Mr. PORTER. Yes. Mr. Buck. Have you been connected with the corporation since its organization ? Mr. PORTER. Yes. Mr. Buck. I wonder if you could and would give the committee the history of the corporation and its organization and what might be termed “its evolution," on through. Mr. PORTER. It is quite a long story. HISTORY AND ORGANIZATION OF NATIONAL DISTILLERS PRODUCTS CORPORATION Mr. PORTER. Virginia. The history, briefly, would be about as follows: At the time of the enactment of prohibition the largest unit in the whisky business, having sold practically all the whisky it had, had a considerable sum of money and entered the food business, the yeast business, the industrial-alcohol business. I am speaking now from the history, not from my own knowledge. They apparently had experience almost solely in the whisky business; the result of that was that that company went into bankruptcy. There were two classes of creditors; there were bonds held by the public, there were loans held by banks. There was a receivership in Kentucky, a bankruptcy in New York. The two sets of creditors got in a dispute. I was an engineer, a partner of an engineering firm, and we were called in to make an examination of what properties there were. As I recall it, Mr. George Rublee was the trustee in bankruptcy in New York originally, and I was ultimately asked to succeed him, and a reorganization was worked out during, I should say, 1922 and 1923, and in 1924 such assets as were left were put into a new company known as the National Distillers Products Corporation, and I became president of that company, which had all the remaining assets of the previous bankrupt company. We continued the operation. The CHAIRMAN. What was the name of the previous company? Mr. PORTER. The previous company was the United States Food Products Corporation. That, in turn, had been a successor corporation to the Distilling Co. of America, and other companies which had been engaged in the whisky business prior to 1914. The CHAIRMAN. When the Distilling Co. of America ceased to produce liquor as the result of prohibition Mr. PORTER. The name was changed to the United States Food Products Corporation. The CHAIRMAN. Where was the distilling company chartered, in what State? Mr. PORTER. I couldn't say that. Mr. Buck. This organization, is that what was commonly callod the old Whisky Trust, or something of that sort ? Mr. PORTER. That, I believe, was started in 1890 and was first called the Distilling Cattle Feeders Co., or something of that kind. Mr. Buck. That was involved in the investigation that I have referred to here this morning ? Mr. PORTER. I assume so. Is that a sufficient answer? Mr. PORTER. I am sorry; I didn't want to go into too much detail. Mr. Buck. What was the size of National Distillers Products Corporation in 1933, at the time of repeal? Mr. PORTER. What do you mean by size? Mr. BUCK. I will run over these with you, Mr. Porter, if you don't object. The Crown Fruit & Extract Co., Inc., New York; is that a subsidiary of National Distillers, or was it in 1933–34? Mr. PORTER. Yes. Mr. PORTER. That was acquired prior to repeal, to handle our imports. The CHAIRMAN. Mr. Buck, may I interrupt? Is the National Distillers Products Co. an operating company? Mr. PORTER. It is today, sir. Mr. PORTER. No; it was not. It was a holding company when it The CHAIRMAN. What sort of stock? Mr. Porrer. Just ordinary shares, of which National Distillerg owned all, always. The CHAIRMAN. I was referring to the National Distillers. What was the capitalization of National Distillers? Mr. PORTER. Today it is 2,000,000 shares, and originally it was 167,000. The CHAIRMAN. One hundred and sixty-seven thousand shares of what kind? Mr. PORTER. Ordinary shares, common stock. Mr. PORTER. After the receivership which I spoke of, in order to form that company, in the first place, preferred shares were issued to the creditors, those that owned bonds and the bank creditors, and they received 11,500,000 of 6-percent cumulative preferred stock. There was no working capital, and for working capital there was sold about 3,000,000 or 3,500,000 of debentures. To make those attractive and to make it possible to sell them, they were sold with common shares, so that when the corporation was started in 1924 it had about 3,500,000 of debentures, about 11,000,000 of 6-percent cumulative preferred stock. The CHAIRMAN. These figures indicate dollars ? Mr. PORTER. Dollars, and 167,000 shares of common stock, which was mostly sold in the debentures. That was the original capitalization. The CHAIRMAN. What was the