Appendix to Brief of Defendants Appellees Appellants — United States Overseas Airlines, Inc. v. Venezuela (No. 539)

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-—“-Pnited States Court of Appeal

- FOR THE SECOND CIRCUIT

Civm Action No. 72-376

‘

Unitep States Overseas AIRLINES, Inc., Raupa W. E. Cox,

Jr., R. W. E. Cox, Letitia Cox, co-partners doing business

as Ocean Air Tradeways ; ‘and Ratrx Cox, Jr., Letra H.

Cox, Resexagt } ‘L. McSweeney, and Anprew L. Cox,-‘a

partnership, doing-business under the firm name and ote

of Ocean Arr TRADEWAYS,

Plaintiff s-A ppellants-Appellees,

‘against —

Compania AEREA ViasEs Expresos DE VENEzUELA, §.A., -

AgRoviAS VENEZUELA Evropa and JorGE MaRcANo,

Defendants-Appellees-Appellants.

* 3 as w<

ON APPEAL FROM JUDGMENT OF THE DISTRICT COURT.

FOR THE SOUTHERN DISTRICT OF NEW YORK

APPENDIX TO BRIEF. OF DEFENDANTS-

MAREE TRA ATS a

- ~

“Se” * Hae a Russet, & NicKERson;

¥ — for ——

mare _Appellants,:

nd ae <_..122 East 42nd’ Street,

““<).' ~ New York, N. 'Y.

7 yO ee: 7.

@e ® > NN

1 >

‘Excerpts F rom Transcript of Testimony |

W itnesses for Plaintiff

| PAGE

Ralph .Cox, J r: “ 7

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Jorge Mareano: ; aa

| Ji rect AcdeeSscheeesnanskqneansennneeethequnnkessenanteneesbetegouasehenced 28, 92

Heriry Schindall:

ee Ons : "

Cross ... ne |

Jorge Marcano (Resumed) :* .

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Alejo. De Cervera:

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Redipect otc seksi acaieaneuen 46.

o ; .

NE sAcchsciscunahh uatiinaseicSbodibuaceiechdecltiaa cmssiaaehesecdasta ic cuaaiiiiin thai 108

Daniel .C. Cox, Jr.: ve

i. NIE.” sncesnil cehisssceaubssnta Riel Licata da ia a sediaecmeaakculs 52

Alexander Rozawick: ;

ae Cer ipuaieiacnsssiicaslioesitesdebapamied ~ 110

ai PAGE. -

Witnesses for Defendant =

- Albert W. Goteh: to ak “s pote

Direct sy RES _ eee scan lubindbtheinicinssteunins apse 48 A

Redirect. .......... VARA 18 SORA aT WENO E Os |

John S. Russell, Jr.:

BE © eartecisgnnnacenieas moron tinmapmsasecetiaag = AE

RY ccisiensaviiercupnintercunbeinlaiginieian Dipsihasedtinieanniions 60

John Page Marshall: , | 9...

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SS AEE ecdatescth enc cdlledcnae LOPE La AR 70

IE © Sadia ainscoccconcctase tua asattanccaaiaeaceeamnes " 92

‘William C. Wold: ,

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RES RON cS REIN ANT Mae CaP Ue tae 83

IR es eee 83, 87, 90

Rebraea: ee 88,90

‘Louis: Zinman: sae ay \

a, SPE ea aE Ce E a

CS cckncahied iMibssceiccntelssathinsoaMcien mecuciath, 100

Deposition from Fremont W. Burger arene

Deposition from Lloyd Webb \..0.0.. cece 110

” . ; j

Deposition from Earl W. Clemett .....2............... irda ;

Deposition from Ralph Rts EL *ccUdGialcissaseetaac ee: 119

Colloquy seninaaehiaaie adacaiebinlan YL ENE Me be MO a 121 :

Translation of Opinion of Dr. Ramon Tenorio ......... 131 _

United States District Court

SOUTHERN DISTRICT OF NEW YORK

Civ. No. 72-376 & 3° .

UNitep Srates oe RSEAS AIRLINES, Ixc., and. Rien Ww. E.

‘Cox, Jr, Ro W. Ki. Cox, Letitia Cox, co-partners doing

business. as Ocean Air Tradeways, and Ratpx Cox, JR.,.

Levirta H. Cox, Resexan L. McSwerexey and ANDREW L.

Cox, a partnership, doing business ‘under the firm _name

_and style of Ocean Air’ 'TRApDEWays,

Plaintiffs.

‘US. Sel

COMPANIA AEREA VIAJES [EXPRESOS DE VENEZUELA, S.A.,

AEROVIAS VENEZUELA europa and JORGE Marcaxo,

: Defendants.

Before: Hon. Epmunp L. Patmrert, District Judge.

“New York, June 15, 1956

10.30 o’clock a.m.

APPEARANCES:

Maurice L..Scnorenwarp, Esq., Attorney for

Plaintiffs; Ty oe

Mavcaice L. Scnorswanp, Esq., and°

®BerNxarp B. Potak, Esy., of Counsel.

