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LOOTERS OF CITY TRUST CO. MILLIONS STILL FREE AFTER 69 DAYS OF AMAZING INACTION BY WARDER-WHO GOT THE SWAG?
$1,225,000 Admittedly Lost to Stockholders, but Officials Maintain Attitude of Silence and Buck-Passing on the Reasons for Closing of the Bank.
By FRANK EMERY. IXTY-NINE days have elapsed S since the wrecking of the City Trust Company and no effective action has been taken by vested officials to ferret out the perpetrators of the $3,000,000 to $4,000,000 fraud and punish the looters. Not one word in explanation of the sensational and mysterious crash! Not one inkling of what caused it! Not one sign of action aimed to bring the wreckers to book in the interests of the $1,225,000 admittedly lost to stockholders and of preventing repetition of the city's most colossal banking scandal since the war. Not one word to allay the suspicion that remissness, or worse, on the part of the State Banking Department aided and abetted the bang that sent somebody's good and invested $1,225,000 in smoke. Such is the amazing history, to date, of the City Trust Company scandal, accompanied by a concert of official inaction, silence and buckpassing and a general running to cover comparable, in recent times in Gotham, only to the similar conduct of other authorities in the Rothstein killing.
MAY GO DOWN IN CITY RECORDS AS ANOTHER OF THE UNSOLVED CRIMES.
If the history of the gambler's murder is repeated, Frank H. Warder, the Superintendent of Banks. will follow former Police Commissioner Warren out of office shortly -Governor Roosevelt has already picked his successor-and the City Trust case will be entered in the records as another unsolved crime with the stockholders still wondering where their money went and an indignant public still minus the accounting that, strangely enough, it expects its officials to render of their stewardships. Mr. Warder's actions-or lack of them-since he closed the bank's doors on February 11 have been most mysterious. He has dodged every issue raised by the bank's collapse in the seven weeks that have intervened since the event, and reporters who sought facts on the crash. He has failed to explain how it happened that his examiners were able to give the City Trust Company clean bill of health 60 days before the smashup, or tell where the vast shrinkage of its assets went in that short time. Mr. Warder has failed to tell the stockholders-and the taxpayers who are interested in having banks adequately supervised by the State agency-why no examination was made of the City Trust Company books between November, 1927, and November, 1928, in violation of the law that requires these checkups to be made twice year.
EFFORT MADE TO PUT WHOLE RESPONSIBILITY ON THE LATE F. M. FERRARI.
Mr. Warder's department has taken the stand, clearly inferred in one of the two enlightening statements that former Supreme Court Justice Jeremiah T. Mahoney made in his role of counsel to the department, that the entire responsibility for the crash was buried with the remains of Francisco Maria Ferrari, the president or the bank, who died on Feb. on hospital bed after an operation for appendicitis. Banks are large institutions employing many men, and the City Trust Company had five branches, each with its crews of managers, cashiers and the like. It is crediting the late Mr. Ferrari with a vast amount of genius to hold that he, and he alone, could have done all the juggling that caused the bank to wind up its career $3,000,000 or moreprobably more-short in its accounts, unaided by confederate or accomplice, unknown to his employees, and so cutely as to fool Mr. Warder's subordinates in the NovemberDecember examination, But Mr. Mahoney, on March 24. credited Mr. Ferrari with all this genius. "There is no question that Mr. Ferrari did things he should not have done," said Mr. Mahoney. "So far as the investigation has gone and so far as know. he seems to be the only one responsible." It was later, only last week, de-
FIGURE IN STORY OF CITY TRUST COMPANY'S SENSATIONAL COLLAPSE veloped by The Eagle that Mr. Mahoney's statement is not quite so strongly held by his partner, Warren Fielding, also of counsel to the department. Mr. Fielding, in a letter demanding an indemnity payment, wrote to the bank's surety that "through the larceny and forgery of Francisca Ferrari or others, by connivance and consent," the bank had been defrauded of more than $500,000. Mr. Fielding's letter was written on Feb. 28. But in the intervening six weeks Mr. Warder's lawyers have not bothered to ask District Attorney Dodd, in Brooklyn, or District Attorney Banton, in Manhattan, to determine who the "others" are and proceed with arresting and prosecuting them. This wouldn't be quite so surprising were the Banking Department equipped with detectives and prosecutors whose business it is to run down and punish bank looters as are the District Attorneys' offices. But the Banking Department isn't. The fact is that either of the District Attorneys probably could, if the Banking Department would enlightened them on the identity of the "others," step out and arrest them. That is, if the "others" are still around after all this time.
FERRARI'S FINANCIAL
CAREER METEORIC AND SENSATIONAL.
