Although he was implicated by several others as the master raind of f'n organisation responsible for the Imanfacture of 14,200 counterfeit Banknotes with a face value of $2 Jeach, Tsang Shit-fong, described as 2 broker, was found not guilty on the charge by First Special District Court on Monday. The Police, ho-wever, reserved the right to appeal against the decision. "Several of the persons who had implicated, Tsang fre in the custody of the Shanghai Public Safety. Bureau, When he learned that he was wanted by the police, Tsang, it was said, fled and Raven is concerned in all that went on, we do not find his name very often upon papers and documents showing that he was the person who. factually put through the transaction <his signature is conspicuous by its absence, Mz. Brown will no doubt say. that he carried out orders very. faithfully: My. Raven's signature does not appear on documents which might be incriminating, but we will show by at least four pieces of direct evidence that Mr. Raven knew from the very beginning, when this Finance Corporation. started doing business in New York stocks, that so-called fully pald-up shares were being made use of by the Finance Corporation in this margin account to fnance the Corporations business. We will show that he knew when the Finance Corporation got possession of share scrip that belonged to other people.
knew that the common ordinary routine practice of the Finance Corporation was to take the share scrip and pledge it to E. A. Pierce Ca, so there can be no question of this being Just business slips and errors, These people knew that at all-time they were using other, people's money and property in a Way which they had no right to do~ ina way that was criminal.
We will show that, if the Finance Corporation were to sink at any time, the Raven Trust Ca, would have to collapse, and. vice versa. All. these companies were so. linked together that, in the mind of Mr. Raven, no istinetion was made between them, one company needed money. and the other had it, it was just simply transferred, If one company had lost money, and was going to show a bad. balance sheet at the end of the ye It was easy to ask the other com= panies to fend them Tls. 195,000, 30 that they could show a balance sheet which would not cause the public to Rose confidence in this company. We will show that Mr, Raven controlled all the destinies of the Finance Corporation—that he had guilty know. Tedge at all times of what that company was doing, and that everything Was done under his direction."
Jan. 6.
Miss A. Violn Smith, Registrar of the China 'Trade Act, connected with the Department of Commerce of the USA, produced the Articles of incorporation of the A.O.F.C,, showing that. it came into existence in July, 1026, She also produced 2 copy' of the minutes of a meeting of Sockholders at which F. J. Raven as appointed president and a direc: for, and J. Warner Brown, vice. president and a director. A list of Shareholders in the Raven Trust Company on December 31, 1932, was put in to show that the defendants Were stockholders in the corporation fat that date, to which Mr. Evans objected. the Judge over-ruled counsel. upon Dz. Sellett explaining that he proposed to prove that Raven was the controlling shareholder in -the Raven Trust Company, and that be was at all Nimes the controlling share holder in the AO.F.C. The records showed that the Raven Trust Com= pany, of F. J. Raven, held 93,040 shares of "A" stock of the A.O.F.C. the last annual report and balance sheet disclosing the fact that commun Sat share stock issued and paid amounted to Mex. $2,435,800, common shore stock issued and paid up amounted to. Mex. $1,070340, and referred stock to Mex. $15,700.
Miss Smith also produced the rec~ fords of the Raven Trust Company, the introduction of which agai Mr. Evane vainly objected, on the ground lat it was immaterial, irre-partnership engaged in stock besiness throughout the United States headquarters being in Wall Street, New York. Since the beginning of 1929, he was in entire charge in San Francisco of the account of the 'AO. Corporation, which commenced doing business with E. A. Pierce & Ca. about February, 1990. About November, 1929, Raven called at the offices of his company in San Francisco, and, later, arrangements wee made with the A.O.F.C. to be his company's clients, the relationship being exactly the same as other corporation customers. Pierce & Ca. carried the A.O.P. Corporation's Jaccount, and executed their orders fon a commission basis, the lotte: Jcompleting, usual signature card and fhypotheeation consent form>—/"American-Oriental Finance Corporation, by F. J. Raven, President."
In the spring of 1934, the ACE. laponed branch offices both in Hongkong and Manila." Witness describe the way in which the business was carried on between his firm and the A.OFC, it being done in the first place through cables, and for the most part it consisted of buying and selling New York securities. Early 1990, the volume of business done was not very large, but towards the end of that' year became very brisk, and, from that ime on, until the closing of the ACC.' in May, 1995, there was a [daily exchange of cables between the [corporation and witness's firm. Bach feeble ordinarily would contain purfehasing oF solling orders, for more than one kind of stock, "and. som [umes several cables were received leach day, which were replied to in manner.