Hate Stimson Russet .& NicKERsON, Esqs.,

Attorneys for Defendants; |

Evcene:H. Nickerson, Hsq., of Counsel.

a - 2 e * 3

£9] Mr. Schoenwald:

} Ralph Cor, Ir. direct—Cross_

I made ah application for the adjournment of this trial

— because the person we expec ted would -testify as to dam-

.ages, Mr. Herbert Goldberg, ws taken ill with a heart

attack and is still ill, and eounsel offered to permit me

to introduce a document which would indicate what Mr,

Goldberg would have testified to if -he had been here, and

this is contained in a Stipulation.

_ Testimony

ee . ———— ae

[13] RALPH COX, IR, called as.a witness on behalf

of te plaintiffs, — first ‘dul¥ sworn, testifie mess fol-

lows: . .. : ° '

Fie * -@ .

{78] The Court: In other words, the purport of

‘it was you macde—your ‘complaint and they told you

to go [79]. ahead and ‘Derformt

- The Witness: Yes. ae

The Court: You told them you couldn’t perforn’

and it ended on a note of disagreement, without:

anything being agreed to? S ‘i

The Witness: That. is correct.

: 2

“

° Ss So

£82] Cross-eramination by Mr. Nickerson: —

Q. Mr. Cox, what office do you hold in United States

Overseas Airlines? “A. Vice-president. .

Q. Are you still. a member of the cpap of Ocean ~

Air Tradeways? A. Yes. ; 4

(). Were you president: of U. 8. 0. A. in 19511 A. I was.

. 3 - - :

ee Ralph Coz, ree °

_ Q. When did you become vice- president? ALA couple

of years ago. <i

: @ ° «

[84] Q. How long had you been in the aviation busi-

ness in 1951? A. Do you mean*when did I start to fly as

a pilot or in business as such?

Q. In any capacity. A. I started in aviation in 1939.

| _Q. When did. you-start in USOA? A. USOA became _

operative in January 1951. Prior to that there Was an |

Ocean Air Tradeways operating, which started in 1946.

Q. What %@nd of operation was that, Ocean Air Trado-

wayst A. It was the same as the U SOA operation, It

was a non-scheduled U. S. earrier type operation.

Q. Transporting passengers, mail, cargo? .A. We were

never permitted to carry mail. We did hea a passen-

gers and cargo. s a

| Q. Did _you_have-any—other 7 companies that ; you werd

connected with, in the aviation business in 1951? A. No.

[8s 1] Q. How ities employees were there of USOA?

_lam now referring to United States’ Overseas Airlings as

USOA. You understand that? A. Yes. : rf

Q. How many employees were there of USOA in the

summer of 1951, July? A. We had 90 to 75: employees,

I believe.

Q. How many officers did yon have? A. Four.

_ Q. Who .were they, With the titles? A. I was the

~president and treasurer. Clemett, Earl. Clemett, Was a.

vice-president of maintenance. Lloyd Webb was vice-

president of operations. R." L. MeSweeney was, othe, sec

retary. ; ; ; ve

Q. Did you have-a man named Jones there? , “A. Yes.

> = P 4

Ralph Cox, Jr.—Cross . ‘

Q. What was his title, if amy?. A. He was purchasing

agent’ at the time. » ;

Q. Did you have_a man -named Ranevet A. Exeuse

me. We had Mr. MeCormick also ag a vice- president. I

had overlooked John McCormick.

,_ 086] Q. What was his job? A. He was ar: vice-

president and he was the Washington representative,

Q: Did you have a man named Sanour? -A. We did.”

Q. What was he? A. He was a pilot and general busi-

ness administrator with us. .

~ Q. Wasn’t he'a lawyer? A. He was a ‘graduate lawyer.

: » e ———

| te . *

Q. Mr. Cox, you testified on your direct exauijnation

that-in May' 1951 you were in Kurope. When asin you BO

- to Europe? A. May of 1951. ) : ,

Q. Yes, what time in May? A Around the middle of

May. | s

Q. Were you, over there on business of the U SOAT A.

I was on business generally, yes.

Q. Where did you go in EF tarope? - A. We went to Paris,

England, Germany; I think Italy. aah :

Q. Where did you go in Italy ?- [87] -A. W here did I go

in Italy? Milan and Venice, .

Q. While you were in Paris did vou.receive any eor-

respondence concerning AVE? A. believe T. did, ‘from

Mr. Clemett. a. .

| : SO | 7 * ° * | : |

>. Q. I show you copy of a letter datedJune 5th and T ask

you whether you. received the original of that when ‘you

were in* Europe. .A>Yes, this appears to be a copy. of

what I received. ca

Ralph Coz, ‘Jr. —Cross |

Q. Do you notice. in that, Mr. Cox, the sentence “Con.

tact AVE in Rome, Italy for complete picture on business.

from Rome to Venezuela’? A. I notice- that. —

-_— |

Mr. Nickerson: I offer this in “evidence, your

Honor. ; are

* 2

ies > [887 (Received? in ‘evidence as Defendant’ s Ex-

aa hibit BQ.) Se \

a. Had. you ‘heard: about AVE prior to the date of that

letter?— ‘A. Yes., “ Dest

“Q. W hom had you heard from? A. From one of “our

pilots by the name of Patton. |

Q. How long before that letter was it that you: heard

|. from hint? A. Oh, T- would say two or three weeks.

| = Q. Did you contact. AVE in Rome, Italy for the com-_

plete picture on business from Rome to V enezuela when:

‘you were in Europe? A. I ean’t recall if I-did.- I-don’t

think T did. Jones may have sent them a wire. But if_

my recollection. js correct, we never received any reply

or it was missent or something.

