sion is hereby granted for the acting chairman (Senator Harris) to conduct hearings in open session without a quorum of two members for the purpose of taking testimony in the matter of Small Business Investment Companies on August 3, 1966, starting at 4:30 p.m.

JOHN L. MCCLELLAN, Chairman.

KARL E. MUNDT, Ranking Minority Member.

Senator HARRIS. Was $92,000 of that additional capital from a personal loan to yourself, Mr. Huck, and Mr. Ivey from the County National Bank of Mineola, N.Y.?

Mr. FINNERAN. Yes, Senator, we borrowed $100,000 at the County National Bank of Mineola.

Senator Harris. So $92,000 of that additional capital was borrowed money?

Mr. FINNERAN. Yes, Senator.

Senator HARRIS. And then the additional amount, $8,000 or $8,000plus-some-odd, was from some other source than borrowed money? Is that right?

Mr. FINNERAN. That is right. Senator, part of it was salaries, and, as I remember it, the second phase of it was salary and fee to me. Senator HARRIS. Let me ask you this: That money came out of Putnam Investors, that $8,000, did it not? You can explain if it did.

Mr. FINNERAN. It went into our pockets for services, apparently through one of our companies, and was intermingled with funds in that company. I don't know how you identify one dollar from another.

Senator HARRIS. Then it was almost immediately in the transaction used as additional capital in Putnam, is that so?

Mr. FINNERAN. That is right, Senator.

Senator HARRIS. So the $100,120 of additional capital was either all borrowed from a bank or, by one way or another which you explain as payment of services, came out of the treasury of Putnam Investors, itself?

Mr. FINNERAN. Yes, but there was an intermediate position there. Senator HARRIS. I understand that. Your testimony on that $8,000 or $8,000-plus-some would be substantially the same, would it, as we heard from Mr. Huck?

Mr. FINNERAN. Yes, Senator.

Senator HARRIS. You heard his testimony on that?
Mr. FINNERAN. I have, Senator.
Senator HARRIS. Very well.

I won't go into the details of that. I do not see anything to be gained by it, since your testimony, I assume, would be the same.

We will go now to this chart which shows self-serving loans by Putnam Investors, Inc. You heard the testimony concerning those items, I presume, all day today, both by Mr. Walsh and by Mr. Huck? Mr. FINNERAN. I have, Senator.

Senator HARRIS. Do you wish to deny, admit, or explain any of those items in whole or in part?

Mr. FINNERAN. I agree almost entirely with the explanation of Mr. Huck on that BAMG transaction.

Senator HARRIS. There was a loan by Putnam Investors, Inc., in the amount of $60,000 on October 24, 1961, to BAMG Corp., is that right?

Mr. FINNERAN. Yes, Senator.

Senator HARRIS. $12,900 of those loan funds went to Kent House Corp., is that right?

Mr. FINNERAN. I am advised that this did happen by the facts of Mr. Walsh's testimony.

Senator HARRIS. You do not deny that $12,900 of that $60,000 loan actually came down to Kent House Corp. do you?

Mr. FINNERAN. I have no personal knowledge of it, but I do agree that it sure did.

Senator HARRIS. It sure did?

Mr. FINNERAN. I have no personal knowledge of it, other than the facts as I have heard them, Senator.

Senator HARRIS. You know the results. I am not talking about the details, but you know the result was $12,900 actually came to Kent House Corp. out of that $60,000 loan, isn't that true?

Mr. FINNERAN. I am sure it must be, because everybody has said it is so. I do not personally know, Senator. I don't propose to argue it. It is not my intention. I just did not have any handling of these

accounts.

Senator HARRIS. Did you have an interest in Kent House Corp.? Mr. FINNERAN. I did.

Senator HARRIS. What was your interest?

Mr. FINNERAN. One-third.

Senator HARRIS. Did also Mr. Huck and Mr. Ivey have an interest? Mr. FINNERAN. They did, sir.

Senator HARRIS. What was their interest?

Mr. FINNERAN. One-third each.

Senator HARRIS. Did Kent House Corp. receive $12,900?

Mr. FINNERAN. As I have heard testified, yes.

Senator HARRIS. Didn't you know about that? It wasn't your wife in that situation, was it?

Mr. FINNERAN. I did know, through conversations with others involved, that this was happening.

Senator HARRIS. You are not trying to say to us that the corporation where you had a one-third interest, not talking about your wife, that that company received $12,900 and you wouldn't know about it until you heard it testified here this morning? You are not saying that to us, are you?

