Commercial Trust Company (Buffalo, NY)

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LUNGHINO SOLVENCY PLEA OFFERED IN TRIAL OF HIS SUIT

company and of the Commercial Share corporation, taking about six weeks for the work, which was started last August.

He testified that his report, made in exactly the same form as the official reports of the State Banking department, was compiled from lists of assets and liabilities, loan registers, lists of stock and bond investments and of collateral.

Mr. Frazer took the stand after John Lord O'Brian, attorney for the Buffalo defendants, had completed his presentation of the case to the jury.

Pointing out that, with the exception of former Supreme Court Justice Daniel J. Kenefick, none of those whom he represents had any knowledge of Mr. Lunghino's experiences with the banking department prior to the date on which the Commercial Trust company was taken over by the Marine Trust company, Mr. O'Brian explained that Judge Kenefick was a personal friend of Mr. Lunghino and had advised him on previous occasions.

Says Lunghino Bought Stock.

'There may be; I'll get in touch with you later in the day.'"

Wished to Meet Directors.

Mr. Egbert then told Mr. Lenahan that he had asked Mr. Lunghino to permit him to meet the directors at the bank, but that Mr. Lunghino refused on the ground it would not look good, but it would be better if the directors came to the Statler hotel to see him, Mr. O'Brian said.

"Mr. Egbert told Mr. Lenahan to go to the Manufacturers & Traders bank and see if they could be persuaded to take a hand in the situation while he went to the Marine and tried to sound out Mr. Rand," Mr. O'Brian went on.

"At the Manufacturers & Traders, Mr. Harriman (Lewis B. Harriman, president) told Mr. Lenahan: 'We'll have nothing to do with it; we've got our hands full with the Pepe bank and besides, we know Lunghino too well.'

"Mr. Egbert talked to Mr. Rand and it was decided the Clearing-House association should meet with him at 3 that afternoon.

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He testified that his report, made in exactly the same form as the official reports of the State Banking department, was compiled from lists of assets and liabilities, loan registers, lists of stock and bond investments and of collateral.

Mr. Frazer took the stand after John Lord O'Brian, attorney for the Buffalo defendants, had completed his presentation of the case to the jury.

Pointing out that, with the exception of former Supreme Court Justice Daniel J. Kenefick, none of those whom he represents had any knowledge of Mr. Lunghino's experiences with the banking department prior to the date on which the Commercial Trust company was taken over by the Marine Trust company, Mr. O'Brian explained that Judge Kenefick was a personal friend of Mr. Lunghino and had advised him on previous occasions.

Says Lunghino Bought Stock.

Mr. O'Brian asserted that Mr. Lunghino persisted in buying all Commercial stock offered on the market and that, in July, 1930, alone, he bought 97 per cent of all Commercial stock offered for sale "by anybody."

On Dec. 9, 1930, George W. Egbert, now state superintendent of banks, but then first assistant to Supt. Joseph A. Broderick, came to Buffalo and told Mr. Lunghino that Mr. Broderick had sent him to get Mr. Lunghino to put ready cash into the S. Lunghino & Sons private bank in Rochester, Mr. O'Brian said.

"Mr. Lunghino lost his temper and challenged the superintendent to close his bank, but things quieted down," Mr. O'Brian continued.

In October, 1930, Mr. O'Brian said, Mr. Lunghino drew a sight draft on the Marine Trust company for $40,000, got it cashed, put it in a safety deposit box and never deposited the draft.

"Securities in Transit."

Mr. O'Brian said Mr. Lunghino indulged in the practice of buying stock and carrying it in an account of "securities in transit," a temporary account, with notations that it had been bought for various persons.

John J. Lenahan, then chairman of the board of Commercial Trust, was a close personal friend of Mr. Lunghino, Mr. O'Brian said.

Mr. Lenahan was president of the Irish-American Savings & Loan association and a director in the Manufacturers & Traders Trust company.