Witness know that the business between the Finance Corporation and his firm consisted largely for clients Jof the corporation, but, so far as the tables were concerned: they did not [disclose the "names of any clients: Pierce & Co's business was entirely with the corporation, and not with any clients of theirs. The corpor tion also dealt quite extensively times with witness's firm in commodiies. Clients often did. business on margin. and els in securities which they fully paid for.
Dr, Sollett—What kind of accounts did the Finance Corporation have?—A margin account, a fully-paid securities (safe Keeping") account, and various commodities account. "As to the margin account, the securities were bought and carried by us on a mare of 25 por cent, of their value. If the securities depreciated in value—there was a drop in the market—we would require more margin, and inform them of that fact by cable. The larger part of the A. O. P, Corporation's dealings in securities was {hrough the margin account: the fully-paid securities account was not very active.
In reply to questions by Mr. Evans, the witness stated that, if the margin Jaccount shares appreciated in value much that they would be fully paid, they were taken from the fmariin account and put to a general account. If some. securities fell in value' below the minimum allowed, fond if no further margin was put in sponse toa demand for same, Pierce & Ca. would be at liberty, in accordance with the usual practice, to; sell the fully-paid securities, as wel fas the shares on margin, provided the result of the sale of the shares on margin was insufficient to protect the account. There were two kinds of afe-keeping. sccurities—one the "request safe-keeping security" by the! client, and the other the safe-keeping fof securities which the broker was compelled to do in accordance with ordinarily the individual must cover his deficiency by the next morning, prior to the opening of the market, would be exactly the same with 3 corporation. In dealing with a finance [corporation with offices in Shanghai, margin call would be sent atthe close of a. business day, and that would be "received in. Shanghat at, [spproximataly, the opening of business the next day. If aT. fmitiance was sent immediately, we would receive the money the next! business day following the call. That is what we would expect, 'The business which the AER. did with Messrs Pierce' & Ca, witness raid, was suMiciently voluminous 0 make it worth hig while to give it his whole attention, The safekeeping account was opened in the fearly part. of 1033, and. there were securities in that account when the Finance Corporation closed. ThOse securities were specially requested be placed in safe custody.
In reply to Mr. Franklin, the wite ness stated that for a corporation 10 engage im. stock business In America (was unusual. The rules of the New [York Stock Exchange di not permit, Jor allow, the payment of any interest fon a credit balance.
Further evidence by the witness was {0 the effect that, if a client had '2 paid-up security, and at the same time a limit order. which had not been executed, should he demand his! fully paid-up security it would not be given to. him unless and until hei {hed put up 25 per cent. margin of the value of the open order. Of course, IIe the ctient, insisted. upon receiving his fully paid-up security, they would et hint have it, but, Th Uhat case, they" Would cancel the unfulatled order. "While his open order was une executed, his fully paid-up. share would be in safe-keeping, and remain the property of the client.
Dr, Sellett—It_ any security, fully pald, in negotiable form, were offered ito you, in' Wen of cash, by an. in= aividuat, "would you know" whether that security. was the property of the Individual, or of his cllenis?—We would not care. We would take the eeurity, and treat it as belonging to the individual, the same as if he had paid vs in cash. They would be the [fame as securities endorsed in blank.
"At this point, the further hearing wax adjourned.
His valve of one or two years ago, Defendants claimed that a 40 per cent. reduction was reasonable, Dr. L. C. Yang, in reply, contended that' the judgments given in other similar cases should not be taken into consideration, because each case must judged on its own merits, and each Judge was entitled to uso his own judgment. These were judgments of the Court of First Instance, not of Supreme Court of Nanking. He quoted Judgment No, 1064, in which the Court. dismissed an action for rent reduction, Which wat a much more reasonable [Judgment but he would not ask the Court to decide this case on the merits fof other cases.
Dr. Yang argued that all the ten~ fants had been paying rental at the resent rate for a number of years and the terms of their tenancy could not be altered or even interfered with by a Court whose duty it ws enforce such contracts. He denied thatthe property in question hod depreciated in value, but rather Increased in value, as proved by the Municipal Assessment, "The depreciation of real property was not a well-Known fact—at least, the depreciation fof the property in question was not for no member of the Court staff was able to tell to-day the market price of the properly without consult-Ing the S.M.C. or the Chinese Land Ofice. Usually, the value of real property was based. on yearly rev. fenues and, if a reduction was allowed by the Court, it was taking part in or being, Instrumental to such depreck ton.
'The Couxt orally delivered jud ment, ordering the tenants to pay the Fent'as claimed and dismissed the Jdefendants' counterclaim, but denied plaintiffs' application for'a provisional execution. A written Judgment expected in the next few days.
Text read from the printed page and cleaned; old type leaves the occasional error.