Appendix — United States v. Citizens & Southern National Bank
Supreme Court brief1975
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IN THE
SUPREME COURT OF THE UNITED STATES
- OCTOBER TERM, 1974
No. 73-1933
UNITED STATES OF AMERICA,
Appellant,
Vv.
CITIZENS AND SOUTHERN NATIONAL BANK, et al.
On Appeal from the United States District Court for the
Northern District of Georgia
JOINT APPENDIX
INDEX
VOLUME I
Page
Relevant Docket Entries ..................2220055 1
Complaint by the United States Filed November 2, 1971 9
\
Answer to Complaint Filed by the Defendants May 5,
iS Se ne ee nA ae an rare ee 24
Transcript of Proceedings Held Before the Hon. Charles
A. Moye, Jr:, United States District Judge for the North-
ern District of Georgia Commencing September 25,
1972:
Appearances [2] ............... 02000 eee eee 45
Testimony of W. D. Padgett—
Direct examination [7] .................... 49
Cross-examination [74] .................... 89
Testimony of William Farr, I1I—
Direct examination [85] .................... 96
Cross-examination [123] ................... 118
Testimony of Herbert Leonard Megar— .
Direct examination [1$1] ............. Seceece 135
Cross-examination [161] ................... 142
Redirect examination [171] ................ 148
Transcript of P:oceedings Held Before the Hon. Charles
A. Moye, Jr., United States District Judge for the
Northern District of Georgia commencing September
26, 1972:
Testimony of James A. Parker—
Direct examination [180] .................. 151
Cross-examination [227] ................... 178
Redirect examination [245] ................ 188
Testimony of Charles B. Ginden—
Direct examination [256] ................... 195
Cross-examination [296] ................... 219
Redirect examination [309] ................ 226
Testimony of Warren Jackson—
Direct examination [312] ................-. 228
Cross-examination [352] ................0.. 251
Transcript of Proceedings Held Before the Hon. Charles A.
Moye, Jr., United States District Judge for the North-
ern District of Georgia commencing September 27,
1972:
Testimony of Warren Woolsey—
Direct examination [361] .................. 257
Cross-examination [408] ................... 284
Redirect examination [424] 22... 292
Testimony of Samuel L. Skogstad—
Direct examination [425] .................. 293
Cross-examination [426] ........0...0...... 294
Redirect examination [476] 2.2.0.0. 0 0... 322
Recross-examination [ 494] .0 0. 333
VOLUME II
Testimony of Mills B. Lane—
Direct examination [508] .................. 343
Cross-examination [539] ................... 361
Redirect examination [ PORE snouesesuscsaucic 374
Transcript of Proceedings Held Before the Hon. Charles
A Moye, Jr., United States District Judge for the
Northern. District of Georgia commencing September
28, 1972:
Testimony of Howard S. Starks—
Direct examination [582] .................. 386
Cross-examination [604] ................... 400
Redirect examination [633] 22... 0.2, 417
Testimony of Joseph Hall—
Direct examination [637] .................. 420
Cross-examination [683] .................... 445
Redirect examination [744] ................. 481
iV
Testimony of Robert Daniel Handley, J r.—
Direct examination [747] ................-. 483
Cross-examination [765] ............ re 494
Redirect examination [774] ................ 499
Recross-examination [774] ................. 500
Transcript of Proceedings Held Before the Hon. Charles
A. Moye, Jr., United States District Judge for the North-
ern District of Georgia commencing September 29,
1972:
Testimony of Warren L. Berry—
Direct examination [777] ................... 501
Cross-examination [784] ................... 505
Redirect examination [802] ........ <eaee uous 516
Testimony of Roy B. Holland—
Direct examination [802] .................. 517
Cross-examination [805] ..............:.... S19
Testimony of Hubert Harris—
Direct examination [808] ................... 521
Cross-examination [812] .................4-- 523
Testimony of Lewis C. Beasley—
Direct examination [815]\.................. 524
Cross-examination [821] -..... KER ERE Sa ees 528
Testimony of Joseph M. Ream—
Direct examination [824] ........... bie ie a 530
Testimony of Henry T. Collingsworth, Jr.— |
Direct examination [830] ................--. 534
Cross-examination [837] .............-.+-5-. 538
Testimony of Gordon B. Trulock, Jr.—
Direct examination [842] ...............4-- 542
Cross-examination [853] ...............++5- 548
Testimony of Ben C. Cook—
Direct examination [854] .................. 548
Cross-examination [859] ................... 552
Testimony of Merrill Autry, Jr.—
Direct examination [862] ....... be hha eeu SS 554
Cross-examination [865] ................... 555
Testimony of L. R. Gellerstedt, Jr.—
Direct examination [873] .................. 559
Cross-examination [881] ................... 564
4
Testimony of King Cleveland—
Direct examination [888] 2... 0... ee. 569
Cross-examination [892] ................... 571
Testimony of W..M. Jackson—
Direct examination 1895] .................. 573
Cross-examination [905] ................... 579
Testimony of Evans Bruner—
Direct examination [932; .................. 594
Cross-examination [940] ................... 59S
VOLUME III
Testimony of J. Mack Robinson—
Direct examination [942] ............ eer 601
Cross-examination [946] ................... 603
Testimony of Walter Eaves~—~
Direct examination [953] .................. 607
Cross-examination [956] ................... 609.
Testimony of E. D. Dunn—
Direct examination [960] .................. 611
Testimony of Nevins Dennis Baxte:—
Direct examination [974] .................. 619
Cross-examination [1004] _ 636 ~
Bh 20108. -empemmemmunmneneY
vi
Depositions:
Warren Lanham Berry— |
| eT re 671
Dr. William M. Cason— |
CGX-199) SAGAS occ ccc cee ce snevness 739
Gus Lockett Connelly— |
(GX-200) 4-29;3; 53.13-54.22 ..............-. 741
Thomas E. Cook— ? .
ee a a 760
Edward E. Elson— . |
cor se | le 2 Sb oy Se .. 774
Louis J. Fortuna— |
(GX-204) 19.6-22.3 ............ [Ri wever nee y 775
Hubert L. Harris— |
EID IT kn kiiee ccc eidivic ev eesues 778
T. Robert Hazelrig—
(GX-20T) SZB1S. occ cc css vened haan a tes 793
Dr, W. Andrew Irvin— .
(GX-208) 12.4-12.21; 18.10-18.24 .............. 811
Hugh F. Lane— , .
a, ee eee are Sanaa ee i: ee eee eee 812
Alva G. Maxwell— ; .
ee DAI Sy ko ioe v5 ae cer ee wa lb hens 848
Dalton F. Scott—-
(GX-215) 34.24-36.3 ...... esc eee vesccreeee 851
Economic Report (Excerpts): Y
Volume 1—[5-14]
[83-84]
[ 1 14 “RB”. l 30 “B”]
LE DPPEES 660i eve cc Sve hne crea ween 852:
Volume 2—Exhibits 20, 28, 29, 53, 54, 55,69 ...... 877
ROLLE LL LESLIE LN ENTE tw
Vii
Dries nn
Viii
GATE U1A5.6) oes neces cesses eee renee
COMA Woon ec cee ew eee ec eaetesas sewn
CITE cos ccc h ep eeherseusds dunes s inst
ix
Co | 7 2 a ree re ee eee ae
GX-193 [1-6, 8, 10, 12, 14, 16, 18, 20, 22, 24, 28] ..
se ee ee ee eene
DX-269 (Sections A, D, F, K and V) ..............
DX-270—Vol. I, GOG 9.27 and GOG 9.6 .........
Vol. II, GOG 26.01 and 26.011 .........
ee
tk ip RIE PO SA EONT ENON EAT
PREECE RTPI LITO IT ITY
\
shat piel aia Pt Nk A Sola
Ogi es ee ee
Dee eictstes ccsoncenion
x
0) | en a re re eee eee eee eee E-1024
DORA TS. 55 kere hoe 5bs gn en sg eee ee nes E-1717
ee povens E-1804
8) Ok) by re eee a ee re er re oer E-1816
DOSED ee oe rn Sek ee ee eee eh eases E-1822
WORSE oie p ses ee ob eas ee ee eae seen esha es E-1826
Notice of Appeal filed March 25, 1973 ............. E-1841
Order Noting Probable Jurisdiction dated October 29,
BOTS hogy bea cts d ces tea ees ne ws sees eeenes E-1842
«
ae Mae She
UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF GEORGIA
RELEVANT WOCKET ENTRIES
Date Filings
Nov. 2 Complaint filed. Summons issued and delivered to
U.S. Marshal.
Jan. 4 Order filed that parties may file with the Clk. certain
affidavits in support of and in response to the Mo-
tion to Lift the Stay, etc. (see order) Counsel shall
mark documents as “Confidential Information” and
the Clerk shall know that they are documents not
to be maintained in the public records of this Ct.,
Directing Clk. to maintain them under seal to be
made available only to the Ct. and Ct. personnel,
and to counsel in this case, until further ordered
(see order for details). Copy to counsel.
Jan. 6 Defendants’ memorandum in support of motion to
lift the statutory stay, with attachments, filed. Sealed
in Vault.
Jan. 20 Case Reassigned to Judge Moye.
Feb. 2 Submitted on Defendants’ Motion to Lift Statutory
Stay and Defendants’ Motion for Protective Order
(Filed 12/30/71)
Feb. 10 Affidavits of William B. Camp, Joseph A. Hall, LI,
W. M. Jackson and Angus Parker. Sealed in Vault.
Ep anes a MNES El EEO AI DY PE TTR BS TB ER REECE RSE BNE NED OCT TREE ELMS LEY BLE IE ET IE EERE i 8
Feb.
Apr.
Apr.
11
. 17
. 20
a
10
20
yoo
Hearing on Defendants’ Motion to Lift Stay Had:
The Court took the motion under @@visement, rul-
ing not to be made for 10 days. Motion of defend-
ants to dismiss and to strike allegations that de-
fendants nave violated Section 1 of the Sherman
Act filed. To CAM.
Brief in support of defendants’ motions to strike
and to dismiss filed. To CAM.
Order filed Denying defendants’ motion to lift the
statutory stay. Copy to Counsel.
Plaintiff's brief in opposition to defendants’ motion
to dismiss and to strike allegations etc., filed.
Submitted to CAM on Defendants’ Motion to Dis-
miss and to Strike.
Supplement to Plaintiff's brief in opposition to de-
fendants’ motion to dismiss and to strike, with
Exhs. 1 and 2, filed. To CAM.
Plaintiffs memorandum in response to defendants’
reply brief in support of their motion to dismiss
filed. To CAM.
Order pursuant to Rule 12(a) of F.R.C.P., the court
postpones until the trial on the merits the disposi-
tion of defendants’ motion to dismiss and strike al-
legations that defendants have violated Sec. 1 of
the Sherman Act served and filed 2/11/72, filed.
(c. to counsel)
Answer of defendants filed.
Consent Protective Order that “that portion of the
FDIC Summary of Deposits 1970 Bank and Branch
Offices by County, State,” which relates to deposits
SARA Te a a NE a
June 16
July 13
July 21
Foon por
—i
held by branch offices in Atlanta Standard Metro-
politan Statistical Areas, shall be used by defend-
ants sulely to prepare for and at trial of this case
and any appeals thereof, and for no other purpose
filed. Copy to counsel.
Protective Order Re: Answer to Interrogatories and
other documents filed. Copies to counsel.
Defendant's Fulton National Bank of Atlanta, mo-
tion for protective order and Order granting same.
Clerk of this Court shall maintain under seal all in-
formation which is designated by the Movant Bank
as Confidential Information: all documents or ma-
terials (fftnished by The Movant Bank shall be
promptly returned to the Movant Bank at the con-
clusion of this proceeding, filed. (Copies furn.)
Defendant's, The Trust Co. of Georgia, motion for
protective order and Order granting same, Clerk
of this Ct. shall maintain under seal all information
which is designated by the Movant Bank as Confi-
dential Information; all documents or materials fur-
nished by the Movant Bank shall be promptly re-
turned to the Movant Bank at the conclusion of this
proceeding, filed. (Copies furn.)
Defendant's, First National Bank of Atlanta & The
Peachtree Bank and Trust Co. motions for protec-
tive orders and Orders granting same, Clerk of this
Ct. shall maintain under seal all information which
is designated by the Movant Banks as Confidential
Information; all documents or materials furnished by
the Movant Banks shall be promptly returned to the
Movant Banks at the conclusion of this proceeding,
filed. (Copies furn.)
Defendant’s, National Bank of Ga. & Robert P.
Guyton, withdrawal of their motion to quash sub-
. 18
=)
. 19
~ at
ay ee
poena & for protective order filed 6/26/72, filed.
Defendant’s National Bank of Ga. & Robert P.
Guyton, motion for protective order and Order
granting same, Clerk of this Ct. shall maintain un-
der seal all information which is designated by the
Movants as Confidential Information; all documents
or materials furnished by the Movants shall be
promptly returned to the Movants at the conclusion
of this proceeding, filed. (Copies furn.)
Depositions of Dalton F. Scott, Gerald M. Powell,
Fiank Berry & Alva G. Maxwell filed.
Deposition of Edward E. Elson filed.
Deposition of Dr. W. Andrew Irvin filed.
Deposition of Churchill P. Goree, III filed.
Deposition of James H. Aldredge filed.
Deposition of Hugh F. Lane filed.
Deposition cf Thomas E. Cook filed.
Deposition of Louis J. Fortuna filed.
Deposition of Hubert L. Harris filed.
Deposition of W. J. Fortenberry filed.
Deposition of Dr. William M. Cason filed.
Deposition of Archie Lee Lindsey filed. —
Deposition of Gus Lockett Connelly filed.
Deposition of Marcus M. Morris filed.
Deposition of Warren Lanham Berry filed.
Defendants’ pre-trial brief, with Appendix, filed.
Plaintiff's pre-trial brief filed.
on
Sept. 25 Plaintiff's Objections to the Admission into evidence
of certain documents offered by defendants and
plaintiff's understanding of certain agreements with
defense counsel filed.
Non-Jury Trial: Defendants’ withdrawal of notice to
take deposition filed; Defendants’ objection to gov-
ernment exhibits filed: Exhibits admitted.
Deposition of T. Robert Hazelrig filed.
Sept. 26 Non-Jury Trial:
Sept. 27 Non-Jury Trial: Exhibits admitted.
Sept. 28) Non-Jury Trial:
Sept. 29 Non-Jury Trial:
Oct. 2 Non-Jury Trial: Case proceeded upon introduction of
evidence by the defendants’ witnesses. Exhibits Ad-
mitted. Court directed that briefs be filed as fol-
lows: Plaintiff's Preliminary Brief due 11-6-72; De-
fendant’s Preliminary & Rebuttal Brief due 11-22-
72: Plaintiff's Rebuttal Brief due 11-30-72; Both
Parties Proposed Findings of Fact & Conclusions of
Law due 12-15-72. Case taken under advisement
by Court.
Oct. 4 Steno-type notes of trial proceedings filed.
Oct. 13 Deposition of Morris B. Pierce filed.
Nov. 7 Plaintiff's post-trial brief filed.
Nov. 22 Defendant's post-trial brief filed.
Nov. 30 Plaintiff's Reply to defendant's post tria! brief filed.
Dec. 5 Defendants’ response to plaintiff's reply brief filed.
Dec. 15 Plaintiff's proposed findings of fact and conclusions
of law filed. Duplicate to CAM by counsel.
Re NE CTT ean 8
ORLEANS AICI ERO ON NA RCT TI UE ee pere tet
Feb.
Feb.
evctevbelneban
Mar.
Apr.
June
Baia Beerealae aaa ad hinds Nad Saas aoc SAREE ABM IA Fs
r
Mar.
15
16
16
23
12
Defendants’ findings of fact & conclusions of law
filed. Duplicate to CAM.
Submitted Pursuant to Entry of 10/2/72.
Order filed directing parties to advise the Court of
their specific objections to the findings of fact made
by the opposing party by 2/15/73. Copy to counsel.
Defendants’ objections to plaintiff's proposed find-
ings of fact filed. Dup to CAM.
Plaintiff's objections to defendants’ proposed find-
ings of fact filed. Dup CAM.
Submitted Pursuant to Order of 1 25, 73.
Motion of Independent Bankers Association of
Georgia, Inc. to file brief amicus curiae, with ami-
cus curiae brief & attachments filed. To CAM.
Reply of defendants to Amicus Curiae brief on be-
half of the Independent Bankers Association of
Georgia, Inc. filed. Dup. to CAM.
Submitted on Motion of Independent Bankers As-
sociation of Georgia, Inc. to file Brief Amicus
Curiae.
Defendants’ letter brief with attachment filed (Dup
to CAM)
Order that motion of the Independent Bankers
Association of Ga., Inc. to file a brief amicus curiae
_is hereby granted, filed. (c. counsel)
Amicus Curiae Brief on Behalf of Independent
Bankers Association of Ga., Inc., filed.
