Otto Heinze & Co. - New York, NY

Bank Information

Episode Type: Suspension → Closure
Bank Type: private
Start Date: October 16, 1907
Location: New York, New York (40.714, -74.006)

Metadata

Model: gpt-5-mini
Short Digest: 57de0a8a

Response Measures

None

Description

Article describes the firm's suspension in October 1907 following the United Copper corner collapse and related insolvency/claims. No explicit description of a depositor run is given; the piece focuses on insolvency, preferential transfers, and later (1909) bankruptcy proceedings with a referee recommending dismissal. Classified as suspension leading to closure/bankruptcy rather than a run.

Events (2)

1. October 16, 1907 Suspension

Cause: Bank Specific Adverse Info
Cause Details: Collapse of the United Copper corner in mid-October 1907 caused sharp decline in securities, overloaning and insolvency/illiquidity leading to suspension.
Newspaper Excerpt: With the collapse of the corner came the suspension of Otto Heinze & Co.
Source: newspapers

2. May 5, 1909 Other

Newspaper Excerpt: Referee recommended that the bankruptcy proceedings against Otto Heinze & Co., bankers and brokers, of No. 42 Broadway, be dismissed. The referee finds failure of proof to show insolvency on Oct 14, 16 and 21, 1907 and that alleged acts of bankruptcy were not proved.
Source: newspapers

Newspaper Articles (1)

1. May 5, 1909 New-York Tribune New York, NY

Article from New-York Tribune, May 5, 1909

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Article Text

FAVORS HEINZE FIRM REFEREE FILES REPORT. Recommends That Bankruptcy Proceedings Be Dismissed. Nathaniel S. Smith, referee, recommended yesterday that the bankruptcy proceedings against Otto Heinze & Co., bankers and brokers, of No. 42 Broadway. be dismissed In his report filed in the clerk's office of the United States District Court he finds that there is a failure of proof to show that Otto Heinze & Co were insolvent on October 14, October 16 and October 21, 1907 and that both the firm and the members of the firm were insolvent. He further finds that the acts of bankruptcy alleged in the petition filed by three creditors on October 21, 1907. have not been proved. The petitioning creditors were W. H Robotham, Frank A. Barnaby and Leo Wise, and the Balance Cable Crane Company intervened as a creditor The acts of bankruptcy alleged were transfers of property to the Mercantile National Bank and to Nelke, Phillips & Co., while insolvent Referee Smith said that the only questions to consider were the alleged acts of bankruptcy and whether the alleged bankrupts were insolvent at the time the alleged bankruptcy acts were committed and at the time the petition was filed The special master finds that there is no direct proof of any intent on the part of Otto Heinze & Co. to prefer the bank. that there is no overt act, that there is no proof that the bank even asked the firm for any additional security, and that the petition failed to show that Otto Heinze & Co. on the delivery of the securities to the bank on October 16. did so with an intention to prefer it over the other creditors of the firm. There is also no proof, the referee says, of any intent to prefer Nelke, Phillips & Co. by the payment of $6,000 on October 14. they having been creditors on October 12 to the extent of $67,000 The explanation made of the Mercantile National Bank transaction to the referee in bankruptcy that the collateral for the $500.00 loan for which the firm applied was to be securities, then worth between $700,000 and $800,000. which were in the hands of certain brokers, and which Otto Heinze & Co would get into their own possession on payment of the money thus borrowed. The loan was granted, but about that time a large check came in for certification and it was found that an overloan had been made Thereupon F. Augustus Heinze, then president of the bank. personally made another loan to himself on good collateral, and lent the proceeds to Otto Heinze & Co., cancelling the other loan. Otto Heinze & not informed of this, and two or three days later sent the securities as they had promised, to the bank, which applied them to another loan of the firm. which owing to the sharp decline in United Copper stock. was not fully se cured. Counsel for the firm have opposed the ad judication in bankruptcy of the firm on this transaction upon two grounds First. that the element of assent was lacking in the alleged preferential transfer. and second, that the firm was solvent at the time basing the valuation of its assets upon current quotations of the securities The report will now go to one of the judges of the United States District Court for approval or rejection. Otto Heinze & Co., in statement made yesterday. say that more than one-half of the in debtedness, which amounted to about $4,500,000 when the petition was filed, has been paid off by the sale of collateral and that they believe that enougn will in time be realized under the readjustment plan, through the Western Development Company, to pay every creditor 100 cents on the dollar As an example of the losses sustained by the members of the Heinze firm through the closing out of their collateral by the banks at the time of the United Copper corner's collapse. it was said yesterday that securities pledged by Otto Heinze, which had cost him $2,500,000 were sold for $325,000 Max H. Schultze, of Otto Heinze & Co., had up 100 shares of Mercantile National Bank stock then selling at 330, and 20 shares of Empire Trust Comstock selling at 320. as collateral for a loan of $20,000. and these holdings were liquidated for $17,000. The members of the firm are inclined to surmise that some of the banks may have sold to themselves the securities held as collateral and one of them remarked yesterday Perhaps that is the reason they have been able to pay such big dividends right after a panic year Lindsay Russell the receiver. has in his possession about $70,000 in cash and a summer home near Butte, Mont. belonging to Arthur P Heinze, choses in action and claims amounting to $500,000 or $600,000. The schedules of Otto Heinze & Co., filed yesterday with the referee report. contain much of interest relating to the causes of the failure The books show that on October 15. 1907. when the collapse of the corner in United Copper stock occurred, the opening incident of the panic, Otto Heinze & Co. owned about sixty-one thousand shares of the common stock of that company and about twelve thousand shares of the preferred Less than five hundred shares. actually in the firm's ession, all the rest having been hypothecated, the plan having been to hy pothecate stock when bought and purchase additional stock with the proceeds of the loan. It was the purpose of the pool to put the stock to 500. and if the corner had been successful a profit estimated at $10,000,000 would have been made on an expenditures of about $1,500,000 Charles W Morse, a man familiar with the Heinze firm's affairs said yesterday, defeated this project. In 1906 he continued. Morse exchanged shares of companies with which he was identified, principally American Ice and Consolidated Steamship, for about 17,500 shares of United Copper stock belonging to the Heinzes, an agree ment being made that neither party to the transaction should sell the stock which had been turned over by the other. Six months or so later, when United Copper began to advance, it was noticed that some of Morse's certificates were coming in, and finally it is said. Otto Heinze & Co. learned that Morse had been disposing of part of his stock and instructing his brokers to exchange his certificates for other certificates in the open market which were to be used in making delivery In spite of this it is said some of the Morse certificates from time to time found their way into the Heinze office. On October 15 there was a short interest in United Copper amounting to 20,000 shares with a much smaller floating supply. exclusive of the Morse holdings. and Otte Heinze & Co. issued their call for delivery When the call came Morse's brokers told him that they could no longer exchange his certificates for others, as there were no others available, Otto Heinze & Co. having cornered the market. Then Morse, according to the story, in structed them to sell his remaining stock, which was done, the fresh supply operating to break the price, which on October 14 had been bid up to 60 and on October 16 touched 10. The Heinze firm refused to regard the Morse stock as good delivery as it had been sold without the consent of both parties to the agreement, and took a similar posttion respecting the twenty-four hundred shares bought for their account by Gross & Kleeberg on the preceding day, alleging that that house had exceeded its instructions, which had been to buy twelve hundred shares. With the collapse of the corner came the suspension of Otto Heinze & Co. and Gross & Kleeberg The latter firm was reinstated on the New York Stock Exchange some time ago, DAHLMAN AGAIN OMAHA'S MAYOR