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For IMMEDIATE Release Friday, December 20, 1940
S E C U R I T I E S AND EXCHANGE
Wash i n g t o n
COMMISSION
SECURITIES EXCHANGE ACT OP 1934
Release No. 2*718
Attached herewith are an Amended Order for Hearing and A Supplemental
Amended Order for Hearing i n the matter o f Transamerica Corporation.
is a proceeding under Section ig
(a)
This
(2) o f the S e c u r i t i e s Exchange Act o f
1934, as amended, to determine whether the r e g i s t r a t i o n o f the C a p i t a l stock
of Transamerica Corporation should be suspended or withdrawn.
The Amended
Order for Hearing was made public i n San Francisco on December 9,
when the public hearings i n t h i s proceeding were resumed.
Order for Hearing i t
1940,
In t h i s Amended
i s stated that the Supplemental Amended Order
for
Hearing should not be made p u b l i c u n t i l the completion of the public hearing.
However, the Commission has been informed that the respondent i n t h i s
proceeding i t s e l f elected to make the Supplemental Amended Order for Hearing public at the resumption o f the hearings on December 9,
1940j and i n
view of t h i s fact the Commission has ordered that i t be generally released.
- 2 UNITED STATES OP AMERICA
BEFORE THE SECURITIES AND EXCHANGE COMMISSION
At a regular session o f the S e c u r i t i e s and Exchange Commission,
held at i t s o f f i c e s i n the C i t y o f Washington, D. C . ,
on the 22nd day o f November, A . D . , 1940.
In the Matter o f
Proceeding under Section 19 (a) (2)
o f the S e c u r i t i e s Exchange Act
o f 1934, as amended, to determine
whether the r e g i s t r a t i o n of
AMENDED ORDER FOR HEARING
F i l e No. I-2964
TRANSAMERICA CORPORATION
CAPITAL STOCK, $2 PAR VALUE
should be suspended or withdrawn
I
On August 7, 1937* Transamerica Corporation f i l e d pursuant to Section
12(b) o f the S e c u r i t i e s Exchange Act o f 1934 an a p p l i c a t i o n on Form 24 for
the r e g i s t r a t i o n o f 11,590,784 shares o f i t s Capital Stock, $2 Par Value,
on the New York Stock Exchange and the Los Angeles Stock Exchange.
Therea f t e r said a p p l i c a t i o n was amended to include r e g i s t r a t i o n on the San F r a n cisco Stock Exchange.
The r e g i s t r a t i o n o f said shares o f stock became e f f e c t i v e on September 10, 1937* and has at a l l times since been e f f e c t i v e .
From time to time since September 10, 1937* Transamerica Corporation has
f i l e d with the Commission amendments to said a p p l i c a t i o n , information s u p p l e mental thereto, and annual reports on Forms 24-iC, pursuant to Sections 13 (a)
and (b) o f the S e c u r i t i e s Exchange Act o f 1934 and the rules and regulations
adopted by the Commission thereunder.
II
On November 22, 1938, the Commission issued an order under Section 19
( a ) ( 2 ) o f the S e c u r i t i e s Exchange Act o f 1934 d i r e c t i n g that a hearing be
held to determine whether, i n said a p p l i c a t i o n f o r r e g i s t r a t i o n and amendments
thereto and i n the annual report on Form 24-K f i l e d by Transamerica Corporat i o n for the f i s c a l year ending December 31, 1937# said Transamerica Corporat i o n had f a i l e d to comply with Sections 12(b) and 13(a) and (b) o f the Securi t i e s Exchange Act o f 1934 and the r u l e s , regulations and forms promulgated
by the Commission thereunder, and i f so, whether i t was necessary or a p p r o p r i ate f o r the p r o t e c t i o n o f investors to suspend f o r a p e r i o d not exceeding
twelve months, or to withdraw, such r e g i s t r a t i o n .