Whether or not Mr. Ferrari was the combination of Ponzi, 560 Percent Miller, Lone Wolf and Bank Raffles that Mr. Mahoney would paint him. his financial career was one of the most sensational and meteoric to have flashed across the metropolitan horizon in a generation. He had won quite a name for himself as a financial genius in the two or three years that preceded his death. In 1920 Mr. Ferrari was the oneman proprietor of a combination banking business and steamship agency in a modest two-room office in Harlem, with his brother, Frederico, functioning as vice president and a young man named Anthony di Paola engaged as general assistant. He died nine years later president of the City Trust Company with a capital of $1,225,000 and a surplus of $965,000-on paper-and with saving deposits in its five branches running over the $7,000,000 mark-a $10,000,000 institution, which he had built up from little more than a dream and the proverbial shoestring. He was likewise the projector of the Federal Securities Company and the Lancia Motors of America, Inc., the latter an ambitious dream of introducing the Italian motorcar into this country. Mr. Ferrari moved during his metamorphosis into financial power from Harlem to a mansion at 1135 84th st., Brooklyn. He was 35 when he started on his astounding rise, and died at 44. The banker. as he expanded from the F. M. Ferrari & Co. to the Harlem Bank of Commerce. which he merged with the Atlantic Trust Company less than a year ago to open up as the City Trust, appears not to have been unmindful of the advantages that might accrue from political friendships. He contributed. it is known, heavily to the war chests of at least one political party.
His directorate of the Harlem Bank of Commerce included number of the politically inclined of the section his enterprise served. On
1-Governor Rooseyelt, asked to take action in City Trust scandal. 2-Brooklyn home of the late F. M. Ferrari on 85th st., Dyker Heights. 3-District Attorney Banton-inactive in bank smash. 4-City Trust Company, where all the trouble started. 5-Bank Superintendent Frank M. Warder-silent on reasons for closing bank. 6-Harlem branch of City Trust Company. 7-Frank M. Ferrari, dead financier at whose door State official's counsel would place all responsibility. his first board were H. Warren Hubbard, Tammany leader and now member of the Board of Assessors; Edward W. Buckley, who was in the Budget Bureau: Henry H. Lazarus, City Marshal, and General Sessions Judge Francis X. Mancuso. Messrs. Hubbard. Lazarus and Mancuso were on the directorate of the City Trust when the smashup came, the latter as chairman of the board. Further, it is not a matter of con- troversy that the banker cultivated the friendship of State officials with whom he might have business contacts.
And prominent among these, Mr. Ferrari's associates assert, was Mr. Warder, whose attorney would saddle the banker with the onus of the irregularities leading up to the crash. The Superintendent of Banks frequently enjoyed Mr. Ferrari's hospitality at the model farm he conducted at Hightstown, N. J., and the banker was Mr. Warder's reference when the latter moved Into his $275-a-month apartment a little more than two years ago. And a motorcar originally owned by Mr. Ferrari's Lancia enterprise was recently in the possession of one of Mr. Warder's household, according to report. But Mr. Ferrari's flair for striking up friendships with politicians and anteing up generous campaign contributions doesn't make the present situation any too clear. Other than Mr. Mahoney's statement anent Mr. Ferrari, the only enlightening statement about the bank wrecking to be made publicly and officially was Mr. Mahoney's asmission in open court that "there isn't a chance in the world for the stockholders to recover their investment." This assuring note definitely placed the minimum losses at $2,190,000-the bank's capital plus its surplus. But it was already well understood that the total losses would exceed that mark by a million or so. While the Department of Banks was honoring the law requiring semiannual examinations of the City Trust Company prior to last November by turning its back on the requirement, according to reliably vouchsafed information, Mr. Ferrari was merging the Harlem and Brooklyn banks and opening three new branches for business. But it only took a telephone call to the Superintendent of Banks two hours after Mr. Ferrari's death to restore to the City Trust Company the attention it had been spared. The directors, headed by the young di Paola, the cashier, were assembled in quorum in Mr. Warder's office before 10 o'clock, and Mr. Ferrari died at 7:15. Bernard K. Marcus of the Bank of the United States, was called in by Mr. Warder and asked if he wanted to buy the bank. Mr. Marcus did. on his own terms. but these were not accepted. The conference adjourned at 4 a.m. on Saturday to the office of Mr Ferrari's attorney, Bernard Fliash- nick. Then Dr. A. H. Giannini. chairman of the board of the Bank of America, appeared. Terms were agreed upon and Dr. Giannini signed either an agreement or an option-the matter is controversial -to take the bank over. It would appear, from the unusual haste evinced for turning the bank over to some one, that somebody had more than hunch about the bank's rickety condition. But Mr. Giannini changed his mind Monday after looking his newly acquired property over. He decided. after going over the papers with Mr. di Paola, that at least $900,000 of the notes were worthless. He told Mr. Warder the next day that he wanted to get out, and in turn was told that he was "pessimistic."
