

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