Mr. FRIEL. That is correct. Mr. FRIEL. I am not sure whether we do it in every State where it is permissible or not. Mr. O'CONNELL. You couldn't tell me whether it is the policy of your company to take advantage of the fair-trade law where one exists so that in all probability if there are fair-trade laws in over 40 States, as I understand there are, the probabilities are that you take advantage of those laws and fix the resale price of your products by contract. Is that correct? Mr. FRIEL. We do. Mr. O'CONNELL. What steps do you take to enforce the provisions of your contracts which maintain å resale price of your products? Mr. Buck. Mr. O'Connell, I have that to be brought out by another witness in another phase of the proceedings. It is perfectly all right; I have no objection to the questions. Acting Chairman REECE. You may call your next witness. Just one more question. Is the Seagram exporting aggregation members of the Distilled Spirits Institute ? Mr. FRIEL. We are. Mr. BUCK. What services does that institute perform for your organization? Mr. FRIEL. Oh, I would say the general welfare of the industry in the country. Mr. BUCK. And the country? Mr. FRIEL. Frankly, I would have to think that over to give you any kind of intelligent answer, Mr. Buck. Mr. BUCK. You pay it considerable money, don't you? Mr. Buck. Our record shows $118,605.43. I imagine that is for the 4-year period. And you don't know what services it performs for you? Mr. FRIEL. Well, it watches the legislation and the general practice of the industry throughout the country. Mr. BUCK. That is all. Acting Chairman REECE. Do you solemnly swear in the testimony which you are about to give, to tell the truth, the whole truth, and nothing but the truth, so help you God? Mr. JACOBI. I do. TESTIMONY OF LESTER E. JACOBI, PRESIDENT, SCHENLEY DISTILLERS CORPORATION, NEW YORK CITY Mr. Buck. Mr. Chairman, Mr. Jacobi, the present witness, is president of the Schenley Distillers Corporation, of New York. Will you state your name, Mr. Jacobi? Mr. JACOBI. Lester E. Jacobi. Mr. Buck. I want to say that Mr. Jacobi, while he has been connected with the corporation for many years—I think perhaps since its organization—has been president only a short time. He succeeded his brother, who was president, and lately deceased. CORPORATE ORGANIZATION OF SCHENLEY DISTILLERS CORPORATION Mr. Buck. Mr. Jacobi, can you give the committee a short résumé of the organization and evolution of the Schenley Corporation? Mr. JACOBI. The present corporation was organized in July 1933, having acquired the old Schenley Products Co. The Schenley Products Co. was a corporation owning two distilleries, one in Pennsylvania and one in Kentucky. It acquired the stock of the Schenley Products Co. by an exchange of its stock, and also at that time sold publicly a portion of its stock. Mr. Buck. Let's begin at the beginning. When was Schenley Distillers Corporation organized ? Mr. JACOBI. July 1933. Mr. Brck. What did you have at that time to begin with in the way of finance, for instance ? Mr. JACOBI. Why I think our company's capitalization at the beginning was about $8,000,000. Mr. BUCK. Was that cold money? I mean was it cash money? Mr. JACOBI. No; it was represented by the assets of Schenley Products Co. which was taken into the new corporation, and the proceeds of sale of 230,000 shares of common stock at $15 a share. Mr. Brck. In other words, you started off with money principally derived from the sale of stocks. Mr. JACOBI. The sale of 230,000 common shares. Mr. Btck. The twenty-first amendment became effective December 1933. Mr. JACOBI. Yes. Mr. Brck. No; I mean in the number of units. How many corporations do you have? Mr. JACOBI. Oh, we probably have 40 or 50 subsidiary companies, not all operating companies, however. We have about 8 or 10 active X X companies. Mr. BUCK. Is Schenley Distillers Corporation a holding company or operating company? Mr. JACOBI. It is an operating company insofar as the Schenley Distillers Corporation is concerned. It is operative as far as distribu tion and sales are concerned. We manufacture in the subsidiary companies. Mr. BUCK. You have 40 or 50 subsidiaries? Mr. JACOBI. I think there are probably that many in existence but not operating, not active. Mr. Buck. Are all of your subsidiaries in the United States? Mr. Buck. Do you have any foreign holdings at all in the whisky business? Mr. JACOBI. Yes; we own some Canadian whiskies that were purchased shortly after repeal. Mr. BUCK." Are they held in Canada or in the warehouse here? Mr. JACOBI. Both. We have some stored here and we have some stored in Canada. Mr. Buck. But you have no corporate interest in any of the corporations in Canada? Mr. JACOBI. None whatever, direct purchase of whisky. Mr. Buck. None in Scotland or Ireland! Mr. JACOBI. We own no whiskies in other foreign countries. We do import some Scotch whiskies and we do import some Irish whiskies which we sell under contract. BANKING ARRANGEMENTS OF THE SCHENLEY CORPORATION L Mr. Buck. Who are your banking agents, Mr. Jacobi; for your corporations, I mean? Mr. JACOBI. You mean for our active banking accounts? Mr. JACOBI. We have 3 in New York City: Bankers Trust Co., Bank of Manhattan, National City Bank, Manufacturers Trust