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Mr. PECORA. That covered the 7,700 shares that did not go into the distribution.

Mr. LEVIS. That is right. Other than that, no funds were put up.

Mr. PECORA. And that was due to the fact, was it not, that you sold through Redmond & Co. shares from time to time against the purchase contracts and against the option?

Mr. LEVIS. Yes, sir; and on the same basis as the purchase contract and the option. The option was never involved in that, Mr. Pecora. On the 22,300 shares that I had, 20,000 of which was joint account with Mr. Day, we were practically out of all those shares on an “asand-when-issued ” basis, by the time we had delivery of shares that we had a contract to be delivered to us on an “as-and-when-issued ” basis.

Mr. PECORA. In other words, you had sold those shares short against the purchase contracts and the option.

Mr. LEVIS. Technically short, Mr. Pecora.

Mr. PECORA. I do not mean short sales in the sense that short sales are used as part of the process called “ bear raiding." I do not mean that.

Mr. LEVIS. I had secured an underwriting from others on the same basis.

Mr. PECORA. When was that joint account you had with Mr. Day terminated ?

Mr. LEVIS. I have a memorandum

Mr. PECORA. There was more than one joint account, was there not, with Mr. Day?

Mr. Levis. I had three accounts, sir, dealing in the 30,000 shares, namely, account 42, which dealt in the 10,000 shares that Mr. Day did not participate in; account 44, which dealt in the 10,000 shares which he did participate in above 26; and account 43, in which he participated above 27.

Mr. PECORA. Yes.

Mr. LEVIS. All those accounts were closed, as per a letter from Redmond & Co., dated May 13, sending me a complete statement of those accounts and a remittance for whatever profit I had from those accounts.

Mr. PECORA. Have you got that letter?
Mr. LEVIS. Yes, sir.
Mr. PECORA. Will you give the figures ?

Mr. LEVIS. Statement of account no. 42, $22,298; account 43, $18,014; account 44, $15,859.50. That letter is schedule no. 35 I filed with your representative.

Mr. PECORA. The profits that you have given us were simply the cash profits, were they not?

Mr. Levis. They were the cash profits from those accounts.
Mr. PECORA. Was there not, in addition to that, a profit in stock?
Mr. LEVIS. Not from the 30,000.
Mr. PECORA. But from the 42,000 aggregate.
Mr. LEVIS. Yes, sir.
Mr. PECORA. What did that amount to?

Mr. LEVIS. I received 12,000 shares, which I paid $27.50 for, or $330,000. I sold, of that, 9,500 shares for $345,000, making a cash profit of $15,254.75, and 2,500 shares that had a cost price to me of $68,750.

Mr. PECORA. That is all, unless you have some statement to make, or any other details you want to give with regard to these transactions. Mr. LEVIS. Thank you. (Witness excused.)

TESTIMONY OF HENRY MASON DAY-Resumed

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Mr. PECORA. Mr. Day, did you hear the testimony of Mr. Seton Porter with regard to the options in the form of puts and calls which the National Distillers Products Corporation gave to Redmond & Co. during the year 1932?

Mr. Day. Yes, sir. Mr. PECORA. Is there anything you want to add to the testimony which Mr. Porter gave with regard to those options?

Mr. Day (after conferring with an associate). There is nothing to add, Mr. Pecora.

Mr. PECORA. In connection with those puts and calls, did you assign or give any interest therein to Wright and Sexton?

Mr. Day. My recollection is that we did; yes, sir. Mr. PECORA. What was that done for? What was your purpose in doing that?

Mr. Ďay. Because I personally am not on the floor of the stock exchange, nor do I in any way pretend to know anything about the floor operations, and I consider that Charlie Wright is an outstanding man in that respect. Mr. PECORA. That is, he is in a better position to make a market?

Mr. Day. Not only that, but he was in a better position to feel the trend of the market.

Mr. PECORA. You heard the testimony also, I presume, of Mr. Porter with regard to the options which his company gave on the common stock of the company to Redmond & Co., or, rather, the commitment it made to sell Redmond & Co. 25,000 shares? Mr. Day. Yes, sir; I did.

Mr. PECORA. You heard the testimony about the option for 12,000 shares given to Mr. Levis?

Mr. Day. I did, sir. Mr. PECORA. Did you have any interest in that option covering the 12,000 shares ?

