Senator HARRIS. Now, was this document to which Mr. Adlerman has referred among the original documents furnished by Putnam Investors in order to secure this charter? Mr. WALSH. Yes, sir. Senator HARRIS. And you have examined it and the original files with SBA? Mr. WALSH. Yes, sir. Senator HARRIS. Very well. It will be marked as "Exhibit 24" and, without objection, will be admitted into evidence. (Document referred to marked "Exhibit No. 24" for reference and may be found in the files of the subcommittee.) Senator HARRIS. Now, Mr. Walsh, the documents that we have just admitted and the testimony that you have given show that, despite the fact that these people had represented to SBA that no salaries were to be paid to the officers; nevertheless, checks were drawn on the Putnam Investors, Inc., funds for ostensible use as officers' salaries? Mr. WALSH. Yes, sir. Senator HARRIS. Will you proceed? Mr. WALSH. I Would like to go back to our staff exhibit SP-19 and identify individually the exhibits which we have to document the transfer of the funds. Senator HARRIS. All right. That now has been admitted into evidence as exhibit 23. Now, what is item A? Mr. WALSH. We have first of all three checks on Putnam Investors' bank account, in the Connecticut National Bank, each dated May 7, 1962, and each in the same amount, $2,300, and each signed by L. C. Huck and Curtis Ivey, payable to Amy T. Finneran, Curtis Ivey, and Louis C. Huck. They were all deposited in the joint account of Louis Huck, Amy Finneran, and Doris W. Ivey, the wife of Curtis Ivey, at the Fairfield County Trust Co. We have a copy of the ledger sheet of the account, the joint account, showing this deposit, and we have copies of two checks that were drawn against these funds. The first is a check dated May 7, 1962, for $5,000 payable to Putnam Investors, Inc., and signed by Curtis Ivey and L. C. Huck. His was the $5,000 that was redeposited in the Putnam account. We have a check for $1,011.11 signed by L. C. Huck, payable to the City Trust Co., and our investigation showed that this was used to pay interest on the personal loans of Finneran, Huck, and Ivey at the City Trust Co. I would also like to refer back to the loan from the County National Bank of Mineola, N.Y. I would like to introduce financial statements submitted by Mr. Huck, and by Mr. Finneran to the County National Bank in connection with their loan. Senator HARRIS. Where did you receive those? Senator HARRIS. They will be admitted, without objection, in a group as exhibits 25 A, B, and C. (Documents referred to marked "Exhibits Nos. 25A, 25B, and 25C" for reference and may be found in the files of the subcommittee.) Mr. WALSH. We have two financial statements from Mr. Huck, one dated June 1, 1962, and the second dated December 31, 1962. Senator HARRIS. Do you want to make any comment about what those show as to net worth? Mr. WALSH. The statement dated June 1, 1962, shows a net worth of $2,400,000, and the statement of December 31, 1962, shows a net worth of $1,600.000. (At this point Senator McClellan withdrew from the hearing room.) Mr. ADLERMAN. He lost something like three-quarters of a million dollars inside of 6 months? Mr. WALSH. Yes; according to these statements. Mr. ADLERMAN. Or rather, there is a decrease in the statement of net worth from $2.4 million on June 1, 1962, to $1.6 million on December 31, 1962? Mr. WALSH. Yes, sir. The statement of Mr. Finneran is actually a duplicate of the one he submitted to the District of Columbia National Bank. Senator HARRIS. This statement was submitted to what bank? Senator HARRIS. And it duplicates the one you previously testified to? Mr. WALSH. Yes, sir. Mr. ADLERMAN. It was on the basis of these financial statements that they obtained the loan of $92,000 from the County National Bank? Mr. WALSH. Yes, sir. Senator HARRIS. Now, then, Mr. Walsh, in the process of your investigation concerning Putnam Investors, Inc., did you find that funds of Putnam Investors, Inc., were used for personal purposes by the owners of the company? Mr. WALSH. Yes, sir. Senator HARRIS. You prepared in graphic form a list of these checks by date, amount, bank, payee, and purpose, did you not? Mr. WALSH. Yes, sir; I did. Senator HARRIS. Is this the document which I hand you now? Mr. WALSH. Yes; it is. Senator HARRIS. That represents the accurate situation on the use of those funds? Mr. WALSH. Yes, sir. Senator HARRIS. You prepared