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Huck & Ivey, is now presented to the subcommittee. Was it made
under your direction and control?
Mr. WALSH. Yes, sir; it was.
Senator HARRIS. 'Is it true and accurate?
Mr. WALSH. Yes, sir; it is.

Senator HARRIS. Without objection, that chart will be admitted into evidence as exhibit 28.

(Document referred to marked as "Exhibit No. 28" for reference and will be found in the appendix on p. 290.)

Senator Harris. Would you explain that?

Mr. WALSH. In our investigation of the loans and investments which were made by Putnam Investors from 1961 up to the present time, we developed information which indicated to us that these loans were properly classified as self-dealing loans in that the operators and owners of Putnam had an interest in these companies.

These are not all of the loans that are on the books of Putnam Investors, but these are the ones which we felt we could classify as self-dealing

Senator HARRIS. Would you take each one?

I will ask you this first: What did these self-dealing loans and investments total insofar as you were able to determine?

Mr. Walsh. The total of these loans and investments is $540,829.

Senator HARRIS. Would you take the individual items as shown by this chart and briefly explain the items?

Mr. WALSH. The first loan that we have on the chart is a loan dated October 24, 1961, to a company called BAMG Corp. Our investigation showed that Messrs. Finneran, Huck, and Ivey were associated with two other individuals named Joseph Keating and Charles Mintz in an operation in New York City, prior to the time of the chartering of Putnam Investors.

The purpose of this operation was to produce TV and radio spot commercials. In the fall of 1961 the company was in difficulties and was failing. The BAMG Corp. was chartered in 1961, on October 23, and a loan was made to it the following day.

This company never actually operated, and in tracing the funds that were made available to it by Putnam Investors, we found that $12,900 of the $60,000 paid to BAMG eventually was deposited in an account called the Kent House Corp., at the Fairfield County Trust Co., and this is a company which was owned by Finneran, Huck & Ivey.

Senator HARRIS. The chart reveals that this $12,900 was traced through three banks.

Mr. WALSH. Yes, sir; it was.

Senator HARRIS. So that in any event, the $60,000 loan which was made October 24, 1961, went to two corporations ultimately, first the BAMG Corp., of which the owners of Putnam Investors were three of the five stockholders, and then a portion of that went from BAMG Corp. to the Kent House Corp., which was owned, was it, altogether, by Finneran, Huck & Ivey ! Mr. Walsh. Yes, sir. Senator HARRIS. What is the next item.

Mr. Walsh. Before we pass that, I might say that we attempted to obtain the books and records of BAMG Corp. under subpena and we

were never able to obtain them. Neither were we able to obtain the books and records of the G. P. Productions, Inc., which was the company by which the money was filtered to the Kent House Corp.

Senator HARRIS. Do you know anything about the ownership of that company?

Mr. Walsh. Not about the ownership. It was incorporated by Mr. Keating and Mr. Mintz. We checked with the Internal Revenue Bureau to see if income tax returns had been filed and we could find no record of any income tax return for BAMG Corp. or for G. P. Productions, Inc.

Senator HARRIS. The next item is in the amount of $60,000 and that loan was made by Putnam Investors on November 28, 1961.

Mr. Walsh. Before we proceed to that, I would like to introduce for the record SP-31, which is documentation on the checks, the $12,900.

Senator HARRIS. The various documents and instruments which substantiate the item on which you have just given testimony, SP-31, will be admitted into evidence without objection as exhibit 29.

(Documents referred to marked "Exhibit No. 29” for reference and may be found in the files of the subcommittee.)

Senator HARRIS. What is the next item?

Mr. Walsh. The next company is a company entitled “Bureau for Advanced Housing.” Our investigation showed that Bureau for Advanced Housing was incorporated in 1961, prior to the chartering of the Putnam Investors. The incorporators were Francis J. Finneran, and S. J. Schwinn, who is deceased. The records of the Bureau for Advanced Housing show that the initial stock issue was 625 shares, and that this was divided between Finneran and Schwinn on an 80-20 percent basis.

Senator HARRIS. Mr. Finneran receiving 20 percent?

Mr. Walsh. Mr. Finneran received 20 percent. Mr. Finneran and his wife received 125 shares of the original stock, which was a 20percent interest.

Senator HARRIS. Do you know what has happened to Mr. Schwinn's interest since his death?