When he discovered that Mr. Lunghino had bought considerable stock with a notation that it was for him, Mr. Lenahan became angry and said he would not accept it, whereupon Mr. Lunghino said he would "straighten it out," Mr. O'Brian told the jury.

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Agree to Stand Loss.

They agreed to stand a total loss of $200,000, divided three ways by Marine, Manufacturers & Traders and Liberty, if the Marine encountered any loss in liquidating the Commercial's $7,000,000 of deposits, according to Mr. O'Brian, who declared that this proves that Mr. Rand didn't want the Commercial Trust company.

Depositors began a run on the Commercial and withdrew hundreds of thousands of dollars, Mr. O'Brian said. The Marine put signs on Commercial Trust, stating it was operating Commercial Trust as a branch, sent over $700,000 in cash to meet demands of depositors, "and the runs on the bank stopped," he related.

Later on, Mr. Lunghino employed James O. Moore and Frank G. Raichle Jr. as his attorneys and they contacted Lyman M. Bass of Kenefick, Cooke, Mitchell, Bass & Letchworth and told him Mr. Lunghino thought the Marine ought to provide money for S. Lunghino & Sons in Rochester.

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LAWYERS ENGAGE IN BITTER DEBATE AT LUNGHINO TRIAL

a chance to study it," Justice Parton Swift said to Mr. Nevins.

"I want to correct their statement," Mr. Nevins said. "After I gave them the report last night, Mr. Lunghino called my attention to a conference we had scheduled to correct some errors in it and—"

Seeks Connection.

"So you took it away," chimed in Mr. Conboy.

"Yes, of course, we had to have it," Mr. Nevins said.

Mr. Conboy demanded to know the purpose of introducing Mr. Frazer's report. He said the Banking department had made a regular examination of the Commercial Trust company in 1930 and that Mr. Frazer's examination had not been made until August, 1934.

Mr. O'Brian wanted to know to what issue in the case the Frazer report was directed. "What's the purpose of it so far as my clients are concerned."

"In the first place, I'm not required to serve a bill of particulars to the gentlemen at this time," Mr. Nevins said. "This report gives the financial condition of Commercial Trust as of the four dates indicated in the report. We expect to show by the report that the capital of Commercial Trust was not impaired at that time and that it did have a surplus. That's what the report is for."

Swift Upholds Nevins.

"Then," Justice Swift said, "it goes very largely to the measure of damages."

"It goes also to show that the Banking department made an improper examination and to show the true situation of Commercial Trust," Mr. Nevins said.

Mr. Conboy here entered a heated objection. He said the Banking department had made an examination that disclosed alleged wrongs, and had served ten orders on Commercial Trust directors to straighten out the bank's affairs.

Justice Swift interrupted with the observation that Mr. Nevins has a right to try his case in his own way.

"You and I," the court said to Mr. Conboy, "perhaps would try it differently, trying to prove the conspiracy first and then the damages, but hasn't he a right to try his case in his own manner?"

"Where's the conspiracy?" Mr. Conboy demanded.

Would Straighten Out Row.

Mr. Frazer testified that he was an assistant bank examiner in Buffalo from 1915 to 1918. At present he is the manager of the Credit Rehabilitation corporation, with offices in the Genesee building.

How Report Was Compiled.

By permission of the Supreme court, Mr. Frazer said, he examined the books of the Commercial Trust company and of the Commercial Share corporation, taking about six weeks for the work, which was started last August.

He testified that his report, made in exactly the same form as the official reports of the State Banking department, was compiled from lists of assets and liabilities, loan registers, lists of stock and bond investments and of collateral.

Mr. Frazer took the stand after John Lord O'Brian, attorney for the Buffalo defendants, had completed his presentation of the case to the jury.

Pointing out that, with the exception of former Supreme Court Justice Daniel J. Kenefick, none of those whom he represents had any knowledge of Mr. Lunghino's experiences with the banking department prior to the date on which the Commercial Trust company was taken over by the Marine Trust company, Mr. O'Brian explained that Judge Kenefick was a personal friend of Mr. Lunghino and had advised him on previous occasions.