Mr. Day. Yes, sir; I did. Mr. PECORA. Will you state the nature of it? Mr. Day. At the commencement I had a 50 percent interest in that option,

and on or before the 15th of June—between the 10th and the 15th-Mr. Levis told me that he wanted to clean it up and abandon it, and I said: “Well, if you feel that way about it, all right; I will take what is left."

Mr. PECORA. Referring to the 42,000 shares of the common stock of National Distillers Products Corporation which were sold by that corporation to Levis and to Redmond & Co. under the agreements of April 28, 1933, that were put in evidence this morning, the total purchase price for those shares fixed by the agreements was $1,080,000, was it not? Mr. Day. If you have that figure there. Was it 42,000, Mr. Pecora, or was it 40,000 ?

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Mr. Pecora. Forty-two thousand. That includes the 12,000-share option. Mr. Day. I see.

Mr. PECORA. And the 30 thousand shares, which excludes the 10 thousand shares that the glass corporation took over and paid for.

Mr. Day. Yes.
Mr. Pecora. That was $1,080,000, as I understand.
Mr. Day. That is correct, sir.

Mr. PECORA. Is it not a fact that those shares, those 42,000 shares, were disposed of shortly after their acquisition, and were taken down without the necessity of putting up any money other than the moneys realized from technical short sales that were made against the purchase contracts and the option agreement?

Mr. Day (after conferring with an associate). Mr. Gibson tells me that that is the figure here, and according to the figures compiled by him, there was a matter of $57,500 put up by Redmond. Mr. PECORA. By Redmond & Co. ?

Mr. Day. Yes, sir; in addition to the $192,000 which Mr. Levis spoke of.

Mr. PECORA. That $192,000 was paid by the persons to whom an aggregate of 77 thousand shares were sold direct, isn't that so?

Mr. Day. That is right, sir.

Mr. PECORA. The balance of these 42 thousand shares was disposed of in the open market through Redmond & Co.

Mr. Day. Yes, sir.
Mr. PECORA. How long did the distribution take?

Mr. Day. I do not know off-hand. [After conferring with an associate.] Mr. Gibson tells me about June 15.

Mr. Pecora. What profits were distributed at the end of the period of distribution of the stock, in cash, and what in stock?

Mr. Day. As far as Mr. Levis was concerned, just exactly what he testified, from his Arthur Young statement; and I took over the balance of that stock and carried it along in my accounts.

Mr. PECORA. What was the amount of stock that was left over at the end of the account?

Mr. Day (after conferring with an associated). Mr. Gibson tells me I took down 21,000 shares of stock and certain cash profits, on which he has not the figure.

Mr. PECORA. Have you the total cash profits from the transactions?

Mr. Day. No, sir; I have not, because it carried into the other accounts. I simply put it in my accounts.

Mr. PECORA. Our analysis, made from records which Redmond & Co. have made available to us, show a distribution of cash profits of $252,158.75; and of 4,600 shares which, on July 26, 1933, had a market value of about $345,000.

Mr. Day. In other words, your figures show that the profit which was made by us was approximately $345,000.

Mr. PECORA. In stock; and in cash of $252,000.
Mr. Day. I have no figures on it.
Mr. Pecora. Making a total of about $597,000.

Mr. Day. I have no figures on it, so I cannot very well answer. I am perfectly willing to accept your figures.

Mr. PECORA. If you find that our calculations are incorrect, will you notify us, and we will have the correction made on the record ?

Mr. Day. I will be only too glad to. I have not closed the accounts, as far as I am concerned. Unfortunately, I took very considerable losses in other things in my accounts. However, Mr. Pecora, I am very glad to accept those figures and, as you say, if there is any difference that we find, we will send you a statement.

Mr. PECORA. Did your firm have any options covering any shares listed on the New York Stock Exchange other than the options that have been discussed here in the evidence, with respect to the American Commercial Alcohol Corporation and the National Distillers Products Corporation?

Mr. Day. What was the year?

Mr. PECORA. When I say your firm, I mean your firm or any of the partners therein.

