Farmers & Banco

Herman Bosshard is a truck farmer in Clay County, Minn., just across the Red River from Fargo, N. Dak. One day last summer by a squiggle of his pen Farmer Bosshard suddenly made himself an immensely important figure in the political and financial life of Minnesota. What he signed was a complaint against 19 directors of Northwest Bancorporation, charging second degree larceny for selling him ten shares of stock for $220. Farmer Bosshard was persuaded to sign the complaint by henchmen of Farmer-Laborite Governor Floyd Bjornstjerne Olson.

From a strictly banking viewpoint the Governor had nothing against the $350,000,000 Banco group. Its 119 banks scattered through eight states from Duluth to Spokane weathered the Depression without a casualty. It was a Northwest Institution from personnel to capital. Its directors included some of the Best Names in Minneapolis -- Heffelfinger, Crosby, Pillsbury.

But Banco, formed in 1929, paid fancy prices for its unit banks, indulged in high-pressure stock selling campaigns. And its 18,000 stockholders watched their investment fade from a high of $99 per share to about $3. Early in the New Deal, having noted the fun the Senate Banking & Currency Committee was having in Washington, Governor Olson began to kettledrum about how Northwestern investors had been swindled out of $100,000,000. Forthwith he ordered his commerce commission to investigate.

The Minnesota probe included First Bank Stock Corp., the other great Northwestern exponent of group banking, but the fact that at least one official was an Olson friend seemed to temper the commerce commission's tactics with that institution. Not so with Banco: After months of investigation the commerce commission presented its findings--allegations that dividends were paid without earnings--to a grand jury in Hennepin County (Minneapolis). Promptly the grand jury voted a no bill, thus thwarting Governor Olson's determination to put someone in jail.

Undaunted was the blond, chunky Governor, who wants to socialize every bank, factory and utility in his flat State. Within a few weeks his legal henchmen turned up in the little town of Moorhead, in the northwest corner of Minnesota where Farmer-Labor strength is great. Moorhead is the Clay County seat, and the Olson prosecutors went out to see Farmer Bosshard, who was one of the 25 Banco stock-holders in the vicinity. On the basis of his complaint, without waiting for the formality of an indictment, a district judge ordered Banco's President J. Cameron Thomson and his 18 directors arrested.

By agreement President Thomson was tried first. Aside from the question of venue--whether the crime, if any had been committed in Farmer Bosshard's county--the trial revolved largely around a prospectus which asserted that "the earnings of the group applicable to stock ownership of the Northwest Bancorporation" were $3.20 per share for 1930. The State tried to prove that since earnings of the subsidiary banks were not actually paid to the parent company, the parent company really had no earnings at all; and since Farmer Bosshard bought the stock of the parent company under the impression that it was earning $3.20 he had most certainly been swindled.

Last week when the State rested, the defense promptly did likewise, not bothering to put a single witness on the stand. Out marched the jury to puzzle over reams of financial statements. Once they called the judge to ask him the meaning of "current charge-offs," but he told them to figure it out for themselves. After 24 weary hours, including a night in the local jail, the jury marched in, pronouncing President Thomson not guilty. Said he: "I am deeply grateful to the people of Clay County. . . . The verdict is a vindication of the Bancorporation."

Overnight Banco stock rose from $4.75 per share to $5.50. Governor Olson would presumably drop prosecution of the other bigwig directors. "In view of the Mitchell and Insull cases," he remarked, "the verdict was not surprising" Left to the Clay County authorities was the problem of persuading the State to shoulder part of the $30,000 costs of this historic trial.

This file is automatically generated by a robot program, so reader's discretion is required.