Says Lunghino Bought Stock.

Mr. O'Brian asserted that Mr. Lunghino persisted in buying all Commercial stock offered on the market and that, in July, 1930, alone, he bought 97 per cent of all Commercial stock offered for sale "by anybody."

On Dec. 9, 1930, George W. Egbert, now state superintendent of banks, but then first assistant to Supt. Joseph A. Broderick, came to Buffalo and told Mr. Lunghino that Mr. Broderick had sent him to get Mr. Lunghino to put ready cash into the S. Lunghino & Sons private bank in Rochester, Mr. O'Brian said.

"Mr. Lunghino lost his temper and challenged the superintendent to close his bank, but things quieted down," Mr. O'Brian continued.

In October, 1930, Mr. O'Brian said, Mr. Lunghino drew a sight draft on the Marine Trust company for $40,000, got it cashed, put it in a safety deposit box and never deposited the draft.

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No Evidence Given.

"The court has no evidence whatever at this time. The jury knows no more than what opposing counsel said in their opening statements. In an ordinary case it is very well to say, 'Let counsel try it his own way.' But that can't be done in this case.

"Every one of my clients is entitled to know what act he is charged with."

"Isn't that in the bill of particulars?" Justice Swift asked.

"No, sir," Mr. O'Brian said. "We ask for it. My clients are charged with grave wrongs that would blacken their character. But what is it each is charged with? We have a right to know."

"Banking is not a right. It is a privilege exercised under a franchise," continued Mr. O'Brian. "The plaintiff is seeking to impeach the Banking department. The department embodied its findings in a report and the plaintiff was formally served with it, together with a letter directing Mr. Lunghino to notify his directors.

"The report contained a valuation of $3.23 per share for Commercial Share stock and $60 per share for Commercial Trust stock. If there was anything Mr. Lunghino took exception to in the report, he had the right to complain to the superintendent of banks.

Approved Report.

"They did the contrary. The directors adopted a resolution approving the report and directed the findings be carried out. Mr. Frazer thinks four years afterwards the banking department erred seriously in its report. They set up certain reserves which he thinks should have been set up differently.

"I object to receipt of any evidence at this time regarding damages. The defendants are entitled to know the charges against them."

Mr. Nevins declared the plaintiff is entitled to "know what we have left and what we lost." He said the jury knows "what went on in Rand's house," referring to a conference between George F. Rand Jr., president of the Marine Trust company, and Mr. Lunghino, prior to the Marine Trust taking over the Commercial Trust company.

Mr. Nevins insisted he is not

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Feared Bankruptcy.

"I told Judge Kenefick I had $1,000,000 equity in the Commercial Trust company and liquidation would make me a bankrupt. The judge told me I was liable to prosecution and advised me to avoid disgrace and humiliation," the witness testified.

Mr. Lunghino testified that he warned Mr. Rand that, if his bank were liquidated, his loans and the loans of his family with the Liberty bank and the Liberty Share corporation secured with stock of the Commercial Trust company as collateral would cost the stockholders of those institutions losses of $250,000.

Mr. Lunghino testified that Mr. Rand sent for George C. Kleindinst, president of the Liberty bank, and told him not to worry, and that the matter would be taken care of.

Detailing some of the arguments he used against liquidation, Mr. Lunghino said he finally told the group that "on advice of my personal friend and advisor, Judge Kenefick, to whom I'd give my right arm if necessary, I would vote for liquidation."

Called Rand's Party.

At Mr. Egbert's suggestion, Mr. Lunghino testified, the group then discussed ways and means of avoiding liquidation. During this discussion, he said, he was congratulated by Mr. Kleindinst on his speech.

"'Then why don't you do something, put a stop to this thing?' I said to him," Mr. Lunghino continued, "and he said, 'This is not my party, it's Mr. Rand's party, and I'm not going to get mixed up in it.'"

