The Cincinnati Enquirer from Cincinnati, Ohio • Page 9

THE ENQUIRER, CINCINNATI, FRIDAY, JUNE 27, 1930 9 the bank January 30, holding 000 in bank collateral for the deposit. Only Two Involved No Other Banks Are Involved, Is Assurance Of State Officials This collateral is in a safe deposit vault at the bank. Cincinnati, who had been summoned by telephone-, and the party then went before August A. Siemon, United States Commissioner, for arraignment. Havel E.

Mau, United States District Attorney, appeared for the Government. After the two defendants Hamilton County also has $400,000 noon and until 7:30 o'clock last night, Norris and Rosenblum and their relatives and attorneys sought to obtain bondsmen. At that hour, still unable to obtain bondsmen, the two men were taken to Hamilton County Jail by Marshal Reeves. Further efforts for bond will be made by them today, it is asserted, and it may be that application will nn deposit there, with $127,000 in col On Deposits Serve bination, confederation and conspiracy, and to effect the objects and purposes of the same, did commit the following Overt Act; that is to say, said Lyman E. Norris and said Harry Rosenblum, on or about February 10th, 1930, unlawfully misapplied certain moneys, funds and credits of the said the Brotherhood of Railway Clerks National Bank of Cincinnati, Ohio, to-wit, the sum of approximately Ten Thousand 000.00) Dollars received from tha sale of approximately Ten (10) Bonds of the Cities Service Corporation, more complete description of which said bonds are unknown." furtheO.r had entered their pleas of not guilty, he requested the Commissioner to fix their bonds at $25,000 each.

Attorney Elston objected to the size of the be made to Judge Nevin for orders reducing the bonds. To Make Closing Of Bank An Advisable Step. In the warrant which was Issued by Commissioner Siemon upon the af lateral covering it. This collateral Is In a safe deposit vault. The City of Cincinnati, however, is said to have had no money on deposit there.

Stephen W. McGrath, City Treasurer, said that he withdrew $250,000 from the bank 4, "as a matter of routine," in accordance with the requirements of his office. He holds $270,000 of bank collateral In the safe deposit vaults, he said, to protect city deposits. He said ho had bean Instructed by the Bank Examiners to hold the securities for the present FORMER OFFICIALS HELD Railway Clerks National Bank are in any way involved. "Rumors concerning any other bank are absolutely unfounded and false.

"We have, of course, had knowledge for some days, concerning affairs of the Brotherhood Bank and, therefore, it has been impossible for us to make any general statement prior to this concerning the banks of Cincinnati. "Since the Brotherhood Bank has closed, It is now possible for us to say that no other banks are Involved County Prosecuting Attorney Nelson Schwab calls upon all citizens to maintam confidence in I lie banking Institutions here. He issued the, following (statement: "It fa essential to the well-being of the community that all of our citizens maintain absolute confidence in our banking institutions. "I cannot impress too strongly upon the citizens of Hamilton County that my investigations Bhow that only two banks are Involved in the manipulations by Amor W. Shafer, and these are the Cosmopolitan Bank and Trust Company and the Brotherhood of Railway Clerks National Bank." bonds, stating the charge only involved $10,000.

Mau responded that he could bring a dozen more charges against each of the defendants and could easily insist on bonds of as was fixed In the State Court as the bond of Amor W. Shafer, Former Manager of the Cincinnati branch of Henry L. Doherty Two Former Officials Arrested On Charges PAYMENT IN FULL, Positive assurance was given to the people of Cincinnati yesterday by Edward D. Schorr, Director of Commerce, that no other banks In Cincinnati are Involved in the financial dealings that caused the Cosmopolitan Bank Trust Co. to close lt3 doors other than the Brotherhood of Railway Clerks National Bank which also ceased functioning yesterday.

Mr. Schorr said: "There is absolutely no occasion for alarm on the part of anyone concerning any of the banks In Cincinnati. The careful Investigation of the affairs of the Cosmopolitan Bank 4 Trust which has been made by the State Banking Department, headed by O. C. Gray, and by the Stato Securities Division, headed by A.

W. Geisslnger, thoroughly convinced all of us that no banks In Cincinnati other than the Cosmopolitan Bank St Trust Co, and the Brotherhood of brokerage concern, who is held in and that there Is no occasion what fidavit of H. E. Hollis, chief of the Cincinnati branch of the Department of Justice Special Agents' Service it Is charged that the two defendants "did unlawfully, knowingly, wilfully and feloniously conspire, combine, confederate and agree together, each with the other, and with divers other persons, to commit divers offense against the United States, to-wit, to unlawfully violate Section 5209, United States Revised Statutes as amended, now Section 592 of Title 12 of the United States Code, commonly referred to as the National Banking Act; that is to say, said defendants did unlawfully, knowingly, wilfully and feloniously conspire, connection with the failure of the Cosmopolitan Bank and Trust Com soever for alarm on the part of anybody concerning any other banks. C.