Co. Mr. BUCK. Bankers Trust? Mr. JACOBI. Yes; I named them, I think. Underwriters Trust Co. and the Commercial National Bank & Trust Co. We also do business with banks throughout the country. Wherever we have offices we have banking connections—Chicago, San Francisco, Los Angeles. Mr. BUCK. They are usually utilized by the subsidiaries? Mr. JACOBI. Whichever way the account may be handled-I mean, usually deposit and checking accounts. Mr. Buck. Do you have an open-credit agreement with Bankers Trust Co.? Mr. JACOBI. We have a banking agreement with 22 banks of which the Bankers Trust Co. is one. Mr. Buck. What is the maximum under that agreement, the maximum credit? Mr. JACOBI. $27,000,000. Mr. BUCK. Who is the banker's agent under the agreement, or who are the agents ? Mr. JACOBI. Why, I think the Bankers Trust Co. might be termed that. I don't know that they are directly an agent; they being a New York bank represent the outside banks, no doubt. Mr. BUCK. Is Mr. Keidel the banker's agent? Mr. BUCK. I have just referred to an agreement with Seagrams. I think it is very similar to perhaps the one that your companies have. Mr. JACOBI. I am not familiar with Seagrams very much. SCHENLEY'S ACQUISITION OF WHISKY STOCKS Mr. BUCK. Beginning with* 1933, how did Schenley acquire its stocks of whisky to meet the demand immediately following the repeal? Mr. JACOBI. Why, we started out with about 5,000,000 or 6,000,000 gallons of whisky. Mr. Buck. How did you get that? Mr. JACOBI. Acquired it and accumulated it through the many preceding years. The present corporation acquired it from the Schenley Products Co. which has been in existence a great many years, probably one of the oldest distilling companies in America. Mr. Buck. You bought it; bought the stocks? Mr. JACOBI. Well, the present principal active officers of Schenley Distillers Corporation were the active heads of the old Schenley Products Co., and it was a reorganization you might say. Mr. BUCK. Have you acquired any stocks from competing companies since that date ? Mr. JACOBI. Since 1933 ? Mr. JACOBI. Yes; I wouldn't say from competing companies. We acquired a stock of whiskies in 1933, just at the time of our reorganization. In fact, I think it was really acquired by the old Schenley Products Co. It may have been delayed so as to be taken into the new corporation, but it was practically at the same time. In July of 1933 we acquired the James E. Pepper Co. of Lexington Ky. Mr. BUCK. What other corporations stocks have you acquired ? Mr. JACOBI. We acquired the Bernheim Distilling Co. in 1937. Mr. BUCK. What were the Bernheim stocks composed of? Mr. JACOBI. Both whiskies and property. Mr. BUCK. Kentucky bourbon whiskies? Mr. JACOBI. Yes. Mr. BUCK. What about the ages? Mr. JACOBI. All the whiskies practically that they had produced. The Bernheim Distilling Co. was not an active selling company. As a matter of fact, they sold no whisky in cases. They operated two plants, one they had never sold a barrel of whisky from it was known as the Belmont Distilling Co. All of that whisky was stored for aging. The Bernheim Distilling Co. manufactured only for sale in bulk. Mr. Buck. How many gallons were involved in that transaction, approximately? Mr. JACOBI. Oh, I should say offhand—I wouldn't want to give this as accurate although it is probably in our questionnaire-probably five or six million gallons. t Mr. BUCK. How were the Bernheim stocks looked upon by the trade at that time generally? What was the opinion of them? Mr. JACOBI. Probably as being the finest whiskies manufactured in America. Mr. BUCK. And also constituting a backlog of aged whiskies? Mr. Buck. You had plenty of whisky at that time, as a matter of fact, didn't you? Mr. JACOBI. No; the real purpose of acquiring the Bernheim plant was due to the fact that we had very little aged whisky at the beginning of repeal. Mr. BUCK. But you had plenty of young whiskies? Mr. Jacobi. No. Very young whiskies, yes; and then we acquired the Pepper plant in July of 1933 and that plant burned down in April of 1934 which deprived us of all our aging whiskies, and from the time of that fire we had been endeavoring to acquire other whiskies to replace it, and the first opportunity we had was to acquire the Bernheim plant. Mr. BUCK. Did the Bernheim plant have a distillery and bottling plant? Mr. JACOBI. They had no bottling plant; they had a distillery. Mr. Buck. What other stocks have you acquired, if you can remember? Just give them to us chronologically. Mr. Jacobi. I don't think we have made any other acquisitions of stocks. Mr. BUCK. Any other acquisitions of competing or potentially competing plants? Mr. JACOBI. No; none. We have acquired no plants. Mr. JACOBI. Yes, sir; we employ both in our various plants, sour mash and sweet mash. Mr. Davis. You mean you are employing both in the same distillery? Mr. JACOBI. Oh, no; in our various plants. Mr. JACOBI. Cascade is a sour mash. As a matter of fact, I would like to correct that, Judge; Cascade is a blend of straight whiskies when bottled. The Cascade whisky as distilled is a sour mash. Mr. Davis. You have no aged Cascade whisky? Mr. BUCK. At the time you acquired the brands you didn't acquire corresponding stock of Cascade whisky? Mr. JACOBI. It was not an active company. |