Evening Star Newspaper, June 9, 1933, Page 4

" A4 s» U, 3. AGENT BALKS AT MITCHELL TRIAL Fearing Jail, He Refuses to Give Information on In- come Tax Return. By the Associated Press. NEW YORK, June 9.—An internal revenue agent, called as a defense wit- ness in the trial of Charles E. Mitchell, declined todgy to give testimony on an income tax return until ordered to do so by the Federal attorney, on the ground that “it might mean a $1,000 fine or that I'd lose my job or go to jail.” The witness was S. O. Baradel, in charge of the income tax examiners in this district. Previous testimony had indicated that in 1930 the 1929 income tax return of Stanley A. Russell, a vice president of the National Ci Co., had been ap- proved in Washington after having been questioned here because he had failed to report his participation in the $1,- 860,000 management fund distribution in which Mitchell received $666,666.67. Mitchell also did not report his sifare, the directors of the company having declared the money to have been an over-payment to Mitchell and the other officers. His failure to do so is the ba- sis of one of the indictments against him | Baradel hesitated as Max D. Steuer, defense counsel, produced Russell’s re-l turn and asked him to identify it. “There are certain methods for dis- closing such information, but this is not one of them,” he said. “Well what is it you want to do?” | Steuer asked. “I don't want to do anything” the‘ witness replied. “This might mean a $1,000 fine or that I'd lose my job or go to jail.” George Z. Medalie, thereupon arose and to give his testimony, was in the court rool to do so. Another A<ant Refuses. Another v u#. ‘revenue egent, Leo Burmon, refused to testify without per- missio~ ¢! “special counsel for the Inters#i Revenue Department,” who, he -amt, was in the court room. Judge Henry W. Goddard remarked he had already signed an order direct- ing the agents to testify and that Medalie. would smooth out the tech- nicalities by calling them as Govern- ment witnesses. Frederick Slanker, special counsel for | the Bureau of Internal Revenue, told | the court that Supreme Court Justice Aaron Steuer, son of Max D. Steuer, had recently ruled in.another case that In- ternal Revenue men could not testify for the defense in income tax matters. “The sins of the father,” remarked Steuer amid general laughter. WOMAN'S RELIEF CORPS | TO SPONSOR EXERCISES | ¥lag Day Program Will Be Held Sylvan Theater Wednesday. The Grand Army of the Republic, | Women's Relief Corps and other patri- otic groups will sponsor Flag day exer- cises next Wednesday at Sylvan Thea- ter. In addition to a program of patri- otic music by the Marine Band, a march by the Women's Relief Corps and the Sons and Daughters of Civil War Veterans, and a drill by the Daughters of America, led by Drill Master R. G. Lewis, are scheduled. Other numbers on the program will be a vocal selection, “A Toast to the Flag,” by Mrs. Dorothy Pierson, and | an address by a prominent speaker, not yet named. Mrs. Marie C. Deale will sing “The Star Spangled Banner,” ac- companied by the band. Rev. Charles T. Warner, pastor of St. Alban’s Epis- copal Church, will offer the invoca- tion, and the benediction will be de- livered by Chaplain William Dorsey of the G. A. R. A color guard of soldiers, sailors and Marines will form for the cere- | monies. Federal attorney directed Baradel and Russell, who , authorized him at on CITY NEWS IN BRIEF. TODAY. Meeting, Tau Beta Phi Sorority, May- flower Hotel, 8 p.m Dance, Georgia State Society, Ken- nedy-Warren, § pm Card party, Vermont State Society, Continental Hotel, 8 p.m. Meeting, Ladies Auxiliary, District Fire Department, District Building, 8 pm. TOMORROW. Garden party, Woman's Auxiliary, Cathedral, Mount St. Alban, 4 to 6 pm To the Public LAMONT AND EWING Deals to Reduce Incorhes De- scribed by Two Partners in Morgan Firm. sales, $114,807.35, was deducted as loss from taxable income. The half a dozen Senators on hand listened without interrupting. Lent Stock to Self. Questioned about the trust accoun set up for his children, Ewing tes were created bv Mrs. Ewing in and 1926, with him as trustes. In 1928, he as tee sold for the accounts 4,350 shares of Johns-Mans- vilie stock which the accounts did not possess. Mrs. Ewing loaned to the trust 1800 shares, and he personally loaned 2,550. ‘The stock was sold for $654,476, ci- vided equally een the four accounts. short sale.” the com- pactly bu y-faced witness said he and his fe g $654,476 “You lent the stock to yourself as trustee?” Ewing nodded, explaining that “the lender of stock in a short sale gets