Gray, State Superintendent Or With Very Little Loss, Says Attorney For Bank. Declaring there was ample protection for depositors over and above all losses had not depositors staged a "run" on the bank, former Judge of Banks', Frank Ambrose, Assistant State Superintendent of Banks; A. W. Geissinger, Chief of the State Division of Securities, and Jack NIda, Assistant Chief of the State Division of Securities, fully concur with me Of Conspiring To Misapply Funds Of Institution Action Of Directors Follows Runs Induced By Exaggerated Rumors Receiver i Appointed. in this statement.

pany, Fifth and Walnut Streets, which closed Its doors recently, and who is said to be largely responsible for the closing of the Brotherhood Bank. Appeal to Commissioner Siemon not to fix such a high bond ws without avail, the Commissioner stating that In his opinion a high bond should be fixed by the Court, notwithstanding the defendants had not left the city between the time they severed their connection with the bank and the time of their arrest. He then set the hearing for July 26. This was at the request of District Attorney Mau, and, it is expected that in the meantime, a Federal Grand Jury will be called by Robert R. Nevln, United States District Judge, to make an investigation of the caso and return indictments.

tory for the funds of a number of In Brotherhood Bank Case Funds Misapplied, Is Charge. As an aftermath of the closing yesterday morning by Federal banking examiners of the Brotherhood of Railway Clerks' National Bank, Court and Vine Streets, Lyman E. Norrig, 38 years old, 7075 Ridge Avenue, until a few days ago Executive Vice President of the bank, and Harry Rosen-bloom, 28 years old, 3870 Marburg Avenue, former Cashier, were arrested under a Federal warrant charging them with having conspired together and with others to misapply the funds of the bank, In violation of the national banking laws and with having on February 10, 1930, misapplied $10,000 of the funds of the bank received from the sale of approximately 10 bonds of the Cities Service Corporation. The arrests were made by George A. Reeves, United States Marshal; Cincinnati labor unions and union representatives.

Only a few weeks ago it raised Its interest rate from 4 to 5 oer cent, which is kaIA tn hv comspire, confederate and agree together, each with the other, and divers other persons unknown, to wilfully misapply moneys, funds and credits of the Brotherhood of Railway Clerks National Bank of Cincinnati, Ohio, the said tha Brotherhood of Railway Clerks National Bank of Cincinnati, being a bank organized and chartered under the banking laws of the United States, and being a member of Federal Reserve System, and the said Lyman E. Norrls, being then and there an employee and officer of said bank, to-wlt, Executive Vice President, and brought a laree increnR in A io me DanK. Robert S. Marx, of the firm of Nichols, Morrill, Wood, Marx and Ginter, attorneys for the Brotherhood Bank, issued an explanatory statement yesterday. "It was decided to close the bank because of unusually heavy withdrawals the last three days to protect the loyal depositors and conserve the assets of the bank for the best interests of the depositors and creditors," he said.

"This decision was made late Wednesday night at a meeting of the directors. The bank was carefully examined at the close of business Saturday, June 21, and in addition was examined by product bankers, and was found to be solvent and in Bound condition. "It was found to be in excellent liquid cash position." Judge Marx said that "in our opinion as lawyers, and barring unforeseen contingencies not known about and of which we have no reason to there is every reasonable when the stock market collapsed, carrying Cities Service stock into a monster slump. Used Stocks As Collateral. It was said that Shafer would take stock certificates to the two bank officials and have them sold through two Cincinnati brokerage firms for his account at the bank, Certain of these stocks were "ordered out," that is they were ordered to be sent to New and transferred on the books of the company to the new purchasers.

Other stocks, however, were ordered to be retained in the brokerage account as collateral, and not to be transferred on the company's books in New Yofk. Theso certificates carried attached powers of attorney, authorizing their use as collateral. The slips were pinned to the certificates. It has developed since that the Its statement as of March 2' showed caoital stork, tim non- large deposits, were keeping their deposits intact, but that a large number of the smaller depositors were withdrawing their accounts in heavy volume. Knowing this condition could not continue indefinitely without temporarily affecting the bank's cash finances, the directors met Wednesday night and drafted a closing resolution, after which formal approval of their action was sought from the Comptroller of the Currency.

The examiners who had gone through the bank records had left the city, meanwhile, The Brotherhood Bank was established as a labor union bank in 1922 at the Dallas, Texas, convention of the Brotherhood of Railway and plus, $100,000, and undivided profits oi The deposits that dsv It is intimated these Indictments were $4,740,281, a gain of $600,000 from thft Teremhet SI alntAmAnt DnA may include two or more other per sons, if the Investigations of Depart John Theobald, Deputy United States attributed directly to the increased Marshal, and J. B. Martin, Special Agent of the Department of Justice, interest rate. Loans and discounts amounted to $3,143,565, Assets Included bonds and Cincinnati. Each man was arrested securities of $1,803,743.