it? Mr. WALSH. Yes, sir. Senator HARRIS. Without objection, that will be admitted into evidence as exhibit 26. (Document referred to marked "Exhibit No. 26" for reference and will be found in the appendix on p. 289.) Senator HARRIS. If you will, take these transactions and testify concerning the use of these funds by the owners, that your investigation revealed. You should testify in regard to these detailed transactions as to how funds of this company were used for personal purposes by the owners, as your investigation revealed. Mr. WALSH. The first item on our list is a check dated October 31, 1962, in this amount of $79,000. This was a check drawn on the Connecticut National Bank by the Putnam Investors' account, and it was payable to the City Trust Co. Our investigation showed that this check was used to pay off the personal loan of Messrs. Finneran, Huck, and Ivey at the City Trust Co., dated August 30, 1961, which was used as their private capital contribution to Putnam Investors. The exhibit numbered to document this-it is one of the exhibits in SP-22. Senator HARRIS. I think we will have you testify to those as you proceed, but we will wait and admit all of those documents and instruments in a group following your testimony concerning this self-serving use of Putnam funds. Mr. ADLERMAN. In effect, what they did was to take the money out of the Putnam Investors' own bank account to pay to the City Trust Co. when their note was due. Mr. WALSH. Yes, sir. Mr. ADLERMAN. This is the note that they took from the City Trust Co. on which they claimed they had a capital of $175,000. Mr. WALSH. Well, it was $78,000. Mr. ADLERMAN. And they paid that off by a check from Putnam's own funds which would include some of the Government money. Mr. WALSH. Yes, sir. This check was issued after the receipt of the first $150,000 from the Government. Mr. ADLERMAN. Now, did they put that money back into the bank account of Putnam Investors? Mr. WALSH. I don't quite follow you there. Mr. ADLERMAN. Did they later deposit that money into the bank account? Mr. WALSH. Yes, sir. Mr. ADLERMAN. How did they do that? Mr. WALSH. You mean the money when they paid off the note? Mr. WALSH. At the City Trust Co.? Oh, yes, sir; it was renewed. Mr. ADLERMAN. When they renewed the note and got the money, did they put it back into the bank account of the Putnam company? Mr. WALSH. Yes, sir. Mr. ADLERMAN. How many times did they do that? Mr. WALSH. They did that several times. I don't know how many times that they did it. Senator HARRIS. Were you able to trace these funds as shown by the check in the amount of $79,000 drawn on the Connecticut National Bank with the ostensible payee being the City Trust Co., and you were able to show that these funds were used to pay personal loans? Mr. WALSH. Yes, sir. The next transaction is a check of $45,000 dated August 6, 1962, drawn on the Putnam Investors' bank account at the Crown Savings Bank at Newport News, Va., and this likewise was payable to the City Trust Co. This also was used to pay off a renewal of the loan of Finneran, Huck, and Ivey at the City Trust Co. Senator HARRIS. And the next item? Mr. WALSH. This is a check dated September 27, 1962, for $75,000 drawn on the Putnam account at the Crown Savings Bank at Newport News, Va. It was payable to the Connecticut National Bank to pay off the 1-year loan for $75,000. That was the original loan that was used to supply capital for the initial operation of the Putnam Investors. Senator HARRIS. In other words, then, here again, once they had secured the charter on the basis of borrowed funds, and received capital from the Government on that basis, after the company was chartered, they turned around and used company funds to pay off a portion of the borrowed capital. Mr. WALSH. Yes, sir. Senator HARRIS. What is the next item? Mr. WALSH. Senator, before we leave this, I would like to point out that $100,000 of Government funds was received by Putnam Investors on September 11, 1962, which was just prior to the issuance of this check. Senator HARRIS. Which was September 27. Mr. WALSH. Yes, sir. Senator HARRIS. What is the next item? Mr. WALSH. The next item consists of the three checks for $2,300 which we have already discussed. These were the checks which were reinvested in Putnam and also used to pay off interest on personal loans. Senator HARRIS. They are payable to Amy T. Finneran, Curtis Ivey, and Louis C. Huck. Do the