I ORT Re ren os .
alk
June
July
July
Aug.
Aug.
Nov.
Nov.
Dec.
Pd
21
Supplement to Amicus Curiae Brief on behalf of
Independent Bankers Association of Georgia, Inc.,
filed. Dup. to CAM.
Defendants’ tender of supplemental evidence, filed.
Copy sent to Amicus Curiae. Dup. to CAM.
Second supplement to amicus curiae brief on be-
half of Independent Bankers Association of Ga.,
Inc., filed. Dup. to CAM.
Affidavit of Joseph A. Hall, III, filed. Dup. to CAM.
Defendants’ supplemental findings of fact & con-
clusion of law, filed. Dup. to CAM.
Third Supplement to Amicus Curiae Brief on be-
half of Independent Bankers Assoc. of Ga., Inc.
filed (Dup to CAM)
Plaintiff's Respcase to supplemental findings of fact
proposed by defendants filed. (1 Dup. to CAM.)
Defendants’ memorandum regarding effect of the
Citizens & Southern National Bank, et al. v. Inde-
pendent Bankers Association of Ga. (Supreme
Court of Georgia, November 15, 1973, with at-
tachments filed. Dup. to CAM.
Fourth supplement to amicus curiae brief on be-
half of Independent Bankers Association of Ga.,
Inc. filed. Dup. to CAM.
Plaintiff's reply to defendants’ memorandum re-
garding effect of the C&S Bank, et al. v. Inde-
pendent Bankers Assoc., filed.
Order finding for the defendant & against the plain-
tiffs, the statutory stay in effect against the effectua-
omic”
sae Qere
4
3
&
rs |
4
:
* J
4
Feb.
June
22
=)
24
RMR DEIR tore rea: ay der eat nee ae .
_— pe
tion of the proposed mergers shall expire upon the
Govt’s. failure to appeal from this Order within
time permitted by law; otherwise the proposed
mergers shall not be effectuated until the comple-
tion of any appeal taken by the Govt., filed. C.
counsel.
Judgment filed and entered finding for the defend-
ants & against the plaintiff; that the defendants
Citizens and Southern National Bank, Citizens and
Southern Holding Company, Citizens and Southern
Emory Bank, Citizens and Southern Bank of East
Point, Citizens and Southern Bank of Chamblee,
Citizens and Southern Park National Bank, Citi-
zens and Southern South DeKalb Bank, Citizens
and Southern Bank of Tucker, Citizens and South-
ern Bank of North Fulton and Citizens and South-
ern Bank of Sandy Springs recover of the plaintiff
United States of America their costs of action. C.
counsel.
Defendants’ Bill of Costs in the amount of $4,-
709.72 filed. (Counsel notified 2/25)
Plaintiff's letter in regard to agreement with de-
fendant as to taxation of cost filed.
Plaintiff's Notice of Appeal filed. (copy to counsel
& USSC w/docket sheet)
Order that the Court amends nunc pro tunc its
“Findings of Fact, Conclusions of Law and Order”
dated 1/25/74 as follows (see order), filed. (c.
counsel)
Defendants’ motion to lift stay, with memorandum
in support of second motion to lift the statutory
stay filed.
NEALE ALL LULL OLNEY AB TEL rp
<a es
June 25 Order denying defendants’ motion to vacate stay,
filed. (copies furnished)
Oct. 29 Certified Copy of Order from Supreme Court not-
ing probable jurisdiction filed. (Copy Counsel
10/30)
Nov. 18 Record on Appeal to USSC, RRR. (6 boxes) (ACK
trunsmittal letter).
United States. District Court
For the Northern District of Georgia
Atlanta Division
United States of America, Plaintiff,
V.
Citizens and Southern National Bank,
Citizens and Southern Holding Com-
pany, Citizens and Southern Emory
Bank, Citizens and Southern Bank of
East Point, Citizens and Southern }
Bank of Chamblee, Citizens and
Southern Park National Bank, Citizens
and Southern South DeKalb Bank,
Citizens and Southern Bank of Tucker,
Citizens and Southern Bank of North
Fulton, and Citizens and Southern
Bank of Sandy Springs, Defendants.
Civil Action
No. 15823
COMPLAINT
(Filed November 2, 1971)
The United States of America, plaintiff, by its attorneys, act-
ing under the direction of the Attorney General of the United
*
ar: ;
States, brings this civil action to obtain equitable relief against
the above named defendants, and complains and alleges as fol-
lows:
I
_ Jurisdiction and Venue
1. This complaint is filed and this action is instituted under
Section 15 of the Act of Congress of October 15, 1914, as
amended (15 U.S.C. Section 25), commonly known as the Clay-
ton Act, and under Section 4 of the Act of Congress of July 2
1890, as amended (15 U.S.C. Section 4), commonly known as
the Sherman Act, in order to prevent and restrain continuing
violations by the defendants, as hereinafter alleged, of Section
7 of the Clayton Act, as amended (15 U.S.C. Section 18) and
of Section 1 of the Sherman Act (15 U.S.C. Section 1).
2. Each of the defendants transacts business and is found
within the Morthern District of Georgia.
Il
- ‘The Defendants
ae Citizens and Southern National Bank (hereinafter re-
‘ferred to as “C&S National”) is made a defendai_ herein. C&S
National is a banking association organized and «isting under
the laws of the United States of America. C&S National has its
home office in Savannah, Georgia and: its _ executive
office in Atlanta, Georgia.
4. Citizens and Southern Holding Company (hereinafter re-
ferred to as “C&S Holding”) is made a defendant herein. C&S
Holding is a registered bank holding company organized and
existing under the laws of the State of Georgia. C&S Holding
EP
2 ee
—ill—
has its home office in Atlanta, Georgia. C&S Holding is a wholly-
owned subsidiary of C&S National.
5. Citizens and Southern Emory Bank (hereinafter referred to
as “C&S Emory”) is made a defendant herein. C&S Emory is
a banking association organized and existing under the laws of
the State of Georgia, and has its principal place of business in
DeKalb County, Georgia. C&S Hdlding owns approximately
95 percent of the stock of C&S Emory.
6. Citizens and Southern Bank of East Point (hereinafter re-
ferred to as “C&S East Point’) is made a defendant herein. C&S
East Point is a banking association organized and existing under
the laws of the Staté of Georgia, and has its principal place of
business in Fulton County, Georgia. C&S Holding owns ap-
proximately 90 percent of the stock of C&S East Point.
7. Citizens and Southern Bank of Chamblee (heveinafter re-
ferred to as “C&S Chamblee”) is made a defendant herein. C&S
Chamblee is a banking associa#orrorganized and existing under
the laws of the State aia a has its principal place of
business in DeKalb County, Georgia. C&S Holding owns 5
percent of the stock of C&S Chamblee.
8. Citizens and Southern Park National Bank (hereinafter
referred to as'“C&S Park National”) is made a defendant herein. ©
C&S Park National is a banking association organized and exist-
ing under the laws Of the United States of America, and has its
principal place of business in DeKalb County, Georgia. C&S
Holding owns 5 percent of the stock of C&S Park National.
9. Citizens and Southern South DeKalb Bank (hereinafter
referred to as “C&S South DeKalb”) is made a defendant herein.
C&S South DeKalb is a banking association organized and
existing under the laws of the State of Georgia, and has its
principal place of business in DeKalb County, Georgia. C&S
Holding owns 5 percent of the stock of C&S South DeKalb.
a SARE a LER SORE EE INS AEN CTA Pa RRP Me i ALUN TARDE AONE SS Oe sv cae eS RENO SA AONE NOIR PLE SEIS
EO
a oe
10. Citizens and Southern Bank of Tucker (hereinafter re-
ferred to as “C&S Tucker”) is made a defendant herein. C&S
Tucker is a banking association organized and existing under the
laws of the State of Georgia, and has its principal place of busi-
ness in DeKalb County, Georgia. C&S Holding owns 5 percent
of the stock of C&S Tucker.
11. Citizens and Southern Bank of North Fulton (herein-
after referred to as “C&S North Fulton”) is made a defendant
herein. C&S North Fulton is a banking association organized
and existing under the laws of the State of Georgia, and has its
principal place of business in Fulton County, Georgia. C&S
Holding owns 5 percent of the stock of C&S North Fuiton.
12. Citizens and Southern Bank of Sandy Springs (herein-
after referred to as “C&S Sandy Springs”) is a banking associa-
tion organized and existing under the laws of the State of
Georgia, and has its principal place of business in Fulton
County, Georgia. C&S Holding owns 5 percent of the stock
of C&S Sandy Springs.
13. Various persons not made defendants herein have com-
bined with the defendants in violations hereinafter alleged, and
have performed acts and otherwise contributed to the further-
ance thereof.
Ill
Definitions
14. As used in this complaint, the term “Atlanta Area”
means the area comprising DeKalb and Fulton Counties,
Georgia.
es
15. As used in this complaint, the term “North Fulton
County” means that part of Fulton County situated north of the
Atlanta city limits.
SEG RNA ENER TAR a a gugaicit AEN RETIN EMESIS EES RNY.
7 LAER SRR 2 et aR Te oy ees ee
a . :
— 13 —
16. As used in this complaint, the term “C&S System” means
the combination of C&S National, C&S Holding, C&S Emory,
Citizens and Southern DeKalb Bank and C&S East Point.
IV
Trade and Commerce
17. Commercial banks fill an essential and unique role in the
Nation's economy. Their principal functions are the acceptance
of deposits for safekeeping and convenience in making payments
by checks, the granting of loans or advances of funds to indi-
viduals and business firms, and the creation through demand
deposits of net additions to the supply of money. Most money
payments in the United States are made through checks drawn
against demand deposits, and the creation and holding of such
deposits is a function peculiar to commercial banks and one
which makes them to a great extent the administrator of the
Nation's check payment system. Through the making of loans
to individuals and business firms, commercial banks supply a
significant part of the credit requirements of the Nation's econ-
omy. Commercial banks also accept time deposits from vari-
ous types of depositors and provide a wide variety of other
financial services, including personal and corporate trust ac-
counts, the collection of drafts, bills, and other commercial in-
struments, the acceptance of bills of exchange, the issuance of
letters of credit, the sale of cashier's checks and drafts on cor-
respondent banks, the purchase or sale of securities for cus-
tomers, the sale of foreign exchange, and the renting of safety
deposit boxes. This combination of services is unduplicated by
other financial institutions.
18. C&S National is the largest banking organization pro-
viding commercial banking services in the Atlanta Area. It op-
erates at least thirty banking offices in Fulton County and one
Wee “SARIS rriees ARNE SOMME MNES
I tS CAN IN a
Persie et iiinta ter savasriccawine Pie eens OTe
utern At wie at ae lamer cent Rae BAGS Ween “ne a
See SY Pree yeabniteh uy PRR GEST hg IR RR eds bane te te
°
—14—
banking office in DeKalb County. As of December 31, 1970, it
had total assets of $1.7 billion, total deposits of $1.4 billion,
and net loans and discounts of $1.1 billion. As of June 30,
1970, its offices in Fulton County had total deposits of about
$706 million, accounting for approximately 27 percent of total
county deposits. Also, as of the same date, its office in DeKalb
County had total d&posits of about $13 million, accounting for
approximately 4.4 p&rcent of total county deposits. C&S Na-
tional, through its whdlly-owned subsidiary C&S Holding, con-
trols about 94 percent oNthe stock of Citizens and Southern De-
Kalb Bank (hereinafter referred to as “C&S DeKalb”) which
operates two offices in DeKalb County. As of June 30, 1970,
C&S DeKalb had total deposits of about $23 million, account-
ing for approximately 8 percent of total county deposits.
19. C&S Emory operates three banking offices in DeKalb
County. As of December 31, 1970, it had total assets of $42.3
million, total deposits of $35.4 million, and net loans and dis-
counts of $28.5 million. As of June 30, 1970, its total deposits
accounted for approximately 13 percent of total DeKalb County
deposits.
20. Combined, C&S National, C&S DeKalb, and C&S Emory
represent the largest banking organization in DeKalb County.
As of June 30, 1970, their combined deposits of about $73
million accounted for approximately 25 percent of total De-
Kalb County deposits.
21. C&S Chamblee operates two banking offices in DeKalb
County. As of December 31, 1970, it had total assets of $21.1
million, total deposits of $18.7 million, and net loans and dis-
counts of $10.7 million. As of June 30, 1970, its deposits ac-
counted for approximately 6 percent of total DeKalb County
deposits.
22. C&S Park National operates a single banking office in
DeKalb County. As of December 31, 1970, it had total assets
ee ee ee eer ee Ee ere eee ee SP = FAAS PON STE
RE ASSES oe a Nr ate PP a «
a
of $11.1 million, total deposits of $9.8 million, and net loans
and discounts of $3.5 million. As of June 30, 1970, its deposits
accounted for approximately 3 percent of total DeKalb County
deposits.
23. C&S South DeKalb operates a single banking office in
DeKalb County. As of December 31, 1970, it had total assets
of $5.1 million, total deposits of $4.3 million, and net loans and
discounts of $2.1 million. As of June 30, 1970, its deposits
accounted for about 1 percent of total DeKalb County deposits.
24. C&S Tucker operates two banking offices in DeKalb
County. As of December 31, 1970, it had total assets of $26.5
million, total deposits of $23 million, and net loans and dis-
counts of $14.8 million. As of June 30, 1971, its deposits
accounted for about 7 percent of total DeKalb County deposits.
25. The predominant share of the business banking offices
in DeKalb County receive is derived from DeKalb County.
DeKalb County is a concentrated banking market. As of June
30, 1970, the four largest banking organizations in DeKalb
County held over 65 percent of total county deposits. If C&S
Chamblee, C&S Park National, and C&S South DeKalb were
merged into the C&S System, it would account for 35 percent
of total county deposits, and the four largest banking organiza-
tions would account for about 75 percent of total county de-
posits.
26. C&S East Point operates three banking offices in Fulton
County. As of December 31, 1970, it had total assets of $28.4
million, total deposits of $23.3 million, and net loans and dis-
counts of $22.9 million. As of June 30, 1970, C&S National
and C&S East Point combined had total deposits of about $732
million and represented the largest banking organization in
Fulton County, accounting for approximately 28 percent of
total Fulton County deposits.
GPR ern rate cr i Rose
\
™N—_—_____
YY 29. The predominant share of the business banking offices
— |
27. C&S North Fulton operates a single banking office in
North Fulton County. As of December 31, 1970, it had total
assets of $7.7 million, total deposits of $6.3 million, and net
loans and discounts of $5.6 million.
28. C&S Sandy Springs operates a single banking office in
North Fulton County. As of December 31, 1970, it had total
assets of. $22 million, total deposits of $19 million, and net loans
and discounts of $11.7 million.
fin North Fulton County receive is derived from that area. North
/ Fulton County is a concentrated vanking market. As of June
| 30, 1970, five commercial banks operated banking offices there.
\ As of that date, C&S North Fulton and C&S Sandy Springs
accounted for about 46 percent of the total deposits held by all
banking offices located in North Fulton County. C&S East
Point has recently opened a single banking office in North
Fulton County. ;
30. Fulton County is also a concentrated banking market.
As of June 30, 1970, the four largest banking organizations ac-
counted for about 85 percent of total Fulton County deposits.
C&S National presently holds about 27 per cent; its subsidiary,
C&S East Point, holds about 1 percent. Thus, the C&S System
holds over 28 percent, the largest share held by any banking
organization. Combined, C&S Sandy Springs and C&S North
Fulton hold about 1. percent.
31. The Atlanta Area is also a concentrated banking market.
As of June 30, 1970, the four largest banking organizations ac-
counted for about 85 percent of total Atlanta Area deposits.
The C&S System holds over 29 percent, the largest share held
by any organization. Combined,!€&S Chamblee, C&S Park
National, C&S South DeKalb, C&S North Fulton, and C&S
Sandy Springs hold about 2 percent of Atlanta Area deposits.
{9 iene
oe | en
32. Customers of C&S National, C&S Emory. C&S East
Point, C&S Chamblee, C&S Park National, C&S South DeKalb,
C&S Tucker, C&S North Fulton, and C&S Sandy Springs regu-
larly utilize interstate communications including the mails, tele-
phone and telegr. ph, to carry on their business with, and apply
for and obtain the services provided by these banks. Each
of the defendant banks regularly utilizes interstate communi-
cations including the mails. telephone, and telegraph, and con-
ducts business with, and provides services to, customers, insti-
tutions, and other banks located in States other than Georgia.
Each of the defendant banks is engaged in interstate commerce.
33. Prior to 1971, Georgia law prohibited banks from
branching outside the cities in which they were located. This
restricted the ability of the major Atlanta banks to open
branches in Fulton and DeKalb Counties. Since 1960, Georgia
law has prohibited bank holding companies from owning more
than 5 percent of the outstanding shares of two or more banks.
In response to these prohibitions against geographic expansion,
the major Atlanta banks, C&S National among them, developed
various relationships -with suburban banks in the Atlanta area.