Mr. Lunghino said he made similar appeals to Mr. Lenahan, Judge Pooley and other directors of Commercial Trust. After about half an hour, he said, Mr. Rand read a resolution stating that the Marine Trust should take over Commercial Trust on the basis of liquidation, guarantee deposits of Commercial Trust and pay over any surplus to Commercial Trust stockholders.

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"Judge Kenefick told me I would be in friendly hands and said, 'We'll take care of you—you won't be in any trouble.'

"Mr. Ingham suggested that, if the Marine Trust company was sincere, it would be the thing for me to step out and let them put their own management in the Commercial Trust company. He said this several times during the evening."

Mr. Lunghino testified the conversation in the basement room continued for more than an hour without him agreeing to liquidate. At that time, Mr. Rand returned and someone said it was getting late, he testified.

"Mr. Rand said his proposition was final. I again told Judge Kenefick I would not consent to liquidation, and he told me I was stubborn. He again told me they would close my bank.

Feared Bankruptcy.

"I told Judge Kenefick I had $1,000,000 equity in the Commercial Trust company and liquidation would make me a bankrupt. The judge told me I was liable to prosecution and advised me to avoid disgrace and humiliation," the witness testified.

Mr. Lunghino testified that he warned Mr. Rand that, if his bank were liquidated, his loans and the loans of his family with the Liberty bank and the Liberty Share corporation secured with stock of the Commercial Trust company as collateral would cost the stockholders of those institutions losses of $250,000.

Mr. Lunghino testified that Mr. Rand sent for George C. Kleindinst, president of the Liberty bank, and told him not to worry, and that the matter would be taken care of.

Detailing some of the arguments he used against liquidation, Mr. Lunghino said he finally told the group that "on advice of my personal friend and advisor, Judge Kenefick, to whom I'd give my right arm if necessary, I would vote for liquidation."

Called Rand's Party.

At Mr. Egbert's suggestion, Mr. Lunghino testified, the group then discussed ways and means of avoiding liquidation. During this discussion, he said, he was congratulated by Mr. Kleindinst on his speech.

"'Then why don't you do something, put a stop to this thing?' I said to him," Mr. Lunghino continued, "and he said, 'This is not my party, it's Mr. Rand's party, and I'm not going to get mixed up in it.'"

Mr. Lunghino said he made similar appeals to Mr. Lenahan, Judge Pooley and other directors of Commercial Trust. After about half an hour, he said, Mr. Rand read a resolution stating that the Marine Trust should take over Commercial Trust on the basis of liquidation, guarantee deposits of Commercial Trust and pay over any surplus to Commercial Trust stockholders.

Avers Aid Pledged.

When Mr. Lunghino suggested that the move would cause a decline in Commercial Trust stock and that he would be unable to take care of the S. Lunghino & Sons depositors in Rochester, he said, Mr. Egbert promised to get the clearing house banks in Rochester to take care of the situation there.

Then Mr. Rand moved for adoption of the resolution and Mr. Lunghino interrupted, he testified, to say, "If the Commercial Trust directors, on advice of our counsel, Judge Kenefick, wish to adopt this resolution, they may go ahead and do it but, so far as I'm concerned, I won't vote for it and wish to be excused; I'll go into another room."

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Asked for State Report. Mr. Lunghino said that on Feb. 23 or 24 he tried to get Mr. Bangert on the telephone, and again a few days later, but not until a still later day was he able to reach him. Mr. Bangert was in Holland, N. Y.

Mr. Lunghino said he asked Mr. Bangert for a copy of the State Banking department's report of the condition of Commercial Trust company as of Jan. 21, 1931, particularly the statement of the stocks, bonds, mortgages and a description of the real estate.

"In general, I asked for a complete statement of assets and liabilities, but he said he couldn't give it to me, I would have to get it from the banking department," Mr. Lunghino testified.

Martin Conboy, counsel for the four State Banking department defendants, objected.

Had No Right to Do So. He said that under the law Mr. Bangert had no right to show Mr. Lunghino the statement.

