te, on terial sums at this that is would u from on to say? us, as ey had ad any business ke that s son of that we ut there esident's we proard that isman & That they s set of it? a consid gotiations gotiations tion, you uding the entioned? the nego Senator GEORGE. Did you make any inquiry about who constituted the group of promoters when you were advised that the loan came to you charged with a commission to a group? Mr. BRECK. No. F. J. Lisman & Co. said that this group of promoters who had brought the Peruvian business to them was entitled to a commission, the customary or usual commission paid on foreign financing, but the precise amount of the commission was not named at the time, nor were those entitled to it, beyond one individual named Bolster, mentioned to us at the time. Senator GEORGE. You made no inquiries or demand for the names of those constituting the group? Mr. BRECK. No, because we thought we knew what it was. It was said that Bolster had originated the business and that he and his associates were entitled to this commission. We thought we were paying no commission to anybody, ourselves; but that we were to pay it through the offices of the firm of F. J. Lisman & Co. who had brought the business to us, and it was so charged when we accepted it. Senator JOHNSON. Did you draw a check for the amount of this commission? Mr. BRECK. No. I told you, Senator, we credited his account with us. Senator JOHNSON. That is, Juan Leguia's account? Mr. BRECK. An ordinary checking account. Senator JOHNSON. And you credited his ordinary checking account at that time with something like half a million dollars; is that correct? Mr. BRECK. No; it was done as the various issues were brought out. He was given his share of the commission to which the group was entitled, at the same time the others were given their share. Senator JOHNSON. Have you a transcript of your books showing Juan Leguia's account? Mr. BRECK. No, sir. Senator JOHNSON. We may ask you to bring your books ultimately here in respect to that. But let us proceed, now. You ascribe this thing originally to Lisman & Co.? Mr. BRECK. I do not understand "ascribe this thing," Senator. Senator JOHNSON. If you do not understand it, I am sure I can not make it much plainer. But you ascribe the agreement to pay Juan Leguia and the promoters to the initiation of Lisman & Co.; is that correct? Mr. BRECK. Yes. Senator JOHNSON. They made a full disclosure to you when they brought the business to you, did they not? Mr. BRECK. They did not. Senator JOHNSON. Did you take it up subsequently with them? Mr. BRECK. Mr. S. A. Maginnis. Senator JOHNSON. And then he learned, or you learned, or your firm learned of the commission agreement? Mr. BRECK. That is correct. He learned from Juan Leg came to see him about the existence of the agreement, and h us, and that was our first knowledge of it. Senator JOHNSON. And you carried it out then? Senator JOHNSON. Is that agreement in writing? Senator JOHNSON. Was it in writing at any time? Mr. BRECK. Not that I know of. Senator JOHNSON. Was there anything of evidentiary c save Juan Leguia's statement to you that he was entitled t mission that you have described? Mr. BRECK. The statement of the representatives of F. J & Co. who had gone to Peru in the first instance and m arrangement with Juan Leguia. Senator JOHNSON. Did they have an agreement in writing Mr. BRECK. I do not know. Senator JOHNSON. Did you ever ask them whether they di Mr. BRECK. I suppose we did. I do not recall that. Senator JOHNSON. Do you recall whether or not they e any_reply? Mr. BRECK. I think there was never any agreement in between them and Juan Leguia. Senator JOHNSON. We have reached the point where yo sentative went to Peru to negotiate this loan. That repr was named what? Mr. BRECK. S. A. Maginnis. Senator JOHNSON. Where is he, please? Mr. BRECK. I understand he is a lawyer in New York. formerly American minister to Bolivia. Senator JOHNSON. How do you spell his name? Senator JOHNSON. Mr. Maginnis then learned at Peru t was in existence an agreement, either verbal or written, for ment to Juan Leguia and others of a commission upon the l Mr. BRECK. Correct. Senator JOHNSON. That was the first loan, was it not? Mr. BRECK. That was the $15,000,000 7 per cent issue. Senator JOHNSON. That antedated by some eight or nir the other two loans, did it not? Mr. BRECK. That is correct. Senator JOHNSON. Then subsequently you paid the com Juan Leguia and others upon the subsequent loans, did you I Mr. BRECK. It was all part of the original arrangem agreement between F. J. Lisman & Co. and this group of 1 of which Mr. Juan Leguia was a member, related to all financing which the firm of F. J. Lisman & Co. or its might do. It related not only to the 7 per cent loan, but called refunding loan which the 6 per cent bonds constitute Senator JOHNSON. Did it relate also to the short-term cr Mr. BRECK. It related to any Peruvian financing done b of which F. J. Lisman & Co. should be a member. Senator JOHNSON. And you took that over? mission to u not? ent. The promoters, Peruvian associates e. to the so redits? by a group Mr. BRECK. We took the obligation over from them when we took the business over. Senator JOHNSON. Did your representative talk to the President of Peru concerning that arrangement? Mr. BRECK. Not that I know of. Senator JOHNSON. He talked, as you know, to his son, did he not? Senator JOHNSON. Did he report in writing to you concerning the matter? Mr. BRECK. He cabled us about it. Senator JOHNSON. Have you the cables? Mr. BRECK. I think we have, Senator; yes. Senator JOHNSON. I want you to produce, if the committee will permit it, all of the letters and the cables that you have in respect to your Peruvian loans, and particularly in reference to the payment of the son of the president, of the amount of money that has been testified here this morning. Will you do that? Mr. BRECK. I will be glad to. I would just like to ask, as a matter of your own convenience, whether you want all our communications with respect to Peruvian financing, because they would take up several drawers full of space. There was a very complicated, lengthy negotiation, involving particularly the refunding loan, during which we undertook to reform the mortgage law and give them a mortgage bank, and in which we advised them about the stabilization of their currency. Senator JOHNSON. I am not interested in the mortgage bank. I am not interested in anything except everything relating to the promoters who obtained the loan for you, and your payments to the son of the