Then Dr. Giannini's examiners, as revealed in The Eagle, returned to the scene and about the first thing they uncovered was the "Due from foreign banks, $800,000" item which they branded as pure fiction and which had been passed up by the State examiners. Dr. Giannini quickly listed himself as an expresident of the bank and there was nothing for Mr. Warder to do but close its doors.
WHO GOT THE SWAG?
IS ONE OF QUESTIONS STILL UNANSWERED.
This record and all other records of the City Trust Company have been impounded by the Banking Department and cannot be scrutinized without Warder's consent. But it would be interesting, and perhaps pertinent, to have the entry. as well as the forged and "dummy" notes, examined by handwriting experts and persons who could give opinions as to when the entries and forgeries were made.
One incident in the Giannini transaction served to cloud the bank's failure with mystery more than ever. if any basis exists for the theory that Ferrari committed the wholesale larcenies and forgeries unaided. That was the revelation,
Bank Superintendent Dodges Issues, While Attorney Puts Blame on Ferrari, Dead Financier, and "Others," Whose Names Are Not Divulged, also made in The Eagle, that the Ferrari family was represented as being so nearly destitute that Mr. Marcus, in his offer, proposed to provide $5,000 annuity for the bereaved family. Dr. Giannini mes this offer in the bidding. If this representation were correct-and it was the banker's personal attorney who testified to its being made-and Ferrari died nearly broke, this question is raised in still bolder relief: Who got the swag? There is no indication that the Banking Department is looking elsewhere. The depositors were silenced early in the readjustment by the plea that too much noise might endanger the bank being taken over in such & way as to restore their deposits. 100 cents on the dollar. They alone stand to come through clean as the result of the transaction by which the Mutual Trust Company was are ganized to make good their savings and carry on business, and which transaction is more credited to Lieutenant Governor Lehman and George V. M'Laughlin, former Sifperintendent of Banks. than to Mr. Warder in the Wall Street environs, But hope springs eternal with the stockholders despite Mr. Mahoney's dictum. And they have been reminded that they were lucky they weren't being assessed $100 on the share, as they could have been held liable under law.
WHERE DISTRICT ATTORNEY DODD STANDS REGARDING COLLAPSE OF CITY TRUST.
It was on March 3 that Mr. Warder, asked when the reason for the bank's closing would be revealed, replied: "That question will be answered if present negotiations are successful." Sixteen days later, when the Mutual had been formed and official fears that the depositors would lose their savings became groundless, Mr. Warder declared that "the matter is closed." And not peep has come from Mr. Warder since. despite public demand and the avalanche of evidence of irregularities. Another is whether or not the bank records indicate that some of the questionable loans were made for bootlegging or other criminal enterprises. Scarcely less amazing than the inaction of Mr. Warder and his associates in making things warm for the looters has been the echo of the Banking Department's reluctance to shake the scandal out displayed by the prosecutor's office in Manhattan, and to lesser degree by the prosecutor's office in Brooklyn and in Albany.
WARDER IS SILENT ON REASONS FOR CLOSING OF BANK.
Mr. Banton's stand is that he is not warranted in trying to find out where the swag went in the absence of a specific complaint of fraud from the freely criticized Banking Department. A commentary on this position is that if Mr. Tuttle, the United States Attorney in Manhattan. had been possessed of the same attitude. the bankruptcy "ring" would still be functioning in its former larcenous smugness and that several bankruptcy crooks now in or headed for prison would be sponging passes to baseball games. Mr. Dodd, in Brooklyn, and his assistant, Mr. Goldstein. started an inquiry going shortly after the wreck, but failed to bring it as far as the Grand Jury, as it had been trumpeted they would. Mr. Dodd has stated that he has uncovered no evidence of the "larcenies and forgeries" claimed by the Banking Department in its letter dunning the Eagle Indemnity Company as being perpetrated in Brooklyn, and his stand is backed up by Edward Ward McMahon. the department's counsel for the Long Island area. There is, though, contradictory matter on the records of Referee Davis probing into the Lancia's assets in Manhattan. Here the testimony of Fortune Gallo, an associate of Dr. Giannini, was that the latter had asserted to him, just before giving up the idea of taking the City Trust Company over. that "most of the bad notes had been found in the Brooklyn