Mr. Nevins said Mr. Lunghino had a right to get it because he still was a director of Commercial Trust and needed the information in his efforts to interest prospects in reorganizing Commercial Trust company.

Mr. Lunghino testified that he had difficulty in obtaining a copy of the contract which he signed, turning over his bank to the Marine Trust company. He finally appealed to Judge Kenefick, who mailed him a copy of the contract.

Defense attorneys attempted to block his answer to a question of whether he signed the contract "through fear," because of threats of possible prosecution made to him before he signed the contract in a basement room in the home of George F. Rand Jr., president of the Marine Trust company. Mr. Lunghino was permitted to answer in the negative by Justice Swift.

Goes to Kenefick's Office. Mr. Lunghino testified that on the morning after he had signed the contract he went to Judge Kenefick's office in the Marine Trust building, where he found John J Lenahan and most of the other directors of the Commercial Trust awaiting him.

He testified he was seated in the library of the law office when Mr. Rand came in and made an announcement.

"We have had the report of our examiners and they find the capital of the Commercial Trust company is practically wiped out," Mr. Lunghino testified Mr. Rand announced.

"I have asked George C. Kleindinst, president of the Liberty bank, and Lewis G. Harriman, president of the Manufacturers & Traders Trust company, each to contribute one-third of the $100,000 fund we are creating to indemnify us against loss in liquidating the Commercial Trust company," Mr. Lunghino testified Mr. Rand said as he left the room.

Saw Signs on Bank. Mr. Lunghino testified that as he entered the Marine Trust building he saw big canvas signs "plastered" on the Main and Seneca street sides of the Commercial bank.

"The signs were on the building before Mr. Rand made his announcements," Mr. Lunghino testified. "They were the same size as our regular bank signs and had 'Marine Trust' printed on them," he testified.

Continuing his recital of what took place in Judge Kenefick's library, Mr. Lunghino said that after Mr. Rand's departure Mr. Lenahan said: "I'm afraid Joe is licked."

"I said: 'Cut that out. Don't make it any harder for me,'" he testified. "Then they all walked out and left me alone."

"What did you do then?" asked Mr. Nevins.

"I started to cry," Mr. Lunghino said, visibly affected at the memory. A few minutes later he asked Justice Swift for a recess, which was granted."

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Rochester Bank Closed.

Resuming his testimony, Mr. Lunghino said that afternoon he was informed that the State Banking department had closed the bank of S. Lunghino & Sons in Rochester. He testified he called Judge Kenefick on the telephone to inform him of what he had learned.

"Joe, I'm awfully embarrassed," he testified Judge Kenefick said to him. "I'm terribly sorry for you. You'll have to get another lawyer."

"Judge, you can't desert me now," he testified he pleaded over the telephone. "You know all my affairs and I'll be in a terrible condition if you don't continue to advise me. I need you badly."

Mr. Lunghino said that Judge Kenefick directed him to Mr. Raichle.

The next step in the affairs of the Commercial Trust company came on Jan. 22 when the stock of the Commercial Share corporation was stricken from the board at the Buffalo Stock exchange, Mr. Lunghino testified.

Newspapers Carry Ads.

The following day the newspapers carried full-page advertisements that the Marine Trust company had taken over the Commercial Trust company, he testified.

Mr. Lunghino told of a telephone conversation with Lyman M. Bass, a member of the firm of Kenefick, Cooke, Mitchell, Bass & Letchworth, asking him to sign a letter which was to be read to the stockholders of the Commercial Trust company. He said he refused to sign the letter.

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Second Contract Granted.

Mr. O'Brian traced the events that followed, which have been testified to in the trial. He said Mr. Lunghino without duress voted for the contract and that more than four weeks later, when he asked for a time extension in order to reorganize his bank, the Marine Trust company readily gave him 45 days. He had asked for 60 days.

"That took the form of a second contract and is evidence of the desire by the Marine to assist the plaintiff," Mr. O'Brian said.

"This," Mr. O'Brian said, "is a question of motive. That night when these people met in Mr. Rand's house the city unknowingly was facing a crisis."

