ing was being considered when the agents of the SEC became active in the Ft. Pierce refunding program. The SEC activities precluded the Crummer organization from taking part in the proposed permanent refunding. The permanent program was awarded to a Crummer competitor and at a noncallable rate which will eventually cost the taxpayers of Ft. Pierce about $700,000 more than they would have been called upon to pay had the investors in Ft. Pierce's original debt been able to negotiate through the Crummer organization. Moreover, the Crummer customers have disposed of their Ft. Pierce holdings and have refrained from purchasing the permanent bonds of 1945 even though they are offered at an interest yield which exceeds the yield provided in the emergency refunding from 1937 to July 1, 1945. (16) In June 1942 the city of Wauchula, Florida, attempted to settle its ten-year default by entering into a contract with R. E. Crummer & Company. In due time the contract was fulfilled, and the plan of composition approved by the Federal Municipal Bankruptcy Act, notwithstanding the fact that the pernicious interference by the SEC agents and a Post Office inspector in league with State agents made it vastly more difficult to complete the undertaking. The suspicions aroused and doubt cast upon the operation by these agents were undoubtedly a contributing factor to the unsatisfactory performance by the city under the contract. On November 20, 1946, the city of Wauchula authorized the refunding of all the indebtedness now outstanding under the June 1942 contract. Holders of a substantial amount of the original bonds (approximately $500,000 par value) who voluntarily participated in the 1942 refunding operation at the solicitation of R. E. Crummer & Company, are cognizant of the fact that Federal and State agents had actually or threatened to interfere with the 1942 refunding operations to such an extent that they are not now interested in any new or different credit accommodations which the city of Wauchula may be seeking through any source. They have concluded that if ever the governmental agencies which interfered with and cast reflections upon their attempt to help Wauchula in 1942, decide to substitute and follow a policy of constructive cooperation for the existing policy of destruction and unwarranted interference, they may be willing to consider new credit arrangements, but. not until then. As a consequence of this decision on the part of holders of approximately $500,000 par value of the outstanding indebtedness, the city of Wauchula will be precluded from obtaining the benefits contemplated by the November 20, 1946, contract, which may mean the imposition of approximately one million dollars additional debt service tax liability against the taxpayers, which threat of this potential increased liability is wholly chargeable to the activities of and interference with the refunding transactions in which the city of Wauchula has engaged in the past by SEC and Post Office Department agents. (17) Another instance similar to the Wauchula dilemma involves the city of Avon Park, Florida, and its creditors. In October of 1946 Avon Park entered into a contract to refund all of its outstanding bonded indebtedness. However, as is true with Wauchula, holders of a substantial amount of the bonds to be refunded have indicated that they will not run any chances by committing their holdings to the proposed refunding. They base their decision upon past events which can be briefly stated as follows: In 1930 their original bonds defaulted. In 1937 the city authorized R. E. Crummer & Company to refund about $1,235,000 par value of the original debt. The Federal Municipal Bankruptcy Act was invoked. Mr. Edward Balls' personal attorney, acting for an insurance company which opposed the proposed terms of settlement, contested the plan. The contest ran the gamut of the courts, finally reaching the Supreme Court of the United States. The highest court reversed all the inferior courts. The plan failed. Litigation followed by several bondholders to enforce their claims. By 1942, an increased tax burden of more than $250,000 had accrued. Again the city appealed to R. E. Crummer & Company for help, as shown by the city's resolution of April 22. 1942. R. E. Crummer & Company accepted the undertaking by, in effect, reinstating the 1937 contract, but was compelled to add the more than $250,000 accrued liability, which amount would have been sayed had the 1937 contract prevailed. The 1942 contract succeeded mainly because the litigant of the 1937 undertaking, an Indiana insurance company, joined in the 1942 undertaking. Despite the equitable success of the 1942 program, all the agents (State and Federal) jumped with all fours on the Avon Park refunding. The decision of the Supreme Court which caused the failure of the 1937 plan then became a "household word" with the SEC agents and the Post Office inspector, notwithstanding the generally recognized success of the subsequent refunding plan of 1942. The