Mr. FINNERAN. I am sorry, I missed something in what you said. I say that it did get there because I heard it so stated today. At the time we had a great many corporations, a great, great many corporations. I had many myself, Huck and Ivey had many of theirs. Together we had many.

Senator HARRIS. How many did you have?

Mr. FINNERAN. I would think probably in the neighborhood of 15. Senator HARRIS. Let's just say yes or no to this: $12,900 of that $60,000 loan we are talking about from Putnam Investors to BAMG Corp. came to Kent House Corp. owned by you, Huck and Ivey, yes or no?

Mr. FINNERAN. I will agree that this happened, Senator.

Senator HARRIS. Let's try to shorten this.

Do you want to make any further explanation, denial or admission, in connection with this $60,000 loan?

Mr. FINNERAN. No denial of any kind.

Senator HARRIS. Very well.

Mr. FINNERAN. I would like to point out, though, Senator, that the theory of this transaction has not been thoroughly explained.

Senator HARRIS. All right.

Mr. FINNERAN. BAMG Corp. as an entity received from Greenwich Productions and I am as vague in my mind as Mr. Huck is because there were a great many things that happened in this thing, but it seems to fit together in the manner in which Mr. Huck puts it because it comes back to me in listening to him that this is what did happen. However, there were many values received by BAMG Corp. in this transaction with the predecessor, Greenwich Productions. Among them was the person of Dudley Andrews, who was well known in the TV and radio industry. He had existing contacts and contracts. BAMG Corp. was to get an exclusive contract with the Bureau for Advanced Housing, which had promises of income in the millions, Senator. And this is no exaggeration, because the man who was in control of the Bureau for Advanced Housing was at that time the biggest homebuilder in the history of America. He was turning out, through the Certain-Teed Corp., 1,800 houses a month, theretofore unheard of.

This Bureau for Advanced Housing had been conceived as a counterpart with the Certain-Teed Corp. BAMG was to get the exclusive contract to furnish the goods and services for the Bureau for Advanced Housing, which it did, indeed, get.

Senator HARRIS. Go to the next transaction, November 28, 1961.

Is it true that Putnam Investors, Inc., made a loan of $60,000 to the Bureau for Advanced Housing?

Mr. FINNERAN. That is right, Senator.

Senator HARRIS. At that time, at the time of that loan, you were a 20percent owner in the Bureau for Advanced Housing, is that correct?

Mr. FINNERAN. That is exactly the way it was. However, there is a story there, Senator. This corporation was formed as a counterpart corporation to be used with the Certain-Teed Corp. at the time when the IEH program was doing this fantastic job.

The corporation was put together as a paper vehicle to be used later as all arrangements were concluded with Certain-Teed. The relationship or the ownership of the stock at that moment is 20 percent, but in fact was not. On the projections and without the money to back up the projections, the Bureau for Advanced Housing just would never have been. But Certain-Teed was to come in with a million dollars, at which time additional stock would be issued.

As Mr. Walsh explained, it was later issued to the National Gypsum Co. in the amount of something like $890,000, as I remember. At that point, this stock became less than 5 percent.

Senator HARRIS. Was that money paid back to Putnam?

Mr. FINNERAN. No, it was not.

Senator HARRIS. The fact remains, however, that no matter how you may explain it, that the Government money in Putnam Investors was loaned to a company in which you had an interest?

Mr. FINNERAN. A very minor interest, Senator, but Putnam also had an equity interest here, and it was in Putnam's interest that I was primarily concerned as well as that of my friend Schwinn.

Senator HARRIS. I understand. However you may explain it, the fact remains that Government money in Putnam Investors came to be loaned to a company in which you personally had an interest; is that right?

Mr. FINNERAN. That is right, Senator.

Senator HARRIS. The same as the $60,000 loan to BAMG Corp.; is that right?

Mr. FINNERAN. That is right, Senator. Well, no, we had no interest in BAMG. Putnam had.

Senator HARRIS. No, but in the $60,000 loan to which you testified to BAMG, you have already said that $12,900 of that did get down to a company in which you had an interest. You already testified to that. The Kent House Corp.

Mr. FINNERAN. I wouldn't say it exactly that way, Senator. I would agree that it did go, indeed, to Greenwich Productions and, in turn, removed us from that picture, whereby then BAMG as part of its arrangement with Putnam received an equity position.