If the Commercial Trust company with 7700 depositors had had a run on it, or had been closed, it meant that there would certainly be a run on every other bank in this community the next day.

"The savings of every person in Buffalo was in danger that night when these men were handling a desperate situation.

Question of Wrongful Motive.

"There is no evidence of any wrongful purpose and I venture to say that in the entire history of this city there never was a more courageous act than that of Mr. Rand in stepping in at the request of the Banking department and taking over the Commercial Trust, protecting the depositors in full and at the same time saving the entire banking situation in Buffalo.

"Now, this is a question of wrongful motive attributed to it upon this flimsy case by this man who on the stand out of his own lips stands convicted of embezzlement and defalcation of the funds of the depositors of his own institution."

Mr. Conboy made a lengthy argument on his motion.

The Commercial Trust company admitted violations of the banking law and admitted doing things that were unauthorized and illegal, Mr. Conboy asserted.

Mr. Conboy declared $109,000 of Commercial Trust company money went out of the bank by means of sight drafts.

He said the first sight draft was that for $13,000 drawn on Frank X. Scherer, "as clear a violation of the banking law" as previous transactions "because this draft was drawn by Lunghino."

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"It shows conspiracy and duplicity; they were in cahoots," he concluded.

One for Jury to Decide.

Mr. Nevins at the conclusion of his argument said he believed the question of whether there was a conspiracy between the Banking department and the Buffalo defendants to obtain control of the Commercial Trust company was one for the jury to decide.

"I can't see it," Justice Swift commented, as he nodded affirmation of Mr. Conboy's request for a dismissal of the complaint.

Mr. Conboy's motion was made a few minutes after Mr. Nevins rested his case.

Justice Swift excused the jury and asked Mr. Nevins if he would concede that failure of the Commercial Trust company to meet the ten demands made by the Banking department before Commercial Trust was taken over by the Marine Trust gave the department the right to close the Commercial Trust.

Says Time Not Granted.

"As I read Section 56 of the Banking law," Mr. Nevins replied, "the Banking department has a perfect right upon examination, if they found certain things improper, then the Banking department—the superintendent—has the right to serve a written notice or demands on the institution, giving the institution some extension of time to remedy. Then the superintendent shall fix a time and place where the officers of the bank may have a hearing."

"Then you take exception on the ground there was no extension of time?" Justice Swift asked.

"I do. They could not meet the demands forthwith, within 24 hours. They gave us no time to accomplish their demands."

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Was to Go to Broderick.

He was to deliver it in New York to Mr. Broderick and let Mr. Lunghino know the result.

"Instead of going to New York, he calls Mr. Lunghino the next morning in a rough voice, tells him he wants him to call a meeting of trust company's board of directors the following day," said Mr. Nevins. "The next morning and before the meeting Mr. Egbert called Mr. Lenahan and they had a conference in the Hotel Statler.

"The Banking department may have a right to close a bank under their tremendous power, but they haven't the right to go around and peddle it. The department, with the one man they kept constantly in touch with, goes to the arch conspirator for its information. This was a violation of law."

Thought It Was Merger.

Mr. Nevins charged that when Mr. Lunghino was invited to attend a conference in the home of Mr. Rand, he believed the discussion was to be about a merger of the Commercial Trust company with the Marine Trust company.

"This was a part of their conspiracy," he charged. "Then Mr. Egbert, in the presence of Mr. Rand, reads the ten demands. In other words, he was disclosing confidential information to a competitor. The statute says these reports must be kept secret. We say it is a violation of law and at the time Mr. Egbert knew it was to be a liquidation and not a merger.

"The threat the bank would have to close was a violation of law," he continued until interrupted by Justice Swift.

View Unchanged.

"I don't see you've said anything to change my point of view," said the court. "At the time these demands were served, the department had the absolute legal right. They did say they would close the bank, but they have a right when things reach that point to take any steps necessary to protect the community.