The total re the said Harry Rosenblum, being an officer of said bank, to-wlt cashier; they the said defendants, intending then and there and thereby to Injure and defraud said the Brotherhood of Railway Clerks National Bank of Cincinnati, Ohio. OVERT ACT. "And the said defendants in furtherance of said unlawful com ment of Justice Agents and bank accountants bear out suspicions now entertained by the national bank examiners and by state officers whose investigations of the affair of the Brotherhood Bank had extended over the period since the failure of the Cosmopolitan Bank. For the remainder -of the after at his home. The father of Rosen-bloom accompanied his son.

Mrs. Norris came to the Federal Building sources were given at $5,659,363. The book value of the stock as of that Steamship Clerks, Freight Handlers, Express and Station Employees. It date was set at 1141.48. with her husband.

was opened in its new building in It was learned yesterday that the At the Federal Building they were Continued On Page 11. 1923, and soon became the deposi tfoara of Education had $400,000 In joined by Charles Elston, attorney, Exaggerated and Incorrect rumors regarding its condition forced the closing of the Brotherhood of Railway Clerks National Bank, Court and Vine Streets, yesterday morning, despite the fact that national bank examiners previously had found that the bank itself actually was solvent. Heavy withdrawals by depositors, alarmed by the city-wide undercurrent of rumor regarding this particular bank, and a possibility that the withdrawals would continue in volume, forced this action upon the Directors three days after they had effectually met the emergency which had given rise to the rumors. It was a case, officials said, of a bank bridging a serious situation completely and then being compelled to quit business because of a wave of hysteria among depositors not aware of the facts of the situation. Bank Is Solvent.

That the bank actually is in a ound condition, financially was indicated by the statement of a representative of the bank yesterday. Although the emergency met by. the Directors arose through the stock manipulations of Amor Sharer, former district sales manager of Henry. L. Doherty which already had forced the closing of the Cosmopolitan Bank, Fifth and Walnut Streets, It was said that the situation at the Brotherhood Bank was entirely different from that at the Cosmopolitan Bank.

"Kited" checks and drafts brought about the closing of the Cosmopolitan. The situation at the' Brotherhood Bank developed through the bank's guarantee of indorsement of signatures of stockholders of the Cities Service Company on certificates handled through that "bank by Shafer and afterward, It is alleged, found to have been forged. Not To Exceed $517,000. Last night It was said that the maximum liability of the bank, even If all the Shafer certificates' turn out to be forgeries, could" not exceed $517,000. Against this the bank had set up $650,000, with $600,000 more available if needed, making a total of well over $1,000,000 available to meet this liability.

This.was more than double the amount needed to insure the bank against any loss whatever through the stock transactions, it was said. This phase of the situation was arranged last Monday. Then began the rumors which sent hundreds of depositors to the bank Tuesday and Wednesday, with a possibility that the "run" would continue indefinitely. So heavy were these withdrawals that the bank anticipated difficulty In. raising Immediate cash to meet all of them, due to the fact that much of its funds, in common with all banks, was loaned and could not be regained until the loans became due.

Two Are Arrested. Numerous conference were held by the Directors, the national bank examiners and other bankers, in an attempt to (straighten out the. situation. These conferences brought about the resignations of three officials of the bank and the arrest yesterday of two of them oh charges of conspiracy in misapplying funds of a national bank. The two arrested were Lyman E.

Norrls, 38 years old, Executive Vice President of the bark until a few days ago, and Harry Rosenblum, 28 years old, Cashier until the same time. Officials said the two men had admitted dealings with Shafer in which they had made personal profits of $60,000 in the last few months, in connection with his stock' transactions through the bank. 1 Will III 8ffit stocks ordered out were legitimately signed Btocks sold for customers, but that the stocks, retained in the account with attached powers of attorney had been forged with the names of the certificate holders, it is alleged. This, it was said, explained why a number of customers were having difficulty in obtaining delivery of their stocks from the Cincinnati branch of the Doherty Company. In some cases where customers went, to the company and insisted upon delivery of stocks, that particular stock would be removed from the collateral list at the brokerage firms and replaced with another certificate for the same number of shares.

The "power of would be removed and the original certificate would be delivered to the customer, who had no idea it had been' used as brokerage collateral. Took Profit In Sales. It also was reported that Rosenblum and Norrls had been working with Shafer in these negotiations. Shafer would turn over stock to them under the market price to be' sold, It was learned. They would sell the stock at the market price, take a two or three point profit for themselves and credit Shafer's account with the balance.