Mr. Day. I have copies of them, which I think you are also holding, the first one of which is the 1932, National Distillers Products; 1933, Libbey-Owens-Ford; 1933, American Water Works; 1931, Petroleum Corporation of America; 1933 to February 1934, GrahamPaige; 1932 to 1953, Warren Foundry and Pipe; 1933, Consolidated Aircraft; 1932, Zonite Products; 1931, Houdaille-Hershey; 1933, Barnsdall Corporation.

Mr. PECORA. I believe your firm has turned over to us photostatic copies of all those options. Mr. Day. That is my understanding, sir.

Mr. PECORA. I have before me the photostatic copies that were received from your firm. I will ask you to look at them and see if they are true and correct copies of those option contracts [handing papers to the witness). Mr. Day. I notice that some of these that you hand me I have not

list here. Mr. PECORA. Do you recognize them as copies of options that your firm, or any member of your firm, had?

Mr. Day. I was neither a partner of my firm at this time, nor was I an employee, which I was before I became a partner of this firm. Some of them are dated 1930, which I know nothing about.

Mr. PECORA. Mr. Gibson, will you look at the photostatic copies of options!

Mr. Day. I just cannot tell about something I do not know the first thing in the world about. I will say substantially, Mr. Pecora, unquestionably they are photostatic copies of records which you got from our office, and our name seems to be contained in all of them, back as far as 1929, and we had something to do with them.

Mr. PECORA. Do they constitute copies of all the options that were given by anyone to Redmond & Co., or any of its partners, during the years 1929 to 1933, both inclusive? ?

Mr. GIBSON. If these were submitted in answer to your questionnaire, they do.

Mr. PECORA. I will offer them in evidence, Mr. Chairman, as one exhibit, and they can be marked. Each separate option may be marked “ A, B, C, D, E”, and so forth, with the exhibit number. The CHAIRMAN. Let them be admitted.

(Copies of options given to Redmond & Co., 1929 to 1933, were received in evidence, marked " Committee Exhibit No. 78, Feb. 22,

on my

1934 ", and the same will be found at the conclusion of today's proceedings.)

The CHAIRMAN. Is it the common practice for members of the exchange to operate under options like these?

Mr. Day. I think it is, sir.

Mr. PECORA. And the purpose of obtaining these options is to enable the optionee to distribute the stock covered by the options at a profit through the medium of market operations?

Mr. Day. Market or private. In other words, the object of obtaining one of these options, most naturally, is to make some money legitimately. Mr. PECORA. Now, you are going to enter into a long controversy.

Mr. Day. I will leave that out, rather than take the time. All right; to make money. I want to finish as bad as anybody.

Mr. PECORA. It was a practice under which members of the exchange from time to time conducted market operations at a profit to themselves; isn't that so?

Mr. Day. Yes.

Mr. PECORA. And the operations would be both on the buying and selling side in order to stimulate the market and create an additional activity in the market by means of which the distribution at a profit was effected?

Mr. Day. Yes, sir.
Mr. PECORA. I think that is all I have to ask.

Mr. Day. The same as they put the dummies in the bus to get other people to ride.

The CHAIRMAN. You may be excused, Mr. Day.
Mr. PECORA. Is Mr. Bowers here?

TESTIMONY OF HENRY S. BOWERS, PARTNER IN GOLDMAN,

SACHS & CO., NEW YORK CITY

The CHAIRMAN. Mr. Bowers, come forward and be sworn, please.

You do solemnly swear that the testimony you are about to give in the matters under investigation by this committee will be the truth, the whole truth, and nothing but the truth. So help you God.

Mr. BOWERS. I do. Mr. Pecora. Mr. Bowers, what is your full name and address, please?

Mr. Bowers. Henry S. Bowers, 30 Pine Street, New York.

Mr. PECORA. Are you connected with the firm of Goldman, Sachs & Co.?

Mr. BOWERS. Yes, sir.
Mr. PECORA. How long have you been connected with that firm!
Mr. BOWERS. Thirty-four years.
Mr. PECORA. In what capacity are you now connected with them?
Mr. BOWERS. First as an employee and since 1915 as a partner.
Mr. PECORA. And what is the business of Goldman, Sachs & Co.?
Mr. BOWERS. Banking, general.

Mr. PECORA. I show you what purports to be a photostatic copy of a letter addressed to the secretary of the Committee on Business Conduct of the New York Stock Exchange under date of August 4, 1933, signed “Goldman, Sachs & Co." Will you look at it and tell

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