the proceeds of the sale as security until the stock borrowed is returned. “The money divided between myself and vife in proportion to the sheres of stock we put up. as lent." After some consultation, Ewing said they had paid 47'. for the stock. Pecora figured that made the total cost of the stock to Mr. and Mrs Ewing $206,625. “So at_the time you sold this stock, it was sold for $447.000 more than the cost price to you and your wife indi- vidually?” Ewing agreed. “Do you call that a profit?” Flet- cher asked. “No there wan't any sale,” Ewing replied, noting that the stock only had been loaned- to the trust account. The short sales were made between August and December, 1928, starting at | 8127, a2nd the les. wer2 $200.75 | " “The tctel, as I have said,” he ex- plained, “was $654,476.” Profits to Trusts. Ewing disclosad that in October and November, 1929, he, as trustee, bought 500 shares of Jchns Mansville at $120 to $125 and that in May, 1931, he bought 500 other shares as trusiee at $47.50. The original shares were returned to himself and his wife, and he returned | $126,872.50 to the trusts. He placed the | profits to‘the trusts at $44,634. | Ewing said he had not covered any | EXPLAIN THER TAX THE EVENING | ing over to the new company securities | | which cost $52.000,000, the Van Swer- | | ingens perconally, and their companies, | received $36,000.000 in cash; securities i on which they mace a profit of $23.000,- | 000, and setilement of a debt of $l,- | 000,000. ! Pecora contended that if they had sold all the securities at the same price | they sold some, they would have re- | | ceived a total of $145,000,000, including | the cash. | Questioned on Loan. | In this computation he did not at- | tempt to figure the market value of | 1,750,000 option warrants carried on | the books at $1 each. | Pecora characterized the total as| | “realizable” profits, but the railroad 'leader took exception, because some ! (Continued From First Page.) | of the profits were not actually realized. | stock transactions wherel Pecora also developed that the Van: Sweringens were able to sell 682,000 | chares of Alleghany stock during 1929 for an average price of $48.50. Pre-| vious testimony has shown this stock | by Morgan & Co. to a se-| of clients, including William in, who has since become Sec- retary of the Treasury, at $20 a share. Pecora questioned Van Sweringen at length about a loan of $5,850,000 made | to the Missouri Pacific in March, 1932, by the Reconstruction Finance Corpo-| ration. The witness said it had been used to reduce obligations to Morgan, Kuhn, Loeb & Co. and the Guaranty Trust Co. The committee counsel recalled the | opinion of Commissioner Eastman of | the Interstate Commerce Commission | that the loan would “serve no good in- terest” in that it was being used to “bail out these banks.” The railroad now is in process of financial reorgani- zation. 'GAITHERSBURG HIG HOLDS CLASS NIGHT Play Features Program Given by | Senior Class—Seven Are in Cast. | Special Dispatch to The Star GAITHERSBURG, Md., June 9.— Class night exercises by the senlor class | of Gaithersburg High School were held | here last evening. Featuring the pro- gram was the play “Mr, Bob,” with Jack Haske, Norman Jacobs, . Fenton Kep- | hart, Alverda White, Evelyn Myers, | Marian Lcwe and Mary Lee Griffith as | members of the cast. | Tpe class poem was rendered by Mar- garet Musser. Robert Louis Wells pre- sented the class key, which was re- | ceived by Samuel L. Gloyd, member of the Student Council. | The gift to the school, which was presented by Jack Haske, was gratefully received by T. W. Troxell, principal. | Other interesting numbers included the | class history, by Gladys Liskey, Isabella | Grifith, Gertrude Watkins, Kenneth Howes and Harry Hamman; pres- entation of wills, by George Bean, Vir- ginia Thomas, Christine Connell, Vir- | ginia Beall, Louise Mainhart, Virginia Davis and Hazel Duvall; with the prophecy, by Helen Fealey, Evelyn more of the short sales, and the prin- | Gloyd, Laura Hershey, Arthur Beall, cipal reason was income taxes. He added that the short sales could have been covered at any time up to the present with a profit. Questicned further, he said he and his wife had received the $654,000 as security for the stock they loaned the trust accounts. “By this process,” Pecora asked, “haven't you and Mrs. Ewing enjoyed all the benefits of outright sales?” “All I can say,” Ewing replied, “is that this was carried out as a regular short sale. The only difference was that the stock was borrowed from Mrs. Ewing and me.” “Has the Morgan firm a policy on short sales?” Pecora asked. “Yes,” Ewing said slowly, “the part- ners are not supposed to sell stock short.” “Did you depart from that policy when the trust sold 4,350 shares of Johns Mansville Co. short?” Ewing answered promptly, “No.” “It was tone for the trusts,” he said. “I acted as trustee.” Fletcher asked why Ewing had not | | Isadore Wolfson, Betty Ward, Catherine | Boland and Charles Schwartzbeck. | " The program was arranged under the | direction of Miss Wilma. Watkins of the High Schocl faculty. 