34. The C&S System and each of C&S Chamblee, C&S Park
National, C&S South DeKalb, C&S North Fulton, and C&S
Sandy Springs have had, among others, the following relation-
ships: (1) C&S National and various persons associated with it
contributed to the initial organization of each bank; (2) C&S
Holding acquired 5 percent of the outstanding shares of each
bank: (3) C&S National and various persons associated with
it assisted in the sale of the remainder of the stock: (4) C&S
National provided mutually beneficial correspondent services
to each bank: (5) C&S National allowed each bank to use the
C&S logogram, which resulted in joint ideutification: (6) the
C&S System provided each bank, in varying degrees, with
personnel, management and operational assistance; and (7) C&S
National and each bank have, in many instances,: jointly de-
SP: weet re:
Britian BRAS Riis ORR
NED CR ORTARIE AIA 0 DIE g OE: REE At AY Ft AEROS aN es CORE TAMERS Re
— | oo
termined the competitive strategy to be foliowed in conducting
the business of cach bank. Consequently, a close working
telationship between each bank and the C&S System was es-
tablished at the time of each bank’s formation and has con-
tinued to the present time.
35. C&S Tucker was organized in 1919 and was operated
as an independent bank until! 1965. In February 1965, C&S
National acquired 80 percent of the outstanding shares of C&S
Tucker. Subsequently, C&S Holding acquired 5 percent of
the outstanding shares, and the remaining 75 percent was ac-
quired by other persons. Following these acquisitions, the
C&S System and C&S Tucker had, among others, the re-
lationships described in subsections (4), (5), (6), and (7) of
paragraph 34, which have continued to the present time.
36. C&S Sandy Springs, C&S Chamblee, C&S North Ful-
ton, C&S Park National, and C&S South DeKalb were or-
ganized in 1959, 1960, 1967, and 1969, respectively. These
banks were organized at a time when the areas of DeKalb
County and North Fulton County were experiencing a period
of significant growth and development. DeKalb County's 1970
population of 414,000 represents a 62 percent increase since
1960. This population increase has been accompanied by an
even larger growth in the number and size of commercial and
industrial firms located in the area. Although the population
center of Fulton County remains the City of Atlanta, that por-
tion of the county’s population located in North Fulton County
has increased from 3.3 percent in 1950 to 9.2 percent. in
1970. North Fulton County has also experienced significant
growth and development since 1960.
37. As of January 1, 1971, Georgia law was changed to
permit banks to branch throughout the counties in which they
maintained banking offices. Because the C&S System main-
tained banking offices in DeKalb and Fulton Counties as of
ee ee ikea
— 19 —
January 1, 1971, it could then legally branch and maintain
banking offices throughout both counties. In 1970, C&S
Emory applied to the Federal Deposit Insurance Corporation
to merge C&S Chamblee, C&S Park National, C&S South De-
Kalb and C&S Tucker into it. Excepting the application to
merge C&S Tucker, which was denied, these merger proposals
received approval on October 4, 1971. Also in 1970, C&S
East Point applied to the Federal Deposit Insurance Corpora-
tion to merge C&S Sandy Springs and C&S North Fulton.
These merger proposals were also approved on October 4,
1971.
Vv
Offenses Alleged
38. Beginning in 1959, the exact date being unknown to
plaintiff, and continuing thereafter up to and including the date
of the filing of this complaint, defendants C&S National, C&S
Holding, and various other persons entered into a combina-
tion with C&S Sandy Springs and various other persons to do
those things described in paragraph 34.
39. Beginning in 1960, the exact date being unknown to
plaintiff, and continuing thereafter up to and including the date
of the filing of this complaint, defendants C&S National, C&S
Holding, and various other persons entered into a combination
with C&S Chamblee and various other persons to do those
things described in paragraph 34.
40. Beginning in 1965, the exact date being unknown to
plaintiff, and continuing thereafter up to and including the
date of the filing of this complaint, defendants C&S National,
C&S Holding, and various other persons entered into a combi-
nation with C&S Tucker and various other persons to do those
things described in paragraph 35.
DB ato
Becstrcaccx Suits
SPOR PHL AO Pt See hE NONE PROG TE Oy Ft ae
a, |)
41. Beginning in 1967, the exact date being unknown to
plaintiff, and continuing thereafter up to and including the date
of filing of this complaint, defendants C&S National, C&S
Holding, and various other persons entered into a combination
with C&S North Fulton and various other persons to do those
things described in paragraph 34. .
42. Beginning in 1967, the exact date being unknown to
plaintiff, and continuing thereafter up to and including the
date of filing of this complaint, defendants C&S National, C&S
Holding, and various other persons entered into a combina-
tion with C&S Park National and various other persons to do
those things described in paragraph 34.
43. Beginning in 1969, the exact date being unknown to
, plaintiff, and continuing thereafter up to and including the
date of the filing of this complaint, defendants C&S National,
C&S Holding, and various other persons entered into a com-
bination with C&S South DeKalb and various other pron:
to do those things described in paragraph 34.
44. The aforesaid combinations described in paragraphs 38,
39, 40, 41, 42, and 43 have been and are jointly and severally,
in unreasonable restraint of the above described interstate trade
and commerce in violation of Section 1 of the Sherman Act.
45. Pursuant to the aforesaid unlawful combinations the
defendants have done, among others, those things described
in paragraph 34 and 35 above.
46. Each of the defendants C&S Chamblee, C&S Park Na-
tional, and C&S South DeKalb have entered into agreements
with C&S Emory which, if carried out, will result in the
merger of C&S Chamblee, C&S Park National and C&S South
DeKalb into C&S Emory. Each of the defendants C&S Sandy
Springs and C&S North Fulton have entered into agreements
with C&S East Point, which if carried out, will result in
SRY CMRI A emg eRR epee it
|
the merger of C&S Sandy Springs and C&S North Fulton into
C&S East Point. The Board of Directors of the Federal De-
posit Insurance Corporation approved these proposed mergers
on October 4, 1971.
47. The joint and several effects of the aforesaid agreements
to merge may be substantially to lessen competition or tend to
create a monopoly in violation of Section 7 of the Clayton
Act.
Effects
48. The effects of the offenses alleged in paragraphs 38
through 47 of this complaint are, among others, the following:
(a) Actual competition and the potential for increased
competition between and among the defendant commer-
cial banks have been and will be eliminated and unrea-
sonably restrained;
(b) Competition “generally in commercial banking in
DeKalb County, Fulton County, North Fulton County,
and the Atlanta Area has been and will be substantially
lessened; and
(c) Concentration in commercial banking in DeKalb
County, Fulton County. North Fulton County, and the
Atlanta Area will be substantially increased.
¢@
ea. ihc nether te, tate tee AGMA Dann RERpR Saou as
PEASE AD AER OR TS, ET
SERRE
PRPC Sa SR os SE
sowtee"
QE N PRAGA becaees
ise aay SRL ARR RARER Ec ON Eee
~
a Re ete a ner ee et eT
a,
PRAYER
Wherefore plaintiff prays
1. That the aforesaid combinations described in paragraphs
38 through 43 of this complaint be adjudged to be unlawful
and in violation of Section 1 of the Sherman Act.
2. That the defendants, their successors, assignees, and trans-
ferees, and their officers, directors, agents, and employees
thereof, and all other persons acting or claiming to act on
behalf thereof, be perpetuaiiy enjoined and restrained from, in
any manner, directly or indirectly, continuing, mantaining, or
renewing the aforesaid offenses, and from engaging in other
combinations, conspiracies, contracts, agreements, understand-
ings or concerts of action having similar purposes or effects,
and from adopting or following any practices, plans, or pro-
grams having similar purposes or effects.
3. That the aforesaid mergers described in paragraph 46 of
this complaint, pursuant to the agreements described therein,
be adjudged to be unlawful and in violation of Section 7 of
the Clayton Act.
4. That the defendants and all persons acting on their be-
half be enjoined from carrying out the aforesaid mergers, or
any similar plans or agreements, the effect of which would be
in any way to merge, consolidate, or in any other way com-
bine the businesses of the defendants.
5. That defendants C&S National, C&S Holding, C&S
Emory, C&S East Point, and all persons controlled either di-
rectly or indirectly by C&S National be enjoined for a period
of ten years from the date of judgment in this action from ac-
quiring control over or merging, consolidating, or combining
with any other commercial banking organizations operating
in the Atlanta Area.
a, |, pon
6. That the plaintiff have such other and further relief as
the Court may deem just and proper.
7. That the plaintiff recover the costs of this suit.
~ DONALD A. KINKAID
JOE SIMS
TIMOTHY BURKE
KENNETH D. STERN
CURTIS -L. FRISBIE, JR.
Attorneys, Department of Justice
Antitrust Division
1776 Peachtree Street, N.W.
Suite 420
Atlanta, Georgia 30309
Telephone: 526-3828
rnowm nny
~ $s JOHN N. MITCHELL
Attorney General
s RICHARD W. McLAREN
Assistant Attorney General
s BADDIA J. RASHID
s ROBERT B. HUMMEL
s WILLIAM E. SWOPE \
Attorneys, Department of Justice
(
s JOHN W. STOKES, JR.
United States Attorney
ae
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
ANSWER OF DEFENDANTS
(Filed May 5, 1972)
Number and Title omitted.
Come now The Citizens and Southern National Bank (“C&S
National”), Citizens and Southern Holding Company (“C&S
Holding”). The Citizens and Southern Emory Bank (“C&S
Emory”). The Citizens and Southern Bank of East Point (“C&S
East Point”), The Citizens and Southern Bank of Chamblee
(“C&S Chamblee”), The Citizens and Southern Park National
Bank (“C&S Park National”), The Citizens and Southern South |
DeKalb Bank (“C&S South DeKalb”), The Citizens. and South-
ern Bank of Tucker (“C&S Tucker”), The Citizens and Southern
Bank of North Fulton (“C&S North Fulton”), and The Citizens
and Southern Bank of Sandy Springs (“C&S Sandy Springs”),
defendants in the above-styled lawsuit, and file this, their An-
swer to the Complaint heretofore served upon them.
First Defense
In answer to the numbered paragraphs of the Complaint, de-
fendants show the following: |
1
Defendants admit that this Court has jurisdiction of this action
under Section 15 of the Clayton Act, but defendants deny that
this Court has jurisdiction of this action under Section 4 of the
Act of Congress of July 2, 1890, as amended (15 U.S.C. § 4),
a, | eee
commonly known as the Sherman Act. By way of further
answer, defendants deny that they or any of them have violated
any of the statutes cited in paragraph 1 of the Complaint or
that they or any of them would, by consummating the mergers
alleged in the Complaint, violate any of those statutes.
2
Defendants admit the allegations contained in paragraph 2
of the Complaint.
3 )
Jf
Defendants admit the allegations contained“ paragraph 3
of the Complaint, but show that C&S National was established
in Savannah, Georgia, in the Southern District of Georgia. De-
fendants show further that C&S National, as the sole owner of
C&S Holding, is a registered bank holding company under the
laws of the United States.
4
Defendants admit the allegations contained in paragraph 4
of the Complaint.
5
Defendants admit the allegations contained in paragraph 5 of
the Complaint.
6
Defendants admit the allegations contained in paragraph 6
of the Complaint.
: — 26 —
i Defendants admit the allegations contained in paragraph 7
of the Complaint.
i 8
{ Defendants admit the allegations contained in paragraph 8
4 of the Complaint.
9
F Defendants admit the allegations contained in paragraph 9
of the Complaint.
10
ne sea otal sp ade
Defendants admit the allegations contained in paragraph 10
of the Complaint.
11
Defendants admit the allegations contained in paragraph 11
of the Complaint.
12
Defendants admit the allegations contained in — 12
of the Complaint.
13
Defendants deny the allegations contained in paragraph 13
of the Complaint.
—_.
|
oe
14
Defendants admit that paragraph 14 of the Complaint uses
the term “Atlanta Area” to mean the area comprising DeKalb
and Fulton “ounties, Georgia, but defendants deny the rele-
vance of that term to this cause of action.
. 15
Defendants admit that paragraph 15 of the Complaint uses
_ the term “North Fulton County” to mean that part of Fulton
County situated north of the Atlanta city limits, but defend-
ants deny the relevance of that term to this cause of action.
16
Defendants deny the accuracy and completeness of the defi-
nition in paragraph 16 of the Complaint but note its use by
plaintiff in the Complaint.
17
Aocwering paragraph 17 of the Complaint, defendants admit
that commercial banks play an important role in the nation’s
economy and that many commercial banks perform some or
all of the functions described in paragraph 17 of the Complaint.
Defendants deny that all of the functions described in paragraph
17 of the Compia‘nt are performed by all commercial banks,
and defendants asseri that many financial institutions generally
perform the same or sizilar functions as do commercial banks
in the geographic areas reievant in this case and are therefore
in diréct and actual competitio;. with defendants. Defendants
therefore expressly deny the last sentence of paragraph 17 and
generally deny any and all other allegations contained in para-
graph 17, except for those expressly admitted herein.
— 28 —
18
Defendants admit that the figures alleged in paragraph 18
of the Complaint are roughly accurate, but defendants show
that the figures alleged for C&S National's total assets, total
deposits, and net loans and discounts as of December 31, 1970,
include C&S National’s banking offices in six cities in Georgia
as well as C&S National’s eight majority-owned banking affili-
ates. By way of further answer, defendants expressly deny
any implication to the effect that the “Atlanta Area” constitutes
a relevant market area or an appropriate geographical region
or section of the country within the purview of either Section 7
of the Clayton Act or Section 1 of the Sherman Act with re-
spect to the business or activities of the defendants or any of
them.
19
Defendants admit that the figures alleged in paragraph 19 of
the Complaint are roughly accurate, but defendants expressly
deny any implication to. the effect that DeKalb County con-
stitutes a relevant market area or an appropriate geographic re-
gion or section of the country within the purview of either Sec-
tion 7 of the Clayton Act or Section 1 of the Sherman Act with
respect to the business or activities of the defendants or any of
them.
20
Defendants admit the figures alleged in paragraph 20 of the
Complaint are roughly accurate, but defendants expressly deny
any implication to the effect that DeKalb County constitutes a
relevant market area or an appropriate geographical region or
section of the country within the purview of either Section 7 of
the Clayton Act or Section 1 of the Sherman Act with respect
to the business or activities of the defendants or any of them.
SELL LAL NT LN ON NNER FIFE TE HN NERC RNR era
| oe
21
Defendants admit that. the figures alleged in paragraph 21 of
the Complaint are roughly accurate, but defendants expressly
deny any implication to the effect that DeKalb County consti-
tutes a relevant market area or an appropriate geographical re-
gion or section of the country within the purview of either Sec-
tion 7 of the Clayton Act or Section 1 of the Sherman Act with
respect to the business or activities of the defendants or any of
them.
22
Defendants admit that the figures alleged in paragraph 22 of
the Complaint are roughly accurate, but defendants expressly
deny any implication to the effect that DeKalb County consti-
tutes a relevant market area or an appropriate geographical re-
gion or section of the country within the purview of either Sec-
tion 7 of the Clayton Act or Section 1 of the Sherman Act with
respect to the business or activities of the defendants or any of
them.
23
Defendants admit that the figures alleged in paragraph 23 of
the Complaint are roughly accurate, but defendants expressly
deny any implication to the effect that DeKalb County consti-
tutes a relevant market area or an appropriate geographical re-
gion or section of the country within the purview of either
Section 7 of the Clayton Act or Section 1 of the Sherman Act
with respect to the business or activities of the defendants or
any of them.
Se en)
24 ‘ =
)
Defendants admit that the figures alleged in paragraph 24 of
the Complaint are roughly accurate, but defendants expressly
j
y
SEE a AER ER CONIA RUMI
AEDT IEE Ea
ee
SS ae ROLE A NE EMT DH eet BS = a aR NRT RUN aREIRD BA EET
sacs. SA) ee
deny any implication to the effect that DeKalb County consti-
tutes a relevant market area or an appropriate geographical re-
gion or section of the country within the purview of either Sec-
tion 7 of the Clayton Act or Section 1 of the Shéqman Act with
respect to the business or activities of the defendamts or any of
them.
25
Answering paragraph 25 of the Complaint, defendants deny
that DeKalb County constitutes a concentrated banking maf-
ket, and deny further that the term “concentrated” as used by,
plaintiff throughout the Complaint has any meaning whatso-
ever. Defendants are without knowledge or information suffi-
cient to form a belief as to the truth of the figures alleged in
paragraph 25 of the Complaint, but defendants deny that fig-
ures such as those alleged in sajd paragraph 25 give a com-
plete and accurate description of competition in the relevant
line of commerce in the relevant geographic market. To the
extent not expressly admitted, defendants deny the remaining
allegations of paragraph 25 of the Complaint.
z
z
z
z
z
26
Defendants admit that the figures alleged in paragraph 26
of the Complaint are roughly accurate, except that defendants
expressly deny that “Fulton County” constitutes a relevant mar-
ket area or an appropriate geographical region or section of the
country within the purview of either Section 7 of the Clayton
Act or Section 1 of the Sherman Act with respect to the busi-
ness or activities of the defendants or any of them.