"I'm asking for evidence of conspiracy and not evidence of hard luck. There is no ulterior motive in the things you've pointed out. Even if the Banking department got the Manufacturers & Traders Trust company, the Liberty bank and the Marine Trust company to get together and told them, 'Here, you take this bank over,' there would be no evidence of conspiracy."

Mr. Nevins next turned his argument towards the events which occurred at the meeting in Mr. Rand's home.

Complete Accord Seen.

"So as to show complete accord between Mr. Rand and the Banking department, Mr. Rand picked resolutions out of his pocket as a magician picks rabbits out of a hat," declared Mr. Nevins.

"Next we must consider the testimony of Miss Dorothy Manges, the former switchboard operator in Mr. Lunghino's bank, who testified she overheard Mr. Bangert tell Mr. Fred L. H. Holzer, a vice president of the Marine Trust company, that the report on the financial condition of the Commercial Trust company, which Mr. Lunghino wanted, was safe because it was being carried..."

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Second Contract Granted.

Mr. O'Brian traced the events that followed, which have been testified to in the trial. He said Mr. Lunghino without duress voted for the contract and that more than four weeks later, when he asked for a time extension in order to reorganize his bank, the Marine Trust company readily gave him 45 days. He had asked for 60 days.

"That took the form of a second contract and is evidence of the desire by the Marine to assist the plaintiff," Mr. O'Brian said.

"This," Mr. O'Brian said, "is a question of motive. That night when these people met in Mr. Rand's house the city unknowingly was facing a crisis."

If the Commercial Trust company with 7700 depositors had had a run on it, or had been closed, it meant that there would certainly be a run on every other bank in this community the next day.

"The savings of every person in Buffalo was in danger that night when these men were handling a desperate situation.

Question of Wrongful Motive.

"There is no evidence of any wrongful purpose and I venture to say that in the entire history of this city there never was a more courageous act than that of Mr. Rand in stepping in at the request of the Banking department and taking over the Commercial Trust, protecting the depositors in full and at the same time saving the entire banking situation in Buffalo.

"Now, this is a question of wrongful motive attributed to it upon this flimsy case by this man who on the stand out of his own lips stands convicted of embezzlement and defalcation of the funds of the depositors of his own institution."

Mr. Conboy made a lengthy argument on his motion.

The Commercial Trust company admitted violations of the banking law and admitted doing things that were unauthorized and illegal, Mr. Conboy asserted.

Mr. Conboy declared $109,000 of Commercial Trust company money went out of the bank by means of sight drafts.

He said the first sight draft was that for $13,000 drawn on Frank X. Scherer, "as clear a violation of the banking law" as previous transactions "because this draft was drawn by Lunghino."

Violation of Faith Charged.

Mr. Conboy said that walls and vaults and safes offer protection to depositors in banks against loss from thieves from the outside.

"But," he went on, "we have no

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Extracted Promises.

Neither on the night of Jan. 21 nor Jan. 22, when meetings were held in Mr. Rand's home, did Mr. Lunghino take Judge Kenefick's advice until he had, "as he thought," extracted certain promises, Mr. O'Brian went on. No threat was made except that Mr. Rand said: "We'll have you and your directors indicted," to Mr. Lunghino, to which Mr. Lunghino replied: "Go ahead, but I won't sign the contract unless you take care of S. Lunghino & Sons."

"Mr. Lunghino is a lawyer. He knew Mr. Rand was not a public prosecutor. Assuming Mr. Lunghino's story to be true, he knew that to have a man indicted meant submitting something to a grand jury.

"And regarding Mr. Rand's threat, Mr. Lunghino was informed the next day that the Liberty, Marine and M & T banks had formed a $200,000 fund to guarantee the Marine against loss in liquidation of Commercial Trust."

Second Contract Granted.

Mr. O'Brian traced the events that followed, which have been testified to in the trial. He said Mr. Lunghino without duress voted for the contract and that more than four weeks later, when he asked for a time extension in order to reorganize his bank, the Marine Trust company readily gave him 45 days. He had asked for 60 days.

