Senator KING. There has been no denial then? Mr. STRAUSS. Except in so far as revenues have been diverted, which they had no right to divert under the contract. Senator JOHNSON. We took two of these bond issues and you gave me the date of default. Now, the $35,000,000 6's of Peru; what was the date of the default? Mr. STRAUSS. The first default was April 1, 1931. The default in the $50,000,000 issue was June, 1931. Senator JOHNSON. Were you the original sponsor for the $35,000,000 loan? Mr. STRAUSS. We were. Senator JOHNSON. What was the next group formed by you? Who constituted that group? Mr. STRAUSS. Do you mean the next group? Senator JOHNSON. Yes. Mr. STRAUSS. Do you mean the people we invited into the original group just as in the other case you asked me about? Senator JOHNSON. Yes. Mr. STRAUSS. Besides urselves were the National City Co., Blyth, Witter & Co., the Guaranty Co. of New York, F. J. Lisman & Co., and the Central Union Trust Co. Senator JOHNSON. What was the step-up price to them? Mr. STRAUSS. The total spread was five points, and the difference between the original purchase price and the next price was 12 per cent. Senator JOHNSON. What was your net profit upon these three Peruvian issues? Mr. STRAUSS. I will have to add them up in order to give them to you. Senator JOHNSON. Well, you may give them separately if that is more convenient. Mr. STRAUSS. Altogether the profit on the 7 per cent issue and the two issues of 6 per cent bonds, aggregating $100,000,000, I mean our profit on them was $601,000. Senator JOHNSON. How much was your profit? Mr. STRAUSS. It was $601,000. Senator JOHNSON. Senator Jones requests me to ask you the date of these three issues. Will you give that information, beginning with the Peru 7s? Mr. STRAUSS. The date of the 7 per cent loan was March 16, 1927. The date of the first 6 per cent national loan was December 21, 1927. And the date of the next, or the third issue, the national 6 per cent loan, was October 24, 1928. Senator JOHNSON. The gross profit upon these issues of bonds as shown by your statement here was: On the first, the $15,000,000 loan, $975,000; on the next, or $50,000,000 loan, it was $2,750,000; and on the next, or $35,000,000 loan, it was $1,750,000. You have stated your net profit. Did you have any representative in Peru at the time the issues or any of them were made? Mr. STRAUSS. Yes. We have had representatives in Peru ever since the first loan was made, constantly. Senator JOHNSON. Who was that representative, please? Mr. STRAUSS. Those representatives have been different people from time to time. My partner, Mr. Henry C. Breck, who sits at my left erted, 1 gave at was ault in 35,000, Who original Blyth, & Co., ifference 112 per se three = them to If that is e and the mean our the date beginning ■ 16, 1927. 21, 1927. 6 per cent bonds as 10,000 loan, 00; and on stated your e time the ever since people from at my left here, went down two years in succession, staying in Peru in all about eight months. Mr. Lionel Stahl, of our staff, sitting on my right here, was down there for over a year. And Mr. Ruan, now dead, was. down there for quite a long time. Mr. Haskell, of our office staff, was also there. One of the firm of lawyers in New York that have been advising us in this matter spent many months down there. Senator JOHNSON. Who was it, if you please? Mr. STRAUSS. Mr. Bloomer and Mr. Dennis spent quite a while there. Senator JOHNSON. All in connection with these loans? Mr. STRAUSS. In connection with these loans and in connection with a bond issue that has since been retired-or a credit, I should have said, that has since been retired; and one that is still outstanding unpaid. Two credits. Senator JOHNSON. Did you pay any part or parts of any commission to any individual in Peru in connection with these loans? Mr. STRAUSs. Yes. Senator JOHNSON. Whom? Mr. STRAUSS. This business came to us from F. J. Lisman & Co., surcharged with a commission to be paid to a group of promoters, and in that group we subsequently learned was the son of the President of Peru. So far as we are aware there was no other Peruvian connected with it. Senator JOHNSON. Do you know how much the son of the President of Peru received upon