Mr. PECORA. In the course of the discussions you must have reached the conclusion that your stockholders would subscribe for the 27,591 shares. Mr. PORTER. Not necessarily. But it looked, on the date when that action was taken and the offer was made, that if we did not have a decline in the market or a change in conditions, that they would take it. Mr. PECORA. And you did not expect a decline in the market at the date you made this offer to your stockholders, did you? Mr. PORTER. I beg your pardon, but the resolution was adopted on the 27th of April, and the stockholders got it several days later, after printing and mailing, and then they had 30 days, or at least 20 days, to avail themselves of the offer, and no one will avail himself of an offer, practically speaking, until the eve of the expiration date. Mr. PECORA. Was this offer to subscribe declined by anybody? Mr. PORTER. No, sir. Mr. PECORA. Wasn't it practically certain that the stockholders would subscribe for all of it? Mr. PORTER. No, sir. There was a risk. We decided we would not pay the expense of underwriting. I had discussed with bankers prior to these negotiations the cost of underwriting what would approximately produce a million or a million and a half dollars, and we found that that would probably cost us a minimum of 2 or 21⁄2 points, and that we could only get such underwriting at such an expense; and we would have been subjected, I believe, to much criticism if the market had gone up and things had gone well, had we made the underwriting with bankers and agreed to pay them 2 or 22 points, or whatever we had to pay. If things had gone very well the stockholders would then have said to us-and this is just on the question you are asking me now-Why didn't you offer all of it to us? We felt that the fair thing to do here was to offer the shareholders 1 share in 10 at the same price, to put the company to no expense for underwriting, and with the great hope and expectation that the market would hold and the shareholders would take it, which is what happened. Mr. PECORA. For all you know, the same thing would have happened if the entire issue of 67,000 shares had been offered to the stockholders. Mr. PORTER. I do not think so, for this reason, that a good deal of that stock was held in fairly large blocks. This was just after the bank holiday in March. The country was in terrible condition. Mr. PECORA. No; this was April 27. Mr. PORTER. I say, the bank holiday was in March, about 40 days before that, and most of our largest shareholders, with whom we could talk, while on the one hand anxious to preserve as much of their equities as possible by not selling any more shares to anyone else than necessary, were, on the other hand, in such financial condition that they would not be very enthusiastic about being asked to make a further subscription to shares at or around the market, or even below it. Mr. PECORA, I think that is all of this witness. Have you any statement to make or any information you would like to give the committee without being questioned specifically, Mr. Porter? Mr. PORTER. I do not think so, sir. Mr. PECORA. You have the opportunity now of doing it if you desire to do so. Mr. PORTER. I do not think there is anything else. Mr. PECORA. Is there anything else you want to tell the committee with regard to the various matters and transactions that you have been examined about? Mr. PORTER. I think that is a complete statement. Mr. PECORA. All right. The CHAIRMAN. You may be excused, Mr. Porter. (Witness excused.) Mr. PECORA. Is Mr. Levis here? I want to have marked for identification only, Mr. Chairman, the copy of the letter shown the witness, and which he stated was not sent. It was drafted, but not sent, dated April 27, 1933, and addressed to Redmond & Co. (Copy of draft of letter, Apr. 27, 1933, National Distillers to Redmond & Co., was marked "Committee's Exhibit No. 77 ", for identification, Feb. 22, 1934, and the same is held in the files of the committee.) TESTIMONY OF WILLIAM E. LEVIS, TOLEDO, OHIO, PRESIDENT OWENS-ILLINOIS GLASS 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. LEVIS. I do. Mr. PECORA. Mr. Levis are you connected with the Owens-Illinois Glass Co.? Mr. LEVIS. I am president of that company. Mr. PECORA. How long have you been connected with