Mr. Nickerson: Do you have a copy of that

wire? | eri :

[89] Q. Pcie you Defendant’s ‘Exhibit C for identifi-

@ition.and ask you if you received that letter. -A. Yes,

I think I received this letter. .

: ae idkereck: I offer that in’ \ etdlaanie.

(Received in evidence as Defendant’s Exhibit C.)

. +

s.- s s

"Ralph Coz; Jr. —Cross

[90]. Q. Defendant’s ‘Exhibit id Mr. Bee: appears . -to

set forth certain communications from Clem to Fritz and

Fritz to Clem: Can you tell us who Clem was? . A. That

was Clemett, Earl° W. Clemett.

Q. And ‘can you tell us who. Decesk. was—I am sorry—

_ who Fritz Was? . A. Fritz refers to Frentont Burger, our

. chief pilot. : i .

Q. I show you Défendant’ ’s Exhibit D for identification

“and ask you whether that is the communitation which you

; referred to, which Jones ReOF to AV E. A. Yes, this looks

; like a copy of the—-

Mr. Nitkerean: 1 will offer that in evidence.

A. (Continuing) —tele “gram. We néver receiv ed an an-

Sw er to that.

» Mr..Schoenwald: No objection.

' (Received in evidence as Defendant’s Exhibit D.)

° e*.—-C«‘ *

[91] Mr. Nickerson:

Is it conceded that ‘Defendant’s Exhibit C is

dated June 7, 1951?

Mr, Schoenwald: Yes, it is.

Q. On Defendant’s Exhibit D, Mr. Cox, Mr. Jones de- |

scribes Jimself as general manager. Was that correét?

A. TH t eventual? became eorrect. ™ don’t know the

date.

Q. June 10, 19512 A’. Then he at that time was pee

manager. <

e Lee Poa) Tapsaiiy Coz, Jr. dias!

Q. Ww as he over in. Europe with you-at that time? - A.

He was. oe.

—Q. Mr. Cox, did you talk with one of your vice-.

presidents; Mr. Webb, in London about AVE in June of

1951? A. I spoke «foe Webb. I think he came over as a’

. [92] crew member and went back around that time, and .

he volunteered that he w ould look into this, the possibili-

. ties of this operation, when he returned to the States.

I said, ‘‘Well, gd ahead and do it.”’

_ Q. Have you*vour diary here, Mr. Coxt A. No, I don’t.

— Q., Didn’t bring. it. with you? A. No: | |

Q. I will read from your deposition. See if this re-

freshes your recollection as to what your diary: said on

the date of May. 31, 1951:

“Lloyd called at. about. eleven p.m.’’:

| ‘Who «is Lloyd, Webb? A. That would be Webb.

Q. 436 is ‘Saud and ready to return’ to the United

States and he is going along since so much needs to be

done in — York and he will try to contact AVE

Caracas.”? _ & a

Do you recall inserting ‘that in your diary? A. That

is probably: correct, yes. ‘

Q- Do you recall whether | it is correct? -A. I cannot -

recall inserting it.

Q. I will. show you your’ sheaanaittlies | £93] A. If it is

in there, it is in there.

lection.

Q. Do, you recall. whether. that. language that I heave -

read is in your diary? A. Not without checking the diary.

It sounds like it, though. ? :

”

A. That. is <ubstantially w hat happened, to my recol-

Ralph Coz, Ir ALross |

Q. Will you bring your diary tomorrow? | A. tT don’t -

know where the diary. is. q:

Mr. Nickerson: Mr. Schoenwald, will 6: bring

Mr. Cox’s. diary tomorrow?

Mr. Schoenwald: If I have it. I don’t thiink that

we have it.

Q. Did you dispose of it, “Mr. Cox? A. No, I never

dispose of things like that.

Q. Where is your ee do you know? pe Iti is _——

at my home. —

Q. Is that where you generally keep it? A. That’s he

right.

.Q. Will you bring that uileorrew, Mr. Coxt A. Well,

I would .have to have it sent in. It [94] isn’t locally

_ available. : |

e e _* |

The Court: Were you reading from. a | deposition

taken before trial?

Mr..Nickerson: Yes, sir. 7

The Court: In the-absence of the diary. itself,

I.take it there would be no quarrel w ‘ith any entry -

from the diary read into the deposition, it woald

he accepted as secondary proof.

Mr. Schoenwald: We are not making a any “objec- |

tion to the use of the text of the deposition. .

7? «

one

(961 . é Iwill show you Defendant's Exhibit E for

identification and ask you whether you received a copy.of

that. A. Did you ask me if I got a copy of this?.

Q. Yes. ‘A. I probably did, but I don’t recall it. ‘Tt is

from Clemett to Bush.

Sa .

- Ralph Coz, Fr. -ftoee

Mr. Nickerson: I will offer it. in evidence. -

Mr. Schoenwald: I am not: going. to object, to

* its admission as an exhibit. .

[97] wise” in evidence as Defendant’ s Scat

hibit E.) |

= . * os

[98] Mr. Niekerson: May I have a letter dated

June 17th from Clemett to Coxt I don’t nave a

copy.

