PAT MCCARRAN, Senate Judiciary Committee, TALLAHASSEE, FLA., January 25, 1947. Washington, D. C.: Answering your telegram this date, (1) Mr. Wheeler was not acting as our agent or with our knowledge or consent in making complaint in Washington on May 21, 1941. (2) We made an effort to collect interest on certain Lee County bonds for customer. (3) We had a great many bond transactions with LeedyWheeler and through their Mr. P. L. Pierce. We talked to Mr. Pierce several times about this transaction and he requested our file and it was turned to him. Don't know how the letter reached the Post Office Department. (4) We have no recollection of letter to Post Office Department. LEWIS STATE BANK. Mr. SOURWINE. This, Mr. Chairman, is a letter with an enclosure, the enclosure being a copy of another letter. The first letter is addressed to the chairman and is signed by Mr. Henry C. Tillman of Tampa, Fla. The second letter purports to be a carbon copy of a letter sent to both the Securities and Exchange Commission at Philadelphia and to the Postmaster General at Washington, D. C. This carbon is signed by Mr. Tillman. This letter came to the chairman unsolicited. It seems extremely pertinent to the subject matter of the investigation. I offer it for your consideration as to whether you desire to have it inserted in the record. The CHAIRMAN. The letters, both original and copy, will be inserted in the record at this point. DEAR SENATOR MCCARRAN: You will not remember me, but I met you in Washington in 1940, the occasion being a trip that I made there to appear as a witness before the House Judiciary Committee which was considering at that time the continuance and expansion of the Federal Municipal Bankruptcy Act. So far as Florida is concerned you can certainly feel absolute justification for your part in that legislation because it has helped wonderfully in this State, and without it and the fact that it existed, instead of being almost through with our Municipal and County debt situation, we would have been in the middle of it. As a recent experience of mine, as pointed out in the letter which I am taking the liberty of enclosing, shows so plainly, the difficulties which other Departments of the Government have, and are, making against the further functioning of that Act, I thought you might like to see one phase of this matter. You are at liberty to use the copy of this letter to the Securities & Exchange Commission and Post Office Department in any way you see fit. I am, with greatest respect, Yours very truly, HCT:DW. Henry C. Tillman. THE SECURITIES & EXCHANGE COMMISSION, JANUARY 16, 1947. 18th & Locusts Street, Philadelphia 3, Pennsylvania. THE POSTMASTER GENERAL, 12th Street & Pennsylvania Avenue, Washington 25, D. C. GENTLEMEN: My firm was retained in the fall of 1946 by the Town of Largo, Florida, for the specific purpose of attempting to work out a settlement of the defaulted debt problem in which the taxpayers and the bondholders have been involved for many years. I am, and have been, very familiar with the workings of the Federal Municipal Bankruptcy Act and the tremendous benefits which that Act has produced for the defaulted taxing units of Florida, wherever the Act could be invoked, which is only possible when 50% of the outstanding indebtedness voluntarily approve the plan and it must be approved by the Federal District Judge before it becomes operative. I found that Largo, a town of approximately 1,000 people, owed in principal, past-due coupons, and past-due interest, about $2,100,000 and with an assessed valuation on a 100% basis of $1,200,000, the only possible solution for that Town was the Municipal Bankruptcy Act, and my first step was to try and interest the bondholders in reaching a settlement of default, under the provisions of the Federal Municipal Bankruptcy law. My efforts so far, with most of the bondholders, have been met with a pointblank refusal to discuss a settlement. It is my understanding that their attitude is largely influenced by reason of the fact that during the past several years many adjustments which were undertaken and accomplished under authority of this Act and which were approved by the Federal District Court have been the subject of investigation, criticism, and other embarrassment as a result of the activities of the Security & Exchange Commission and the Post Office Department. I do not know, of course, the start of these activities nor do I know the authority for, nor the justification of the same. Nevertheless, it seems apparent that if they may be responsible for the little Town of Largo not be able to induce the required percentage of its bondholders to discuss settlement, which can mostly be accepted by the provisions of the Municipal Bankruptcy Act, then it would seem that the property owners of this little Town are entitled to a real complaint. The problem in which the Largo taxpayers are today involved is, for practical purposes almost identical with the problem which the taxpayers of the