the company in that capacity? Mr. LEVIS. Four and a half years, sir. Mr. PECORA. You are also a director? Mr. LEVIS. Yes, sir. Mr. PECORA. And a stockholder, of course? Mr. LEVIS. Yes, sir. Mr. PECORA. Have you heard the testimony given today before this committee by the preceding witness, Mr. Seton Porter? Mr. LEVIS. Yes, sir. Mr. PECORA. You heard references to William E. Levis in that testimony? Mr. LEVIS. Yes, sir. Mr. PECORA. You are the Mr. Levis referred to in that testimony, are you not? Mr. LEVIS. Yes, sir. Mr. PECORA. Without going over the details of the transactions referred to by Mr. Porter, with respect to the options that were given to you by the National Distillers Products Corporation, will you tell the committee whether or not you exercised that option in full? Mr. LEVIS. I exercised the option in full. Mr. PECORA. You also purchased the 20,000 shares of stock referred to in that option letter in addition to the 12,000 shares that were optioned to you? Mr. LEVIS. Yes, sir. Mr. PECORA. Twenty thousand shares were purchased by you at $25 a share, and 12,000 shares were optioned to you at $27.50 a share? Mr. LEVIS. Yes, sir. Mr. PECORA. At the same time did your corporation, namely, the Owens-Illinois Glass Corporation, buy 10,000 shares at $25 a share, referred to in the letter offered in evidence here this morning, dated April 28, 1933? Mr. LEVIS. May I correct that, Mr. Pecora? You have made that statement before. The Owens-Illinois Glass Co. have never made an investment in any of their customers' business. The investment was made by the Illinois Glass Consolidated Corporation, now called Illinois Glass Co., of which I am also president. Mr. PECORA. Is that a corporation separate and distinct from the Owens-Illinois Glass Corporation? Mr. LEVIS. Yes, sir. It has nothing to do with it except that it is a large stockholder of Owens-Illinois Glass Co. stock. It was formerly the Illinois company's assets that were sold that caused the Owens Bottle Co. to become Owens-Illinois Glass Co. Mr. PECORA. Then these 10,000 shares were not purchased by the Glass Manufacturing Co. known as the Owens-Illinois Glass Co., but were purchased by this other corporation called the OwensIllinois Mr. LEVIS. Called the Illinois Glass Consolidated Corporation. Mr. PECORA. That company bought those 10,000 shares at $25 a share? Mr. LEVIS. Yes, sir. Mr. PECORA. Under the terms of the letter of April 28, 1933. Mr. PECORA. Now, at the same time, you heard Mr. Porter testify, a sale was made to Redmond & Co. of 10,000 shares of the common stock of National Distillers Products Corporation, also at $25 a share. Mr. LEVIS. Yes, sir. Mr. PECORA. Did you have any interest in that sale? Mr. LEVIS. I had an option on those 10,000 shares at $27, good for 5 days. Mr. PECORA. That option was given to you by Redmond & Co. ? Mr. LEVIS. Yes, sir. Mr. PECORA. Did you exercise that option? Mr. LEVIS. Yes, sir. Mr. PECORA. And took down all the 10,000 shares? Mr. LEVIS. Yes, sir. Mr. PECORA. So that all told, you acquired individually 42,000 shares of the National Distillers Products Corporation? Mr. LEVIS. Yes, sir. Mr. PECORA. At these prices? Mr. LEVIS. Yes, sir. Mr. PECORA. 20,000 shares at $25 a share, 10,000 shares at $27 a share, and 12,000 shares at $27.50 a share. Mr. LEVIS. Yes, sir. Mr. PECORA. Did you hold those shares or did you dispose of them shortly after you acquired them? Mr. LEVIS. I disposed of them shortly after I acquired them. Mr. LEVIS. Yes, sir. Mr. PECORA. Through what broker or brokers? Mr. LEVIS. Redmond & Co. Mr. PECORA. Did you have a joint account with them in any of those shares? Mr. LEVIS. I had a joint account with Mr. Mason Day, of that company, in the shares. Mr. PECORA. When was that joint account formed, Mr. Levis? Mr. LEVIS. Sir? Mr. PECORA. When was that joint account formed with Mr. Day? Mr. LEVIS. On April 29. Mr. PECORA. 