Q. I show you copy ofa letter dated June 17th, ad-

. dressed ‘to “Dear Ralph’’ and signed by ‘““Clemett"? and

_ask you whether you received the original. A. Yes, I

believe I received the original. e ;

Mr. Nickerson: I offer that in evidence. That

will be BR, your Honor.-- |

(Received in evidence as Defendant’ Ss Exhibit.

BR.)

Q. Do ‘you’ recall, Mr. Cox; after -you got back from

‘Europe, who was the first person in your organization |

‘that you talked to about AVE?. A. McCormick, I _—.

was the first.

QQ. Let me refiesh your recolléction.. On page 14 of .

_ your. deposition, where you say, ‘‘When I got back from.

Europe I heard about AVE from a man by the name . ae

[99] of Waters.”’ Do you recall whether or not—does aS

that refresh your récollection whether he was the first

one you talked to? A. It doesn’t recall to my recollection:

he was the first because. when I got off the ship I was mét

by McCormick, whether—

}

! » | er ia yee, ‘10

Ralph Cox,+Jr..—Cross

-Q. It doesnvt refresh your recollection A. And at that |

~ &me— | °

Q. Excuse me. ‘. At Faas time 1 hadn’t even, met

Waters. I didn’t meet him until, two or three days: later.

Q. When was Waters hired by you? A. He was hired »

when I was in Europe, sometime in June, I think. ©

Q. And you did talk to him’ after f¥ou got, back from:

Europe, did you?’ A. After I got back to Wildwood. First

I stayed in Ne York a couple of days.’ Then I spoke

to Waters—I met: him and I-spoke to him.

Q. Didnt vou know whether Waters had been employed

by AVE prior to the time he was employed by USOA?

A. I belieye he stated he had. ,

Q. Did ) yeu talk to him about the pote ntial of [100] the

operation at all? A. If seems to me Waters took part in

‘a conversation with McCormick and Burger and Clemett-

down. in WildW6od, hut it was basically communications

and Waters telling us how familiar’ he was with Spanish

~~ of the type-of-operation down there.

- @ Did you know whether Mr. Waters had been. over

-the AVE route before? A. Tt seems to me he told me he

had been over it in diis position, down there ,with AVE

before. aa ard.

‘Q.~ Does. this sentence from page I8 of your deposition

. < ‘ . . :

refresh Your recollection as to whether vou talked about

the potential with Mr. Waters, reading from the middle.

- of the page: ‘He understood _they had a potential of two

trips a week, hetween VenezhAla and Europe’*? Do. you

recall Wise ‘cussing that with Waters? A. Probably I did.

(). Do you recall that it. was Waters who made the

arrangements *for Colonel Mareano to meet with Mr.

MeCormick or tried to make atrangements?. A. I don’t

know if he did or not. <Q

os ee

= as

a ;

Ralph ¢ Con, Jr. pune |

. ° ’ e. .

Q. I will re ae from your de wettion, page 23: 4] spoke

»with MeCormick by telephone from [101] Wildwood. He

was in Washington. And ‘it seems ts me that Waters

had made arrange ‘ments or thought he had made arrange-

ments for Mareano to meet .MeCormick’’?

Does that refresh your recollection? <A. Yes, that ddes.

Q. After. you got back did you talk to Clemett about

_the AVE operation? A. Yes.

_ Q..What was Clemett’s position with the compahy?

What» was his function? I know he was a vice- -president.

A, He was in charge of. maintenance.

Q.: Was he a vice- president? A. That's right.

Q. Did you talk with Webb after\an got back ‘to the

United States about AVE? A. T believe so, but it was

mostly Clemett and Me ormick, really, sacle MeCormick °

and Burger.

Q. You also talked with burger, did you? A. That’s -

right. c}°

Q. Do you reeall that vou kept after, MeCormick in.

order to. make an appointment with Mr. Marshall or

Colonel. Mareano to discuss entry into a deal? A. 1 don’t

recall keeping after MeCormick. MeCormick was in Wash-

ington, and just whether he kept (102) after’ Marshall

or vice versa’ I don't recall. Usualiy MeCormick and I.

spoke every day on the phone, though, about other busi- |

ness, . oat

Q. Page 26 of your de position : “After md eonversa-

tion with W aters, I called MeCormick to see what hethad

done, if anything, or what had) transpited.”’ 4

Do you recall calling MeCormick and asking that? A. *

I probably did. I can ‘@recall the conversation, but T was

quite sure, as I say, wel), that. 1 spoke every day _to Me-

Cormick. 5 . ~

12°

Ralph Coz, Jr.—Cross

‘®

Q. Did you ask him wi he had done? A. Yes:

Q. With respect to ‘AVE. A. believe I did, yes.

‘ ae |

Q. In your conversations with Mr. Clemett in or abbut

June of 1951,.did he make any argument to you that a

deal with AVE wouldn’t be a good deal? A.’On the con-

trary, Clemett was the one that—Clemett- had that Polly-

anna viewpoint towards. almost - everything—he was in.

- favor. of it becausé we didn’t have too great an operation.