Hearing pursuant to said
order was duly convened on January 16, 1939* a n d was continued thereafter from
time to time u n t i l March 25, 1939# on which date said hearing was adjourned
- 3 days 1
subject to c a l l on ten
notice from the Commission.
Said adjournment
was granted at the request o f counsel for the Commission who, on said March
28, 1939* stated i n open hearing before the t r i a l examiner that Transamerica
Corporation had o f f e r e d to the Commission f u l l access to i t s books and r e cords and those o f i t s s u b s i d i a r i e s , and that adjournment o f the hearing was
desired to enable the Commission's s t a f f to examine the books and records to
which access was being given.
Since on or about A p r i l 10, 1939, members of
the s t a f f of the Commission have been engaged i n an examination o f c e r t a i n
o f the books and records of Transamerica Corporation and i t s a f f i l i a t e s and
s u b s i d i a r i e s , and i n an examination of other relevant reports and documents.
Ill
Members o f the s t a f f o f the Commission have reported to the Commission
information obtained i n such examination which, i f t r u e , tends to show that
Transamerica Corporation has f a i l e d to comply with the provisions of the
Securities Exchange Act o f 1934, and o f the r u l e s and regulations thereunder,
i n that the aforesaid a p p l i c a t i o n for r e g i s t r a t i o n and amendments thereto,
and the annual reports supplemental thereto f i l e d on Form 24-K f o r the f i s c a l
years ending December 31, 193*7, 1938* and 1939, r e s p e c t i v e l y , contain numerous false and misleading statements of m a t e r i a l f a c t s , and omit material i n formation required by the pertinent forms and by the i n s t r u c t i o n s applicable
thereto, as follows:
(1)
During the years 1936 to date the f o l l o w i n g companies have
been, at various times, subsidiaries of the r e g i s t r a n t and have not been
disclosed as such, although such disclosure i s r e q u i r e d by Item 4 (a) of
Form 24 and Item 1 (a) o f Form 24-K:
Bank o f America, N. T. & S. A . ,
Merchants National Realty Corporation, Downtown P r o p e r t i e s , I n c # , F i r s t
National Bank o f Ashland, Oregon, F i r s t National Bank o f M e r r i l l , Oregon, F i r s t National Bank Of Klamath F a l l s , Oregon, F i r s t National Bank
of Southern Oregon, F i r s t National Bank o f C o q u i l l e , Oregon, State Bank
of Ashland, Oregon, Central Bank o f Oakland, C a l i f o r n i a , National Bank
o f Tacoma, Washington, F i r s t National Bank o f Forest Grove, Oregon,
Coolidge and McClaine Bank, S i l v e r t o n , Oregon, Northern C a l i f o r n i a Bank
of Savings, F i r s t National Bank o f Arizona, phoenix Savings Bank and
Trust Company, p a c i f i c Coast Mortgage Company, Western States Corporat i o n , Bankamerica Company, West Coast S e c u r i t i e s Company, American Medi c a l L i f e Associates, I n c . , Western Land S e c u r i t i e s Company, p a c i f i c
Coast Holding Company.
(2)
No disclosure has been made i n answer to Item 4 (b) o f Form 24
or Item 1 (b) o f Form 24-K for 1937 and succeeding years that A. P.
Giannini, L. M. G i a n n i n i , and John M. Grant, or one or more of them,
have been and are parents of the r e g i s t r a n t , as that term is defined i n
the i n s t r u c t i o n s applicable to Form 24 and Form 24-K.
(3)
I n answer to Item 7 o f Form 24 adequate disclosure has not
been made of the general character of the m a t e r i a l l y important business
of (a) Transamerica Corporation, (b) C a p i t a l Company, (c) C a l i f o r n i a
Lands, I n c . , (d) Transamerica General Corporation, (e) Transamerica S e r vice Corporation, ( f ) American Brokerage, I n c . , and (g) Associated American D i s t r i b u t o r s , Inc.