1933? Mr. LEVIS. Yes, sir. Mr. PECORA. How many shares were involved in that joint account? Mr. LEVIS. On the original purchase, 20,000 shares were involved, and of the option, I abandoned the joint account plan as outlined in the letter, with Mr. Day's mutual consent. I took down all of the optioned shares and actually sold to Mr. Day 7,250 shares at $29.16 per share, retaining myself 4,750 shares, that cost me $27.50 a share. Mr. PECORA. What was the purpose of the formation of the joint account with Mr. Day, Mr. Levis? Mr. LEVIS. I did not feel that I could at that time afford to purchase all the shares personally. Mr. PECORA. As a matter of fact, what was the apportionment of interest between you and Mr. Day in that joint account? Mr. LEVIS. May I state that there was an account, 10,000 of the 20,000, that ran to me, in which I had other associates of mine who paid for 7,700 shares of that stock of the first 10,000 out of the 20,000 that ran to me. I took the balance of those shares directly myself, with no participation on the part of Mr. Day. On the remaining 10,000 shares, Mr. Day was joint account with me at a price of 26 or better, and on the 10,000 shares that I received through Redmond, he was joint account with me at 27 or better. Mr. PECORA. What was the purpose of the formation of the joint account with Mr. Day? Mr. LEVIS. I might answer it in Mr. Day's words and the words of Mr. Wright, "to distribute the stock and make a profit." Mr. PECORA. Was trading done for that joint account after its formation? Mr. LEVIS. Mr. Day was more or less the manager of the matter. My records, as audited by Arthur Young & Co., indicate that in one of the 10,000-share blocks 400 shares were bought that were subsequently distributed, and in the other 10,000-share blocks 13 hundred shares were bought that were again distributed, so that we really, in distributing 20,000 shares, dealt in 3,700 shares-I mean in 2,100 shares. The CHAIRMAN. Did you employ any publicity agents or make any effort to boost the stock? Mr. LEVIS. No, Mr. Chairman. They were all open-market transactions. Mr. PECORA. In those market transactions did not the account buy and sell in order to enable it to make its distribution? Mr. LEVIS. In the only accounts that I had anything to do with, Mr. Pecora, one account bought 400 shares which it subsequently sold, and another account bought 13 hundred shares which it subsequently sold. The only shares purchased that were not received directly from National Distillers or Redmond & Co. were those 17 hundred shares. Mr. PECORA. Was that the only joint account or syndicate account that you participated in which traded in the stock of the National Distillers Products Corporation during the year 1933? Mr. LEVIS. So far as I can recall, sir. Mr. PECORA. In connection with the operations to dispose of the stock which you agreed to purchase, and did purchase directly from the National Distillers Products Corporation, as well as the stock that was optioned to you by that corporation, was it necessary at any time for you to make any payments for that stock, except out of proceeds derived by you from the sale of the stock in the market against those purchases or options? Mr. LEVIS. In answering that, Mr. Pecora, I thought of it as an entire block of 40,000 shares. There was paid by me $250,000 for the Illinois Glass Co.'s 10,000; $192,500 for my other associates' 7,700; and I banked the balance of it at Redmond. It would have been no different, in my own mind, had I gone to a bank at which I had credit and borrowed the money and put the dollars at Redmond, than if I had gone to Redmond and put up my option agreement, or any other collateral, and borrowed the money from Redmond with which to make the payment. Mr. PECORA. The 10,000 shares that were taken over by the company, the Owens Glass Co., or corporation, were not a part of the joint account with Day? Mr. LEVIS. No, sir. Mr. PECORA. So, we will leave those 2,000 shares out of the reckoning for the time being. The corporation paid for 10,000 shares, of course. Mr. LEVIS. Yes, sir. Mr. PECORA. And did not dispose of them in any market operation, and probably still have them. Mr. LEVIS. They still have them. Mr. PECORA. Confining ourselves, then, to the 32,000 shares, represented by the 20,000 you bought directly from the National Distillers, and the 12,000 optioned to you by the National Distillers, and the 10,000 that you took over from Redmond at $27, was it necessary for you to put up any moneys out of funds other than those derived from sales which you had made in the market against those purchases and against that option? Mr. LEVIS. Nothing other than the $192,500 that was put up by my associates. |