27
Defendants admit that the figures alleged in paragraph 27
of the Complaint are roughly accurate, except that defendants
expressly dgny that “North Fulton County” constitutes a rele-
AS RATE WI I RAC RE Cs BOG OS AAR RA St eS een Oe SL Ree PEEL ING IE REEL AP NT AT AE SE LD ARI al A Sn
3 is eae ret bas Sta Satay a PREIS
£
| ee
vant market area or an appropriate geographical region or sec-
tion of the country within the purview of either Section 7 of
the Clayton Act or Section | of the Sherman Act with respect
to the business or activities of the defendants or any of them.
28
Defendants admit that the figures alleged in paragraph 28
of the Complaint are roughly accurate, except that defendants
expressly deny that “North Fulton County” constitutes a rele-
vant market area or an appropriate geographical region or sec-
tion of the country within the purview of either Section 7 of
the Clayton Act or Section 1 of the Sherman Act with respect
to the business or activities of the defendants or any of them.
29
Answering paragraph 29 of the Complaint, defendants deny
that “North Fulton County” constitutes a concentrated banking
,market. Defendants are without knowledge or information suf-
ficient to form a belief as to the truth of the figures alleged in
* paragraph 29 of the Complaint, but defendants deny that fig-
ures such as those alleged in said paragraph 29 give a com-
plete and accurate description of competition in the relevant
line of commerce in the relevant geographic market. To the
extent not expressly admitted, defendants deny the remaining
allegations of paragraph 29 of the Complaint.
° 30
Answering paragraph 30 of the Complaint, defendants deny
that Fulton County constitutes a, concentrated banking market.
Defendants are without knowledge or information sufficient to
form a belief as to the truth of the figures alleged in paragraph
30 of the Complaint, but defendants deny that figures such as
those alleged in said paragraph 30 give a complete and accurate
| oe
description of competition in the relevant line of commerce in
the relevant geographic market. To the extent not expressly
admitted, defendants deny the remaining allegations of para-
graph 30 of the Complaint.
31
Answering paragraph 31 of the Complaint, defendants deny
that the “Atlanta Area” constitutes a concentrated banking mar-
ket. Defendants are without knowledge or information suffi-
cient to form a belief as to the truth of the figures alleged in
paragraph 31 of the Complaint, but defendants deny that fig-
ures such as those alleged in said paragraph 31 give a complete
and accurate description of competition in the relevant line of
commerce in the relevant geographic market. To the extent
not expressly admitted, defendants deny the remaining allega-
tions of paragraph 31 of the Complaint.
32
‘Answering paragraph 32 of the Complaint, defendants admit
that they are engaged in interstate commerce, but deny the re-
maining allegations of said paragraph.
33
The allegations contained in paragraph 33 of the Complaint
allege a partial but incomplete history of the anti-competitive
Georgia laws which have sought to restrict the growth and ex-
pansion of all banks and bank holding . mpanies in the state,
including the major banks in Atlanta. Beginning in 1960, C&S
sought to, and did, extend the pro-competitive benefits of C&S
banking to residents and businesses located in suburban areas
surrounding the city limits of Atlanta, Augusta and Savannah,
through the vehicle of organizing and establishing the “cor-
respondent Associate” banks, which remained in full com-
VALERA LE AE SNR NAIDOC L PPLE ELL ILE ARE A a
— 33 —
pliance with the artificial :estrictions of Georgia law. Other
banks in Atlanta and throughout the state did likewise. De-
fendants deny that Georgia law since 1960 has prohibited Bank
holding companies from owning more than 5% of the outstand-
ing shares of twe or more banks, but show instead that Georgia
law has prevented bank holding companies: from thereafter ac-
quiring or holding direct or indirect ownership of more than
5% of the voting shares of any bank. [Ga. Code Ann. § 13-207].
Defendants deny the inference that C&S National responded to
these state law restrictions by developing relationships with
existing suburban banks in the Atlanta area. By way of further
answer, defendants show that C&S National responded to these
state law restrictions by helping establish and organize new
banks and, in the case of C&S Tucker, by reorganizing an exist-
ing, dormant bank, all with the permission of state and federal
bank regulatory agencies.
_—
.
- —-
34
Answering paragraph 34 of the Complaint, defendants deny
the allegations of subparagraph (7) thereof, but admit the re-
maining allegations contained in said paragraph 34.
35
Answering paragraph 35 of the Complaint, defendants admit
the allegations of the first sentence, deny the allegations of the
second sentence, and admit the allegations of the third sentence.
Defendants admit that after C&S Holding acquired 5% of the
outstanding shares of C&S Tucker, the C&S System and C&S
Tucker had the relationships described in subsections (4), (5),
and (6) of paragraph 34 of the Complaint, but defendants deny
that the C&S System and C&S Tucker engaged in the relation-
ships described in subsection (7) of paragraph 34 of the Com-
plaint.
AROSE H Rem! : FOI RE IE LORS ARPES ERE DRT By SR ERAS IESE IRS SIONS DONE RN et TS
— 34 —
36
Defendants aden the allegations contained in paragraph 36
of the Complaint.
37
Defendants admit the allegations contained in paragraph aT
of the Complaint.
38
Answering paragraph 38 of the Complaint, defendants ad-
mit that C&S National, C&S Holding, and C&S Sandy Springs
have engaged in the relationships described in subsections (1),
(2), (3), (4), (5), and (6) of paragraph 34 of the Complaint, but
deny that C&S National, C&S Holding, and C&S Sandy Springs
have engaged in the relationships described in subsection (7)
of paragraph 34 of the Complaint. Defendants are without
knowledge or information sufficient to form a belief as to the
truth of the allegations. that various other persons, who are
not named by the Complaint, have been involved in the rela-
tionships described in paragraph 34 of the Complaint.
39
Answering paragraph 39 of the Complaint, defendants admit
that C&S National, C&S Holding, and C&S Chamblee have
engaged in the relationships described in subsections (1), (2),
(3) (4), (5), and (6) of paragraph 34 of the Complaint, but
deny that C&S National, C&S Holding, and C&S Chamblee
have engaged in the relationships described in subsection (7)
of paragraph 34 of the Complaint. Defendants are without
knowledge or information sufficient to form a belief as to the
truth of the alegations that various other persons, who are not
named by the Complaint, have been involved in the relation-
ships described in paragraph 34 of the Complaint.
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40
Answering paragraph 40 of the Complaint, defendants admit
the C&S National, C&S Holding, and C&S Tucker have en-
gaged in the relationships described in subsections (4), (5), and
(6) of paragraph 34 of the Complaint, but deny that C&S
National, C&S Holding, and C&S Tucker have engaged in the
relationships described in subsection (7) of paragraph 34 of the
Compiaint. Defendants are without knowledge or information
sufficient to form a belief as to the truth of the allegations that
various other persons, who are not named by the Complaint,
have been involved in the relationships described in paragraph
34 of the Complaint.
41
Answerikig paragraph 41 of the Complaint, defendants admit
that C&S National, C&S Holding, and C&S North Fulton have
engaged in the relationships described in subsections (1), (2),
(3), (4), (5), and (6) of paragraph 34 of the Complaint, but deny
that C&S National, C&S Holding, and C&S North Fulton have
engaged in the relationships described in subsection (7) of para-
graph 34 of the Complaint. Defendants are without knowledge
or information sufficient to form a belief as to the truth of the
allegations that various other persons, who are not named by
the Complaint, have been involved in the relationships described
in paragraph 34 of the Complaint.
42
Answering paragraph 42 of the Complaint, defendants ad-
mit that C&S National, C&S Holding, and C&S Park National
have engaged in the relationships described in subsections (1),
(2), (3), (4), (5), and (6) of paragraph 34 of the Complaint,
but deny that C&S National, C&S Holding, and C&S Park Na-
tata
Se EE ee SET’ ees 77
inte iad deb edn
— 36 —
tional have engaged in the relationships described in subsection
(7) of paragraph 34 of the Complaint. Defendants are without
knowledge or information sufficient to form a belief as to the
truth of the allegations that various other persons, who are not
named by the Complaint, have been involved in the relation-
ships described in paragraph 34 of the Complaint.
43
Answering paragraph 43 of the Complaint, defendants admit
that C&S National, C&S Holding, and C&S South DeKalb
have engaged in the relationships described in subsections (1),
(2), (3), (4), (5), and (6) of paragraph 34 of the Complaint,
but deny that C&S National, C&S Holding, and C&S South
DeKalb have engaged in the relationships described in sub-
section (7) of paragraph 34 of the Complaint. Defendants are
without knowledge or information sufficient to form a belief
as to the truth of the allegations that various other persons,
who are not named by the Complaint, have been involved in
the relationships described in paragraph 34 of the Complaint.
44
Defendants deny the allegations contained in paragraph 44
of the Complaint. By way of further answer, defendants assert
that the relationships described in subsections (1), (2), (3), (4),
(5), and (6) of paragraph 34 were established with the consent
or knowledge of the state and federal bank regulatory agencies
and have, from their very initiation, encouraged and enhanced
competition and have promoted trade and commerce in the
relevant geographic markets by introducing and expanding bank-
ing services therein. These relationships, therefore, have met
the banking convenience and needs of the communities served by
the defendants.
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45
Answering paragraph 45 of the Complaint, defendants ad-
mit that they have engaged in the relationships described in
paragraphs 34 and 35 of the Complaint, with the exception of
the relationships described in subsection (7) of paragraph 34
of the Complaint. Defendants deny that these relationships
constitute unlawful combinations.
46
Defendants admit the allegations contained in paragraph 46
of the Complaint.
47
Defendants deny the allegations contained in paragraph 47 .
of the Complaint. Further, defendants deny that the merger ©
transactions can be judged jointly or cumulatively, but show
that each transaction must be judged separately and independ-
ently of the others. By way of further answer, defendants assert
that the consummation of each and every one of the agree-
ments described in paragraph 46 of the Complaint will encour-
age and enhance competition in the relevant geographic and
product markets by expanding banking services therein and will
promote the convenience and needs of the communities served
by the defendant banks. |
—
48
Answering the subparagraphs of paragraph 48 of the Com-
plaint, the defendants allege as follows:
(a) Defendants deny the allegations contained in sub-
paragraph (a) of paragraph 48 of the Complaint. By way
a
— 38 —_
of further ‘answer, defendants show that the banks in-
volved in this lawsuit are not in actual competition with
one another and that there is no potential for increased
competition between and among them.
, (b) Defendants deny the allegations contained in sub-
paragraph (b) of paragraph 48 of the Complaint. By
way of further answer, defendants deny that DeKalb
County, Fulton County, North Fulton County, and the
Atlanta Area are relevant geographic markets in this law-
suit, and, in any event, defendants deny that the con-
summation of the agreements described in paragraph 46 of
the Complaint will substantially lessen competition in those
areas. ;
(c) Defendants deny the allegations contained in sub-
paragraph (c) of paragraph 48 of the Complaint. By way
of further answer, defendants deny that DeKalb County,
Fulton County, North Fulton County, and the Atlanta
Area are relevant geographic markets in this lawsuit. De-
fendants further deny that commercial banking is concen-
trated in those areas and that the consummation of the
agreements described in paragraph 46 of: the Complaint
will substantially. increase concentration in those areas.
Defendants further deny that commercial banking is the ap-
plicable product market by which to judge the allegations of
the Complaint and this paragraph 48. By way of further an-
swer, defendants show that they would not be guilty of the
offenses alleged in the Complaint even if commercial banking
were the applicable product market.
: , 49
Defendants deny each and every allegation in the Complaint
that has not been either expressly admitted or denied hereto-
fore.
ta eRe oe BIR WE
Second Defense
The Complaint fails to state a claim upon which relief can
be granted against defendants or any of them.
Third Defense
The allegations of the Complaint based on Section 1 of the
Sherman Act fail to state a claim upon which relief can be
granted against defendants or any of, them.
Fourth Defense _ °
The allegations of the Complaint based on Section 7 of the
Clayton Act fail to state a claim upon which relief can be
granted against defendants or any of them.
Fifth Defense
The proposed mergers that resulted in the initiation of this
lawsuit constitute what is essentially an internal reorganization.
Five of the defendant banks, C&S Chamblee, C&S Park Na-
tional, C&S South DeKalb, C&S North Fulton, and C&S Sandy
Springs, were organized under C&S guidance and direction,
and a sixth defendant, C&S Tucker, was reorganized under
C&S guidance and direction, all at a time when Georgia law
did not permit C&S National or any other Atlanta bank to
branch outside the City of Atlanta. [These six defendants are
hereafter referred to collectively as “C&S Correspondent Asso-
ciates”]. A close working relationship has existed ever since,
and a majority of the stock in each bank has been held con-
tinudusly by directors, officers, and employees of C&S National,
directors, officers, and employees of subsidiary banks of C&S
Holding, and a number of influential customers who maintain
significant banking relationships with one or more such banks.
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The remaining stock is well dispersed, with no significant blocks
held independently of the C&S System. The management of
each of the C&S Correspondent Associates has been drawn from
the C&S System, C&S National has hired their employees, and
these employees participate fully in the various employee bene-
fits provided by the C&S System. C&S National provides credit
services, investment advice, and numerous other services to the
C&S Correspondent Associates in much the same manner as it
does for its own branches and subsidiary banks. Like the other
banks in the C&S System, the C&S Correspondent Associates
use the C&S name and logo and advertise jointly with C&S.
A significant percentage of the loan portfolio of each Corre-
spondent Associate is made up of loans purchased from C&S
National. C&S National has.subscribed to capital notes of each
C&S Correspondent Associate when additional capital has been
needed. In short, the C&S Correspondent Associates are recog-
nized by the public and by C&S National as C&S banks. They
do not compete today and have not competed in the past. The
proposed mergers have been contemplated since the C&S Corre-
spondent Associates were organized by C&S, but the mergers
were not possible when Georgia law prevented banks from
branching beyond municipal boundaries. The mergefs have
now been made possible by a change in Georgia’s branch bank-
ing law which became effective on January 1, 1971. The pro-
posed mergers, if allowed, will not alter the existing competitive
structure in any relevant geographic market, and they will not
add to the concentration of banking resources in any relevant
geographic market. Furthermore, there is no reasonable proba-
_ bility that the C&S Correspondent Associates will become dis-
associated from the C&S System in the future if the proposed
Mergers are denied.
Sixth Defense
_ The Board of Governors of the Federal Reserve System, not
this Court, has jurisdiction under the Bank Holding Company
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Act (“BHCA”) [12 U.S.C. § 1841, et seq.] to determine the
legality of the transactions and relationships existing between and
among C&S National, C&S Holding, and their affiliates and sub-
sidiaries. ’
Seventh Defense
In 1966 and 1868, the Federal Reserve Board in the exercise
of its jurisdiction conducted an investigation into the legality of
the C&S acquisition:; and relationships, and plaintiff participated
in a hearing conducted in connection with that investigation,
during which the relationships alleged by plaintiff in paragraphs
34 and 35 of the Complaint to-violate the Sherman Act were
fully explored. The Board did not find that the acquisitions and
operating relationships violated the then existing provisions of
the BHCA. Plaintiff did not challenge the Board’s decision or
take any other action, until the filing of the Complaint in this
lawsuit, to challenge the legality of the relationships attacked
by the Complaint, and is therefore barred, by laches and the
statute of limitations, estopped and forever foreclosed from doing
so now.
Eighth Defense
Section 11(e) of the BHCA [12 U.S.C. § 1849(e)] requires
that the legality of the transactions whereby C&S National and
C&S Holding acquired and established continuing operating re-
lationships with the C&S Correspondent Associates be deter-
mined by Section 3 of the BHCA rather than by Section 1 of
the Sherman Act. The C&S relationships did not violate Sec-
tion 3 of the BHCA at the time they were initiated, and do not
now. The structure, organization and operating relationships
‘between and among defendants are in compliance with the
BHCA, sanctioned arid exclusively regulated thereby, and are,
therefore, not subject to attack under Section 1 of the Sherman
Act in this Court.
a.
Ninth Defense
The transactions whereby C&S National and C&S Holding
acquired and established continuing operating relationships with
C&S Sandy Springs, C&S Chamblee, and C&S Tucker were
consummated prior to July 1, 1966, and are therefore conclu-
sively presumed by Section 11(d) of the BHCA [12 U.S.C.
§ 1849 (d)] not to have been in violation of Section 1 of the
Sherman Act.
Tenth Defense
The C&S Correspondent Associates are “subsidiaries” of C&S
National and C&S Holding as defined by Section 2(d)(3) of the
BHCA [12.U.S.C. § 1841(d)(3)]. These intra-enterprise rela-
tionships, therefore, cannot constitute a “combination . . . or
conspiracy” in restraint of trade or commerce in violation of
Section 1 of the Sherman Act.