• 4 (4)
I n answer to Item 24 of Form 24 disclosure has not been made
o f the business, vocation or employment of a s u b s t a n t i a l nature which
the various o f f i c e r s and d i r e c t o r s o f Transamerica Corporation have had
i n connection with the operation o f P a c i f i c Coast Mortgage Company and
i t s subsidiaries,
(5)
In answer to Item 28 o f Form 24, and Item 12 o f Form 24-K
for 1937 and succeeding years, there has not been disclosed a l l remuneration paid by the r e g i s t r a n t and i t s s u b s i d i a r i e s , d i r e c t l y and i n d i r e c t l y , to o f f i c e r s and d i r e c t o r s o f Transamerica Corporation,
(6)
I n answer to Item 11 o f Form 24 adequate disclosure has not
been made o f a l l shares o f stock o f Transamerica Corporation b e n e f i c i a l l y
owned by Transamerica General Corporation and Transamerica Service Corporation.
(7)
The c e r t i f i c a t e s o f Ernst & Ernst accompanying the f i n a n c i a l
statements f i l e d pursuant to Form 24, and to Form 24-K for 193*7 and succeeding years, contain no disclosure of the.dependence o f Ernst & Ernst
on audits made o f the books o f Transamerica Corporation and i t s subsidi a r i e s and a f f i l i a t e s by the personnel o f the Bank o f America, N, T.
S. A , ; said c e r t i f i c a t e s f a i l to state the opinion o f said accountants
with respect to the f i n a n c i a l condition and r e s u l t s o f operations o f the
i n d i v i d u a l companies; and said c e r t i f i c a t e s do not f a i r l y state the
opinion o f said accountants concerning the inadequacy o f the reserves
provided for the r e a l estate owned d i r e c t l y and b e n e f i c i a l l y by C a l i f o r nia Lands, I n c . , and C a p i t a l Company, and the e f f e c t which p r o v i s i o n for
adequate reserves would have upon the earnings and earned surplus o f
those companies and of Transamerica Corporation*
(8)
Ernst & Ernst were not, at the times o f t h e i r c e r t i f i c a t i o n s
o f the f i n a n c i a l statements o f Transamerica Corporation and i t s s u b s i d i aries, f i l e d pursuant to Form 24, and to Form 24-K for 1937 and succeeding years, independent p u b l i c or independent c e r t i f i e d p u b l i c accountants
with respect to said corporation within the meaning o f the r u l e s and r e g ulations o f the Commission, the forms pursuant to which said f i n a n c i a l
statements were f i l e d , and the instructions applicable thereto,
(9)
Dividends paid by the Bank o f America, N. T. & S, A , , to
Inter-America Corporation, and through i t to Transamerica Corporation,
during the years 1933 to 1936, i n c l u s i v e , have been improperly treated
by Inter-America Corporation and Transamerica Corporation as income, thus
rendering misleading the p r o f i t and loss statements for the years 1934,
1P35» and 1936, and the balance sheets for 1936 and succeeding years o f
Inter-America Corporation and Transamerica Corporation,
(10)
Transamerica Corporation's p r o f i t and loss statements for the
years 1934, 1935* 193o» and 1937 # and the balance sheets for 1936 and
succeeding years, are misleading because o f charges to p a i d - i n surplus
~ 5~
o f contributions made by Transamerica Corporation to the operating expenses o f Associated American D i s t r i b u t o r s , I n c . , from 1932 to 1937»
inclusive.