"That took the form of a second contract and is evidence of the desire by the Marine to assist the plaintiff," Mr. O'Brian said.

"This," Mr. O'Brian said, "is a question of motive. That night when these people met in Mr. Rand's house the city unknowingly was facing a crisis."

If the Commercial Trust company with 7700 depositors had had a run on it, or had been closed, it meant that there would certainly be a run on every other bank in this community the next day.

"The savings of every person in Buffalo was in danger that night when these men were handling a desperate situation.

Question of Wrongful Motive.

"There is no evidence of any wrongful purpose and I venture to say that in the entire history of this city there never was a more courageous act than that of Mr. Rand in stepping in at the request of the Banking department and taking over the Commercial Trust, protecting the depositors in full and at the same time saving the entire banking situation in Buffalo.

"Now, this is a question of wrongful motive attributed to it upon this flimsy case by this man who on the stand out of his own lips stands convicted of embezzlement and defalcation of the funds of the depositors of his own institution."

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Advice to Lunghino.

"There is no evidence in this case that any of my defendants ever instigated or ever heard of the orders until Judge Kenefick (former Justice Daniel J. Kenefick, a defendant) heard them read on Jan. 21 in Hotel Statler," Mr. O'Brian said.

"The demands, which are the root of this case," Mr. O'Brian continued, "the demands, which produced this situation, were formulated by the Banking department and were served on the directors of Commercial Trust and were under consideration by them before any defendant except Judge Kenefick ever heard anything about them," Mr. O'Brian declared.

"Judge Kenefick's advice to Mr. Lunghino in Mr. Rand's house was as Mr. Lunghino's adviser. The advice he gave was on the facts. In view of the ten demands by the Banking department, Judge Kenefick gave the very best advice under the circumstances.

"The law is well settled that advice can never be duress.

Extracted Promises.

Neither on the night of Jan. 21 nor Jan. 22, when meetings were held in Mr. Rand's home, did Mr. Lunghino take Judge Kenefick's advice until he had, "as he thought," extracted certain promises, Mr. O'Brian went on. No threat was made except that Mr. Rand said: "We'll have you and your directors indicted," to Mr. Lunghino, to which Mr. Lunghino replied: "Go ahead, but I won't sign the contract unless you take care of S. Lunghino & Sons."

"Mr. Lunghino is a lawyer. He knew Mr. Rand was not a public prosecutor. Assuming Mr. Lunghino's story to be true, he knew that to have a man indicted meant submitting something to a grand jury.

"And regarding Mr. Rand's threat, Mr. Lunghino was informed the next day that the Liberty, Marine and M & T banks had formed a $200,000 fund to guarantee the Marine against loss in liquidation of Commercial Trust."

Second Contract Granted.

Mr. O'Brian traced the events that followed, which have been testified to in the trial. He said Mr. Lunghino without duress voted for the contract and that more than four weeks later, when he asked for a time extension in order to reorganize his bank, the Marine Trust company readily gave him 45 days. He had asked for 60 days.

"That took the form of a second contract and is evidence of the desire by the Marine to assist the plaintiff," Mr. O'Brian said.

"This," Mr. O'Brian said, "is a question of motive. That night when these people met in Mr. Rand's house the city unknowingly was facing a crisis."

If the Commercial Trust company with 7700 depositors had had a run on it, or had been closed, it meant that there would certainly be a run on every other bank in this community the next day.

"The savings of every person in Buffalo was in danger that night when these men were handling a desperate situation.

Question of Wrongful Motive.

"There is no evidence of any wrongful purpose and I venture to say that in the entire history of this city there never was a more courageous act than that of Mr. Rand in stepping in at the request of the Banking department and taking over the Commercial Trust, protecting the depositors in full and at the same time saving the entire banking situation in Buffalo.

"Now, this is a question of wrongful motive attributed to it upon this flimsy case by this man who on the stand out of his own lips stands convicted of embezzlement and defalcation of the funds of the depositors of his own institution."