20,000 CATHO‘LICS CAMPED l NEAR MUNICH, GERMANY |Ban on Gesellentag Removed and Journeymen of Different Trades Gather for Convention. | By the Associated Press. | | MUNICH, Germany, June 9.—The | ban ‘on the Gesellentag having been removed, about 20,000 persons from all parts of the world camped in tents outside the city today for the Roman | Catholic Convention of qualified jour- | neymen of different trades. Groups came from the United States covered the short sales and reaped the | and many journeyed afoot from various profit for the trusts. “I thought it would go still lower,” Ewing replied He was reminded that the low for Johns Mansville was 12Y% in March of this year. “Why didn't you sell then?” Pecora asked. Ewing said he would have reaped a big profit for the trusts, but added idgment is not infallible.” “I don't think the trusts have any kick coming thus far,” he said. Made Large Profit. Yesterday Pecora finished questioning O. P. Van Sweringen, railroad operator, | disclosing that the Van Sweringen group | made millions_ in the organization of the Alleghany Corporation in 1929 and | had paper profits of almost $100,000,000. | The Alleghany holding company was | set up by the Van Sweringens with the | financial aid of J. P. Morgan and Co. | to control their several railroads in uni fied fashion Van Sweringen, who had proved a | poor witness on the first two days and | then turned around to show a remark- | able recovery of memory during the last two, readily agreed he and his associates had made $8.000,000 from the formation of the holding company. | He testified that in return for tum We have received many inquiries from consumers and dealers, ask- ing where BUDWEISER BEER is obtainable in the ci ton. Dealersare supplied from the ANHEUSER-BUSCH Washington D.C.Branch J. Julius Ehrhard, Mgr. Located at Delaware & E Streets, S. W. Phone —METROPOLITAN 0812 Consumers calling phone number will be given the address of BUDW nearest them wh further disappointment. | European countries. The Nazi Ba- | varian police had issued an order pro- | hibiting the Gesellentag only four days | ago, but it was withdrawn. Vice Chancellor Franz von Papen is to address the gathering tomorrow. The | Gesellenverein was founded in 1846 by | Father Adolf Kolping, a Catholic priest. |“ROBIN HOOD” SENTENCED | ——— ICorsican Bandit Believed Last in | Mountain Region. | AJACCIO, Corsica, June 9 (#).—Th: last of Corsica’s notorious outlaws, An- | drew Spada, who was captured in his | mountain hideout more than a week | ago, was sentenced yesterdy to two | years in prison on a charge of carrying weapons illegally. |~ Regarded as a sort of Robin Hood by Corsicans, Spada had evaded capture | 11 years. 1 Murphy Reaches Shanghai. | SHANGHAIL June 9 (#)—Gov. Gen. | Frank Murphy of the Philippines ar- | rived here today en route to Manila to assume his new duties. He received an enthusiastic welcome from Americans and Chinese in Shanghai. ty of Washing- the above tele- EISER dealers ich will avoid STAR, WA FRIDAY Text of Lamont Statement Morgan Partner Explains Stock Sales Under W hich $114,807 Was Deducted From 1930 Taxable Income. the Associated Press. \ HE full text of the prepared | statement read to the Senate Banking Committee today by Thomas S. Lamont, youthful Morgzn partner, explained the he deducted $114.807 from his §930 taxable income by selling stock to his wife, follows “When I went home over last week end I looked up as thorough as I could in those two days the transactions which I had had in those stocks men- tioned last Friday by Mr. Pecora. I ascertained the following facts “I was in 1930 the owner of those stocks which Mr. Pecora specifically referred to. At the end of that year I had a real loss in them, due to the decline in values. I sold them as fol- lows: a) Publicly— “One thousand shares Shamrock Oil Gas Co., on December 30, 1930, “One thousand five hundred Conti- nental Oil Co., on December 31 1930. “Two hundred Durium Products Cor- po;;!lon preferred, on December 31, 1930. “Three hundred Hall Electric Heating Co., on December 31, 1930. “(b) To my wife on December 30, 