activities, charges, criticism, etc., of these agents relating to the refunding operations in which the city of Avon Park and its creditors have heretofore engaged, have caused a substantial amount (in volume) of Avon Park creditors to conclude that they will not participate in the extension of any new or different credit accommodations to this city, even though it may be that the improved financial status of Avon Park and present money market would ordinárily afford Avon Park more favorable terms, except for the fact that its credit opportunities have been impaired by governmental interference, and the city will inevitably be denied the benefits contemplated by the October 1946 contract. Personally, I favor impartial and competent regulation of dealers in municipal securities and I have so stated, publicly, many times. Proper and effective regulation would have been of immeasurable value and assistance to the investors and taxing units of Florida. To illustrate: (a) R. E. Crummer & Company, while undertaking a refunding of a certain taxing unit, would in aid thereof issue definite and accurate statistical data to the investing public which was primarily interested in that particular problem. Simultaneously a du Pont satellite would issue and distribute a "bid and asked" quotation sheet covering a long list of securities (including the taxing unit then involved in an R. E. Crummer & Company refunding operation) which was given such wide and frequent circulation that the investing public generally accepted the quotations as being sufficiently reliable that practically all sales during this period were influenced thereby, and many misinformed and discouraged investors were thus induced to liquidate their holdings at from 25% to 50% of the par value thereof, while all those participating in the refunding programs sponsored by R. E. Crummer & Company ultimately realized 100% of principal, plus a reasonable rate of interest. If honest, impartial, and competent regulation had been present during the long period when these "bid and asked" quotation sheets were being released, it is most unlikely that investors holding less than 10% of the outstanding bonds of Sunter County, Florida, would have been influenced to sell such bonds to interests associated with the du Pont interests at about thirty cents on the dollar in preference to accepting the refunding program sponsored by R. E. Crummer & Company which ultimately returned all other holders one hundred cents on the dollar. The tremendous losses thus inflicted upon the bondholders who liquidated at such heavy discounts, and the taxpayers of Sumter County who were denied the benefits of the refunding program for neary five years, and the great risk to which the holders of approximately 90% of the debt were subjected during this long period of enforced delay and uncertainty would have been avoided. (b) During the very time the "witch hunting" of the SEC and Post Office Department agents against the Crummer companies was at its 'height, various Florida officials were sponsoring a refunding involving bonds of the Everglades drainage district in Florida. Upon completion of same, the holders of the original securities realized about 33% of their rightful claims, and the dealers and attorneys participating in the transaction realized more than one-half million dollars as so-called expenses and profits. If impartial and competent regulation had been present, the holders of the original securities would have been advised that (on the basis of the terms which had applied to every refunding program completed by R. E. Crummer & Company over the preceding ten years and involving more than $170,000,000 par value of securities, they were entitled to approximately ten million dollars in excess of the sums realized, and at not exceeding a cost of more than one-third of the amount paid as expenses and profits. (c) Also, while these same Federal agents were spreading acrimonious propaganda about Crummer's refundings, methods of doing business. etc., among the investing public, and were being scornfully insolent to those investors and governing authorities who dared to even suggest that their dealings with the Crummer organization had been entirely satisfactory, a real scandal in municipal financing was in the making. The participants include State officials and one of the attorneys for the du Pont interests. The victims are Orange County, Florida, taxpayers. The plan, as finally consummated, involved prematurely the refunding of a portion of the Orange County debt, and resulted in unconscionable profits for probably the most unwarranted refunding transaction in which any county in Florida ever engaged. Impartial regulation, supported by alert and effective enforcement, would have prevented this nefarious scheme. (d) In 1939 and 1940 the du Pont satellites obtained contracts from the governing authorities of Pinellas County and the city of Winter Haven. These contracts and legal proceedings which followed were designed to effect a repudiation in part of preexisting financial