those issues being made by the Government of Peru? It was five-eighths of 1 per cent, was it not? Mr. STRAUSS. The entire group of promoters received for the tobacco loan two-thirds of 1 per cent, and on the subsequent, 11⁄2 of per cent. Senator JOHNSON. That is, upon $100,000,000 they received twothirds of 1 per cent on fifteen millions and one-half of 1 per cent upon eighty-five millions; is that correct. Mr. STRAUSS. That is substantially correct. Senator JOHNSON. That aggregates about what sum? Something over $600,000, does it not? Mr. STRAUSS. $533,000. Senator KING. Was that on the par? Senator KING. Not what they sold for? Senator JOHNSON. So that to a group of promoters in Peru, of which the son of the President was one, you paid for the privilege of floating this lone five hundred and some odd thousand dollars; is that correct? Mr. STRAUSS. Not entirely. It was not a group of promoters in Peru; it was an American group, which included one Peruvian, the son of the President. Senator JOHNSON. Do you know how much the son of the President received? Mr. STRAUSS. About $415,000. Senator JOHNSON. What was the name, please, of the President of Peru and his son at that time? Mr. STRAUSS. The President was Augusto Leguia. 92928-32-PT 3- -2 Senator JOHNSON. And his son's name, if you recall? Senator JOHNSON. Do you know whether or not the fact son of the President received the sum of money that you tailed as one of those engaged in promoting this loan, and anything to do with the defaulting of the loan? Mr. STRAUSS. It has nothing to do with the defaulting of Senator JOHNSON. Are you aware of the fact that the of the Republic and his son are being prosecuted upon transaction? Mr. STRAUSS. Yes, among others, I believe. Senator JOHNSON. And are you aware of the fact that been any decision of the courts of Peru in respect to any activities in regard to these loans? Mr. STRAUSS. A revolutionary tribunal has given judgmen the president and against his son. Senator JOHNSON. Against the president and against his Mr. STRAUSS. Yes. Senator JOHNSON. That revolutionary tribunal has gi judgment in respect to those particular loans and becaus sums that have been received; is not that correct? Mr. STRAUSS. I am going to ask, if I may, to have my who is more familiar with it, answers the question. I will answers. Senator JOHNSON. I shall be very glad to have anybod concerning this transaction; and if you will do so, go a Mr. BRECK. The tribunal gave judgment against the pres his son for a great variety of acts of so-called illegal en and found a very large Senator JOHNSON. You say "illegal enrichment." Th it bribery? Mr. BRECK. I do not know, sir. Senator JOHNSON. "Illegal enrichment " will do. Go a Mr. BRECK. Among the transactions for which they wer this tribunal were alleged commissions and profits of vari on various kinds of business, contracts, concessions, and m and similar things. The tribunal had the idea that the and his family had made a great deal of money during t bency of Leguia as president of Peru. Senator JONES. May we have the record show what his TESTIMONY OF HENRY C. BRECK Mr. BRECK. My name is Henry C. Breck. Senator KING. Were any of those transactions domesti acter, that is, the granting of concessions or monopolies individuals in Peru to carry the business? Mr. BRECK. That is what the tribunal claimed. Senator KING. How much did they find, if they found been obtained by the president's son in conection with action? Mr. BRECK. Nothing that I know of. the • dehad loan. ident very re has their gainst on? n that of the partner, opt his answer ead, sir. lent and ichment y called head, sir. tried by us kinds onopolies president e incum name is? c in charto private at all, had this trans Senator KING. It was not singled out, then? Mr. BRECK. Not that I know of. Senator JOHNSON. It was included, was it not? Mr. BRECK. Yes, among other things. Senator JOHNSON. When you say it was not singled out, you do not mean to say that it was not mentioned? Mr. BRECK. No. Senator JOHNSON. It was a part of the indictment that was had against the president and his son? Mr. BRECK. So I understand. Senator JOHNSON. Have you any correspondence, Mr. Strauss, with those who promoted