Eleventh Defense
C&S National and C&S Holding caused the formation of the
C&S Correspondent Associates as subsidiary corporations for
the actual carrying on of their immediate lawful business, or
the natural and legitimate branches or extensions thereof. C&S
Holding held part of the stock of such subsidiary corporations.
The effect of such formations was not to substantially lessen
competition; therefore, said matters (alleged by the complaint to
violate the Sherman Act and the Clayton Act) are protected by
_ Section 7 of the Clayton Act.
Twelfth Defense
The plaintiff is not entitled to injunctive relief against the
merger agreements described in paragraph 46 of the Complaint
EEE
—
because there is no actuai competition between and among the
defendants, and no competition will be eliminated by the con-
summation of the merger agreements. The consummation of
the agreements will serve only to simplify and reorganize the
intra-enterprise relationship between and among the defendants
and to permit the defendants to offer better and more competi-
tive banking services. The plaintiff is not entitled to the relief
sought on the basis of the potential for future competition be-
tween the defendants. The alleged potential competition is
speculative, conjectural, and cannot constitute the basis for re-
lief under the antitrust laws.
Thirteenth Defense
As a further defense to the charges of the Complaint, defend-
ants contend that even admitting arguendo that the effect of the
proposed mergers would be to substantially lessen competition
or to create a tendency towards a monopoly in a line of com-
merce in a section of the country, the anti-competitive effects
are clearly outweighed in the public interest by the probable
effect of the transactions in meeting the convenience and needs
of the communities to be served.
Fourteenth Defense
The operating relationships between and among the defend-
ants are now and have been since their inception designed to
bring sound, safe, innovative, competitive C&S banking to sub-
urban communities which otherwise would not have been so
served. The Correspondent Associate form chosen by C&S to
accomplish this goal has utilized traditional and accepted forms
of correspondent banking relationships which are not and have
not been in unreasonable restraint of trade.
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PRAYER ©
Wherefore, having fully answered the Complaint, defendants
and each of them pray that this action be dismissed with preju-
dice against the plaintiff; that they may have such other and
further relief as this Court may deem just and proper; and, that
they recover the costs of this action from the plaintiff.
This Sth day of May, 1972.
Respectfully submitted
/s/ DANIEL B. HODGSON
/s/ JAMES E. THOMAS
/s/ MICHAEL A. DOYLE
/s/ JOHN K. TRAIN
/s/ WALTER M. GRANT
Counsel for Defendants
Of Counsel:
ALSTON, MILLER & GAINES
1200 C&S National Bank Building
Atlanta, Georgia 30303
PHILIP L. ROACHE, JR., ESQ.
1150 17th Street, N. W.
Washington, D. C. 20036
(Certificate of Service Omitted in Printing.)
= po
[1*] UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
(Title Omitted in Printing)
Transcript of proceedings had before The Honorable Charles
A. Moye, Jr., Judge, United States District Court, on the 25th
day of September, 1972, commencing at the, hour of 10:00
o’clock, a.m., in Atlanta, Fulton, County, Georgia.
[2] Appearances of Counsel:
For the Plaintiff: Donald A. Kinkaid, Esq., Kenneth D. Stern,
Esq., Curtis L. Frisbie, Jr., Esq., Neal F. Lehman, Esq.
For the Defendants: Daniel B. Hodgson, Michael A. Doyle, Esq.,
Philip A. Roache, Esq., Nevins D. Baxter, Esq., Walter
M. Grant, Esq.
The Court: Call the case of the United States of America
against the C&S National Bank, No. 15823. Is everyone ready?
Mr. Kinkaid: Yes, Your Honor. ,
The Court: C&S?
Mr. Hodgson: Yes, Your Honor.
The Court: Now, have each of you submitted your list of
exhibits?
Mr. Hodgson: They are submitted and admitted, I believe,
Your Honor.
The Court: All right. If not, the clerk is directed to admit
them and prepare an official list of them and you will reserve
* Numbers appearing in brackets in text indicate page numbers
of original stenographic transcript of testimony.
— 46 —
any objections by submitting a memorandum of objections
with respect to the exhibits of the opposite party.
Mr. Kinkaid: Yes, sir.
3 The Court: Anything further before we proceed?
[2] Appearances of Counsel:
For the Plaintiff: William E. Swope, Esq., Donald A. Kinkaid,
Esq., Joe Sims, Esq., Kenneth D. Stern, Esq., Curtis L.
Frisbie, Jr., Esq., Neal F. Leshman, Esq.
For the Defendants: Daniel B. Hodgson, Esq., Michael A.
Doyle, Esq., Philip A. Roache, Esq., Walter M. Grant,
The Court: Call the case of the United States of America
against the C&S National Bank, No. 15823. Is everyone ready?
Mr. Kinkaid: Yes, Your Honor.
The Court: C&S?
Mr. Hodgson: Yes, Your Honor.
The Court: Now, have each of you submitted your list of
exhibits?
Mr. Hodgson: They are submitted and admitted, I believe,
Your Honor.
The Court: All right. If not, the clerk is directed to admit
them and prepare an official list of them and you will reserve
any objections by submitting a memorandum of objections
with respect to the exhibits of the opposite party.
Mr. Kinkaid: Yes, sir.
The Court: Anything further before we proceed?
[3] Mr. Kinkaid: Yes, sir.
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The Court: Anything further before we proceed?
’ Mr. Kinkaid: Yes, Your Honor, before we proceed, Mr.
Gladden on behalf of the Trust Company would like to bring
a matter to Your Honor’s attention.
The Court: All right, sir, you may proceed.
Mr. Gladden: Your Honor, my name is Joe Gladden of the
firm of King and Spalding. We represent the Trust Company
of Georgia, which has supplied, pursuant to a subpoena duces
tecum to the plaintiff in this action, certain information having
to do with origin of deposits, which upon motion of the Trust
Company of Georgia, as well as several other banks, was
made subject to a protective order entered by this court in
July. The terms of that protective order did not cover the
handling of that information in the event it was utilized at
trial, for the reason that at that time neither the parties nor
the banks producing the information were aware exactly how
the information would be used.
We have been informed by the Government [4] that one of
their exhibits incorporates information produced by the Trust
Company of Georgia showing origin of demands and certain
deposits, which was furnished pursuant to the subpoena and
made subject to the protective order. We simply wish to move
the Court with respect to that exhibit, and unfortunately I
don’t know how it has been identified in the memorandum,
pre-trial memorandum, but with respect to that exhibit we
wish to move the Court to make that exhibit subject to the
protective order to be maintained by the Clerk under seal,
pursuant to the terms of the order.
{S] The Court: I assume, would the parties have accepted the
information that there is no violation of the protective order
as of yet?
Mr. Gladden: No, sir.
The Court: Any objections to that direction and can it be
handled?
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Mr. Kinkaid: Yes, Your Honor, plaintiff would object to
placing this material under a protective order for all purposes.
The material involved shows the origin by zip code of demand
deposits under $1,000 and I may note that we have similar
exhibits for other banks which had previously been granted a
protective order for pre-trial purposes. All the other banks
have also been notified that exhibits similar to Trust Company
exhibit will and have been offered in evidence and Trust Com-
pany is the only bank which has sought to continue the ap-
sess acs of the order to this material at this point.
It’s our feeling that the information involved would not in
any way prejudice the Trust Company if it becomes a part of
the public record. I do believe that the burden would be on
the\parties seeking the order to demonstrate that disclosure or
placing this exhibit in public record would constitute serious
prejudice to the parties.
[6] The Court: With respect to the relief you want, is it that
the figures not be referred to or used by in respect to witnesses
here during the trial or simply that at the close of the trial the
exhibit be sealed?
Mr: Gladden: The latter; the latter, Your Honor.
The Court: In this case, why don’t we simply defer ruling
on the motion until the close of the trial. Please notify counsel
when the close of the trial occurs and then we'll take up your
motion at that time.
Mr. Gladden: Your Honor, if you prefer, we'll be happy to
file a written motion with a brief.
The Court: Please do so. That way I'll certainly remember
it better.
All right, is there anything else before we proceed?
Mr. Hodgson: In pre-trial conference in chambers last week,
both of us agreed that in view of the rather extensive briefing
that has been given to the Court and the number of documents
_—
ins NE sess
that have been presented to the Court, there'll be no need for
opening statements., So far as the defendants are concerned,
that is basically still the case. However, the trial briefs that
were submitted, it seems to me, make it appropriate for us,
when our case comes along, to suggest to the Court certain
points of emphasis that may have been raised by virtue [7] of
those briefs ha.ing been filed. We would like to reserve our
right for that purpose. |
The Court: Mr. Kinkaid, are you ready?
Mr. Kinkaid: Yes, sir.
The Court: You may proceed.
Mr. Kinkaid: Plaintiff calls Mr. Dave Padgett.
Whereupon, |
W. D. PADGETT,
was called as a witness by and on behalf of the Government,
and having first been duly sworn, testified as follows:
Direct Examination
By Mr. Kinkaid
Q. Would you please state your full name? A. William
David Padgett.
Q. Where are you employed, Mr. Padgett? A. Trust Com-
pany of Georgia, Atianta, Georgia.
Q. What is your position with Trust Company? A. Group
vice president.
-Q. Are you in charge of any department or division of
Trust Company? A. The Southeastern Division of the United
States Division, which handles all of our business outside the
City of Atlanta, and financial institutions inside the City of
Atlanta.
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[8] The Court: Before you proceed, Mr. Kinkaid, let me in-
quire, what is the situation with respect to a transcript? It will
have some bearing on the extensiveness of my notes I’m going
to have to take. Is there going to be a transcript prepared prior
to the final briefs or not?
Mr. Kinkaid: My understanding is, sir, that there will be a
transcript prepared for each day’s proceedings that will be
available sometime in the evening.
The Court: But, before I have to make a decision, there
will be a complete transcript?
Mr. Kinkaid: Yes, sir. \
The Court: All right.
By Mr. Kinkaid
Q. Could you give us a rough idea of just what this par-
ticular department does at Trust Company? A. Well, as I
said, we handle all of our commercial banking business outside
of the City of Atlanta with the exception of national accounts,
financial institutions inside the City of Atlanta, deals mainly
with commercial, large commercial accounts, domiciled out-
side the City of Atlanta in the southeast, and correspondent
accuunts, bank accounts.
Q. Roughly how many correspondent bank accounts does
Trust Company presently have? A. As I recall, 452, in that
particular division that I supervise.
[9] Q. What geographic area does that division cover? A. Eight
southeastern states.
Q. What are your duties and responsibilities insofar as the
correspondent bank accounts are concerned? A. Well, to service
those that we have and to secure others in the course of new busi-
ness.
Q. How long have you been group vice president? A. Oh,
approximately five years.
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OQ. What were you before you became group vice president?
A. Vice president.
Q. Were you in the correspondent area as well at that time?
- A. Yes, sir.
Q. As a matter of fact, how long have you been working in
the correspondence area? A. Since 1955.
Q. And has it always been with Trust Company? A. Yes.
Q. Are you familiar with the term “correspondent service”?
A. Yes. .
Q. Is that a term that you use in your business? A. Well,
that’s a pretty all-encompassing term, but, yes.
Q. Could you give us your definition or understanding [10]
of, from your own standpoint, what is encompassed by the term
“correspondent service”? A. Well, it’s basically any service that
they might call on us that we can supply starting from clearing
items and collections right on through the latest technical service
offered in the computer service and automation.
[11] Q. Is there any definition of correspondent service that, to
your knowledge, is accepted generally in the industry or does it
vary from bank to bank? A. I think definitely it would vary from
bank to bank as to what they would do and when they would
do it and how they would do it, and the charge, if any, the fee,
acceptance or what.
Q. Could you tell us the basic correspondent services that
Trust Company offers? A. You mean you want a list of—you
want me to name the
Q. Yes, name as many as you can think of, offhand. A. Well,
of course, your main service would be the clearing of checks
and collections, shipment of coin and currency, credit inquiries,
over-lines, computer services, demand deposit accounting, sav-
ings, CD's accounting, monthly repayment loan, accounting on
— 52—
' computer, investment advice, bond services, safekeeping of se-
F curities.
The Court: You are going too fast.
es
A. I am sorry.
The Court: Advice?
A. Advice.
The Court: All right: What else?
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A. Safekeeping of securities, services through [12] your
various specialty departments, your "international department,
_trust department, corporate trust department.
Q. Let’s go back through these. A. Yes, sir.
Q. And take one, each one at a time, and I would ask you
to give us some idea of just what each one of these services in-
volves, insofar as Trust Company is concerned. Why don't we
start with the check-clearing. A. Well, the correspondent bank
‘will prepare what we refer to as a cash letter, in some cases,
_Sepending on the degree of the usage, it may be all of the items
outside of the particular city where they are located, and send
, it to-you for collection. You process it and send it—forward it .
/ on to the centers on which they are drawn or to the. Federal
Reserve Bank. It would, on the other hand, you would probably
intercept their cash letter, their Fed Cash letter from the Fed
Reserve Bank paying those items, or particularly, if you are
doing a demand deposit and accounting on computer collection
part of it, would simply mean any item that they might have in
the way of a draft or bill of lading with documents attached or
trade acceptance or what-have-you, that they might forward for
collection, which you would, in turn, collect for them and credit
their account, et cetera.
[ 13] The Court: Excuse me. Does'your eight Southeastern ‘states
‘coincide with the Atlanta Federal Reserve Bank?
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A. I would—rather than answer that, I would prefer to name
the states that we do handle, it is North and South Carolina,
Tennessee, Georgia, Florida, Alabama, Mississippi and Louisi-
ana.
Q. You just mentioned a term “intercepting”, was it a Fed
cash letter? A. Yes, sir.
Q. Could you just-explain that briefly? A. Well, if you are
doing the demand deposit accounting, in other words, if you
are doing the bookkeeping for a bank, then you can pick up
their—the Federal Reserve sends them a cash letter each day
of all items drawn on them, so you just shortstop it, instead of
it going to you and back, you just shortstop it. It saves, in
some cases, nearly a day's time.
Q. How are your. check-clearing services paid for by the
correspondent bank?) A. Well, usually you measure their cost
on an analysis basis, and it is done by balances, there is 10
actual charge involved. They maintain sufficient balances with
you to pay for this particular service.
Q. The next item you mentioned was coin and [14] currency.
Could you just briefly indicate what that means?. A. Well, your
banks that are not members of the Federal Reserve system de-
pend on their correspondent banks in the Reserve city to furnish
them coin and currency, in most cases. It depends on their
particular uses. A lot of banks even generate more coin and
currency than it needs, so there’s a problem of shipping it to
their correspondent. Rather than shipping it to them, suppose,
for example, they have a military installation in their.town and
have a need for a large amount of cash, say once or twice a
month, they would order this; if they are not a member of Fed, |
they do not. They would have to order it from their correspond-
ent bank and pay for it in that manner.
Q. I think the next item on your list was—had to do with
credit. Could you explain more of what you had in mind there?
A. Well, we refer to it as over-lines or any credit that would
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normally exceed their legal limit. It does not necessarily have
to be the case, but in most instances, it is. It could be a small
bank in a small town would have a manufacturer or large cus-
tomer who might need at a given time during the year credit,
say, of a million or two or three million dollars, [15] whereas
their legal limit could very well be fifty or a hundred thousand
dollars. And, by very well going to a correspondent for an over-
line, this would, enable them to maintain their primary position
with their customer, and it would be done through them. And
in a lot of cases,-the local customer would not even know who
the correspondent bank was; as far as they're concerned, their
local bank is handling it. And they would handle the participa-
tion on a cost basis; it is quite common.
Q. Is there any sort of, I guess we can call it, a time factor
involved, in that type of participation between the small cor-
respondent and the large bank? A. It depends on who the bank
is and how well you know them, and the relationship you have
with them, and how many times you have dealt with them. in
credit matters, and so you can give an answer on the telephone.
Others, you want the document sent to you, you want to
talk about it and so forth and so on. It is just as quick as a
telephone call or it could involve weeks of negotiations, depend-
ing on the type loan, how complex and so forth. Really, how
well you knowAhe people you are dealing with and how often
you have dealt with them. ;
Q. To your knowledge, would there be any difference other
than the differences you just noted in terms of type of loan in-
volved? Would there be any difference [16] between your
handling of a participation with a correspondent bank, on the
one*hand, and the headquarters of Trust Company processing
a loan request placed at one of its branch offices that happened
to be over the lending limit of the local branch manager? .A.
Well, I think in all fairness, I would have to say that in deal-
ing internally from the branch to the main office, et cetera and
so forth, you are dealing with really a little different level. And
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if a correspondent who maintains substantial balances with you
calls in, usually he is dealing direct with a man who can give a
decision then and there, if necéssary, whereas the other might
go through a sort of a committee or require a little discussion
and so forth. I would say that being the same type general
credit that they would get the answer about the same time.
Generally, within the same day, if at all possible, unless it was
a very unusual situation.
