Senator HARRIS. Did you find out their residences and make any examination as to the source of funds they used for this purchase? Mr. WALSH. Yes, sir; I did. Senator HARRIS. Would you state what you found? Mr. WALSH. First of all, Senator, I would like to suggest that the documentation which I have to support this, which is quite voluminous, be submitted in bulk after I have finished my testimony, if that is satisfactory to you, sir. Senator HARRIS. Are these documents you have identified personally through your investigation? Mr. WALSH. Yes, sir. Senator HARRIS. Without objection, it will be received into the record marked "Exhibit 8A" through the letters necessary to identify each instrument. (Documents referred to marked "Exhibits Nos. 8A through 8W" for reference and may be found in the files of the subcommittee.) Senator HARRIS. Proceed. Mr. WALSH. The investigation which we conducted disclosed that $347,000 of the $349,000 which was paid for Frontiers Capital Corp. came as a result of two personal loans made by Milton Gordon and Franklyn Levenson. One of these personal loans was made in Chicago, Ill., and the second one was made in Dallas, Tex. The Chicago loan was initiated in the summer of 1964 between Martin Von Zamft, Milton Gordon, and Franklyn Levenson, and the parties in Chicago were Jonathan C. Bunge and Milton Kramlich. Both of those gentlemen were from Chicago. The sum of $277,000 was obtained as a result of this loan. The actual cash was furnished by the Merchandise National Bank of Chicago; $277,000 was sent to New York where it was deposited in an escrow account in New York and was used as part of the payment which was made to Mr. Hammer. On the Chicago loan, the investigation we conducted disclosed that $60,000 was subsequently paid on this loan in November 1964. The source of funds used to pay this partial payment came from the funds of Frontiers Capital, however. They did not come from the personal funds of Mr. Gordon and Mr. Levenson. Mr. ADLERMAN. At this point, Mr. Walsh, was this $60,000 paid ostensibly to a company called Construction Facilities Co. ? Mr. WALSH. Yes. There was an ostensible loan on the books of Frontiers Capital in the name of Construction Facilities Corp. Mr. ADLERMAN. Then was that, by various means, transferred from one corporation to another until it finally ended up as a repayment to Mr. Milton Kramlich? Mr. WALSH. Yes. It actually was applied against an obligation due at the Merchandise National Bank that was owed by Mr. Kramlich. Mr. ADLERMAN. Was that the Kutz-Kwik Corp.? Mr. WALSH. The Kutz-Kwik Corp.; yes, sir. Mr. ADLERMAN. In effect, we have a repayment of the loan by the company, not from the funds of Mr. Levenson or Mr. Gordon, but from the funds of the small business investment company, used to pay back the indebtedness they owed on the loan they made to buy the company originally? Mr. WALSH. That is correct. Mr. ADLERMAN. Go ahead. Mr. WALSH. The Dallas loan was initiated in May 1964 with a letter from Mr. Martin Von Zamft to a Mr. S. Mort Zimmerman in Dallas, soliciting a loan for Mr. Gordon and Mr. Levenson, and offering to buy an interest in a hotel in Texas. On June 29, 1964, Mr. Zimmerman made a loan of $70,000 to Mr. Gordon and Mr. Levenson, and this money was also used in the purchase of Frontiers Capital. This loan is unpaid and Mr. Zimmerman has advised he has instituted legal action in order to collect the $70,000. The records of the Bankers Trust Co. in New York City show that the $70,000 from Mr. Zimmerman and the $277,000 from the Chicago loan were deposited there, and on July 17, 1964, $349,965 was paid to Milton Hammer for the Frontiers Capital stock. Senator HARRIS. Then is it your testimony from your investigation and the supporting documents and records, that the purchase of Frontiers Capital Corp. was with borrowed funds altogether? Mr. WALSH. Yes, sir; that is true. Senator HARRIS. Very well, proceed. Mr. ADLERMAN. In effect, then, they borrowed money and they acquired assets of $700,000 without putting a cent up in cash? Mr. WALSH. Yes, sir. Mr. ADLERMAN. Mr. Walsh, did you prepare a chart based upon your studies in this case as to what happened to most of the funds in Frontiers Capital? Mr. WALSH. Yes, sir; I did. Mr. ADLERMAN. Would you explain that