We were dependent from time to time on military con-

tracts, and he thought it would be a good idea to get a-

‘schedule run going, if [103] I remember correctly, and ,

‘there were a lot of conversations. back and forth. One

day we- thought it sounded good, the next day we thought

it-didn’t sound so good. We didn’t know too much about

it; it was a, speculation. ‘

(. So Clemett was the one who thought it would be a

good opportunity, did he? A, Clemept wrote mie two .

letters in Paris, and was really the first one I he. ard about

it from. ts

Q. You are sure he didn’ t argue to you that it wasn't”

_ a good opportunity? A. [f he did, I don’t reeall it: |

Q. Are. yau sure he did say that? A. T am fairly. cer-

tain. All of-as viewed it with favor, provided—

* @.. Now I am asking you about Clemett and only about

Clémett. A. Clemett took part in the conversations.. It .

_ Wasn't just Clemett and me. We were all in this thing

together. R

7 Did you know who Gotch & Craw ford : were, Mr. Cox?»

' A. No, I did not.

Q. Had never heard of them. before, had you? [104]

A. No.

BB i.

Ralph Cox, dr. Cross

(105) Q. How long had° Clemett been with you, Mr.

Vox, in 1951, July? -

. - e@

Aci think. he had been with us for. around six < £106]

months. ees

Q.-How long had -Burger been with yout A. Probably

—I think Burger came with us around the first of the-

year, around Christmastime, thereabouts, of 1950.

oQ. How long had Webb béen with you?’ A. He had

arrived a couple of months after Clemett, in the spring

of 1951.

Q. How «bout Mr. MeCormick? fe * McCormick had

Leen with us for about ten months probably at that tame. -

e «+ .

ea “

[142] Q. Do vou or do you not recall what the general .

| outline of the proposed operating grrangements was?’ A.

Right now | don’t reeall it. IT would have to read it over

again, ; |

Q. Do vou recall that) in’ those ‘proposed operating

arrangements AVE was to retain‘responsibility for pro-

curement, promotion, reservations and_ ticketing: of all

ttafhe?) A. That is what

we Weren't interested in Having traffic separated, so [113]

that we would just take it oF leave it when it was gener-

ated and nat control tariffs or, rather, the commissions,

and the policies of procurement, .et cetera. We were

‘specifically discussing that, referring.to generating traffic

1 American colleges out-of Bermuda, which was talked

ahout to some extent, and T didn’t feel we should be |

“faced with®a ticket eager coming along in the- middle of

this thing and say ‘ing, | fe’ want 40 percent,’’. or some-

‘thing like that. Thatis when‘l said we are going to have

to have control of this traffic.

“>

hey proposed, but we said that —.

14°

, Ralph Cox, Jr.,—Cross

Q. So right fromthe beginning, Mr. Cox, you told Mr.

Marshall, did vou not, USOA wanted control of all traffic |

procurement, did you?- A. Or words to that effect. I+)

might add that partic ‘ularly all traffic in Rome was

entirely— — i

. ¢ e@ ; 5

(117d Q. Let me read froin your dépasition, page 88:

.“He (referring to Mr. Marshall) said that openly the

~ Venezuelan embassy would probably not embarrass them-

Selves too much by showing partiality to AVE.’

Do -vou reeall that? A. That ’s right, he said that.

- Q. Do vou recall testifying to that? A. Yes, I do, and

that he further stated— ,

Me.. Nicke ‘rson: T move. to. strike it out. This

Witness will not/ remain responsive to my question,

- The C ourt: Vos.

«ae . ° .e +i.

p20] Q). Who Yirafted Defendant's ; Exhibit’ GG? A,

jurver drafted this, to my hest recellection.

* * - «

(1217 Q. Did you make any change in it? A. “After:

Burger. draftest a j

Q. Yes... A, I don't recall: T might have.

Q. You know vou made no changes in it, don"t vou? A,

We are looking back five vears. We went over these notes.

He made a rough draft and, then—-usualky he made a rongh

draft and then a smooth copy. ‘There mat have been some

changes but if there were T don't remember. ”

Q. Have you refreshed vour recollection for tliis trial:

by reading your deposition? ASSome time'ago. T haven't

had a chance to do it in the--to do ‘it recently,

* Q. T read from page 100, next-to-the-last question:

*“Q. Did vou change anything that Mr. Burger had

written? ‘‘A. No,-not that I reeall."’ oe

-«

Ralph Cox, Jr..—Cross

Do you recall that testimony? A. Yes. Just about

what I said now. I don’t recall. =

[122] Q. From page 100:

MQ. Do you have a prior draft of Defendanigs Exhibit

Gt A. I don’t. know of any such thing.”’

- Do you recall that testimony? A. I can’t recall it.

What is Gt

Q. G is the exhibit I sii showed you, the letter dated

July 19th. A. Do I have a prier draft of that? I don’t -

recall, R s i Sue

— Q. Do you recall that testimony? A. That is in 1951,

that testimony, igy’t it, or 19521 ee

Q. Do you recall that testimony? A. I don’t recall

stating: it’ just that \ way. If it jis in | there, I must have

_ said’ it. a

s e | 2 e

[125] Q. Were there any prior drafts of the letter of

July 21st, Defendant’ = Exhibit I, Mr. Cox? [126] A. I can-

not recall.

Q. I will read from your deposition, page 112:

“Q. Did he (referring to Burger) make any prior

draft? A. I don’t believe there were any such.’ ome

Do you recall that? Does that refresh ypur-récollec-

“Mont A. Yes: -. a

Q. Do you recall making a referénce.to the draft of—

to the letter of July 21,1951, Defendant’s Exhibit I,

‘vour diary? A. I don’t recall.