(11)
The p r o f i t and loss statement for the year 193*7, and the
balance sheets for 1937 and succeeding years, of Transamerica Corporat i o n do not adequately disclose the nature o f c r e d i t s created i n 1937
by the t r a n s f e r from Transamerica Corporation to Transamerica General
Corporation o f 10,000 shares o f the common stock o f I n t e r - C o n t i n e n t a l
Corporation, and
1 8 4 , 0 0 0 s h a r e s o f common stock o f National City Bank
o f New York, and by the transfer by Transamerica Corporation to C a l i f o r n i a Lands, I n c , , o f 15,000 shares o f the common stock o f Bank o f
America, N. T. & S» A,
(12)
The surplus accounts o f Transamerica Corporation, as contained i n i t s balance sheets f o r 1937 and succeeding years, are imp r o p e r l y stated by reason o f the f a i l u r e to charge against earned s u r plus that p o r t i o n o f the amount paid by Transamerica Corporation i n
1937 to reacquire i t s own stock for c a n c e l l a t i o n , which exceeded the
par value and p a i d - i n surplus applicable to said stock.
(13)
The investments o f Transamerica Corporation and i t s s u b s i d i aries i n the common stock o f the f o l l o w i n g banks have not been disclosed
on the appropriate balance sheets and supporting schedules for the years
indicated below:
YEAR
INVESTMENT
1937
National Bank o f
Washington
1936
F i r s t National Bank
o f Ashland, Oregon
F i r s t National Bank
o f M e r r i l l , Oregon
F i r s t National Bank
o f Klamath F a l l s ,
Oregon,
F i r s t National Bank
o f Southern Oregon
F i r s t National Bank
of C o q u i l l e , Oregon
State Bank o f
Ashland, Oregon
National Bank o f
Tacoma, Washington
Transamerica General Company
1936
Pasadena Savings Bank
California First
National Bank o f
Long Beach
Inter-Continental
1936
Central Bank o f
Oakland
COMPANY
Transamerica
Inter-America
(14)
Corporation
Corporation
Corporation
Footnote
(B) to the balance sheet of Transamerica Corpo1937, does not f u l l y disclose the nature
r a t i o n as at December 31,
- 6 of the l i a b i l i t y created by a certain contract entered i n t o by and
between the Bank o f America, N. T, & S. A . , and Transamerica Corpor a t i o n on July 14, 1937, r e l a t i n g to the common stock o f National
City Bank o f New York.
(15)
Footnote {%) to the balance sheet o f Transamerica Corpor a t i o n as at December 31, 1937, does not f u l l y disclose the material
portions o f the contract r e f e r r e d to therein, and the circumstances
under which the said contract was entered i n t o .
(16)
The balance sheet o f Inter-America Corporation as at
December 31, 1936, improperly c l a s s i f i e s a c e r t a i n item o f $9,302,381.82
as "reserve for l i a b i l i t y and possible loss under outstanding contract
o f guaranty"•
(17)
On the balance sheets of Transamerica General Corporation
and Transamerica Service Corporation for 193^ ar*d succeeding years,
the b e n e f i c i a l i n t e r e s t o f said companies- i n shares o f the common
stock o f Transamerica Corporation i s concealed by the c l a s s i f i c a t i o n
thereof as "notes r e c e i v a b l e " .
(IS)
The reserves applicable to the r e a l estate owned d i r e c t l y
and b e n e f i c i a l l y by C a l i f o r n i a Lands, I n c . , and Capital Company are
improperly carried on the books of Transamerica General Corporation.
(19)
The reserves provided for anticipated losses on r e a l estate
d i r e c t l y and b e n e f i c i a l l y owned by C a l i f o r n i a Lands, I n c . , and C a p i t a l
Company are inadequate, with the r e s u l t that the surplus accounts o f
those companies for I936 and succeeding years are overstated, and the
expenses o f those companies for 1934 and succeeding years understated.
(20)
The p r o f i t and loss statements for 1934 and succeeding years,
and the balance sheets f o r 1936 and succeeding years, o f C a l i f o r n i a
Lands, I n c . , and Capital Company are false and misleading i n that
losses incurred by those companies on the sale o f r e a l estate from
1932 to date have been charged to reserves which were not created to
provide for such losses.