Senator HARRIS. I understand that. I understand that is what your testimony is. But just to get the interest of this committee to the surface, the loan to BAMG Corp., on that loan you admit that part of those funds, part of which were Government funds, came to rest in a corporation in which you had a personal interest. Yes? Mr. FINNERAN. Yes, Senator.

Senator HARRIS. In the $60,000 loan to the Bureau for Advanced Housing, Government funds came to be loaned to a company in which you had a personal interest; is that right?

Mr. FINNERAN. Yes, Senator.

Senator HARRIS. The third item: Do you want to deny or explain, or admit, the various loans totaling $87,109 to Coordinated Interiors, Inc., testimony concerning which you heard?

Mr. FINNERAN. No, only to repeat, Senator, that this was a company in which Putnam had a big stake by way of stock interest and stood to make considerable money.

Senator HARRIS. Is it true that Coordinated Interiors shared space with the Bureau for Advanced Housing?

Mr. FINNERAN. I would not say it that way, Senator. The Bureau for Advanced Housing had a brandnew building in Princeton, N.J., of some 8,000 feet, a two-floor colonial building, in which Coordinated Interior, as a contractual supplier, was given space.

Senator HARRIS. They did not pay for the space?

Mr. FINNERAN. No, this would be part of the consideration for their services.

Senator HARRIS. I see.

Now, is it true that Coordinated Interiors assumed a debt of BAMG in this transaction?

Mr. FINNERAN. Not that way, Senator. What they did was Coordinated Interiors paid BAMG for all of its assets, and it replaced BAMG. Schwinn was one of the most remarkable geniuses in the marketing business in the world, and this was one of his fortes. He insisted this was a silly name to have connected with a national program with well over $1 million in it, and with all kinds of property.

Senator HARRIS. Did you, during these transactions, have an interest in Coordinated Interiors, Inc.?

Mr. FINNERAN. No, Senator.

Senator HARRIS. Did your wife?

Mr. FINNERAN. No, Senator.

Senator HARRIS. Why was she signing checks?

Mr. FINNERAN. As a protective measure it was part of the loan agree

ment.

Senator HARRIS. Was there agreement whereby she would be able to sign checks on the bank account of Coordinated Interiors, Inc?

Mr. FINNERAN. Yes, Senator, either she or one of the other officers of Putnam.

Senator HARRIS. Is it true that Mr. Louis Huck was able to sign checks on Coordinated Interiors, Inc.?

Mr. FINNERAN. I am sure this is so, Senator.

Senator HARRIS. The loan agreement from whom to whom?

Mr. FINNERAN. From Putnam to Coordinated.

Senator HARRIS. Then they would sign checks on Cooradinated Interiors, Inc., but had no ownership in the ownership of that company, is that your testimony?

Mr. FINNERAN. They personally had no ownership or interest. Senator HARRIS. But Putnam did?

Mr. FINNERAN. Putnam did and this was strictly a protective measure done with other companies, too, Senator.

Senator HARRIS. Do you want to say anything further about Coordinated Interiors' transactions? Was that debt ever paid back to Putnam Investors?

Mr. FINNERAN. No, it was not, Senator. It was a victim of the National Gypsum's bankruptcy of the Bureau for Advanced Housing. Senator HARRIS. Do you want to say anything further on that transaction?

Mr. Adlerman has brought to my attention a very interesting point. That is, would you consider the National Gypsum Co. a small business of the kind that this act was intended to benefit and encourage?

Mr. FINNERAN. I don't believe that there is any relationship as to their size to the Small Business Act. Putnam, as a small business investment company, had a minor portion of a million-dollar company. That is within the Small Business Investment Act, as I understand it. Senator HARRIS. Of course, they are a good deal larger than that themselves, though, are they not?

Mr. FINNERAN. I don't believe this enters into that rule, Senator. Senator HARRIS. I am just asking you are they or not. Whether they enter into the rule is another determination.

Mr. FINNERAN. This is a $300 million corporation.

Senator HARRIS. Do you want to say anything further about those transactions with Coordinated Interiors, Inc.?

Mr. FINNERAN. I am sorry, I didn't catch that.

Senator HARRIS. Have you anything further you want to say at this time about Coordinated Interiors, Inc., before we go to the next item? Mr. FINNERAN. I would like to say that although the Bureau for Advanced Housing was the primary and principal lifeblood of Coordinated Interiors, beyond the point of the collapse of the Bureau for Advanced Housing I spent considerable time at no pay and used my contacts to help Coordinated Interiors.