chart? Mr. WALSH. Yes, sir. Senator HARRIS. First, Mr. Walsh, referring to the chart which you have now presented concerning transactions of Frontiers Capital Corp. after July 23, 1964, does this chart represent the true and accurate situation concerning those transactions according to your personal investigation, and was the chart made under your supervision and control? Mr. WALSH. Yes, sir; it does present a true picture and it was made under my control. Senator HARRIS. Without objection, a copy of the chart marked "Exhibit 9" will be admitted into the record. (Document referred to marked "Exhibit No. 9" for reference and will be found in the appendix on p. 285.) Senator HARRIS. Would you proceed, Mr. Walsh, to explain the chart? Mr. WALSH. To summarize the chart, it shows that selfserving loans and investments appeared on the books of Frontiers Capital Corp. in an amount of $449,500. I want to say, Mr. Chairman, that this does not represent all of the loans that were on the books. There were other transactions in which the status of the loans is not quite clear. But these are loans and investments which we have classified definitely as self-serving loans. In addition to that, the second total shows that over $330,000 of the proceeds of these self-serving loans has been traced to cash payments and to other disbursements which were used for the benefit of Franklyn Levenson, Milton Gordon, Martin Von Zamft, and William Marmorstein. Senator HARRIS. Would you take the amounts on the left-hand side of the chart, item by item, and briefly, using the chart, trace for the committee what became of those amounts? Mr. WALSH. The first transaction we have is dated July 23, 1964, which you will note is just a few days after the consummation of the sale of Frontiers Capital Corp. The books of Frontiers Capital show a transaction between Frontiers and Economic Security Corp. of $140,000. Economic Security Corp. was a straw company and the purpose of this transaction was to permit Economic Security Corp. to buy the stock of Lunar Enterprises, a company owned by Franklyn Levenson. In tracing the actual disposition of the cash disbursed by Frontiers in connection with this transaction, we found that $115,000 was transferred to Miami, Fla., to the account of Mr. Jack Worth, agent. Senator HARRIS. Before we go any further there, backing up to the first amount you testified to, the $140,000, you say it was shown on the books as a loan and investment to Economic Security Corp. What do you mean a straw corporation? Mr. WALSH. Economic Security Corp. was a company that was in existence, but it had no assets. The loan was made by Frontiers Capital to the owners of record of Economic Security Corp. in order to permit them to purchase the stock of Lunar Enterprises and to commence operations. Senator HARRIS. Lunar Enterprises, itself, was owned by Franklyn Levenson? Mr. WALSH. Lunar Enterprises was owned by Franklyn Levenson. Senator HARRIS. Then you say the actual purpose was, first, tha. $115,000 was transferred to Mr. Jack Worth, agent, in Miami? Mr. WALSH. Yes, sir. Mr. ADLERMAN. How was that transferred? Mr. WALSH. There were two transactions. The first was a transfer of $85,000 on July 23, 1964. The second transfer was a transfer of $30,000 on July 27, 1964. Mr. ADLERMAN. At this point, I would like to call Mr. Jack Worth to testify. Senator HARRIS. Mr. Jack Worth? Would you hold up your right hand? Do you swear that the testimony you are about to give before this subcommittee will be the truth, the whole truth, and nothing but the truth, so help you God? Mr. WORTH. I do. TESTIMONY OF JACK W. WORTH, ACCOMPANIED BY COUNSEL, HAROLD UNGERLEIDER Senator HARRIS. Identify yourself by name and address, if you will. Mr. WORTH. Jack W. Worth, 12486 Northeast 7th Avenue, North Miami, Fla. Mr. Chairman, can I pose a question at the moment? Senator HARRIS. Before we go any further, let me say that you are entitled to be represented by counsel in your appearance before this subcommittee. I want to ask you if you are represented by counsel? Mr. WORTH. I have counsel since this noon. I talked to Mr. Adlerman this morning on two specific questions. I find this noon on reading an indictment of the Federal grand jury in Miami that my name is numerously mentioned. I consulted counsel this noon to