the options was really Hollender's money. But a dividend of $ 64,000 was declared to make this payment to the Germans, when it really would have cost the Germans on the fact of the options about $ 82,500 for 75% of the capital stock of a company which, at the time, had a net worth of over $ 500,000. The Germans could have exercised their option, declared a dividend to reimburse themselves and made a large profit on the transaction.
This purported cancellation was gone through evidently to prevent the seizure of the stock by the United States, it being apparent that the United States and Germany were near to the breaking off of their relationship and resulting war. The plaintiffs, however, were reluctant even to going through with this cancellation and held it up until they could obtain better contracts for their work.
In the following January a special dividend was declared to reimburse the stockholders for the additional taxes that they had to pay by reason of the dividends that had been declared to the stockholders with which they had paid for the cancellation of the options.
I am satisfied that the cancellation of the options was fictitious and that the Germans still remained in control. There remained also the cross-options of the Trenton meeting and the escrow agreement under which Ward, Stevenson and Koch had possession of the shares. Accordingly, in August 1941 new cross-options were prepared and the old ones were cancelled by all parties, although Koch did not sign the new one.
In September the signatures were torn from the new cross-options. The escrow agreement entered into at Trenton was terminated, and the shares delivered to the stockholders.
All these cancellations were pre-dated to January 1941. This was a continuation of the fraudulent concealment of the German interests, when the stockholders were compelled to file affidavits that they were the true owners of the stock standing in their names.
In February 1943 the plaintiff Paul Vort bought 50 shares of the stock of Althor from Ward and 17 shares from Lancaster. Before that time the stockholders conferred concerning the removal of Ward, Koch and Stevenson from the company, knowing that they were suspected by the Government by reason of their having represented Hollender for a long time, Koch being his cousin, and he and Ward known to be involved in Thorer & Hollender when under investigation by the Office of the Alien Property Custodian. The plaintiffs claim that this sale was at the instance and with the consent of the Alien Property Custodian.
At this time the affairs of Thorer & Hollender and of Basch were before the Alien Property Custodian and were being investigated by the government agents. The fact that the former attorneys of the German vendors of the stock in the majority group of Basch & Co. were being considered by the Alien Property Custodian's office, as a result a suggestion was made that what was called the 'management group,' consisting of the plaintiff Vort and his associates, should buy certain of the stock held by Ward and Koch and their associates, who were members of the 'investment group,' so as to oust them from the controlling interest. The Alien Property Custodian did not object to this sale and so advised Mr. Cowen, who was representing the stockholders. He also told Mr. Cowen that since the stock was not vested, the parties had a right to make the sale, and that the purchasers would get a good title to the property; also, that if at any time later the Alien Property Custodian determined that this particular stock was German owned, he would vest the proceeds of the sale, rather than the stock. The plaintiffs claim that as they acted upon the suggestion and with the approval of the Alien Property Custodian, the Government is estopped from vesting the stock itself. However that may be, the transaction was an open one with full knowledge of it by the Alien Property Custodian and the money used in the purchase apparently was the money of the purchasers. As the stock was to be sold there was no reason why the plaintiffs should not be the purchasers. They were seeking to get the control of the company and it does not seem that they were doing that in the interest of the Germans.
In 1947 the plaintiff Vort bought 90 shares from Ward and 28 shares from Koch. Plaintiff Nauen bought 40 shares from Ward. These shares were vested by the Alien Property Custodian. At that time the Government had made no determination that either Basch & Co. or its shareholders were enemy material and the shares were not blocked. There is nothing to show that any money, other than the plaintiffs' was used in this transaction and in my opinion the purchases were valid.
It results, therefore, that the relief sought by the complaint will be denied as to the optioned stock bought by the plaintiffs at the Trenton meeting, but relief sought will be granted for the return of the stock bought in 1943 and in 1947 and the dividends on that stock.
The relief sought in the cross complaint will be granted as to the dividends on the optioned stock bought by the plaintiffs at Trenton and denied as to the dividends on the stock bought in 1943 and in 1947.
Counsel for the plaintiffs has filed a motion to strike certain portions of the evidence admitted at the hearing and for certain specific findings of fact and conclusions of law. The Koch confessions of 1945 and the letter from Stevenson to Moran of Oct. 25, 1945 are not admissible against the plaintiffs and will be stricken. The evidence of the Thorer & Hollender conspiracy, in view of the close association of the parties to it with the plaintiffs and their joint membership on the Board of Trustees, will not be stricken in view of the fact that it is incredible that the plaintiffs were not aware of what was going on, and knew that Ward and Koch were representing the Germans. While on the case of the 1943 and 1947 sales, I think the evidence was admissible as showing the plaintiffs' knowledge of Ward and Koch German affiliation, I am, nevertheless, as stated above, of the opinion that they were not participants in the Thorer & Hollender conspiracy. All communications between the parties to the conspiracy in furtherance of the conspiracy, whether communicated to the plaintiffs or not, are admissible against them; so also are statements and affidavits of any of them in an attempt to conceal the conspiracy.
I have stated in this memorandum the facts and conclusions of law which I deem relevant and necessary in my view of the case.
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