Mr. Walsh. If I may continue here just a minute, Senator, the company began operations with money which was advanced by Putnam, and actually neither Mr. Finneran or Mr. Schwinn contributed any capital to the company for their stock.

In the fall of 1961 the Putnam Investors furnished money which ultimately totaled $60,000 and this was the money which they used to begin operations. In 1962 the National Gypsum Co., a major U.S. corporation, purchased 60 percent of the stock of the Bureau for Advanced Housing. There was an increased stock issue, and they acquired a 60-percent interest in the Bureau for Advanced Housing, and altogether invested about $800,000 in the bureau.

However, the operation of this company was not successful and after operating about a year the Bureau for Advanced Housing was placed in involuntary bankruptcy by the National Gypsum Co., with over $1 million in debts and only $30,000 in assets.

Senator HARRIS. The Bureau for Advanced Housing is a New York corporation !

ton, N.J.

Mr. Walsh. It was a New Jersey corporation, operated in PrinceSenator HARRIS. What was its general purpose ?

Mr. Walsh. The purpose of the Bureau for Advanced Housing was to sell packaged plans for model homes to construction companies and builders throughout the United States. The interest of National Gypsum Co. was in fact that in the design of these model homes, a substantial use would be made of National

Gypsum Co.'s products. Senator HARRIS. And your testimony on that loan is that it was a $60,000 loan to a company in which one of the effective owners of Putnam Investors, Inc. owned a 20 percent interest.

Mr. Walsh. Yes, sir.

Senator HARRIS. Do you have documents and instruments which substantiate those items on your chart which have not been admitted into evidence yet?

Mr. WALSH. Yes, sir.

Senator HARRIS. Without objection, then, they will be marked as "Exhibits Nos. 30A-30F” and admitted into evidence.

(Documents referred to marked "Exhibit Nos. 30A-30F” for reference and may be found in the files of the subcommittee.)

Mr. Walsh. I might say in the operation of the Bureau for Advanced Housing, before the involuntary bankruptcy, there was considerable friction between the National Gypsum Co. and the other interests represented by Mr. Schwinn and Mr. Finneran. Mr. Schwinn was president of the company, but prior to its dissolution, he delegated his authority to Mr. Finneran, who was acting as president at the time of the dissolution of the company.

Senator HARRIS. So Mr. Finneran was actually in control of the management of the company itself?

Mr. Walsh. Yes, sir.
Senator HARRIS. All right. What is the next item?

Mr. WALSH. This is a company called Coordinated Interiors, Inc. This company was chartered in 1961 and began its operation in the office of the Bureau for Advanced Housing, which we previously discussed.

The purpose of this company was ostensibly to act as a purchasing agent for the Bureau for Advanced Housing. It received funds from Putnam Investors, from the beginning, and its incorporators and its operators were Charles Mintz and Joseph Keating, whom we have already mentioned in connection with BAMG.

Our investigation showed that on August 18, 1962, Coordinated Interiors, Inc., received a check of $56,000 from Putnam. Coordinated Interiors at this point then wrote a check on these funds payable to Charles Mintz. Charles Mintz endorsed this check back to Putnam and this endorsement of the check back to Putnam was used to pay off the obligation of BAMG. So, in effect, the BAMG loan was paid on August 18, 1962, with Putnam's own money.

Mr. ADLERMAN. This is really a "bailout” of their own investment in this company which made TV or radio commercials.

Mr. WALSH. Yes, sir.

Mr. ADLERMAN. They wanted to get repaid for their investment, so they sold that company to BAMG. They were given a loan of $60,000

to pay them for their radio or TV commercials, and subsequently they made a loan to Coordinated Interiors, which in turn paid back the loan on BAMG. There was a real bailout of the loss that they may have had on that TV company, or radio company, through a Putnam deal all the way through.

Mr. WALSH. Yes, sir.

Senator HARRIS. Now, your chart shows that Amy Finneran and Louis Huck, who were not officers of Coordinated Interiors, Inc., signed some of the checks.

Mr. WALSH. Yes, sir. We have copies of checks of Coordinated Interiors in which the signature of Amy Finneran and the signature of Curtis Ivey appear as signers on this account.

Senator HARRIS. Then among the Bureau for Advanced Housing, BAMG Corp., and Kent House Corp. and Coordinated Interiors, Inc.

, there was a very close and interlocking relationship involving virtually the same people?