City of Stuart, Florida, were involved for many years. There are other instances where the Municipal Bankruptcy Act has proved a great benefit to Florida Municipalities, but the Stuart Case seems nearer to fit the problem with which I have to deal. The City officials of Stuart induced holders representing the necessary percentage of its indebtedness to discuss terms of settlement and to complete the same under the provisions of the Federal Municipal Bankruptcy Act and under the plans agreed upon, so that today the taxpayers of Stuart are enjoying interest charge on its total indebtedness of about one-sixth of the interest charge which is annually accruing against the taxpayers of the Town of Largo on approximately the same amount of indebtedness. The ability of the Town of Largo taxpayers to secure a similar settlement means a difference to them of being able to hold their property or to lose it, because one has to but refer to the figures to see clearly that the people of Largo would find it entirely beyond their ability to pay the carrying charge on their bonds unless there is an agreed settlement reducing both the face of the debt and the interest upon the debt. Notwithstanding the greatly improved position of the City of Stuart due to the settlement in the Federal Municipal Bankruptcy Court and the satisfaction of a great majority of the holders of the outstanding debt both in amount and numbers, and the approval of the terms of settlement by the Federal Courts, including the United States Supreme Court, I understand the investigators of your Commission and the Post Office Department have been quite active over a long period of time in an apparent effort to disrupt the very satisfactory relations which were established by the City of Stuart and its bondholders when this refunding program began to operate with the approval of the Federal Courts. Since I have found that these activities of the Federal Departments above mentioned, are responsible for blocking me in the efforts which I am making to settle the troubles of this little Florida community of 1,000 souls, and I am finding it difficult to even get a discussion of my problem with some of the bond holders, I would respectfully request that you promptly advise me in all details of the activities of your Department relating to the refunding of the City of Stuart debt which was undertaken and completed by this City under the provisions of the Municipal Bankruptcy Act and approved by Federal Judge John W. Holland. I would respectfully ask that you inform me specifically of the authority under which the investigators operated, the names of the officials who assumed to grant the authority for the activities of the investigators, the names of all investigators who functioned thereunder, the method of their activities and he final results thereof. I am to some extent familiar with the fact that the United States Senate authorized an investigation of the activities of your Departments in Florida pursuant to Senate Resolution No. 35, 79th Congress, to determine whether or not such activities were undermining the creditors of the State and interfering with the operations of the Federal Municipal Bankruptcy Act. I used all of my influence in the original adoption of this Act and later, to have it continued and expanded, even going to Washington as a representative of by Board of County Commissioners to appear as a witness before the House Judiciary Committee at one time. I have, therefore, followed the workings of the Act with a great deal of interest and have found my activities in its favor have been fully justified by the results accomplished. I do not know whether the Senate investigation has been completed or not, nor do I know whether a report has been filed but if the activities of your agents have produced a situation whereby, as illustrated, the holders of the Stuart refunding bonds which they accepted in place of the default claims with the Federal Courts and being used to make the holders of those securities believe that the terms of that settlement which was agreed upon and approved by the Court which must be the subject of full review and snooping of Federal agents of other Departments, I can see that the holders of the Town of Largo bonds and of any other similar situated defaulting taxing unit could not logically expect the holders of its defaulted indebtedness to participate in any debt adjustment program and thereafter be subject to the same experiences which were apparently forced upon the City of Stuart and the holders of its refunding bonds. And if these practices are to be continued, the City officials of the Town of Largo will have to be advised by me that the settlement in Court may not be the end of the matter, which advice I would be very much opposed to giving unless I found it necessary in justice to my clients. I hope you will promptly give me all the information sought by this inquiry and that it may convince me of the justification of the activities of your