(21)
The p r o f i t and loss statement for the year 1936, and the
balance sheets for 1936 and succeeding years, o f Transamerica General
Corporation do not adequately disclose the nature o f c r e d i t s created
i n 1936 by the transfer from Transamerica General Corporation to
Transamerica Corporation o f 724,101 shares o f the common stock o f
Bankamerica-Blair Corporation, and by the t r a n s f e r by Transamerica
General Corporation to I n t e r - C o n t i n e n t a l Corporation o f 67*042 shares
o f the common stock o f General Metals Corporation*
(22)
On the balance sheet o f Transamerica Service Corporation,
as at December 31, 1937* the b e n e f i c i a l i n t e r e s t o f said company i n
shares o f the common stock o f Bank o f America, N. T. <5c S. A . , P a c i f i c
Coast Mortgage Company, F i r s t National Bank o f Forest Grove, Oregon,
Coolidge and McClaine Bank, S i l v e r t o n , Oregon, and Great Republic
L i f e Insurance Company, i s concealed by the c l a s s i f i c a t i o n thereof
as "notes receivable".
-1
-
(23)
The surplus accounts o f C a l i f o r n i a Lands, I n c . , and C a p i t a l
Company, as shown on t h e i r balance sheets for 193& and succeeding years,
i n c o r r e c t l y give e f f e c t to s o - c a l l e d "recoveries" i n u r i n g to said companies by v i r t u e o f t h e i r i n t e r e s t i n c e r t a i n contracts entered i n t o
between Transamerica Bank Holding Company and Bank of America, N, T. &
S. A . , on February 1, 1933* and Corporation o f America and Bank of
America, N. T»
S. A . , on January 2, 1934*
(24)
The surplus accounts o f C a l i f o r n i a Lands, I n c . , and C a p i t a l
Company, as shown on t h e i r balance sheets for 1937 and succeeding
years, i n c o r r e c t l y give e f f e c t to c e r t a i n s o - c a l l e d " p r o f i t s " i n u r i n g
to said companies on July 14, 1937, as a r e s u l t of the resale to the
Bank of America, N. T. & S, A . , o f c e r t a i n charged o f f assets o f said
Bank.
(2?)
On the balance sheets o f C a l i f o r n i a Lands, I n c . , as at
December 31, 1937, and succeeding years, c e r t a i n amounts due from
Bankamerica Company, Western States Corporation, and Pacific Coast
Mortgage Company, are improperly c l a s s i f i e d as "notes receivable",
(26)
Footnotes to the balance sheets and p r o f i t and loss s t a t e ments o f Transamerica Corporation and i t s s u b s i d i a r i e s r e l a t i n g to
s e c u r i t i e s held on December 31, 1931* and subsequently sold (as for
example Footnote E to the balance sheet of Inter-America Corporation
as at December 31* 193^) do not accurately s t a t e , i n the l i g h t o f the
s o - c a l l e d r e o r g a n i z a t i o n o f Transamerica Corporation and subsidiaries
in 1931 * the e f f e c t of such sales upon the income, earned surplus,
and p a i d - i n surplus o f said companies.
(27)
The balance sheets o f Transamerica General Corporation for
1936 and succeeding years do not disclose the r e s t r i c t i o n s imposed by
the I t a l i a n government upon the investment o f said company i n the
c a p i t a l stock of Banca d'America e d f I t a l i a .
(28)
Said a p p l i c a t i o n f o r r e g i s t r a t i o n , amendments, and annual
reports contain a d d i t i o n a l false and misleading statements, and mat e r i a l omissions, r e l a t i n g i n p a r t i c u l a r to the f i n a n c i a l statements
o f c e r t a i n s u b s i d i a r i e s o f Transamerica Corporation f i l e d as a part
of said a p p l i c a t i o n , amendments, and reports.
A description of such
a d d i t i o n a l false and misleading statements, and material omissions,
i s set f o r t h i n a separate order adopted simultaneously herewith
(hereinafter r e f e r r e d to as the "Supplemental Amended Order for
Hearing").