president, and, if any were made to the president, to the president himself. Mr. BRECK. None was made to the president. Senator JOHNSON. You are certain of that? Mr. BRECK. Yes; positive. Senator JOHNSON. Do you know what was done with the credit that the son had with your firm? Mr. BRECK. He drew against his deposit, the way that any other customer would, when he needed money. Senator JOHNSON. Did he exhaust that deposit? Mr. BRECK. He has nothing on deposit with us now. Senator JOHNSON. Have you drafts or checks that he drew upon. that deposit? Mr. BRECK. I would think so. Senator JOHNSON. Will you produce them, please? Mr. BRECK. I would be delighted to. Senator JOHNSON. I want the Juan Leguia checks or drafts drawn upon the deposit which I understand that you gave him credit forI speak in round numbers-half a milion dollars upon those loans. Senator KING. Would you return the checks to him in commercial transactions? Mr. BRECK. Yes; just the way any bank does. It might be possible to get a transcript of the accounts. I doubt if the checks would be obtainable. I know there were cable payments. Senator JOHNSON. Of what size, please? Mr. BRECK. Thousands of dollars. I remember one to some Paris firm for merchandise. Senator JOHNSON. Of thousands of dollars? Mr. BRECK. Yes. Senator JOHNSON. Tell me approximately how large the largest amount was that you cabled. Mr. BRECK. I do not recall, Senator. My recollection is, although I have never looked at the account in summary form, that they were paid to tradesmen of one kind or another, such as Abercrombie & Fitch, New York hotels, or Senator JOHNSON. Do you mean to say that a large amount would be paid out to Abercrombie & Fitch? Mr. BRECK. I think he lived at the rate of at least $250,000 or $300,000 a year for several years. Senator JOHNSON. He could, under the circumstances, I presume, have lived at that rate. Do you know whether or not your loans to Peru enabled Leguia to continue in office? Mr. BRECK. All I know is the purposes for which the loan proceeds were applied. Senator JOHNSON. What were the purposes? Mr. BRECK. If I may refer to that memorandum that I gave you, Senator, the proceeds of the tobacco loan were applied primarily to the redemption of certain internal issues in relatively small amount; to payment for the machinery necessary to complete the tobacco factory itself, furnished by American concerned; and the remainder largely for road building, according to the statements of the Peruvian officials themselves. The 6 per cent Peruvian national loan was primarily a refunding operation undertaken for the purpose of simplifying the country's financial structure, which up to that time consisted of several issues of bonds secured by specific revenues of one kind or another; and they had so complicated the country's financial structure that it was unable to borrow economically by reason of it. We therefore undertook this refunding loan, and of the $85,000,000 principal amount, the bonds constituting the first and second series, approximately 632 per cent of the proceeds were used to purchase or retire external secured bonds, extend secured serial notes, and internal floating indebtedness-approximately 632 per cent. About 1.3 per cent was used to provide capital for a mortgage bank. Approximately 634 per cent provided the money for the construction and improvement of dock and shipping facilities paid in its entirety to an American firm of constructors. Senator JOHNSON. What was that firm's name? Mr. BRECK. Frederick J. Snare Co.; 28.3 per cent was used for expenditures for public works of one kind or another specified in an exhibit to the loan contract, such as roads, irrigation, and works of sanitation and hygiene. Senator KING. Did you supervise in any way the expenditures of that 28 per cent, or did you have some one there to see that they were properly applied for the purposes which you have just stated to Senator Johnson? Mr. BRECK. We would like very much to have, and we requested it, but were told we were usurping the sovereignty of a nation, to their expenditures would be employed. We were able, o control the expenditure of money spent on the docks by out entirely to the contractor ourselves. Similarly with refunding. It was all done by concentrating the proceeds lves and the City Co. and paying them out to the bondtheir bonds were redeemed. 28.3 per cent which was spent for public works, we paid the Government, not in one lump sum as they wished but $750,000 monthly, on the ground, we said, that they economically spend a large amount at once, and it was et the money regularly, and we so paid it out to them. KING. Did your agents who were there report that they cting these improvements or making these improvements and bridge and roads as indicated? CK. In a general way, yes. The Ministry of Finance of ic each month published a list of the public works exin great detail. We followed that list closely, and at fter the second series of the Peruvian national loan, we mental in getting the President to designate a United my officer to report upon the public works then being in Peru. We felt that there was construction going we ourselves perhaps would not have selected had we it, and we wanted the benefit of some expert advice on onel Moore, this American engineer, was designated by ent to go over the whole works, which he did, and he the President, not to us, six months after that. This ing the second series in the fall of 1928. We felt that ditures were in many cases unnecessary, or at least unt that time, having in mind Peru's state of development, and we urged the President to cut them down drastically ntrate them, spending what money he had on 1, 2, or 3 orks instead of distributing it largely all over the counjected to that, and that was the beginning of the end of as as purchasers of the Republic's securities, because we not wise thereafter to purchase additional bonds while s were being made in that way. KING. What were the expenditures generally that the r, Colonel Moore, looked after? K. A large irrigation project in northern Peru, the Olmos roject, and several separated railway projects, not linked other, and considerable road building. JOHNSON. You have been discussing these loans, and I them with you, with your permission, hereafter. You mount that you credited to the account of Juan Leguia, ? K. Yes. OHNSON. That was how much? к. Approximately $415,000. OHNSON. Between $400,000 and $500,000 would be within. nyway? K. Yes; it would. OHNSON. The account upon your books ran just in the n Leguia, did it not? x. Yes. 1 |