Q. Have you read your diary since you were exaniined

on your deposition? A. No. ,

(). I-will read from the top of page 117, your testimony,

as to what is cohtained in your diary for. July 21, 1951,

Saturday:

i. ‘ Sy

don’t recall his being there. He’ may have been.

| Ralph Coz, Jr.,—Cross

‘‘Burger and I worked out an answer to Marshall’s

telephone call regarding AVE and I-hope it is accepted.”

Do you recall that? A. I probably wrote that, yes.

Q. Did you have any. discussion with Mr. Marshall

[127] about the provision in the contract which recites—

it is IG, in the third. sentence—‘‘The president of CAVE

shall be reimbursed by Overseas for actual business ex.

pense and, subject: to the attainment of an annual average

load factor of not less than 50 perat, shall also receive

“an annual salary of $15,000 a year.’’

Did you discuss that: load _ factor of not less than 5i)

percent with Mr. Marshallt

A. I believe so. ee |

Q. When you signed the contract on July 25th, Mr. Cox,

who was present? <A. Miss Wilcox, McCormick, Marshall.

and J think Burger. G °

Q. Sanour. was there, wasn’t het. A. “Was he there!

I don’t remember if he was there or not.

Q. Do you recall whether he. was or not? [128]: A. I!

Q. I show you Defendant’s Exhibit Q for identification

and ask you whether you signed the original. ~ ae |

A. Yes. I gave that letter to Mr. Burger. ,_

Q. Can you recall the date when you signed it, ApProxi-

mately? A. It must have been about the time that he left

with the airplane for Caracas from Wildw ood. That-is-

my best recollection. /

17,

Ralph Coz, Jr.,—Cross

Q. About what date was that? A. f would have to chéetk

those = records. It was around the rere of —_—

I think. |

Mr. Nickerson: I offer it in evidence.

a eS ae

(Received in’ evidence as Defendant’ S Exhibit

Q.) ee | i.

[130] Q. I show you ‘Defendant’ s Exhibit for iden

tification. 1 —————— Sr ee sm

e . e

0131) A. Yes, I believe this* came i Burger..

. Mr. Nickerson I. offer that in evidence:

(Received in evidence as Defendant’s Exhibit

* e e :

Q. Mr. Cox, do you am this te stimony stom your

. deposition: ‘

“Q. Did you diseuss Mr. Waters’ analysis? .That is

the exhibit that has just. been marked. A. I considered

Mr. Waters, who told me he had gotten a couple of books

“published, was a little verbose on- some of his comments,

“but I took into consideration. the experience and back-

ground of his knowledge ‘of this AY K; eee. |

. . @ e °

(132] A. Yes. gh

Q. “‘I did feel that Waters was primarily a flight com-

munications expert but not an overall expert on every

single phase, ‘However, his comments on other depart- :

ments: we did not take lightly because he has been over

3) a.

eee ce

| Ralph Cox, Jr.—Cross

~¢

the runs :and he knew these people and we had_ to -start.

somewhere.’”

Do you recall that testimony? A. T believe I do.

Q. Did you discuss ‘Defendant’s Exhibit P,:which has

just been marked, with anyone at the time you read it?

A:-Is that signed by Burger or Waters? ;

Q. Waters.. A. That is ee think: I diseussed

_itwith—Burger. ~ [.

Q. Did you ‘enon this sentence with Derenr: ‘*Madrid

was the most difficult to manage in the European area

during AVE’s past experience for many reasons. The

laws were difficult to comply with, dollars are practically

impossible. té remove from the country. [133] Thns, only.

token passengers should be loaded-at Madrid.’’

Do you recall discussing -that with Mr. Burger? A.

‘That is westbound out’ of Madrid, isn’t it?

Q. What I- read, do you recall discussing it? A. Yes,

I think | we discussed that. ‘ '

of se e -_

~ Q. When did you ‘discuss it?. A. This was prior to our

going down to Venezuela or else it was prior to our send.

ing the airplane down.. These were all Mr. Waters’

- comments. .

a @ .

[134] Q. Do you recall discussing with Mr. Burger

whether Paris was a trving station?’ A. No, I don’ t recall!

that. We weren’t even going to go into: Paris, ce rtainly .

“not in the initial phases. 7

it ia . e

Q. As a matter of fact, on your first. flights you consid-

‘ered that Portugal was only going to be the fuel stop,

Ralph: Coz, Jr.—Cross

e ; 8 ome ;

didn’t yout A. We assumed full loads weathpund sir,

We were only going to stop for fuel, that’s right but. -

we anticipated developing it. cer

: ‘ ee

[136] Q. Do you recall that dlonel Marcano told him

in the presence of you and several others of USOA that

he should give you any information that vou wished that

[137] was in the books? “A. I don’t recall that.

- Q. Do you recall that he didn’t say that? A. I don’t

’ recall-that he said_it or not. ' Ie ahs |

Q..Do you recall you requested the by-laws of CAVE?