IV
The information reported to the Commission by members of i t s s t a f f
as set f o r t h i n Paragraph I I I hereof, tends, i f t r u e , to show f u r t h e r that
the f a i l u r e of Transamerica Corporation to comply with the provisions o f
the Securities Exchange Act o f 1934, and of the rules and regulations
thereunder, as alleged in Paragraph I I I hereof, among other things,wa? a
part o f a scheme to conceal from, and was for the purpose of concealing
from, the actual and p o t e n t i a l owners of Transamerica Corporation stock
the fact that i t had been, since 1932, and was, the continuing p o l i c y o f
Transamerica Corporation and i t s s u b s i d i a r i e s .
~ 8~
(a)
to manipulate the market for Transamerica Corporation's
common stock on the various n a t i o n a l s e c u r i t i e s exchanges upon which
said stock was traded, by d i r e c t and i n d i r e c t purchases o f said stock
for the account o f Transamerica Corporation, i t s s u b s i d i a r i e s , a f f i l i a t e s and others, by s o l i c i t i n g p o t e n t i a l investors to purchase
said stock, and by financing the purchase o f s a i d stock by others, and
(b)
to induce investors to buy, or to withhold from s e l l i n g ,
said stock by means o f statements o f material facts which were, at
the time and i n the l i g h t o f the circumstances under which they were
made, f a l s e and misleading with respect to such matters as earnings
of Transamerica Corporation and i t s s u b s i d i a r i e s , the r e a l estate
owned by s u b s i d i a r i e s , of Transamerica Corporation, the nature o f the
market for Transamerica Corporation common stock, and, in general,
the f i n a n c i a l condition of Transamerica Corporation and i t s s u b s i d i aries and a f f i l i a t e s , and with respect to c e r t a i n other matters r e ferred to i n the Supplemental Amended Order f o r Hearing.
V
The Commission, deeming such action necessary and appropriate i n the
public i n t e r e s t , hereby orders!
(1)
That the hearing o r i g i n a l l y ordered and adjourned as set
f o r t h i n Paragraph I I I hereof s h a l l be reconvened on December 9> 1940,
for the purpose o f taking testimony as to whether Transamerica Corpor a t i o n has f a i l e d to comply with the provisions o f the Securities Exchange Act o f 1934, and o f the r u l e s , regulations and forms promulgated thereunder, i n the respects alleged by the Commission's s t a f f
as set f o r t h i n Paragraphs I I I and IV hereof, and, i f so, whether i t
i s necessary or appropriate f o r the protection o f investors to suspend
for a period o f not exceeding twelve months, or to withdraw, the r e g i s t r a t i o n of the stock o f said corporation.
(2)
That said reconvened hearing s h a l l be conducted before
Henry F i t t s , an o f f i c e r o f the Commission, and that said o f f i c e r s h a l l
enjoy and exercise the same powers as conferred upon him by the
o r i g i n a l order in t h i s matter issued November 22, 1938.
(3)
That said reconvened hearing s h a l l be resumed on said
December 9, 1940, at ten p ' c l o c k , A. M,, in Room 1301 of the Commiss i o n ' s Regional O f f i c e at 625 Market S t r e e t , San Francisco, C a l i f o r n i a ,
and s h a l l continue thereafter at such times and places as the o f f i c e r
hereinbefore designated may determine.