this loan, to whom these payments were made by Seligman & Co.? Mr. ŠTRAUSS. None. Senator JOHNSON. How did you make the payments? Mr. BRECK. The account of Juan Leguia on our books was credited with the amount of money due him. Senator JOHNSON. You do not mean to say that your account ran to Juan Leguia alone? Mr. BRECK. No; other people were also paid. Senator JOHNSON. But you have on your books an account with Juan Leguia? Mr. BRECK. We did have. Senator JOHNSON. Where is it now? You say you did have it. Is it not still there? Mr. BRECK. It has no money in it. Senator JOHNSON. That is because you paid him? Mr. BRECK. We paid it out on his order as we would for anybody else. Senator JOHNSON. You had a distinct account of Juan Leguia? Senator JOHNSON. He was a son of the president of the Peruvian Mr. BRECK. He was. Senator JOHNSON. How much does your account show that you paid him? Mr. BRECK. $415,000. Senator JOHNSON. What did you pay Juan Leguia $415,000 for? Mr. BRECK. Because he was a member of a group of promoters who brought the business to F. J. Lisman & Co., who, in turn, brought it to us, so that when it reached us it was charged with that obligation to pay commissions to a group of which Juan Leguia was a member. Senator JOHNSON. And you paid them? Mr. BRECK. We paid them. Senator JOHNSON. Did you pay them before you sold the bonds or afterwards? Mr. BRECK. Afterwards. Senator JOHNSON. After you sold the bonds to the American public, Juan Leguia got $415,000 from you; is that correct? Mr. BRECK. Correct. Mr. STRAUSS. May I add this? Twenty-six per cent of the loans were placed abroad. That is a minor matter, but I just mention it. Senator JOHNSON. You placed some of them abroad? Mr. STRAUSS. Yes. Senator JOHNSON. You escaped that percentage, at any rate, on these defaulted loans. But you are quite right; it is immaterial where they were placed. Where are your books at the present time? Mr. BRECK. In New York. Senator JOHNSON. Do your books show to whom you paid sums for obtaining this loan and when? Mr. STRAUSS. May I interrupt for a moment? Senator JOHNSON. You may, of course; but you said that this gentleman knew the facts. Mr. STRAUSS. All right. Senator JOHNSON. I am very glad merely to get the facts; that is what I am seeking to do. I will get them from anyone, but I would rather pursue it with ont of you at a time. Now, if you desire, Mr. Strauss-I do not want to keep you from saying anything you want to with reference to this transactionMr. STRAUSS. I will say it afterwards. Senator JOHNSON. Say it right now. What is it you wish to say? Mr. STRAUSS. This business, as I understand it, came to us, as Mr. Breck has said, from people in New York saying that they had to pay a commission. We had no knowledge that Leguia had any interest in it until quite a long time afterwards, when the business had proceeded up to a certain point. I just wanted to make that clear that we did not retain in any way the services of this son of the President, and when we did find it out it was something that we did not like. We thought it did not make a good picture; but there we were, committed to a group of promoters who had the President's son among them, and when we found he was among them we proceeded with the business and carried out the obligations toward that group of promoters. Senator JOHNSON. Let me ask you right there: When Lisman & Co. came to you with this loan they told you, did they not, that they were obligated for a percentage to Juan Leguia and his set of promoters? Mr. BRECK. They did not. Senator JOHNSON. You did not know it before? Mr. BRECK. We did not. Senator JOHNSON. It was subsequently that you learned it? Mr. BRECK. After we had embarked on the negotiation a considerable time. Senator JOHNSON. After you had embarked on the negotiations with Peru? Mr. BRECK. With the President of Peru. Senator JOHNSON. But after you embarked upon the negotiations with the President of Peru, but before their consummation, you knew that you were obligated to a set of promoters, including the son of the President of Peru, for the sum that you have mentioned? Mr. BRECK. Quite correct. Senator JOHNSON. And you went on and consummated the negotiations? Mr. BRECK. We did. |