A. It seems to me we did. es

Q. Did you get them? A. I think we ia | |

Q. Do you recall that you asked Colonel Mareano to

“rome to—eancel an agency contract which he had with an

Agent in the United States? A-Along the lines of our

3 wanting to control the traffic, Yes, we asked that he cancel, -

| think jit was, Red Air or some such name, up in New

‘York. a ee ey a

~-Q. Do you recall whether he did do it while vou were

down there? A. He said he sent a wire doing so.

Q. Did you see the wire that he sent? A. IT think we_

had copies of that wire. I cannot remember offhand.

~ QT show you Defendant's Exhibit U_and ask you

whether you saw a copy of that? “A. It seems to me [ .

recall seeing this. © | |

C138) Mr. Nickerson: I offer it in evidence.

e *. @ .

(Received in evidence as Defendant's Exhibit U.) .

Q. When vou came back from Caracas, after that trip,

did you leave anyone down there from USOA? A. I think -

we left Waters down there. =

Ralph Coz, r r.—Cross

Q. Did you leave Van Bohemant (A. I can’t recall if

we left Van, Boheman or not. We ‘may have, though. :.,

would have to check that. , e

: . it .” e . °- cs: {

Q. I will show you Defendant’s Exhibit AC for iden-

tification, a cable from Burger t6)Cox, dated August 20,

1951, and ask you if you received the [139] original of

it. A. I believe we received this at Wildwood, yes.

Mr. Nickerson : I offer that in evidence.

_ Q.. What was. the date, on or about the date? |

Sux e es @e : ‘

A. This is the date—the day and month. That is 20/8,

It must be August 20th: but I cannot, tell from that. That

doesn’t seem Tight. I don’t ‘think that is correct. _

; e > @ e ‘ j

Q. I he you Defendant’s Exhibit AL tee ‘identifica.

tion and ask. you if you received the original of. that.

[140] A. Yes, I think we received this too. |

~ Mr. Nickerson : I offer that in evidence.

. sa ‘

Q. Do you recall about when you received it? A. It is

dated be ae aard, — "o..

-(Resivel in evidence _ as Defendant? s ‘Exhibit

AL. ) :

(Defendant's. Exhibit AC received in evidence. )

Ralph Coz, Jr.—Cross |

C141] Q. I show you Defendant’s Exhibit AB for iden- »

_ tification and ask you if you received the original of that .

on or bout its date. A, Yes, we received this.

Mr. Nickerson: I offer that im evidence.

° °° -e

(Received in evidence . as’ Defendant” Ss Exhibit

pS oe as 4

‘Q. ‘Did you give Mr. Burger peranission to pabitiate an

inter-line agreement with at Italia? A. In so far as

USOA could do so, yes.

£145] Q. oo you been a defendant in. quite a lot of

lawsuits, Mr. Cox, you or your company? A. In quite a

lot of lawsuits?

~ Q. How many?

Mr. ihiiesonwah: I would like that mation to

_ be clear. Is he talking about the company or Mr.

Cox?

, Mr, Nickerson: I will hecads it down.

“Q. Mr. Cox, first, personally. A. Oh, I have been sued

a few times, but I think quite a number.

Q. How manyt A. I guess about three or four law-

swits I have had. : . S

Q. And how about USOA?. Has USOA been a defend- |

ant in quite-a number of lawsuits? A. No, I would not

say so. . ; ' : ©, :

Q. How many? ° _ me e ?

; cca ° e | ee

~The Court: T will allow ee question on [146]

the condition that it. be amended to provide that

. ‘ Ja.

Ge Be

Ralph Cox, Jr.,—Cross

it ——- the time of” his: connection with the

company. | |

Q. While you. were with USOA how many lawsuits has

it been int} A. There have been, two or three.

Q. Are you sure that is all? A. Well, are you talking

about going to trial or being sued and various things?

Q. Suits brought against you. A. How is that?

Q. A’suit that‘is brought against you irrespective of

“whether you went to trial. A. I can’t tell you. Every

once in a while some employee sues for some claim of

some sort or other and it may. go to trial and it may

ie not..

, Q. Didn’t Waters sue you ‘for ‘ie salary you didn’t

pay him? A. We paid him. We overpaid Mr. Waters. Mr.

Waters had quite'a claim there that was’ just fantastic.

Q. He sued you? A. He sued us, that’s right. :

Q. Didn’t Mr. W arner. sue you? A. Mr. Warner sued

us, that’s right.

Q. Was that for services that he rendered you? [147]

A. And Warner set them up, set himself up as an expert

over Burger, and claimed fantastic sums which weren't

in the picture. at all. —

Q. USOA has had quite a history of violations of the

Civil Aeronauties Administration? A. Oh, no, they

haven't. No, _— haven’t.

Mr. Schoenwald Objection.

Q. Let me ask you this. Has USOA ever had any vio-

lations alleged against it by the Civil Aeronautics Board

for failure to maintain its records at its base—

Qtr. Schoenwald : Objection.

The Court: Why are you going into this?

es. eo

Ralph Coz, Jr—Cross

_ Mr. Niekerson: Your Honor, * want to show—

~The Court: Relationship between the corpora-

tion and the civil regulating agency could not pos-

_ sibly affect the issues of this case or the witness’s. .

credibility. | ee

Mr. Nickerson:. I want to show. the. absolute

disregard that this individual has for any legal

processes and any regulation, and I have them

here, they are as'‘long as your arm, from the Civil

Aeronautics authority as to what violations are

outstanding against them, and [ think that affects

the eredibility and it shows, the absolute disregard

these people— 7

a [148] The Court: You see, we would have to_

undertake a trial within a trial in- order to ascer-

tain the merits and validity of these various viola-

tions. I.could not undertake to do: that.