obligations. A du Pont attorney was prominently identified with the litigation. The holders of the original bonds sustained an unjustified loss, commercially and otherwise, in excess of one-half million dollars. The du Pont satellites emerged with fat and unreasonable profits; and, this experience alienated many investors who had previously cooperated in all constructive debt solutions. Impartial governmental supervision under proper regulation would have prevented these schemes. Individuals with less perspicacity than the distinguished members of the Subcommittee would probably consider the foregoing account tainted with personal invective. It is not so intended, and with few exceptions, I have deliberately refrained from giving my personal opinions. The main difficulty has been to keep the statement within the limits of these pages, for the complete story would require volumes. It must be that the activities of the SEC and Post Office Department, through their representatives and agents in the conduct of this investigation, are unprecedented in the annals of their governmental agency. Agents, turned loose as they were, armed with the power of subpena and possessing only the scantiest knowledge of the subject matter, harassing the investing public (transmitted with this letter, as exhibit A, is a folio of documents from investors and others), disrupting the orderly functioning of business institutions, questioning their business judgment, ignoring Federal court decrees, criticising the judgment of elected public officials, insulting members of the bar, intimidating employees of the employer being investigated, a vacuous SEC accountant saying no one can honestly make over $10,000 a year, usurping the prerogatives of the Department of Justice, and invading the sanctity of American homes-doing all this in a mad hunt to find a criminal, or, failing, to create one. If this procedure were to be condoned by the Congress and later duplicated it will, as I see it, become a serious menace to government, to the spirit of free people, to the enjoyment of free enterprise, and to the liberty of the individual. I hope "history will not repeat itself." I believed the two agents of the Atlanta regional office of the SEC when they said they wanted to make a "routine" investigation and our turn had come. This was in 1941. But when it became evident that all the machinery of the SEC had been set in motion, when word reached me that SEC agents and a Post Office inspector were conferring with Mr. Ball and his attorney, when civil suits bearing the tag of Ball influence were filed, when my attorney and I, with an appointment previously made, were unable to confer with a member of the SEC although we traveled to Philadelphia for that purpose, when hearings requested by my associates were denied, when the agents avoided interviewing bondholders who were in a position to know the facts and had sought to tell them, and, finally, when the criminal indictments were found, I knew that back of all of it there was a great issue "Crummer must leave Florida." There is not a man so blind, prejudiced, or bigoted to believe that this great effort was made for any less stake. In this the someone back of it all has succeeded. A few desks, typewriters and wastebaskets constitute the remains of R. E. Crummer in Florida. The du Pont interests have gained the dominant position in the field of municipal finance, but at the cost of the taxing units. Their credit has been unfairly undermined, for they have lost the protection and aid of a substantial portion of the most economical source of credit represented by thousands of investors. Real competition, for all effective purposes, is nonexistent, and the effectiveness of the Federal Municipal Bankruptcy Act, as amended, is greatly impaired. It has been said that, "Hindsight is a splendid quality" but unfortunately, it cannot be put in reverse action. If I could have known in 1929 that the BrownCrummer Investment Company and R. E. Crummer & Company would have been compelled to either prosecute or defend over one thousand law suits in support of their efforts to protect their investor-customers, and to aid the many governing authorities of Florida taxing units who desired to restore solvency and confidence, I probably would have followed the withdrawal course of the forty-odd other investment dealers who participated in the original purchase and distribution of $500,000,000 par value of bonds. However, to have had a part in the most remarkable recovery ever recorded in the history of municipal finance in America, which was achieved despite the constant opposition of the Alfred I. du Pont fortune, and to have met many of the fine Florida people, does in some degree compensate. Respectfully submitted, REC'T R. E. CRUMMER. Plant Port St. Joe, Florida. Honorable ED LARSON [Copy of letter referred to on p. 2] ST. JOE PAPER COMPANY, Florida Securities Commission, Tallahassee, Florida. DEAR SENATOR LARSON: We have observed that the R. E. Crummer Company is being dissolved, though