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 manufac

turer

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 all 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. purports to be a photostatic reproduction of the you have just handed to me, dated June 16, 1933. 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.

I show you what copy of the letter Do you recognize

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

Mr. 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]:

Messrs REDMOND & Co.,

48 Wall Street, New York, N.Y.

JUNE 16, 1933.

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.

sir.

Mr. DAY. It was put into the original syndicate agreement; yes,

Mr. PECORA. And dealt with in the same manner.

Mr. DAY. Yes, sir.

Mr. PECORA. As the stock that was optioned to the syndicate under date of June 1, 1933, by the Libbey-Owens Securities Corporation. Mr. DAY. That is correct, sir, absolutely.

Mr. PECORA. Were the trades that the syndicate made in the stock, that have already been testified about by both you and Mr. Gibson, trades which included trades under this option of June 16, 1933?

Mr. DAY. The trades which were testified to yesterday, in the volume of stock which I gave you from the copy of the memorandum which you had, were part and parcel of this, and the same syndicate were part and parcel of this, and had the same participation.

Mr. PECORA. And also operated without putting up any cash from its own resources. That is to say, the syndicate was able to take down the stock under this option out of the proceeds of sales of the stock which it had already made in the open market against this option.

Mr. DAY. They took down this with the differential.

Mr. PECORA. What was the difference?

Mr. DAY. I do not know, but there would be a differential. There was no money put up. There was enough money there to take it in. I do not mean to quibble.

Mr. PECORA. On those options, during the operations of this pool last summer, when stock was purchased on the way down, from about 28 to 21, is it not a fact that those purchases were made to cover a short position which the pool had taken in the stock?

Mr. DAY. I could not answer without, so to speak, matching up trades.

Mr. PECORA. Perhaps Mr. Gibson, the auditor of your firm, could inform you as to that.

Mr. DAY. I think, if given sufficient time, we could answer that question, and would be very glad to.

Mr. PECORA. How much time would you need, Mr. Day?

Mr. DAY. I do not know, sir. Personally, I think the answer is that if that was true, we are perfectly willing to admit that. Probably it was true. But, on the other hand, if we bought 25,000 at $27.50, and we bought 26,000 at $26.50, and the market went down to 21 or 21%, or 2114, whatever happened to be the low, it is fair to suppose that this group would have been only too glad to have bought stock 5 or 6 points lower than the point at which they had

taken these on.

Mr. PECORA. The reason I asked you that is because our analysis of the trades would tend to indicate that was what was done, but I wanted to make sure of it so that the record will not in any way do an injustice to the facts.

Mr. DAY. I have gentlemen here who could break it down. Possibly they could go outside and break it down. I have my two best men here, who handled all these details. I, personally, did not. I will be very glad, if it so shows, to testify that at that particular moment there was a buying power in the syndicate.

Mr. PECORA. I will tell you what I suggest might be done. Let your Mr. Gibson make the break-down, and if he reaches a conclusion, from his analysis of the trades made by the syndicate, other than the one that we have reached, let him so state, and we will put it in the record.

Mr. DAY. I want to facilitate it all I can. At any rate, whether he would be able to do it right here, without his tickets and other paraphernalia which they use in a matter of that kind, I do not know. Mr. Gibson would be very glad to return here at any time and give you the facts about it for your record.

Mr. PECORA. If we do not hear to the contrary in the next few days from you or Mr. Gibson, it is safe to assume that these purchases on the way down were made to cover short positions.

Mr. DAY. I think that is quite correct, sir.

Mr. PECORA. Was there any other option that this pool or syndicate acquired during the time that it was trading in this stock last summer?

Mr. DAY. No, sir.

Mr. PECORA. I have no further questions to ask, then, about these pool operations in this particular stock. Is there anything you want to add to the testimony you have already given on this subject, Mr. Day, without the necessity of being asked specific questions about it?

Mr. DAY. I do not think there is very much that I would like to add, and I hesitate to add what I might say, but, in justice to my partners and Redmond & Co., I would like to say that in this particular instance-and we try in every single instance, in any stock we go into I have heard this question raised here, which brings it to my mind. We have a very large statistical department that makes a very thorough analysis of any stock, and in this particular instance we considered it was undervalued. I had a break-down made, to correct an impression relative to the manner in which I handled this situation. It was closed while I was away, but I had, I suppose, the most to do with it, and, interpreted as it may be interpreted, there was a profit of $395,000. There was a distribution of 165,000 shares. According to the accounting department, they tell me that there was a profit per share of $2.40. At a price of $30, this would represent 8-percent commission paid for distribution.

I have not anything to add further than that. I am giving you the best of my recollection.

The CHAIRMAN. You may be excused.

Mr. PECORA. I want Mr. Day to testify with regard to another inquiry.

Mr. DAY. At this time?

Mr. PECORA. Not at this time, but I want him to remain within call. (Witness temporarily excused.)

Mr. PECORA. I now call Mr. Seton Porter.

TESTIMONY OF SETON PORTER, NEW YORK, PRESIDENT NATIONAL DISTILLERS PRODUCTS CORPORATION

The CHAIRMAN. 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. PORTER. I do.

Mr. PECORA. State your full name and address, please, Mr. Porter, Mr. PORTER. Seton Porter; 52 William Street, New York.

Mr. PECORA. Are you the president of the National Distillers Products Corporation?

Mr. PORTER. Yes, sir.

Mr. PECORA. How long have you been president of that company? Mr. PORTER. Since its formation.

Mr. PECORA. That was when?

Mr. PORTER. 1924; 10 years.

Mr. PECORA. Since its formation, have you also been a member of the board of directors of the corporation?

Mr. PORTER. Yes; always.

Mr. PECORA. What is the capital structure, briefly, of the National Distillers Products Corporation?

Mr. PORTER. At the present time, sir?

Mr. PECORA. You might give it at its formation in 1924, and then briefly give any changes that have been made in its capital structure since that time.

Mr. PORTER. It is quite a long story, sir, and, if you would permit me to be approximate, I can give you roughly the idea.

Mr. PECORA. All right, sir. Do it that way.

Mr. PORTER. The company was formed in 1924 as the outgrowth of a receivership and a bankruptcy. I came into the matter as an engineer on reorganization, and subsequently was asked to become the president when this company was formed as a reorganization.

It started with approximately three and one half millions of, I think, about 7-percent bonds. Those bonds were sold to the public. The proceeds of those bonds were used to pay

Mr. PECORA. Were they debenture bonds?

Mr. PORTER. Debentures; 10 years, I think they were, sir. The proceeds of those bonds were used to pay the expenses of reorganization and trade creditors, and that sort of thing, and leave a small amount of cash in the company.

The company had, in addition to those bonds, a little less than $12,000,000 of 7-percent preferred stock, which was given in exchange or was given for the bank debt and a previous issue of bonds. There were about six millions of bonds outstanding in the hands of several thousand people of the old company and about six millions of bank debt. This preferred stock was, through the reorganization, given in exchange for those bonds and the bank debt, so that this company you are now asking me about, sir, started in 1924 with some three and one half millions of debentures, elevenmillion-and-odd of this preferred stock, and 168,000 shares of common stock.

Mr. PECORA. No par value.

Mr. PORTER. No par value. Just to make the picture a little more complete, that preferred stock, because of the difficulties, was not made cumulative for a period of 6 years. At the end of 6 years it was to become cumulative. That is where we started.

As to the first change, roughly speaking, we succeeded in selling a yeast company, known as the "Liberty Yeast Co.", and with the proceeds of that sale at that time I think we succeeded in paying

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