(4)
That t h i s Amended Order f o r Hearing s h a l l be served f o r t h with upon Transamerica Corporation, and s h a l l be made p u b l i c on, but
not before, the reconvening of the hearing as hereinbefore ordered,
(5)
That the Supplemental Amended Order f o r Hearing hereinbefore
r e f e r r e d to s h a l l
likewise be served f o r t h w i t h upon Transamerica Corporation, and that a copy t h e r e o f , together with a copy of the Amended
Order f o r Hearing, s h a l l be served, with the cox^sent of said corporat i o n , upon each other corporation or firm named i n either o f said
-
9 -
orders which i s d i r e c t l y affected thereby, but that said Supplemental
Amended Order f o r Hearing S h a l l not be made p u b l i c u n t i l the complet i o n of the hearing hereinbefore ordered, providedf
however,
that
(a)
said Supplemental Amended Order for Hearing, or any
p$rt t h e r e o f , may be made public at any time upon j o i n t motion
of Transamerica Corporation and such other person as may be
d i r e c t l y affected by the part o f the order concerned; and
(b)
said Supplemental Amended Order for hearing, or any
part t h e r e o f , may be made public by the Commission at any time
upon i t s own motion to the extent necessary or appropriate i n
connection with any j u d i c i a l proceeding to enforce any subpoena
issued by the Commission or any duly appointed o f f i c e r thereof,
or in any other j u d i c i a l proceeding r e l a t i n g to the i n s t i t u t i o n
or conduct o f t h i s proceeding, or i n connection with any argument
or controversy concerning the a d m i s s i b i l i t y o f evidence at the
reconvened hearing, or to any other extent necessary to the
o r d e r l y and e f f e c t i v e conduct and d i s p o s i t i o n o f this proceeding*
(6)
That except as s p e c i f i e d i n subparagraph (2) o f t h i s Paragraph V, t h i s o r d e r , and the Supplemental Amended Order for Hearing,
s h a l l i n a l l respects be substituted for and supersede a l l other orders
for hearing, and amendments thereto, heretofore issued by the Commission i n t h i s matter•
By the Commission*
(SEAL)
Francis P. Brassor,
Secretary.
UNITED STATES OF AMERICA
BEFORE THE SECURITIES AND EXCHANGE COMMISSION
At a regular session o f the Securities and Exchange Commission,
held at i t s o f f i c e s i n the City o f Washington, D . C . ,
on the 22d day o f November, A. D . , 1940.
I n the Matter
of
Proceeding under Section 1 9 ( a ) ( 2 )
o f the S e c u r i t i e s Exchange Act o f
1934* as amended, to determine
whether the r e g i s t r a t i o n o f
SUPPLEMENTAL AMENDED
ORDER FOR HEARING
F i l e No. 1-2964
TRANSAMERICA CORPORATION
CAPITAL STOCK, $2 PAR VALUE
should be suspended or withdrawn
I
Reference i s hereby made t o the Amended Order f o r Hearing adopted
by the Commission i n the above e n t i t l e d matter on November 22, 1940, and
i n p a r t i c u l a r to subparagraph (2S) o f paragraph I I I and subparagraph (b)
of paragraph IV t h e r e o f .
II
In a d d i t i o n to the a l l e g a t i o n s s p e c i f i c a l l y set f o r t h i n Paragraph
I I I o f said Amended Order for Hearing, members o f the s t a f f have reported
to the Commission information which, i f t r u e , tends to show that the a p p l i c a t i o n , amendments, and anuual reports of Transamerica Corporation cont a i n false and misleading statements, and material omissions, i n the
following respects:
t
(1)
Credits applied to reduce the indebtedness o f Corpor a t i o n of America, Inter-America Corporation and Transamerica
Corporation to the Bank of America, N.
& S» A . , under c e r t a i n
! contracts entered i n t o on June 2o, 1931, December 31, 1$31» and
1 February 13, 1932, have been improperly and f a l s e l y described as
"recoveries" i n answer to Item 33 o f Form 24 and i n Schedule V
\ | o f the balance sheet o f Inter-America Corporation as at December
-
31, 1936.
- l
-
(2) Direclwmd indirect contributions made s^f Transamerica
General Corporation to occidental Life Insurance Company, for the
purpose of offsetting losses of the latter company, have bean improperly charged against a "reserve for real estate losses and contingencies of Occidental Life Insurance Companyrt shown on the balance
sheet of Transamerica General Corporation for 1936 and succeeding
years.
(3) On the balance sheets of Pacific National Fire Insurance
Company for 1936 and succeeding years, surplus has not been segregated as required by the instructions to the form applicable thereto.