see if this would be placing me in jeopardy. Counsel was here a moment ago. Mr. ADLERMAN. Who is your counsel? Senator HARRIS. Are you represented by counsel? Mr. WORTH. Yes, sir. Senator HARRIS. Do you want him to sit there with you at the table? Mr. WORTH. Yes, sir. Senator HARRIS. You are certainly entitled to that. You are now represented by counsel. Would you identify him for the record, your attorney who is present with you in the room? Mr. UNGERLEIDER. My name is Harold Ungerleider, attorney, Miami, Fla. Senator HARRIS. And, Mr. Worth, this is your attorney ? Mr. WORTH. Yes, sir. Senator HARRIS. I want to state to you that anything you say in this hearing may be used against you in some legal proceeding. You understand that? Mr. WORTH. Yes, sir. Senator HARRIS. You are not a defendant named in an indictment? Mr. WORTH. No, sir. Mr. ADLERMAN. You are not a defendant in the indictment in Miami? Mr. WORTH. Not at the present. Mr. UNGERLEIDER. May I take a moment to confer with him? I had about 7 minutes at the noon hour. If I may take about 112 minutes, I would appreciate it. Senator HARRIS. The committee will stand in recess for 3 or 4 minutes, if that will be sufficient for you. (A brief recess, with the following member present, Senator Harris, was taken at 4:32 p.m., and reconvening at 4:37 p.m., with the following member present: Senator Harris.) Senator HARRIS. The subcommittee will be in order. Mr. ADLERMAN. Mr. Worth, did you receive information that you were going to be the recipient of a draft of $85,000 in your bank in Miami on July 23, 1964? (Witness conferred with this counsel.) Mr. WORTH. I did receive such information. (Witness conferred with his counsel.) Mr. ADLERMAN. I will have to object to one thing. We cannot allow counsel to coach a witness. He can advise a witness, but he cannot coach him on these questions. Mr. UNGERLEIDER. Mr. Adlerman, let me state that I just advised the witness that he has his constitutional privilege against self-incrimination if he cares to invoke it. I gave him no answer regarding the question. Senator HARRIS. Very well. Mr. ADLERMAN. Did you receive information from Mr. Von Zamft, Martin Von Zamft, that you were to receive $85,000 deposited to your account as agent on July 23, 1964? Mr. WORTH. I must decline to answer that in my explanation here of a potential possibility that I may still be indicted. It is a 39-page indictment that I had not read before. Mr. ADLERMAN. Mr. Worth, when did you first meet counsel ? Mr. ADLERMAN. Whose counsel is he? Mr. WORTH. I don't know. He was here. Mr. ADLERMAN. Did he approach you or did you approach him? Mr. ADLERMAN. Who introduced you to him? Mr. WORTH. Von Zamft. Mr. ADLERMAN. Mr. Von Zamft? Mr. WORTH. Yes. Mr. ADLERMAN. Did they ask you to take the fifth amendment to protect them? Mr. WORTH. No, not particularly. They pointed out Mr. ADLERMAN. Did they indicate to you that you were going to be indicted? Did they tell you that? Mr. WORTH. There is a possibility, when I read the indictment. My name appears five times. Mr. ADLERMAN. Have you been indicted? Mr. WORTH. No, sir. I have not. Mr. ADLERMAN. Are you going to be a witness in that case? Mr. WORTH. As far as I know, I suppose I would be called. Mr. WORTH. No, sir. Mr. ADLERMAN. Did they indicate to you that you were going to be indicted? Mr. WORTH. There are three attorneys that indicated that to me, that the possibility existed. Mr. ADLERMAN. I might be indicted for something, too. Who knows? I don't know. Do you have any feeling that you are going to be indicted in this case? Was it indicated to you that you were going to be indicted? Mr. WORTH. I have had no such indication at this time; no, sir. Mr. ADLERMAN. Do you honestly believe that you are in jeopardy or that your rights are going to be jeopardized, and that you have to take the fifth amendment? Do you honestly believe that you are going to be incriminated? Mr. WORTH. This I don't know because I have done nothing to be incriminated for, actually. Mr. ADLERMAN. And you are doing this on the advice of this attorney who was introduced to you by one of the other witnesses, Mr. Marmorstein? Mr. UNGERLEIDER. I want to object to that. Senator HARRIS. You are not entitled to testify unless you are sworn. Mr. UNGERLEIDER. I would like to be sworn. |