This explains how they made deals with him, It was said. When the Cosmopolitan Bank failed to open more than two weeks ago and Shafer's name -was brdught J'nto the case, one brokerage firm, which held 10,000 shares of the Shafer stock sent the entire lot to New York for transfer. It then was discovered that the names had been forged. The Doherty Company informed the brokers, who in turn informed the bank. Since the bank in the course of its business had, guaranteed the signatures of the customers on.

these certificates, it became Involved. The Federal officials were called Into the case, and national bank examiners began an immediate examination of the books. They found the large contingent liability on the part of the bank and brought it to the attention of the directors. Resignations Are Last Monday the Directors went over the situation with the result that the Brotherhood of Railway Clerks, which owns 51 per cent of the bank, put up $300,000 backed by $750,000 in collateral. J.

Castel-linl, President of the bank for several years, put up $100,000 and then tendered his resignation as President and Director. Rosenblum and Norrls put up $100,000 in property they held and also resigned. In addition the bank carries a forgery bond for $150,000, making a total of $630,000 immediately available to overcome the contingent liability. Also, the Brotherhood agreed to put up $200,000 more If necessary. The double liability of stockholders, which can be imposed if necessary, would add another $400,000, carrying the total available well over $1,000,000.

This, it was Is sufficient to Insure depositors of the bank against loss. Officials of the bank, believe they will be able to pay 100 cents on the dollar when the bank's affairs are liquidated. Receiver Takes Charge. The liquidation will be in charge of Ira Fulton, National Bank Examiner at Cleveland, who becomes the receiver of the bank. He took immediate charge of the bank yesterday, shortly after the official closing notice, written on a bank letterhead, had been posted on.

the front of the bank. Although rumors were current for several days that the- bank was involved through Shafer's operations, it was pot until yesterday that the actual situation became known. The notice, signed by Fulton, read: "This bank has been closed by resolution of the Board of Directors and the assets placed in the hands of the Comptroller of the Currency of the United States for liquidation. National Bank Examiner I. J.

Fulton in charge." Before the notice was posted, police were notified and a detail was on hand to guard against any demonstrations. Although scores of depositors and stockholders came to the bank during the day, when its plight became known, there was little need for the police, it was said. During most of the day only one patrolman was on duty there. At the time that Norrls and Rosenblum were.removed as officials of the bank, formal announcement was made that they had, resigned, but no explanation was made. Nothing was said at the time about the resignation of Mr.

Castelllnl as President Rumors began to appear, however, immediately afterward, and this brought on a two-day run, which took $1,000,000 out of the bank Tuesday and Wednesday, it was said. The directors found that many loyal friends of the bank, some with 1 (TJIpO businesses and residents of Cincinnati, The Fifth Third Union Trust Company provides a city-wide banking service, through twelve offices, and brings the facilities of "Cincinnati's Largest Bank" close to your home and your place of business. i The people of Cincinnati tre cordially invited to be present at the formal opening of the new Banking Home of the Harrison and Spring Grove Av. Office The Fifth Third Union Trust Co. Cor.

Harrison Ave. and Spring Grove Ave. Saturday, June 28th, 1930 -9 A.M. to 9 P.M. This bank is not only great in amount of deposits, but in ml the number of people it serves and the diversity and high character of its interests.

Through its large capital and resources, nearly seventy years experience and prestige, this bank has won the confidence of Cincin-natians. In commercial business, its accounts are widely diversified, and vary in size from small retail stores to tremendous industries, whose credit needs extend into large figures. The Board of Directors of this bank, thirty-three in number, includes leaders in nearly every field of business. Equipped with sound business judgment, gained by years of experience as the guiding factors in the great industrial and professional enterprises they head, they shape the policies of this bank to react to the greatest benefit of every customer. Morris and Rosenblum were arrested by United States Deputy Mar shals on warrants sworn to by Ha- veth E.

Mau, United States District Attorney. When arraigned before United States Commissioner A. Siemon they pleaded not guilty. Mau asked that their bonds be set, at $25,000 each. Although the specific charge was the misapplication of flARRIJON-SPItrKG CROVt-OTriCt Or- TMt TirTH-THUD-UNlON-TRUST'CO'- E.

W. EDWARDS, 'President $10,000, It was said that several simi jgg fwm Third HmTmist- fef lar charges could be filed. Commissioner Siemon set' their bonds at that amount and fixed their hearing for July 26. Morris gave his address as ,7075 Ridgeway Avenue, and Rosenblum his address as 3870 Marburg Avenue. While District Attorney Mau was promising a special session of the grand jury to investigate the case within the next two' weeks, it was learned that Sharer's transactions with the Cities Service stocks had been under way sine last November, MEMBER FEDERAL RESERVE SYSTEM.