(4) The Combined Report of Condition of Bank of America, N. T.
& S, A # , First National Bank in Reno, and Bank of America (California)
as at December 31, 193^* improperly includes unrealized appreciation
in the carrying value of government, municipal, and other securities.
(5) The Combined Reports of Earnings and Dividends of Bankofif
America, N. T# & S . ' A . , First National Bank in Reno, and Bank of
America (California} for the years 1934, 1935 r fend 1936,' im#rop#rly include
as items of income, unrealized profits created by writing up the
carrying value of government, municipal, and other securities*
. £
(6) The Combined Reports of Earnings and Dividends referred to
I in subparagraph (8) hereof conceal donations made by Bank of America,
; i N. T,
S, A», to its parent or a f f i l i a t e d corporations as depreciat i o n , losses on loans, or other loss or expense items.
(7) ?he Combined Reports of Earnings and Dividends referred to
in subparagraph (5) hereof misstate the net p r o f i t of Bank of America,
N* T. & S. A., in that item of the report relating to "net profits as
national bank since organization."
(8) The Combined Reports of Earnings and Dividends referred to
in subparagraph (5) hereof do not include in that item relating to
"voluntary contributions to surplus or profits 11 a l l premiums received
i from the sale of the capital stock of, and a l l other voluntary contributions to the surplus or profits of, Bank of America, N. T. & S. A*
I
(9) The reserves in the Combined Reports of Earnings and D i I vidends referred to in subparagraph (5) hereof are inadequate to pro; vide for estimated losses and doubtful and slow accounts, for depreciation of bank premises, including furniture and fixtures, losseg.
on other reaft.estate» bonds, and other securities owned by Bank of
(10)) TEe reserves-contained in the Combined Report of Condition
referred to in subparagraph (4) hereof do not make adequate provisions for estimated losses and doubtful and slow accounts, for depreciation of bank premises, including furniture and fixtures, losses
on other real estate, bonds, and other securities owned by Bank of
America, N.
& S. A.
1
Ill
I n addition to the a l l e g a t i o n s s p e c i f i c a l l y set f o r t h i n paragraph IV o f
said Amended Order for Hearing, members of the s t a f f bav© reformed i c T ^ i e i ^
Commission; information, which, I f true* tenda to^shdw t h a i - t h ^ r f a i l u r e o f
• 2 -
Transamerica Corporation to comply with the p r o v i s i o n s o f the S e c u r i t i e s
Exchange Ac\ o f 19J4, and p f the rules and r e g u l a t i o n s thereunder, as
alleged i n paragraph IV o f said Amended Order f o r Hearing, was f u r t h e r a
part o f a scheme to conceal from, and was f o r the purpose o f concealing*
from the actual and p o t e n t i a l owners o f Transamerica Corporation stock
the fact that i t had been, since 1932, and was, the continuing policy of Transamerica Corporation and i t s s u b s i d i a r i e s to induce investors to buy, or to
withhold from s e l l i n g , said stock by means o f statements of m a t e r i a l facts
which were, at the time and i n the l i g h t o f the circumstances under which
they were made, f a l s e and misleading with respect to the earnings and
dividends o f Bank o f America, N»
&
A . , and with respect to said
Bank f s asset condition*
IV
I t i s hereby ordered that i n the reconvened hearing ordered i n
paragraph V of said Amended order for Hearing, testimony s h a l l be taken
with respect to the matters set f o r t h i n Paragraphs I I and J I I hereof to
the same extent as i f said matters had been set f o r t h s p e c i f i c a l l y i n
said Amended Order for Hearing.
V
I t is f u r t h e r ordered that t h i s Supplemental Amended Order f o r
Hearing s h a l l be served and published i n the manner* and subject to the
conditions, prescribed i n subparagraph (5) o f Paragraph V o f said Amended
Order for Hearing.
By the Commission.
(SEAL)
Francis P. Brassor*
Secretary.
@FedFRASER