value of the common stock? Mr. PORTER. The common stock at that time represented, of course, a great deal of past goodwill and hopes and expectations, but it had very little value at that time. It sold for, I imagine, seven or eight dollars a share; I don't remember exactly. The CHAIRMAN. Did you say whether or not it was par-value stock? Mr. PORTER. I think it was no-par value originally. It is no-par value today. The CHAIRMAN. The actual financing of the corporation, then, was by means of the preferred stock which was issued in exchange for assets, and the debentures which were issued in exchange for cash; is that correct? Mr. PORTER. Preferred stock was issued to pay creditors, and the only cash came from the sale of common shares and debentures, which was about $3,000,000. The CHAIRMAN. By “creditors” I assume you mean those who were selling the physical assets of the corporation. Mr. PORTER. No; they were people who had lent the money or who had bought bonds—bondholders and bank creditors. The CHAIRMAN. How about the physical assets, how were they acquired ? Mr. PORTER. They were part of the bankrupt estate. a 275 2750 1165 2.585 23:31 165 a Mr. BUCK. You had been an engineer prior to that time? . Mr. PORTER. Except that this company was engaged in the medicinal-whisky business during the period of prohibition. Mr. Buck. When did you first become associated with the whisky business? Mr. PORTER. At this time, in 1924. Mr. Buck. You also had an engineering corporation that you Mr. PORTER. Alex D. Shaw was a company that had for many years been engaged—that is, prior to prohibition in the importation of foreign spirits and wines; and so that we might have an importing branch to our business, we acquired control of what had been for many years an inactive business. Mr. BUCK. When was that? Mr. Buck. You acquired it under the anticipation of repeal of the eighteenth amendment ? Mr. PORTER. Yes. Mr. Buck. And Alex Shaw is an old-established importing firm in New York, has been there for many years; is that correct? Mr. PORTER. That is right. Mr. BUCK. And just before repeal National acquired a control in Alex Shaw; is that so? Mr. PORTER. Yes. Mr. BUCK. What is the status of the Alex Shaw Co. now with Mr. PORTER. We own it. Mr. Buck. Was John de Kuyper & Son, Inc., a subsidiary of National at one time? Mr. PORTER. Yes. Mr. PORTER. Well, the firm of Johs de Kuyper & Zoon, of Rotterdam, have been engaged for many, many years in the manufacture of cordials in Holland, which they sell all over the world, and we and they conceived the idea that they should be manufactured in America to serve this market, and we formed a small company, in partnership with them, whereby, using their formula and skill and knowledge, under the supervision of their experts, the cordials are made in this country. That company has, I think, a capitalization of about $100,000. We own 70 percent of the stocks, and our Holland partners own 30 percent. Mr. BUCK. In other words, that is a subsidiary organized by National with this Holland concern after repeal for the purpose of making certain specialties in the business? Mr. PORTER. That is correct. Mr. Buck. National Pure Spirits Corporation: When did you acquire that? Mr. PORTER. How is that? National what? Mr. BUCK. National Pure Spirits, a Delaware corporation organized in 1934. Mr. PORTER. I don't know, sir. Mr. Buck. You don't know? It is apparently an experimenting company for aging of whisky, or something of that sort? Maybe you have forgotten about it. Mr. PORTER. I don't think that is an active company. Mr. PORTER. Oh, I think that was a company that must have been Mr. Buck. Yes; but I am asking you about a period when these things were being acquired. Now you are talking about a period when you are divesting. Mr. PORTER. That company may have been formed in a period of acquisition, I am not sure. The CHAIRMAN. May I suggest that you ask the witness to give us the list of subsidiaries at the time the company was organized in 1924 and then the list of subsidiaries now so that we can make the comparison. Mr. Buck. Do you have such a list, Mr. Porter, of the subsidiaries of your corporation as it existed in 1934 ? Mr. PORTER. In 1934 ? The CHAIRMAN. You see, the suggestion which one draws from these questions and from your testimony is that because of changed conditions the character of the corporation was changed. You acquired apparently some subsidiaries at the time of organization and then you divested yourself later on. I think the committee would like to know just what the status of the subsidiary organiza |