1930— “Five hundred shares State Street In- vestment Corporation. “Three hundred and fifty Investment Corporation of Philadelphia, “237 P. R. Mallory & Co., common. “My beneficial interest in 1,000 of Simms Petroleum capital stock. Gave Note for Stock. “My wife purchased in the market a similar amount of the shares sold publicly. “She purchased them for cash and borrowed an equal amount from me, | upon her demand note which, though not specifically collateralled, was well covered by the shares themselves plus her other personal estate. “Proper transfer stamps were affixed to each transfer; the usual commissions were paid to the brokers where securi- ties were sold through public sales. “There was no agreement nor any understanding between us that I should any time later on repurchase these shares from her, or any of them. “I intended the sale to be a com- plete and final disposal of these shares and she understood it to be s0. “Dividends on these shares after she bought them were naturally paid to my wife for her own personal account. “1 was advised that under these cir- cumstances I was fully within my rights in deducting from my income return for the year 1930 the amount of the loss sustained. “In. the early part .of 1931 things seemed to improve, but after several | months they seemed to me to be slipping | and by April i looked to me as though | they might get considerably worse. | “I talked to my wife about this and | we both felt that it was not wise that | she should continue to carry this debt | against stocks. Repaid Original Price. “Therefore, I purchased the stock | from her on April 8, 1931, at the orig- | inal price and she thereupon paid her loan; the note was surrendered and marked ‘paid.” “There was no substantial difference then in the value of the securities com- pared to December, 1930. The neces- sary steps involved in a purchase of securities compared tock place, includ- ing the payment of transfer taxes. I believe that I acted fully within my rights in making this purchase. “I am told that even if my tax deduc- tions growing out of the loss on all the above sales except those made pub- licly were eliminated it would result in an additional tax of $1,440.29 in my re- turn and $595.75 in my wife’s. “I have always understood that the Bureau of Internal Revenue regularly examines the tax returns made in our office and that whenever they find mis- takes they call our attention to them. “I have been told that in 1932 they made their usual examination, both of | my own and my wife's income tax re- turn for 1930. “At that time they were given full access to all books, papers and accounts, including the accounts of J. P. Morgan & Co., in which these transactions were recorded. Complete information was given to the bureau regarding both my sale in December. 1930, and my pur- chase in April, 1931. Waives Limitation. “I'd like to say here that mistakes in my returns could come from clerical errors in their compilation, which in our office are rare, or they could come from_some error on my own part in the handling of my affairs. If the bureau had found the latter I can only say that it would have been an honest | mistake and that it would probably have been due to mv difficulty—which others share—of fully understanding the technique and details of the income tax law. “Since the bureau’s examination I have received from them no inquiry, | criticism or complaint, nor has there been at any time any redetermination | of my tax or any request for a further | payment. “Some one has said that the time allotted the bureau under the statute to make a redetermination has expired. That doesn’t mean anything to me cause I don't intend to try and hide my income tax return now or at any time behind a statute of limitation. “If the bureau wants to make a re- investigation of these transactions, nat- urally I am entirely willing that they | should do so and quite ready to waive any benefit from the lapse of time which the statutes may give.” | NURSE DISTRICT FORMED |Damascus and Laytonsville Areas Are Included. | Special Dispatch to The Star. | ROCKVILLE, Md, June 9.—A new | public health nursing district has been created in the county, Dr. V. L. Ellicott, county health officer, has announced. It comprises Damascus and Laytons- ville election districts, and Miss Keys, county health nurse, has been placed in charge. As the population of this area is small, Miss Keys will be able to continue her work on the county tuberculosis program. JUNE 9. 1933. FARMER ATTAGES NEW RELEF BAL James R. Howard Says It Is Impossible to Legislate Food Control. By the Associated Press. CHICAGO, June 9.