Q. Now, insofar as your, own willingness to participate on
large loans from your correspondent banks, is that willingness
on your part in any way affected by the money market condi-
tions, if that—I don’t know if that is the right term to use or
not, but in other words, what I am getting at, is times of easy |
credit versus times of hard credit, if I may use those [17] terms.
A. You are referring to the credit crunch of *66-'68, when money
was tight and so forth?
Q. I would say that is a good example, yes. A. Well, yes.
Money is much more readily available at this time than it was
during that time, and we would be in position to give an answer
a little quicker. During the credit crunches of °66-’68, there
was a lot of times when you had to find the money before you
could put it out, if that answers your question.
Q. Another item you have mentioned, I think, before the loan
participation, if I recall correctly, had something to do with
the credit information. Am I correct in that, was that.one of
the correspondent services you mentioned? A. Credit informa-
tion.
Q. Credit information. A. As it pertains to companies, cor-
porations and so forth, yes. That is readily available to them,
should they have a customer dealing with a party or a company
where they are—you know, they are not known to them and
so forth, and it involves a contract or a substantial sum of
money, they call and want to know if their customer can deal
in full confidence with XYZ Company and so forth.
es once
[18] Q. Is that service used frequently by your correspondent
banks? A. Yes, it is. It is a service that they can render to
their local customer, when they are dealing with companies
that are unknown to them, where they have to—where it in-
volves advancing of money or credit.
Q. How was that service paid for by the correspondent bank?
A. Well, of course, this service is readily available to any bank,
whether they are a correspondent or not. That is just in the
general flow of commerce, that this is—you would give this
service to any bank, whether they are a correspondent or not.
Of course, a correspondent who maintains balances with you
would feel a little freer to call maybe more often on things that
are not as important to him as he would if he were not a cor-
respondent.
[19] Q. I may not have asked you, is there any fee for the
coin and currency service? A. Not generally, no, unless it’s
excessive. If you had—again, if you had a military payroll in
the area that a bank had to have an excessive amount. Gener-
ally, the answer to that would be no, generally, other than an
analysis charge.
Q. I'd like to go back to the data processing or computer
services that you briefly. mentioned earlier. Could you go
through those a little slower and sort of indicate to us the
various types of data processing services available from Trust
Company and give us sort of an idea what each one involves?
A. Well, your demand deposit, it would be that actually doing
the bookkeeping for all of the banks, demand deposits or check-
ing accounts which means that at the end of the day they
would send to you all items, all of the checks drawn on that
particular bank. By sorting them and running them through
the computer, they would be posted to the proper accounts.
You also furnish statements for them on a monthly basis which
they send out.
Time deposit, it varies from savings accounts to time certifi-
cates, certificates of deposit, et cetera, that you keep an ac-
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curate record of them and actually doing the accounting and
computing of the inierest on the computers. ag of this is done
for a fee.
[20] On the repayment loans or inetalbnent loans, accounting
is where you do the monthly, you post it, prepare the docu-
ments for them, also post the monthly payments also on a
monthly basis. That’s also for a fee.
The Court: Before you called one of the items a CD item.
Is that a counter-demand?
The Witness: Certificate of deposit, time.
By Mr. Kinkaid
Q. Insofar as the installment loan service that you just indi-
cated, does that—maybe I misunderstood what you said. Does
that include sending of bills, so to speak, to the installment
loan customers of the correspondent banks? A. Well, you send
it, you actually prepare them and send them to the bank. The
bank itself sends them the monthly payment coupon book. In
other words, I think, I would be safe in saying nothing is mailed
directly to the bank customer. Everything goes to the bank,
the bank and from the correspondent bank to their customers.
Q. Let's see if we have got everything here. We have install-
ment loan and accounting, demand deposit accounting, savings
accounts for which you would include certificates of deposit.
Does that take care of all the computer services? A. Various
different types of time accounts. J
Q. Now, you mentioned the term bookkeeping dust now. I've
seen the term bookkeeping used at least, I think, two [21]
different ways in banking. Perhaps you can help me on that.
I think I have seen it used one place, something general book-
keeping. A. General ledger
Q. General ledger? A. Part of general ledger bookkeeping,
which is a computer service offered to, depending on the size
of the bank as to how extensive it would be. Somebody might
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have 25 general ledger accounts, some might have several hun-
dred general ledger accounts. That is a service at the present
time we do not offer so, I could—some banks do. We do not
at this time.
Q. Is there any other type of bookkeeping done for banks
on the computers? A. You mean that we do not offer; is that
what you are asking me?
Q. I was just wondering, I’m trying to clarify my own mind,
perhaps. I’ve seen the same kind of bookkeeping referred to
in two different terms. That’s why I’m confused. Is there any-
thing other than general ledger bookkeeping in banking? A.
Well, now, of course, basically, using the term in its basic
form, any kind of accounting or record-keeping would be baok-
keeping. You’re doing bookkeeping when you're doing demand
deposit accounts and go one step further and post [22] gen-
eral ledger entries, accruals, the entries to be posted and send
them back to them. I can’t think of anything else, unless you
have some specific item.
Q. No, I’m trying to clarify the meaning of these terms in
my own mind. A. It’s probably the same term, two different
terms really meaning the same thing.
Q. Insofar as someone using your computer services, do you
at Trust Company supply the form on which information is
reported or sent in to the computers? A. Yes.
Q. Is there any—excuse me, go ahead. A. Well, of course,
it’s less expensive to them to use the regular soft wares, as we
know it. In some cases they prefer different type statements
and so forth, which we do use when we draw up statements for
them.
Q. That would be the statements coming out after the in-
formation has been run through the computers? A. Right, that
they mail to their customers.
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Q. Starting at the, I guess, what you would call maybe the
input side of the computer operation, is there any necessity for
the forms on which information is reported to your computer
to be standardized in any way, to your knowledge? A. You're
going to have to restate that. I’m not quite [23] sure what
you are asking.
Q. Let me put it a different way. Do the banks which use
your computer service, do they report information that’s going
onto your report, on your computer? Do they all use the same
type of forms in making such reports? A. Well, I think you can,
in general, yes, most of the time you pick it up off documents
that they send to you and inasmuch as a check is a check, then,
yes, they would use standard type information. That could be
different size or different colors, or different qualities of paper,
but it’s generally the same type of documents that you pick this
information up from. And on your monthly, generally your
information can come in any way and you pick it up and put
it in the necessary form to get the information on your com-
puter.
Q. I think the next item you mentioned was investment ad-
vice. Could you tell us a little bit more about that? A. Well,
I am thinking mainly of our bond department that sells Gov-
<€ ernment Bonds, government agencies, municipal bonds of vari-
ous types and so forth and keep in touch. It depends on how
much they use, the bank uses. They may buy all of their bonds
from you, may buy some, or they may on occasion buy bonds
from you. And in that, other than actually selling, investment
advice would come under, we have a computer service called
portfolio analysis and accounting which gives them an up-to-
date listing, monthly, of all their [24] bonds, the present mar-
ket price, accruals on it and tells them what coupon, what
interest is due and when, so forth. It’s a combination advisory
service and accounting service, bookkeeping, if you wouid.
Q. Is there a fee charged for the first type of advice? A. The
portfolio, the PWAS service is a computer service, yes, fee in-
ae Ol es
volved. Other than that, there is no fee involved other than
the margin or mark-up on the bonds, whatever it might be,
which would not be a fee itself.
Q. I think you also mentioned safekeeping. A. Safekeeping
of securities. Most of our correspondent banks would prefer to
have their securities held in one single location or maybe two
at the outside. All the securities or the securities that they buy
or purchase would be shipped to this particular bank to
be placed in safekeeping. Sometimes they have one safekeep-
: ing account, sometimes two. Maybe one here and one in
4 New York. These securities are domiciled there and processed
through the collection of coupons, et cetera, and so forth,
until they are either sold or they mature and this is a service
that is rendered free of charge except the analysis charge, bal-
ances copy.
paren
Q. I think the last thing you mentioned was, if I recall cor-
rectly, specialized services. I think you also mentioned inter-
national services. Could you give us an idea of the specialized
services that you have in mind? [25] A. Well, it could be
through actually any department in the bank, in a department
they could have a customer interested in either importing or
exporting. It could involve letter of credit, it could involve de-
veloping a market in some foreign country, it could be through
your corporate trust department. It could be they have a cus-
tomer who needs somebody to act as a transfer agent or reg-
istrar. It could be in the trust department they may have a
customer who needs to place funds in escrow or some various
fiduciary capacity of the trust department.
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Q. Do you have any correspondent banks that do not have
trust departments of their own? A. Quite a few. Most of your
small banks do not have trust departments.
Q. Do they refer trust customers over there or customers of
theirs who are, seeking trust services, are those referred to your
department? A. Some of them are, yes.
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Q. Do you have any correspondent bank accounts in the
general Atlanta area with banks that do not have trust depart-
ments? A. Yes, sir, you’re speaking of major Atlanta?
Q. Yes. A. Metropolitan?
Q. Yes. [26] A. Yes.
Q. Have any of those correspondent banks referred trust cus-
tomers to you? A. Yes, sit.
Q. In those cases, have you sent, or had someone from your
trust department go out and visit with the correspondent bank’s
customer or is there any policy ‘in that regard? A. Well, it de-
pends. Sometimes they call and set up the meeting and they
actually bring their client in that needs this particular service or
they might set it up so one of our people might call on them:
It depends on the situation. Are you saying wouid we call on
them direct? 5
Q. No, would you go out to the correspondent bank to meet
with his customer who is seeking trust services? A. Sure.
Q. I don’t know, you have mentioned this term already, and
earlier, but are you familiar with the term fed funds? A. Fed-
eral funds, yes. '
Q. What does that mean? A. Well; it’s really a misnomer
now, but in the beginning it was where a bank who had excess
reserves on deposit with the Federal Reserve Bank could sell
those by the day to another bank. It’s now come to mean any
bank that has excess funds whether he be a member of Fed or
not. They are called correspondent funds, fed funds, but it’s a
vehicle of [27] where a bank can sell excess funds by the day
as compared to investing in some treasury bills for thirty days,
sixty days, or two or three days, so forth. You can actually sell .
funds by the day. If you have $5 million. in excess reserves,
Federal Reserve Bank, that you do not need today, why, there
is a market available where you can sell those and for a stated
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rate for the one 24-hour period. They are returned to you the
following day.
Q. Would ydur small correspondent banks be able to par-
ticipate in that operation? A. Yes, sir.
Q. In what way? A. Well, we establish a market, your nor-
mal, of course, this is probably gone by the board. At one time
your minimum amount was $1 million. A lot of smaller banks
never at one time had this amount. So it’s now, I think, the
accepted minimum is probably a hundred thousand dollars
which gives them the privilege of investing this amount by the
day.
Q. I’m not sure if } understand just how Trust Company fits
into this operation insofar as the small correspondent banks are
concerned. Could you explain that? A. Well, we make a
market available to the small correspondent banks. We either
buy or sell fed funds or torrespondent funds whichever the case
may be at the going market. in other words, they may, one day
sell you [28] $500,000 in fed funds and the next day they
might turn around and buy $500,000 in fed funds, depe i on
their money position as of that day. It’s up to us to decide What
position we are going to be in. But, we either are net buyers
or net sellers, depending on our position as of that day.
[29] Q. Does that mean, then, thatthe small bank is dealing
directly with you, rather than with the Federal Reserve Board or
anyone else? A. Well, they have never—the Fed-funds market
has never been through the Fed Reserve Bank or the Federal
Reserve Board, that is the vehicle by which you move the
money from one place to the other. In other words, suppose,
as an example, maybe I can explain it this way, suppose the
Trust Company of Georgia, when we at noon decided on our
‘money position we might be net sellers of say fifty million dol-
lars in Fed funds or five million dollars in Fed funds, then we
would sell it to maybe Chase in New York, and we would
wire it through Fed to make it immediately available. And
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when you are selling money during the day, you must deliver
it promptly, and that is the vehicle you use. And you always
deal either through a bank or a money broker.
Q. Does Trust Company offer any sort of credit card service
to its customers? A. Yes, sir, Master Charge.
Q. Is there any service to correspondent banks which would
- involve the Master Charge service? A. Well, they can either
become a member of the—I believe the correct name is South-
eastern Bank Card [30] Group, and be a member, or they can
be an agent of a member bank. And we have some correspond-
ents who are agents of the Trust Company of Georgia and Mas-
ter Charge.
Q. Could you explain what is meant by an agent of Trust
Company or Master Charge? A. Well, in other words, they can
offer this, they can offer this to their customers without assum-
ing any of the risks, and the credit liability will be assumed by
the party they are acting as agent for; in this particular case it
would be us.
Q. Do these banks have the option, if they wish, to assume
the risk of that operation as well? A. If they wanted to be a
member direct, yes, they do.
_ Q. In the case where a small bank is acting as an agent for
Trust Company with respect to Master Charge, what would a
credit card obtained from the correspondent bank look like?
In other words, would the credit card that a customer of the
agent bank receive, would it have the agent bank’s name directly
on it or would it have Trust Company on it? A. It would have
the agent’s bank.
Q. Does Trust Company have a lock-box service available?
A. Yes.
3 [31] Q. Could you give us sort of a brief description of just
; what a lock-box service is? A. Well, probably have a large,
generally speaking, they are larger concerns or a concern who
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has quite a few invoices, which are collected in one central
point. For example, if a manufacturing concern in Miami,
Florida would enter into an arrangement with an Atlanta bank
to have a lock-box, which means that all of their remittances
would be sent to a post-office box in Atlanta, Georgia, and it
. would be picked up numerous times during the day by the bank
they entered into the contract with. And these items would be
processed immediately, thereby saving the time that it would
take to come from Atlanta to Miami and back in to process.
In other words, probably cut off two days’ flow in the meantime
on that. You just intercept checks and put them back into the
systems at a more rapid pace.
Q. Would such a service be available in any way to cus-
tomers of a correspondent bank? A. Well, to the extent, yes,
we would—any bank would set up a lock-box pian for a client
of the correspondent bank. In that case, of course, you would
set one up for anybody, under normal circumstances, but the
flow of funds, instead of coming into the correspondent would
probably come into the Trust [32] Company of Georgia for
the credit and advice of the correspondent bank, where it hap-
pened to be located.
Q. In that type of situation, first of all, would there be a fee
involved, and second of all, how would it be paid or by whom
would it be paid? A. Well, normally there is no fee involved in
this. You are paid by balances, but that would depend entirely
upon the setup that the correspondent bank wanted to have.
In other words, if the company would maintain sufficient bal-
ance with them to pay for it, and they, in turn, could maintain
sufficient balances with you to pay for it, then it would be just
an analysis charge. Then, if the volume built up and it got
to cost more, then, maybe you would have to ask for more bal-
ances to cover that, both ways, both from the bank and the
. bank from the corporate client. There could be a fee arrange-
ment there, there could be an arrangement where they would
prefer a fee rather than balances. In other words, if they
pee,
couldn’t maintain sufficient balances, they would agree to pay
a fee or a maintenance charge on this, It could be either way.
Q. Does Trust Company offer any pension and profit-shar-
ing plans to corporate customers? A. Yes, we do, through our
trust department. \
Q. Could you, suai give us just a brief idea [33] of just
what type of plans would be offered and how they would be
offered? A. Well, suppase that a correspondent bank wanted
a pension and profit-shaging or retirement plan, a pension plan
or maybe a profit-sharing plan; then, our trust department would
—with an actuary, would work out a plan for them, and they
would have to contribute X number of dollars per year in order
to service or fund this particular plan, and it would be a con-
tract arrangement or fee involved in it. And the money would
then be invested, in order to assure that as of a certain date, ©
there would be enough money for X number of employees that
would be retiring at that time. And your profit-sharing plan |
would be the same thing, except it would be worked on prob-
ably a percentage basis. In that, again, the money would be
invested for them. All of this is on a fee basis through the
trust department. |
Q. Are any of these pension and profit-sharing plans, have
any of them been made available to correspondent banks as
such? A. Yes, each plan is tailored for that particular bank or
that correspondent bank’s client.
Q. Excuse me. In other words, when you say client, you
mean customer of this—a corporate customer [34] of a cor-
respondent bank? A. Could be anybody.
Q. Does Trust Company have any service which would in-
volve the preparing of payrolls for corporate customers or busi-
ness customers generally,. !et’s say? A. There is a computer
service that does this, and they furnish you the information,
either the number of—hourly employees or salaried employees,
et cetera and so forth. And you prepare either the checks for
FN,
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them or you credit the account for them, and so forth, prepare
their withholding forms, et cetera, that type of thing. Yes, sir,
it is done on a fee basis. *
Q. Are any of your’correspondent banks using that service
for their own employees? A. Some for their own employees,
some for the employees of clients and customers.
Q. Is Trust Company in the factoring business? A. Yes, sir,
we are. ;
Q. Could you briefly describe what is basically involved in
factoring? A. Well, generally, factoring is done in two steps.