checks themselves or the records of the company indicate a purpose for those checks? Mr. WALSH. No, sir. The records do not show the purpose. Senator HARRIS. You understand it is maintained that those three checks were for the purpose of paying officers' salaries? Mr. WALSH. Yes, sir. Senator HARRIS. That is despite the representations made to SBA, the documents we have previously admitted into evidence, that no officers' salaries were to be paid? Mr. WALSH. Yes, sir. Senator HARRIS. Very well. What is the next item? Mr. WALSH. The next items are two checks, both dated June 5, 1962, drawn on the County National Bank of Mineola, N.Y. These checks were payable to Louis C. Huck and Curtis Ivey. Senator HARRIS. Were you able to trace what became of the proceeds of these checks? Mr. WALSH. Yes, sir. These checks were endorsed by them to Francis J. Finneran and were ultimately deposited in the Charles County Land Co. bank account. Mr. ADLERMAN. Is that company owned or operated or controlled by Mr. Finneran? Mr. WALSH. Yes, sir; by Mr. Finneran. The next transaction is a check dated June 27, 1962, $5,000, drawn on the Putnam bank account at the County National Bank of Mineola, N.Y. It was payable to Walter Shultise. Our investigation indicates that at this date Walter Shultise was an employee of Francis Finneran in Washington, D.C. Mr. ADLERMAN. Did that check or the records of the company show any purpose for this $5,000 check? Mr. WALSH. No, sir. We haven't been able to find a purpose for that check. Mr. ADLERMAN. But the payee, as you state, was on that date an employee of one of those who was an effective owner of this company? Mr. WALSH. Yes, sir. Mr. ADLERMAN. What is the next item? Mr. WALSH. We have a check dated September 19, 1962, for $2,000 drawn on the Crown Savings Bank account, for Putnam, at Newport News, and the payee was Francis J. Finneran and it was deposited in his personal account. Mr. ADLERMAN. What is the next item? Mr. WALSH. The next item consists of three checks, each dated January 7, 1963, $7,000 each, and they were all drawn on the County National Bank of Mineola, N.Y., on Putnam funds, and they were payable to Francis J. Finneran, Louis C. Huck, and Curtis Ivey. These checks were deposited in a joint account of Finneran, Huck & Ivey and were used to pay off a personal loan of Finneran, Huck & Ivey at the Connecticut National Bank. This loan did not have anything to do with the capital injection of Finneran, Huck & Ivey, and as far as I can determine the personal loan had no relation to the affairs of Putnam. Senator HARRIS. But this was a personal loan of these three named individuals. Mr. WALSH. Yes, sir. Senator HARRIS. What is the last item? Mr. WALSH. The last item is a check of $2,000 dated March 30, 1965, drawn on the Putnam account at the National Bank of Rosslyn, Va., and it is payable to the St. Charles Development Co., which is a company controlled by Mr. Finneran. Senator HARRIS. Therefore, the total amount of Putnam funds you found to have been used for personal purposes by the owners of this company was $245,900 between October of 1962 and March of 1965? Mr. WALSH. Yes, sir; that is correct. Senator HARRIS. Now, these documents and checks and other instruments to which you have been referring up to now, identified in our files as SP-31, SP-22 and SP-19, SP-23, SP-1 and SP-24 will, without objection, be admitted into evidence as exhibit Nos. 27A through 27N. (Documents referred to marked "Exhibit Nos. 27A through 27N" for reference and may be found in the files of the subcommittee.) Mr. WALSH. Senator, I believe we have not discussed SP-31 at this point. We will touch on that later. Senator HARRIS. That will be withheld at this time until we go to the next stage of your testimony. Now, Mr. Walsh, in addition to the use of these funds for personal purposes by the owners, to which you have just testified, did your investigation reveal any self-dealing loans or investments which could be traced to companies owned or controlled by Mr. Finneran, Mr. Huck, or Mr. Ivey? Mr. WALSH. Yes, sir; it did. Senator HARRIS. Have you prepared a chart to graphically illustrate the use of such loans and investments? Mr. WALSH. Yes, sir; I have. Senator HARRIS. Is that the chart that you now present? Mr. WALSH. Yes, sir; it is. Senator HARRIS. The chart which is identified as self-dealing loans and investments traced to companies owned or controlled by Finneran, |