—Inferring th: the new farm relief bill was in the na- ture of another “noble experiment,” James R. Howard, Iowa farmer and [ former president of the American Farm Federation, last night declared it was | | practically impossible to legislate faed | control. Speaking at the annual banquet of the National Metal Trades Association, Howard said: “Our Nation ought to have had suf- ficient recent experience with the eighteenth amendment to know the limitation of Government in legislating human actions and liberties.” | While lauding the “action” displayed by President Roosevelt, Howard said he did not know of any law that Congress could pass to keep the farmer from producing at a maximum. If acreage were cut_here, he said, foreign coun- tries would act accordingly and expand acreage. | Farmers Heartened. | Farmers have been heartened by the | recent increase in prices, he said, but they were of the opinfon the increasc came from natural causes rather than legislation. “Inflation is the only corrective I | can see for the economic absurdity into | which we have been forced. History | cites many instances in which at- tempts have been made to control food production by governments. So drastic have been the attempts to enforce these laws that the death penalty has been prescribed in some instances for disobedience. Yet no nation has ever succeeded in accomplishing the results d&;ired by means of such laws,” Howard sald. “No farmer wants printi press monfey with wildcat inflation,” said. | eral Reserve issue based on national credit, the larger use of silver, or the | lowering_ grain content of the gold dollar. If any difference we favor the latter.” Officers Re-elected. J. F. Lincoln, Cleveland, urged in- dustrial leaders to take steps to obtain Government Tepresentation before complete ruination of business” was brought about. He compared “mud- dling attempts” of the Government to “We express little choice between Fed- | control industry with the le of the goose that laid the golden egg. “The net result of this excursion into | golden egg experimentation.” Lincoln said, “is that the eggs stop and we all suffer.” All officers were re-elected and the following councilors were named: H | S. Chafee, Providence, R. I; Roe S Clark, Springfield, Mass.; Henry W.| Johnson, Trenton, N. J. T. Keller, Detroit; J. R. Kinney, Boston, and A. H. Tuechter, Cincinnati. Woman Robbed by Two “Doctor: CHICAGO, June 9 (P —Two “d tors” called on Mrs. Kathryn Z: At least they said they were do: and that they had been sent by the County Hospital to examine her. In- 2ad, she told police, they proceeded o rip a money bag from r dress, taking Ler life savings of $1,070. Mary Lewis Under Knife. NEW YORK. June 9 () —Mary Lewis, opera singer, was operated yesterday for chronic appendicit {the Harbor Sanitarium. Phy | said she was resting comfortably. = : $10,000 Taken From Messenger. | . PEKIN, Il., June 9 () —Two men held up a bank messenger d bo keeper in front of the post office tode: and escaped with $10,000 in currency. W. M. Martin Named Colonel. Deputy Marshal Willlam M. Martin, assigned to the Municipal Court, has been appointed a colonel on the staff | of Gov. Ruby Laffoon of Kentucky, in recognition of his services during the| ‘World War. —when you dress in M they have the style that Palm Beach REPORT IS ORDERED IN OUSTER OF LONG Seek to Determine Whether Peti- tion to Senate Could Be Received. By the Assoctated Press. The Senate Judiciary Committee to- day instructed a subcommittee headed by Senator King, Democrat of Utah, to prepare a formal report for submission tomorrow on whether a petition to the Senate, asking the ouster of Senator | Huey P. Long, Democrat of Louisiana, could be received and was privileged for publication. The petition, prepared, signed and advocated by former Gov. John M. Parker of Louisiana, contained & num- s against Long, who on allenged its receipt by Vice in a report presented to the whole committee today, is under- stood to have held that it should have been rece that it could be pub- lished so long as there was official ac- tion by the Senate making it & public document and no malice was involved in its publication. .It was understood that King and Senator Hastings, Republican of Dela- ware, will go over this report this after- noon, shorten it and probably other- wise revise it somewhat, but not change its material sense, and report back to the whole committee tomorrow. astheproverbial cucumber ode featherweights—for charms and the comfort that keeps the temperature down. Replenished! 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