First, the factor, in this case, ds the Trust Company of Georgia,
would pre-approve any credit or shipment of goods, and then ©
secondly, would purchase the invoice for cash, assume the
credit risk involved. [35] In other words, if it is a manufactur-
ing company, and they say we would like to ship $20,000
worth of whatever they are shipping to ABC Corporation in
New York, we say, “Fine, we will accept the credit, ship the
goods”. And we would, in turn, purchase the invoice for cash
and we would wait until the normal business terms, maybe 30,
net 10, before we received our money from ABC Corporation. |
It is a purchase of accounts receivable is what it amounts to.
There are various ways, there’s other alternatives you can take
on that, but basically it is a purchase of accounts receivable.
Q. Are any customers of your correspondent banks presently
using the factoring service that you just described? A. Yes,
they are.
Q. L think you just indicated that when you purchased the
receivables, you would then pay cash to the factoring client?
A. Right.
Q. How would that money be routed back to the factoring
customer himself? A. Well, if he is a direct customer of ours,
__ we would just merely credit his account with the Trust Com-
| pany. If he were a customer of a correspondent bank, [36] then
/
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we would credit the correspondent bank’s account for the credit
and advice of the factoring customer.
Q. Mr. Padgett, I would like to hand you Government’s Ex-
hibit 193, the very last one here.
Your Honor, this is the booklet entitled “Trust Company of
Georgia oe Banking Services.” It is our very last
exhibit. es
The Court: The amended set?
Mr. Kinkaid: Excuse me, sir.
The Court: In your amended set? ©
Mr. Kinkaid: Yes, sir.
; The Court: All right.
| =O. Mr. Padgett, do you have any idea of roughly when this
particular booklet was written? A. There's no printer's date on
here, but it looks like it was about ten years-ago, about 1961
or '62.
Q. Who actually wrote this booklet, can you recall? A.
d Well, it was prepared by a man in our organization by the name
_ _ of Luke Fink, who talked to” everybody concerned and put it
together, and getually it is, in effect, his language, I guess is
what you would say. é
[37] Q. Were you personally consulted with respect to this?
A. Yes, sir. ;
Q: Have you had a chance to read this particular booklet
recently? A. When I gave it to you, yes. . ;
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Q. All right. So far as you are concerned, are the services
described in this booklet, are they accurately described? A.
All of them afe, they have been. The only change has been
really, an up-dating as far as automation is concerned, com-
puters involving some of them. There has been one we show
here, we show an industrial development department or refer
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to it. We no longer have a department known as business and
industrial development. It’s done possibly by the officers in the
national division rather than being departmentalized.
Q. What do these officers do today? Would it be the same
as described in here for the previous department when it was in
existence? A. Originally, yes.
Q. Would those be the only corrections you would be making
in this as of today? A. I would think so, other than some of
the nomenclature might have changed, but virtually it is the
same.
Q, Could you please turn to page 7 of that exhibit? A. Yes,
af ;
[38] Q. About the middle of the page there is a notation,
“Trustee,” under pension, profit sharing, thrift and other em-
ployee benefit plans. Could you tell us what the thrift plan
would be? A. I'm sorry, I’m afraid I’m not—I think I know,
but I would rather—I'm not sure.
Q. Are there any other employee benefit plans that you know
of at the moment that would be covered under this particular
service? I've got to rephrase that, that’s confusing. When you
say Trust Company acts as a trustee under pension, profit shar-
ing, thrift and other employee benefit plans, my question really
should be, can you give us an example of-sther employee bene-
fit plans referred to? A. Well, I think one might be the plan
which the professional men, doctors and attorneys, use, it’s
called what, the Keough Bill; is that right? It could be that,
where professional people ask to set aside a certain amount of
money each year for their own profit sharing or pension, if you
will, so forth. It could be a plan like that or specially devised
plan for an individual or group rather than corporations, et
cetera.
Q. Would that plan you just mentioned, for professional
people, would that be available to professional people, customers
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of your correspondent banks? A. Sure, anybody. It’s on a fee
basis.
[39] Q. Now, could you turn to page 19. Now, in the? first
paragraph on that page there are several different things. It |
emphasized some which'I believe we have already covered this
morning. I'd like to just go through these and the ones we don’t
seem to have covered, we would like to ask if you will just sort
of spell this particular thing out a little bit more for us.
What would the term “Taxes” mean in this context? A. I
think what it means were that our expertise or knowledge, if
you willy and any particular change in the tax laws, and so
forth. In other words, something new and different comes up,
you have some question about it. They probably do not use a
distinguished tax firm like we do. We would make this avail-
able to them, tell them what we are doing, this type of thing,
what ought to be done, what you ought to look at or refer them
to a tax expert in their given area that could help.
Q. There is one before that, “Check Processing and Book-
keeping.” Would that be something more than just your com-
puter operation? A. Well, of course, back at this time there were
not as many banks using computers as there are now. Probably
referring to, we would probably send in a team of operation
experts to review their bookkeeping system to see if it could
be helped. In other words, if they needed to change to a [40]
different type of equipment, and so forth. .
Q. Would that be necessary today with banks on the com-
puter setup? A. Not really, but it could be very important to
a small bank that’s still using manual bookkeeping machines if
they wanted to upgrade and change, and so forth. I would say
you would have fewer calls now than you did then. If that an-
swers your question.
Q. What would be in the context of this paragraph the kind of
advice that you would be offering on the next item,,zamely in-
stallment credit? A. Would be anything from how we train
pany, i
people to make installment loans, forms we use, methods we use,
F collection methods we use or forms we use. How we evaluate
j credits, the terms, 24, 36 months, et cetera, and so forth.
Q. Are you just—I think you mentioned training. Is there
d any kind of training available at Trust Company for employees
: or officers of your correspondent banks? A. Certainly.
Q. What would be some of them? A. We don’t conduct for-
4 mal classes per se. If a correspondent called and asked us to
train a teller or someone in the personnel department, credit
Office, installment lending office, we would do that.
q Q. One item in here is called “Audit Systems.” What [41]
would that involve in terms of offering advice to correspondent
; banks? A. It could mean that we could, would tell them how to,
j how they should conduct a director’s audit, how they should
trace their loans, how they should trace savings accounts,..and
E so forth: Just as in most of your audit systems you do not ac-
4 tually, you know, ask for a direct confirmation on everything.
But, ten loans, five, six, depending on the volume and so forth,
and what is involved, internal security mainly.
Q. Now, this item, the tellers’ procedure, would that be part
of what you just mentioned as training tellers, or would that be
something else? A. Might, might furnish them with a manual,
training manual, how we train them and how we handle them,
and so forth.
Q. What would be involved in giving advice on loan collec-
tion methods? A. Probably tell them the procedure we use, what
we do when a loan is thirty days past due, sixty days past due.
How we effect collections, what we find is necessary to convince
us, to move against the collateral and so. forth, repossess an
automobile. :
Q. How would you become involved in advising a corre-
spondent on the purchase of new equipment and supplies? To
what extent would you be involved in that sort of thing? [42] A.
Mostly to do a feasibility study as to what type of equipment
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they should use, when they should get it, whether they should
purchase it or should lease it. Generally, in a full feasibility
study, really, as to whether they need it, how much equipment
they needed, and so forth. A lot of time there is a tendency to
over-buy, when you are buying this type of thing.
Q. Does Trust Company do any leasing of equipment of this
type? A. We would arrange—we would arrange to handle a
lease contract for somebody. We do not lease, we do not lease
the equipment per se.
Q. Right. What would be the sort of thing that would be
contemplated by this term personnel assistance? [43] A. Well, it
could be anything from helping them train personriel, helping
them be sure that they are using the proper procedure in ac-
quiring personnel. In other words, their personnel department
is doing the things that is necessary to do nowadays in order to
comply with the law or it could be—it could be we would assist
them in finding personnel. In other words, if they needed a
cashier in the bank or if they needed a lending officer in the bank
or president of the bank, et cetera and so forth.
Q. Can you explain the next term, “job evaluation”? A.
Oh, it mainly has to do with the classifying of a particular job,
how much should you pay a branch manager and how much
should you pay a monthly repayment lending officer and how
much should you pay a teller, et cetera and so forth. A job, a
formal job description showing what has to be done, what
should be done at pay scale from the minimum to the maximum.
- Q. What would be involved in offering advice on protection
and insurance? A. Anything from whether they should use
guards, whether they should—what their bond should be,
whether they should have cameras, internal security, anything
in that line.
Q. Do you have anybody available to actually [44] advise
on securities systems? A. Well, that is not his primary job. We
have a former FBI agent, who is in charge of our security. It
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is just like anything else, you know, we don’t have a trust man
available for a particular job, but we can make him available
under these circumstances, if need be. Under that case, we
would make our security man available to them for that pur-
pose.
Q. Could you turn to Page 21, please?
The last sentence of the first paragraph on that page states
that: “We are always glad to share information on national and
sectional accounts, and to aid our correspondents in their rela-
tions with them.”
Could you expand on that for us, just how does Trust Com-
pany aid its correspondents in their relations with national or
sectional accounts? A. Well, it could be that a correspondent
bank would call in and say we understand that such-and-such |
~a store would be located in our area. If this is true, we would
like to have them do business with us and we would attempt to
find out, first, if they were going to locate a store there; and
second, recommend that they use this particular bank, and to go
beyond that we would probably tell them, because we had previ-
Ous experience, as to just how they go about selecting [45] their
local bank, whether the local manager makes the decision,
whether the vice-president in charge of finance makes the de-
cision, whether the treasurer makes the decision, whether they are
just actually measuring the closest bank, period. That is it.
Really what they are looking for in the area and so forth.
Q. In those situations would anybody from Trust Company
call on a national or a sectional account with———. A. Sure.
Q. someone from the correspondent bank? A. Well,
that could be the case if it were important enough, but most
times, if they had asked you to call on them for them, that your
man would go by himself. If it were important enough, there’s
a chance that the president of the local bank might want to go.
It really depends on what it is. If it were a chain store or a de-
partment store, he would not. If it were a manufacturing con-
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cern that would employ four or five hundred people, probably ©
the president and the entire bank board would want to go.
Mr. Kinkaid: Your Honor, would this be an appropriate point
to take a little break?
The Court: All right. We will take a ten-minute recess.
(Whereupon a recess was had.)
[46] Q. Mr. Padgett, does Trust Company provide any kind of
assistanice with respect to correspondent banks’ lending prac- -
tices, as such? A. I don’t quite—would you rephrase that, I
don’t quite understand.
Q. Well, does Trust Company help a correspondent bank
in making various types of loans or in setting up procedures
whereby or under which its loans are granted? A. Oh, you
mean, for instance, on real-estate loans, and so forth? Your
checklists, your technical procedures, yes we do that.
Q. Could you tell us just a little bit more as to the nature
of that assistance, the form it would take? A. Well, generally,
when there’s been any change in the banking laws or any regu-
lations by the regulatory authorities, that really change any
particular receivable financing or ‘construction loans or any
technical change, why, most of your Reserve city banks will
put out a memo or guideline sheet showing the changes, what
should be done, this, that and the other and so on. Of course,
on any specific request, we would do that on anything. If a
bank had some question about making a term loan, covenants
that could go in it and so forth and so on, [47] we would be
glad to do that. But, as a general rule, unless it is some techni-
cal, drastical change, you wouldn’t put out a white paper on
it, so to speak. _ 3 :
Q. Have you ever gotten a call from a correspondent bank
to the effect that it’s gotten into or its loan procedures have
sort of gotten into a mess, and could you give us a hand in
straightening them out? A. Yes.
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Q. Has that happened often, to your recollection? A. Not—
no, it would be the exception rather than the rule.
[48] Q. If you can think, I’m not asking you for names of any
banks in the situation where inat has actually happened, can
you recall what Trust Company did to help the correspondent?
A. Well, generally, what you do would be send, say, a team of
two fairly competent credit analysts to go in and help survey
the loans and see what they were doing or see what they were
not doing or needed to be done, and so forth.
Q. What do you mean by survey their loans; what would
that involve? A. That would depend. You've got one or two
loans you’re having trouble on, and find you do have one or
two, it could be they lost their chief executive officer of the
bank and they are, you know, think that maybe he was a little
oo liberal in his lending policies and so forth, might want you
look at the entire note case, all of their loans, in which you
would do that, or maybe just a certain type of loan you have
a problem with.
.Q. You just mentioned they may have lost their chief ex-
ecutive. Has that happened often during your experience at
Trust Company? A. Where they would lose the president of
the bank?
Q. (Indicating the affirmative.) A. Sure.
Q. And in those cases have you assisted the bank in any
way in replacing the chief executive? [49] A. In some cases,
yes, sir, tried to.
Q. Roughly speaking, how would you go about trying to
resolve a problem like that? A. Well, smost of your major
banks sort of act as, I would say clearing house, that wouldn't
be correct, they try to stay on top of the situation and know
who is available, who is looking for a job of this type, and so
forth, try to put the parties in touch or could have somebody
that’s been in the banking up in the east coming to this section
sai ME i
of the country, wanting to move to this section of the country.
Local boys that’s been off to school located on the west coast
that want to come back, this type of thing.
Q. Going down the line somewhat, do you or have you had
requests for help in situations where tellers or other employees
of correspondent banks are sick or died, for one reason or
another are not available, and for one reason or another a re-
placement is needed on a temporary basis? A. Generally not
just one in cases like that. They can get by with one. Where
you have a couple on vacation or something happens to a
couple, so forth. There have been occasions, yes, where you
would have to step in and furnish two, three people in one |
department.
Q. Have you had any request from correspondent banks to
assist them in the financing of any expansion, for example, reno-
vating their bank building or perhaps building a branch [50]
building or replacing their equipment? A. Not any equipment.
We have had some real estate tin companies who bor-
rowed money to build a building of build a branch, and so
forth. I don’t recall whether any equipment has been involved.
Q. You mentioned the real estate holding company. How
would that, a real estate holding company be involved with
one of your correspondent banks? A. Well, it could be that
they were up to their brick and mortar maximum as far as
i their capital was concerned. They were building a new build-
ing, new branch and wanted to borrow money. They would
form a Rolding company, real estate holding company who
would borrow the money secured by a lease from the bank
. for a period, given period of time, which would fund the loan.
Q. And again, how does—how would “Trust Company enter
into that particular situation? A. Either help them place the
loan with an insurance company or make it yourself.
Q. To your knowledge, are there any banks headquartered
outside Atlanta that are trying to, trying to sell correspondent
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services of the type we have been talking about this morning
_ to small banks in this area? A. Yes, sir.
Q. Now, could you identify some of these for us? [S51] A.
You mean by name?
‘Q. Yes, sir. A. Wachovia out of Charlotte, North Carolina
National out of Charlotte, American National out of Chatta-
nooga, Central Bank out of Birmingham, First National out
of Birmingham. The Jacksonville Bank, Barnett, Florida Na-
tional, Atlantic National. Your New York banks to a lesser
extent, they call on small banks in Georgia not as active as
the ones I've mentioned, but all of your New York banks call
on the banks, Chase, First National City, and so forth.
Q. To your knowledge, do the banks that you refer to as
the active sellers, namely the North Carolina and Tennessee,
et cetera, banks, to your knowledge, do those banks offer
. pretty much the same range of —— services that
your bank offers or do they offer more or less or can you
categorize them that way? A. I would think most of them are
pretty much the same with the exception, of course, of your
computer services. ne teabe a mileage range in there, mile-
age factor that enters into it, )that banks out of Chattanooga
would be restricted as tothe surface transportation, really,
fifty, sixty miles. Other than that, it would be pretty much the
same except maybe swe could be in some policy as
in regards to overlines/ and something like that. Basically, I
would say they are pretty much the same. Some does more,
[52] depending on the size, and some are in a position to do
more of one thing than another. Basically, they would all
attempt to do the same thing, I think I'd be safe in saying.
Q. During the past, say, ten years or so, can you recall any
Officers at Trust Company who have left Trust Company to
become officers of small banks? A. Yes, sir.
Q. Have there been any that you can recall? A. Well, I
don’t know that we have had any more than anybody else.
on TP hee
We have had quite a few back over the years, particularly in
the Florida area, back when a lot of banks were being au-
thorized and opening down there. They were offering some-
body attractive salaries and situations. Georgia during that
period lost a lot of men to Florida.
Q. Generally speaking in those situations, were the people
who left the kind of people that Trust Company would have
rather had stay; in other words, were they——— A. Yes.
Q. ——<caliber people? A. Yes, sir.
Q. During the time that you have been working in the—
or in this correspondent area, Trust Company, has Trust Com-
pany assisted in the formation of any new banks? A. Yes, sir.
Q. Could you guess as to roughly how many Trust Com-
pany [53] has assisted or has helped in the formation? [54]
A. Fifteen to twenty.
Q. Where would these banks be located? A. Mostly in Geor-
gia and Florida. A few in other states, but the majority of
them in Georgia and Florida.