we are advised that there is litigation now pending in the State of Florida, in which this company is involved. We have further noted that a new company has been organized-we believe the name is the Crummer Company-with much the same personnel as the R. E. Crummer Company, except it is alleged that Mr. R. E. Crummer will be connected with the new company only in an advisory capacity, instead of the chief administrative officer, as in the old company. The reason of this letter is that, in our opinion, the conclusions of fact of R. S. Pierce, Jr., special master in the U. S. District Court, in the matter of Bay County, makes findings of facts, if our interpretation is correct, that would probably cause your Commission to revoke the license of R. E. Crummer Company, that is, providing the master's findings were sustained by the court, after due and proper consideration. Judge A. V. Long, district judge, in his findings of fact and conclusions of law, not only adopted and approved the master's findings of fact, but made a few findings of his own. In addition to this matter, certainly the members of the Florida Securities Commission must have heard of numerous other dealings in which the Crummer organization was involved, where it was rumored that irregularities if not worse, took place; therefore, may we request, if your Commission is inclined to issue a license to the same individuals, under the name of the Crummer Company, who were actively engaged in the R. E. Crummer Company, that representatives of this company and possibly other parties may want to appear and present evidence why the issuance of such a license may not be in the public interest. Sincerely yours, ST. JOE PAPER COMPANY, STATE OF FLORIDA, County of Orange, ss; Before the undersigned, a notary public, personally appeared R. E. Crummer who, being first duly sworn, says that the above and foregoing statement under date of January 4, 1947, is true and correct to the best of his knowledge, information, and belief; and that the documents contained in the appended folio are true and correct copies or photostats of the originals. R. E. CRUMMER. Sworn to and subscribed before me this 9th day of January 1947. [SEAL] My commission expires June 14, 1947. B. BATTERLIS, Notary Public. Part I: OUTLINE (a) U. S. Senate Resolution No. 35. (b) U. S. Senate Report No. 53. (c) U. S. Senate Report No. 159. (d) U. S. Senate Resolution 112. (e) Letter of chairman Senate Committee on the Judiciary. Part II: (a) Announcement of Securities and Exchange Commission re: Indictment Against Roy E. Crummer et al. (b) Form of inquiry sent to bondholders by Mansfield, post office inspector. Part III: (a) Letter of R. E. Crummer and Company addressed to the holders of Panama City bonds, dated June 12, 1942. (b) Letter of Roy E. Crummer, dated December 28, 1943, with copy of his letter to a purchaser of two (2) bonds of Panama City, Florida. Part IV: 25 Communications from individuals and institutions named in either, one, or both, the Citrus County and Panama City criminal cases, as defrauded creditors. Part V: (a) Statement of former Governor Doyle E. Carlton of Florida showing Roy E. Crummer's assistance in the early stages of the financial collapse of Florida's taxing units. (b) Letter from A-O-U-W of Kansas, a large investor in municipal securities. (c) Letter from E. H. Pringle & Co., an investment dealer. (d) Letter from Robert Pennington, one time attorney for Alfred I. du Pont. (e) Letter of James C. Titus, large investor in municipal securities, adressed to chairman, Committee of the Senate on the Judiciary. Part VI: Eleven additional letters from individuals and institutions interviewed by Federal agents. Part VII: 38 additional letters from invididuals and institutions who were not interviewed by Federal agents. Part VIII: (a) Statement of Frank L. Carson as published in a newspaper of Wichita, Kansas, August 4, 1944, following the return of the indictments. Mr. Carson, his wife, the two Cossmans (whose financial transactions were handled by Mr. Carson), and his bank are alleged to be defrauded creditors. (b) Sample of lease required by Florida National Bank and Trust Company at Miami. PART I (a) U. S. Senate Resolution No. 35. (b) U. S. Senate Report No. 53. (c) U. S. Senate Report No. 159. (d) U. S. Senate Resolution No. 112. (e) Letter of chairman, Senate Committee on the Judiciary. 79TH CONGRESS 1ST SESSION S. RES. 35 IN THE SENATE OF THE UNITED STATES JANUARY 18, 1945 Mr. HILL (for Mr. PEPPER and Mr. ANDREWS) submitted the following resolution; which was referred to the Committee on the Judiciary FEBRUARY 19, 1945 Reported by Mr. MCCARRAN, without amendment, and referred to the Committee to Audit and Control the Contingent Expenses of the Senate FEBRUARY 26, 1945 Reported by Mr. HAYDEN, with amendments; considered, amended, and agreed to RESOLUTION Resolved, That the Senate Committee on the Judiciary or any duly authorized subcommittee thereof, is authorized and directed to make a full and complete 96270-47-pt. 2- -36 |