agents as regards the specific situation to which my attention has been called, to-wit, namely, the City of Stuart refund. I trust further that the information which you give me may enable me to convince the Largo bondholders that your past activities may not constitute such a threat of arrestment and annoyance in the future that they would refuse to discuss a settlement of the Largo default. If, however, I do not receive the prompt and satisfactory reply to this inquiry, I expect to solicit our Florida Congressional delegation and Senators to very energetically pursue the matter to the end that we in Florida may know whether or not our local Government authorities have the right to negotiate with the creditors in an honorable manner to settle our difficulties, and particularly when we arrive at an agreement which may be approved by the Federal Court, that no Federal Agency investigators may be allowed to snoop around and thereafter interfere with such a settlement. I am taking the liberty of sending a copy of this inquiry to the Senate Subcommittee to which I understand the investigation authority, Senate Resolution No. 35, has been referred. I trust you can see the importance of a reply to this communication so that I can have a proper answer to the objections which I have met so far from the bondholders to a discussion of the debt settlement which I am attempting to put over; a settlement which, I might add, in my opinion would be beneficial to both the Town of Largo and the bondholders and which I hate to find is jeopardized in its inception due to what is reported to me as the disagreeable interference of Federal Departments seeking to undo that which has been legally done in a Federal Court and approved by a Federal Judge. Respectfully yours, TILLMAN, MARSICANO & MCEWEN, By HARRY C. TILLMAN. HCT: DW. Mr. SOURWINE. Mr. Chairman, I have no further documents or evidence to offer at this hearing. As the chairman well knows, we still lack some information which we have sought from various sources and which has been denied to us, but the limitations of time make it appear that we must close the record without waiting or making further efforts to secure that lacking material. The CHAIRMAN. Very well. In view of the statement of counsel, and in view of my own personal knowledge of the activities of this committee and its efforts to procure information which has been denied to it by some of the departments of the Government, particularly the Post Office Department, we regret to have to close the matter at this point, but time limits our activities and hence the hearings on the matter are closed. (Whereupon, at 10:30 a. m., Thursday, January 30, 1947, the hearing in the above matter was closed.) APPENDIX A Replies from bondholders, identified by witness Mansfield as having been segragated in an envelope in his files. Your case No. 37536-F. Mr. E. J. MANSFIELD, H. C. CRITTENDEN ATTORNEY AT LAW 311-12 Beymer Building WINTER HAVEN, FLORIDA, March 27, 1943. P. O. Inspector, Jacksonville, Florida. DEAR SIR: Your inquiry addressed to Roger W. Babson by Touchton & Crittenden, attorneys, has been received by the writer, the former law firm of Touchton & Crittenden being now dissolved. The former firm of Touchton & Crittenden handled some legal business for Mr. Roger W. Babson in the past, but in none of these matters did this firm pay for Mr. Babson any money to Brown-Crummer Company, R. E. Crummer and Company, or the Crummer Company, of Wichita, Kansas, Chicago, Illinois, and Orlando, Florida. So far as I know, Mr. Babson has purchased no securities from any of the above-named companies. Neither, so far as I know, have any of the clients represented by the former firm of Touchton and Crittenden or by the writer, since the dissolution of that firm, bought any securities from any of the above-named companies. So far as I know, most of the investors with the above-named companies, although buying many Florida securities, were nonresidents of the State of Florida, and at the present time I do not recall any investors with the abovenamed companies. Therefore, I am returning to you, herewith, your form letter, dated March 26, which you may if you desire, reddress to Mr. Roger W. Babson at Babson Park, Florida, or Babson Park, Mass. A letter addressed to him at either place will be received by him. MY DEAR SIR OR MADAM: Will you please inform me whether your business transactions with Brown-Crummer Company, R. E. Crummer and Company, and the Crummer Company, of Wichita, Kansas, Chicago, Illinois, and Orlando, Florida, have been satisfactory. If not, full particulars in answer to the following questions will be greatly appreciated. If the space provided for answers is not sufficient, please furnish the additional information on the back of this form or on an additional sheet of paper, numbering your answers to correspond with the numbers of the questions. (1) How much money, if any, did you pay this person or concern? Fees only in refunding Avon Park Bonds. |