©. Just how has Trust Company assisted in. the organization
of these banks? Now, of course, I’m not trying to suggest that
they ali have been—follow the same pattern, but could you give
us examples as to the type of assistance that Trust Company
would provide in connection with the formation of a new bank?
A. Well, I think it mainly would be in the form of counseling,
really, as to what they should do, when they should do it, et
cetera and so forth. That is about all anybody can do at that
stage of the game.
Q. Generally speaking, is there any particuiar stage in the
formation of the bank where you folks have become involved?
A. Whoever gets in on the ground floor usually would stand
the best chance of erding up with the business, once they re-
ceived their charter and opened for business.
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\ Q. Well, do you or have you become involved with the new
bank, for example, at the stage where people are just getting
together as organizers or is it at a later [55] stage or. A.
Well, at all stages, but as far as new business is concerned, vou’
prefer to—the sooner the better. In other words, just general'y
what happens is, you have a town with, say, one bank and a
group of local businessmen decide that they want to organize
another: .bank or the community could support another bank
or the need was there for another bank then, they generally let
it be known that they are of this bent of mind, and those who
are in position to help them is maybe the local bank uses two
Atlanta banks, and that leaves two or three other Atlanta banks
” that are not\ involved, that are in a position to help them, and
whoever. would really do the most or offer to do the most or,
be of the most help at that particular stage would probably end
up with the business, once ‘they are in business.
Q. When you say business, do you mean correspondent ac-
count at that bank? A. Yeah, well, that’s all it would amount to.
Q. Do you assist in preparing the application for the charter,
for example? A. If need be, yes.
Q. Generally speaking, what would that sort of assistance
entail? [56] A. Well, mainly, mostly things of a technical na-
ture, most founding banks will have a local lawyer as the in-
corporating secretary \and they need very little help. Maybe
projections, you know, the first two- or three-year figures, this
type of thing and so forth. But, it is in the technical sense
mainly. \
int, would there be any assistance
to run the bank or people to work
in the bank? A. You have to, in applying for a new charter,
either state or national, at\some stage of the game, you have
to list not only your directors, but your officers, and that is part
of the approval. In other ‘words, at that tirae they approve
the chief executive officer and the top two men in the bank,
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so you must have names to submit to them at that time, and
that is a very important part of it.
Q. Have you assisted these to-be-formed banks in finding the
chief executive officer at that time? A. Yes, sir.
Q. You mentioned that the directors have to be identified to
the regulatory agency. Just how important is that? A. You
mean how important——
Q. Or is that something of real importance at [57] that
time? A. Oh, yes. Well, that is part of the application orig-
inally, the greater part of the application goes into the back-
ground of the directors of the bank, and their prior business
connections, just general background information on them. It
plays a very important part in it.
Q. Has Trust Company or have you on behalf of Trust Com-
pany assisted, been involved in any way with that particular
matter, namely, the selection of directors for the new bank?
A. Well, not to that extent. Most ofthe time you have, say,
a group of ten men, which are your new nucleus, and at that
stage they have all decided that they want to be directors of the
new bank, and it is pretty well set at that stage. It could ,os-
sibly involve some advice and counsel as to the type of business
that one of them might be involved in, or the background of
one of them might not be of the type that ought to be in the
thing. Other than that, that would be about all you could do.
Q. Have you been asked by any of the organizers to check
out the backgrounds of any of the directors for purposes of
identifying them to the regulatory agencies? [58] A. Not teally,
because they are local—these fellows know more about them-
selves than you will ever find out about them, and if not really
—we are talking about local banks now in small communities.
Most of them know each other pretty well over a long period of
time, thus the reason for the close association.
Q. Would that also be true for suburban areas of metropoli-
tan Atlanta? A. I would think so, because to begin with, you
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‘ have to—they have to be a right close-knit group and usually
over an extended period of time, and they have to be able to
get along. And organizing a bank is just like anything else, you
turn to those who you know and those who think like you think,
and so usually they are pretty well known to each other.
Q. Have you had occasion to assist any of these new banks
in selling their first stock issue? A. Well, really, selling it is no
problem. They are usually over-subscribed, So you might
offer to—usually they restricted it to a set amount. In other
words, no one person will have over. X number of shares, X
number of dollars and so forth. _You might offer to finance it
for them over a given period of time, if necessary, but really not
much of that is required, and selling it is really—hadn’t been a
problem. They are [59] usually over-subscribed, a man sub-
scribed to a thousand shares probably ends up with maybe three
or four hundred, maybe five hundred shares. :
Q. Now, once the bank has its charter, what have you done
or have you done anything to further assist the new bank in
terms of actually opening up for business and conducting a
banking business? A. Well, a lot of times you would help them
pick their location. Of course, when the charter application
goes in they must have the location, not picked, but under some
option, so that it can be acquired. Help them decide what
would be the best location, traffic patternwise, et cetera. Help
them acquire and train personnel to run it, other than the top
two people. Might send a man down to help them decide what
they needed in the way of forms and pre-opening advertising,
this type of thing and so forth. Just anything that needs to be
done, really, and there’s a lot to be done in openifig a new
bank.
Q. Have you had any of these new banks that you have as-
sisted in forming request that you sell them any loan participa-
tions in their early days? A. Yes, because in the beginning, of
course, they have deposits coming in and the loan demand is
rather slow. Did you ask me—you said had we had requests? ~
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[60] Q. Yes. A. My answer was yes.
Q. Okay. Have you had any requests from a correspondent
bank that is in existence in. terms of their wanting to seek ap-
proval for an additional branch office? A. About the only—
well, that’s really a rather simple procedure. About the only
thing that they might ask, there again, would be of a technical
nature. The application is pretty simple. And, if they are
properly capitalized and can build the building and so forth,
really, there’s no great problem there other than just filling the
need, or that would be about the extent of that.
Q. Incidentally, have any of the banks that you have helped
get started, once they have actualiy siaried to operating, have
any of them written or called you and reported on generally
how they are doing? A. Well, not really. You are in pretty
close contact with them, and of course, as you know, the
regulatory authorities require call statements at least twice
a year and more, depending on where the bank is located, the
site of the bank and so forth. This is routine, that these are
sent out to all of your banking friends; you are in pretty close
contact with [61] them. They tell you, you know, what their
deposits are and how they are doing, this, that and the other.
And of course, they are right anxious to get out of the red
and in the black at that stage. They keep you posted on profits,
but it is an informal thing. If you don’t call them they might—
if you don’t call them about some other matter, fey might not
take the trouble to inform you.
[62] Q. Generally speaking, were you at that time, in the
bank’s history, would you be in more frequent contact than
later on when it’s running smoothly, well established? A. No,
in the beginning we are a little closer in contact because of the
day-to-day problems. Everything is new and different, they get
hit with an awful lot at one time. So, the older they are and
more experience they have had, really, probably the less con-
tact you would have with them in that respect.
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Q. Have you ever had occasion to purchase any capital
notes from any of your correspondent banks? A. On occasion,
yes.
Q. What type of institution generally speaking, purchases
such capital notes? A. Well, an institution could be insurance
companies or other banks, or, of course, a lot of them sell them
to individuals on the local scene.
Q. Is itedifficult or has it appeared difficult for you from your
experience for small banks to place capital notes of this type?
A. I wouldn’t say it was difficult. It depends on how hard a |
bargain they’re trying to drive, what sort of rate they want to
get. It’s available. Now, as to how readily available, I would
have to say as compared to what, but it is available.
[63] Q. Once the bank is in operation, have you ever gotten any
requests for assisting in a promotion like trying to increase the
bank’s savings accounts or. perhaps trying to get its demand
accounts up higher? Have you been asked for any assistance
with respect to those types of. promotions? A. Yes, on occa-
sion we have. It would depend on the nature of the request as
to how we would comply with it, what we would do. Maybe if
it was advertising, we would furnish them the mats that we wouid
use for radio transcript and ads, so forth. If it were a new busi-
ness, Office call problem we would tell them how we do, what
we do under the circumstances and suggest they plan on that.
Q. I guess going back to something that we discussed quite
a while ago, about how many banks does Trust Company.
for about how many banks does Trust Company administer
pensions and profit sharing plans, if you happen to know? A.
Probably more than I can recall rather hurriedly, eighteen or
twenty.
Q. Is this something that has been done for banks for over
a long period of time or is this something that is a more fecent
development? A. Some of them have been in existence for a
good while. But, I think that to answer your question, I think
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this has become more popular, more in general use in recent
years as a tool or measure of not only paying people better [64]
but holding them. True, with all fringe benefits. It's more
popular now than it was ten years ago. .
Q. Do Trust Company officers or other personnel ever meet
with the directors of correspondent banks? A. On occasion,
yes, sir. ,
Q. Could you give us an example of the type of occasions on
which that would happen or has happened? A. Well, generally,
it’s when you are involved in some type of new undertaking.
Portfolio accounting aid advisory service, for instance, usually
in smaller banks involves your directors. They might ask that you
present this to the Board of Directors or might have to do with
an investment program or might have to do with pension and
profit sharing program that affects all of it. In other words, the
Board would have to pass on it and then they will ask you to
present it to the Board of Directors. It is an opportunity we
welcome but we do not have very often. *
Q. I'd like to go back to one area that we covered a while
ago, namely, the seeking of advice by correspondent banks. I
believe you did give us some examples. Could you just sort
of, if you could, give us sort of a—just a general picture of the
various types or the range of things on which your correspondent
banks seek advice from you? A. You mean outside of the nox:
mal routine banking inquiries?
[65] Q. Well, even just taking that, what do you mean by
routine? You mean that’s routine? A. Well, of course, what
we would consider routine a layman wouldn't consider routine.
It could be anything from an overline or some question about a
particular loan or problem they were having locally, locating a
business or could be a tax problem, could be’ an investment
problem, could be something entirely personal that he would
ask you to do because of where you were located. It could be
he’d ask you to get him hotel accommodations for the Georgia-
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. Georgia Tech week-end, could be anything. Some friend, his
_ daughter is in town, needs a job. Some kid finishing school
needs to be interviewed. They ask of us the same favors you
would ask of your associate colleagues if you needed something
in another town with some firm you were associated with and
doing business with.
Q. So far as advice being sought by correspondent banks
from Trust Company, is this advice_always sought by the cor-
respondents, or does the Trust Company have any type of pro-
gram of proffering advice to its correspondent banks? A. We
don’t proffer advice nor do we advise on a continuing basis ex-
cept in maybe an investment area or the Trust investment area;
whereas, you enter into a contract to oversee a loan portfolio,
you reyiew them monthly, quarterly, daily, maybe daily, de-
pending on what they are. Other than [66] that, why, I think,
the answer to your question would be, no. We love to give ad-
vice but you can only give it when you are asked.
Q. Do you, for example, have a program for keeping your
correspondent posted with respect to your own policies or
practices? A. Well, we are not—our policies and practices are
not a secret but we have no permanent or on-going way to put
them before these people at all times. We have a correspondent-
conference that used to be every year, now it’s every other year,
at which time we very frankly state our policies, how we feel
about what is going to happen. If asked, we would tell, but you.
just don’t pick up the telephone and say, “Joe, let me tell you
what wonderful things we are doing today.”
Q. Even getting more specific than just general practices
and policies, how about Trust Company loan policies or loan
practices? Is there any continuing program of any kind to keep
your correspondents advised as to what you are doing in the
lending area? A. Not really, because this is not even—what
we like to do and what we want to do is not germane as far as
they are concerned. When they want something and need
something, that is the most important thing to them. They are
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neither interested nor inclined to listen to our policies at a time
like that. It’s really—I mean, if they ask, “What [67] are you
doing about so and so,” we'd be glad to tell them but they don’t
call up and say, “What is your policy with regard to a ten-year
term loan to a textile concern?” If that is what they want, they
just say, “Look, here’s what we need.” So, we have no way of,
you know, letting our policy be known on any given thing.
Q.. Incidentally, is there any difference in—I can’t think of
the word—is there any difference among your correspondent
customers in terms of the number of or types of services they
take from you? For example, I’ve seen the term primary cor-
respondent used, what is a primary correspondent? A. Well,
most banks have at least two or more relationships. They are
the one where RT 4 give their first loyalty and percentage, why,
most of their balances to and so forth would be the primary
correspondent. The onc they use most frequently, the one they
would think of calling when anything comes up, would be their.
primary correspondent.
The secondary would be where they maintain an account
. and maybe use it for investment purposes, so forth, on occasion
call on you, and so forth. But, generally, they have a primary
correspondent and secondary correspondent.
Q. Well, looking at just your primary correspondent, who
would maintain the good balances with you that you referred
to and take a great many of your services, does that relationship
you have with them in. any way enable Trust Company [68]
to exercise any control over the primary correspondent? A.
No, sir.
Mr. Hodgson: If Your Honor please, Mr. Kinkaid has been
leading Mr. Padgett all morning. We don’t have any objection
to him asking what would he do, when he asked him about con-
trol, but we insist that the word be defined before the witness
answers. I'd like to pose an objection.
The Court: Yes, I think the objection is well taken.
— 86 —
Mr. Kinkaid: Pardon, Your Honor?
The Court: I think the objection is well taken. As I under-
stood Mr. Padgett’s definition, the definition worked in the dif-
ferent direction from that in which you are using it. A large
bank might be the primary correspondent or secondary corre-
spondent of the smaller bank. He didn’t use the term in “he
sense that there is a group of smaller banks which are primary
correspondents of the larger or of the Trust Company. I under-
stood his definition was the primary correspondent is the bank
which the smaiier bank turns to most frequently for advice. The
secondary bank or correspondent is the one to which they may
have an investment account and then if it needs some other ad-
vice or something, it may turn to it. Yt wasn’t in the sense of
the flow from a big bank to the little bank:
[69] Mr. Kinkaid: Right. Now, I sée exactly what—yes. I
had it turned around in the question.
By Mr. Kinkaid
Q. So far as those correspondents which consider you their
primary—use you as their primary correspondent account, does
that relationship between you and those particular banks in any
way put you in a position or give you any ability to influence
what those banks do in their own banking business? A. None
whatsoever.
The Court: I think that is a real conclusion, if they value—
if they valued the advice of the Trust Company and take it, ob-
vicusly that is a method of influencing their conduct, because
they asked for advice and presumably they intend their con-
duct to be governed by it. So, I’m not sure that you and the wit-
ness are on the same wave length on this question.
Mr. Kinkaid: Well, in terms of the advice they seek, I think
you are perfectly right; they wouldn't be seeking advice if they
didn’t want to listen to it.
eo —
— 87 —
The Court: If they didn’t want to [70] follow it and be in-
fluenced by it. What you are asking him, if they asked advice,
do they have to take it, and I think the answer is obvious: no,
they don’t have to take it.
By Mr. Kinkaid .
Q. Mr. Padgett, was that what you had in mind when I
asked the question and you gave the answer? A. Well, in strictly
referring to banking matters, financial matters, then most of the
time they will—if they didn’t want your advice, they wouldn't
ask for it. When they do ask for it, they do take it. Now, as I
understood the other part of your question, what influence I
would have over them in any matter outside of banking, it is
absolutely none. Because, as we all know, and whether you
know or not, most_of your correspondent bankers are right in-
dependent, influential, well-to-do, knowledgeable people, and
they make up their own mind about whatever they want to.
And, so in banking, I mean in matters pertaining to banking,
usually they do accept your advice, but on other matters, they
may ask your advice and then not accept it.
The Court: All the things you have been talking about this
morning are banking matters, aren't they?
A. Yes,. sir.
[71] Mr. Kinkaid: Your Honor, excuse me just one minute,
please.
’ By Mr. Kinkaid
Q. Let me try, if I can, to set up a definition of control. Let
me define it as the ability to dictate the policies and practices
of a bank. Now, using that as the definition, would your re-
lationship with those banks that treat you and consider you their
primary correspondent, would that ‘relationship put you in a
position to exercise control, as I have just defined it?
Mr. Hodgson: If Your Honor please, I have no objection to
this question if this answer is responsive only to that question,
— 88 —
so long as Mr. Kinkaid’s definition of control is recognized as
having had no substance created for it in this case, or, indeed,
in any other area I know of. But, if he just wants to ask that
hypothetical question, I have no objection.
The Court: All right. With that understanding, you may
answer.
A. Would you repeat it now?
By Mr. Kinkaid
Q. Okay. We have got a definition of control as meaning
the ability to dictate policies or practices of a bank, and the
question is, using that definition, does [72] your relationship
with those banks that use you as their primary correspondent
put you in the position to exercise that kind of control? A. No.
Q. Mr. Padgett, are you familiar with recent amendments
to the Bank Holding Company Act that were passed, as I re-
call, in late 1970? A. You would have to be more specific
than that, and name them. There have been some changes.
Q. Well, for example, are you aware that there was an
amendment to the Bank Holding Company Act in late 1970,
which added the so-called controlling influence test to defini-
tion of subsidiary? Is that familiar to you at all? A. I have
read it. If you want to ask me a question about it, ask me, and I
will te
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