Mr. WALSH. Yes, si

Senator HARRIS. Do you have instruments and documents which substantiate this item of your testimony?

Mr. WALSH. Yes, sir; I do.

Mr. ADLERMAN. What was the total amount that went through the Coordinated account?

Mr. Walsh. Considering the $80,000, $60,000 from BAMG, the total debt to Putnam was $147,000.

Mr. ADLERMAN. You only show $87,000, but it was $147,000. The other $60,000 was what they paid back into Putnam, paying off the loan on BAMG.

Mr. WALSH. Yes, sir.

Senator HARRIS. Those documents now presented by Mr. Walsh will be marked as “Exhibits 31A-31G” and, without objection, will be admitted into the record.

(Documents referred to marked "Exhibits Nos. 31A through 31G” for reference and may be found in the files of the subcommittee.)

Senator HARRIS. What is the next item?

Mr. WALSH. The next item is a company known as Megadyne Electronics, Inc. This company was chartered in New York State in 1956 and it operated on a small basis for a number of years.

In 1961, Louis Huck and Curtis Ivey had contracted with the owners and operators of Megadyne to furnish financing for Megadyne, and in return they received an option to buy a substantial portion of Megadyne stock.

During 1961 and 1962 Messrs. Huck and Ivey did make loans to Megadyne, and these loans were made by Huck and Ivey's company, which was known as Willow Wood Corp. Huck and Ivey became directors of Megadyne during this period. Megadyne was attempting to obtain Government contracts from the Signal Corps, but had little success in doing this.

In May of 1962 Putnam Investors issued a check to Megadyne for $60,000 which represented

a loan to Megadyne. On the same day that Putnam Investors issued the check to Megadyne, Megadyne drew a check against these funds for $52,000 payable

to Willow Wood Corp., so in effect the money from Putnam went to Megadyne and Megadyne thereupon paid their obligation to Mr. Huck's and Mr. Ivey's other corporation with Putnam funds.

Megadyne went into voluntary bankruptcy on September 9, 1963. No reorganization plan was ever submitted or approved. The assets were negligible, and the $60,000 that was due Putnam was unpaid. As a matter of fact, the records show that no claim was ever filed on behalf of Putnam, but there was some correspondence that indicated at a later date this was due to an oversight.

Senator HARRIS. Do you have a series of documents and checks and instruments which document the testimony you have given on that item?

Mr. WALSH. Yes, sir; I do.

Senator HARRIS. Those documents presented now by Mr. Walsh will be marked as "Exhibit 32 A and B” to identify the various items, and without objection they are admitted into the record.

(Documents referred to marked "Exhibits Nos. 32A and 32B” for reference and may be found in the files of the subcommittee.)

Senator HARRIS. What is the next item?

Mr. Walsh. Our investigation and also, I might add, the investigation of the Small Business Administration-indicated that three borrowers shown on the books of Putnam Investors were, in fact, one entity. These borrowers were listed as Cross Roads Motel, Inc., Cross Roads Industrial Park, Inc., and Dosan, Inc.

Investigation showed that all three of these companies were incorporated by a Mr. Dominic Santella, of Ridgefield, Conn. We received information that Mr. Santella had previously worked as a carpenter for Mr. Finneran.

The investigation showed that Mr. Santella contributed no capital to these companies, that the companies were initiated with a personal note of Mr. Santella to the corporation for $1,000, and that thereafter funds were obtained for operating purposes from Putnam Investors.

(At this point Senator Javits withdrew from the hearing room and Senator Mundt entered the hearing room.)

Mr. Walsh. The investigation indicated that the money which was advanced to these three companies was used to acquire parcels of real estate in Connecticut, and that most of this real estate was real estate in which a personal interest was had by Mr. Finneran, Huck, and Ivey.

Senator HARRIS. The total amount of these loans of various dates, according to your chart, was $136,590.

Mr. WALSH. Yes, sir.

I will have to qualify that a bit. Actually, a total of over $180,000 had been advanced, but during an examination, the Small Business Administration called attention to the fact that these were one entity, and that the total amount was overlined. It was over the maximum amount.

Senator HARRIS. At that time, what was the amount of money that Putnam Investors, Inc., could loan to any one company?

Mr. Walsh. It was 20 percent of the private capital.

Senator HARRIS. At the time it was overlined, what would that have been?

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