Ring-Around- A-Rosy

Greatest single U. S. bank crash was that of New York City's slyly named, shyster officered Bank of United States, which last December closed the doors of its 59 branches on 400,000 customers who had $160,000,000 deposited at the time. Investigation by the State revealed a vast tangle of suspicious irregularities. After two months eight officers of the bank were indicted for willful misappropriation of funds. Five were ordered to trial: President Bernard K. Marcus, son of the institution's founder; Russian-born Chairman of the Executive Committee Saul Singer; Counsel Isidor Jacob Kresel, one-time prosecutor of the city's police and judiciary investigation; Herbert Singer, 24-year-old son of Saul, law clerk in Counsel Kresel's office; Henry W. Pollock, executive vice president in charge of the bank's law department.

Counsel Kresel fell ill, is yet to be tried.

But last week, after a criminal trial which lasted three months--the longest in the history of New York county--justice was meted out to the other four. All save Pollock, on whom the jury could not agree, were found guilty, liable to seven years in prison, $1,000 fine. They were remanded to jail without bail. The deal for which the culprits were held responsible was selected from a host of other shady practices by which the bank's officers, panic-stricken by the 1929 stockmarket crash, guided the institution to ruin. It was a game of financial ring- around-a-rosy, played as follows: Bankus Corp. and City Financial Corp., subsidiaries of the Bank of U. S., had a book value of $4,800,000 worth of real estate equities, but owed the parent organization $8.000.000. How were the subsidiaries to pay off? Two dummy organizations, headed by Herbert Singer, were formed. Each was capitalized at $100, issued 100 shares of stock. They were called Premier Holding Corp. and Bolivar Development Corp. Bankus reappraised its holdings at $8,000,000, the amount it owed the bank, traded them to Premier for its worthless stock. Then Bankus sold the stock to Bolivar for $4,800,000 on credit. Then, to get some actual money into the deal, three safe deposit companies controlled by Bank of U. S. borrowed $8,000,000 from the bank, bought Premier's shares from Bolivar. Bolivar then paid its debt to Bankus ($4,800,000) with part of the money received, lent Bankus the remaining $3,200,000. Bankus was now able to pay its debt to the bank with money the bank had gratuitously put in the game. In other words, no money ever really changed hands; the bank was still $8,000,000 out of pocket.

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