Mr. Nickerson: “Maybe he will concede some of

ee them when I read them.

(1493 The Court: Yes. Let me suggest this,

you make an offer of proof and then I will rule

on it. I am afraid I cannot let you go into it but

I will permit you. to make an offer of proofs fe

Mr. Nickerson: I offer to prove that USOA Has

had the following violations—had the following

_violations outstanding against it: in December

1951, one, failure. ‘to maintain aircraft ‘and engine

records. at the company’s principal maintenance

- base; two, operation of.a propeller approximately

315 hours in excess of approved overhaul time;

. three, employment of flight navigator who was not

-. jn possession of an appropriate navigator and

Ralph Coz, Jr.—Cross

medieal certificate; four, operation of an aircraft -

with unsecured’ license, life raft, ladder,. cargo,

oxygen bottle, et cetera, in thie aircraft; five, opera-

_tion of an aircraft with 4 two-pilot crew in excess

of prescribed flight time limitations; six, operation

of an aircraft with a captain in command who flew

in: excess of flight’ timne limitation; seven, failure

to maintain proper airmen records; eight, failure

to maintain coniplete flight manifest record; nine, .

failure to require pilot training in accordance. with

the company’s operations [150] when his instru-

ment and equipment standard checks. had expired;

eleven, operation of an.aireraft with loose passen-

ger seats, trunks and unsecured equipment in the:

- eabin; twelve, operation of an aircraft’ with an

inauliibient number of seats and seat belts for’ the:

number .of passengers aboard; thirteen, lack of

proper pilot check by . qualifies. company check

pilot; ‘fourteen, operation of an aircraft’ with a

captain who flew in excess of prescribed limitation;

fifteen, operation of an aircraft with a crew? who

flew in excess: of prescribed flving time. limitations?.

sixteen, failure to maintain records for 144 flights; -

seventeen, utilizing of five pilots in excess of pre-

scribed flying timé limitation ;\ eighteen, operation |

of aircraft in trans-Pacifie operations without the

required radio transmitter frequency ; nineteen,

operation of aircraft in excess .of maximum allow-

able gross weight limit; twenty, operation of. air-

craft again in excess of: maximum allowable gross

weight limits; twenty-one, same, twenty-two, the.

same; twenty-three, the operation of aircraft in

an unseaworthy condition in that inadequate” sizé

~ ~

es a Cox, Jr.—Cross

wire, an inadequate circuit breaker and improperly

installed generator sy stem were: utiliged aboard an

- aircraft.

[151] The next number, company unaided its

aircraft to meet its operational requirements with:

- out. proper organizational coordination to insure

adequate maintenance; ‘next, company has failed to

provide .for. its employees adequate and proper

- engineering and operational data to insure that the

- operation of its aircraft will be in accordance with -

the operating requirements of the civil air

regulations. c

Next, flight crews have exhibited a lack of requi-

site knowledge to operate aircraft corumunications

equipment in international and overseas operations.

_ Next,:routine control of mainten nance of communi- |

cations eqiipment is inadequate ‘becdtise of absence |

-. of a company inspection sv stem | as required by the

civil air regulations. Sueee

Next, the company has ‘failed to provide. adequate S

engineering data and information to its maintenance

personnel in order to provide for proper modifica-

tion of tlie aircraft and aircraft components:

Next, company has .failed to establish the re-

quired -organization maintenance training program.

T offer to prove that. °

-The Court: Are you “finished?

Mr. Nickerson: Yes. rie xe

‘ [152] The Court: I sustain the objection on

the ground that it would lead us, far afield and in-

volve us in issues’ whieh we are not called on. to

°°”

deal with in this case. It could not possibly have.

“any relevancy here. ° i tule it out.

”

@ e .

®.

~G yout -

: CG.

& . | Bs

RS ee oo a

Q._. “Ralph Cox, Jr—Cross :

Q. As.a matter of fact, Mr. Cox, you are in contempt

personally of a judgment right, here in New York, aren't

Mr, Schoenwald : Just a maisent. |

' A. That is not—

. . e @ -}

Mr. Schoenwald: I also object to the examina-

tion of the witness in connection with the last .[153] ©

question. The only possible area of question of:a..

_witness’s' credibility would be his conviction of a

crime. Unless the,question encompasses a convic-

‘tion of a crime, I feel‘it is improper.

~ =

Q. 4s

The Court: You say the only way a witness can

be impugned is*by provirg he has been convicted

of a crime?

aa a . ° ie .

The Court: You may ask him whether he was

in contempt of judgment.

s there a judgment outstanding: against you in a

Separation action here in New-York? | “A. No.

Qe Wasn't there a judgment against you? A. There

a was at one time.

Q. Didn’t it provide that you should make certain pay-

ments? A. They were made.

Q. Yes, and you didn’t come into the state, did ‘you?

[154] A. I had a child that was in danger of its life and

I stayed out of the state with an, infant then on a psy-

chi&trist’s s recommendation, ‘and | will do it again if it is

the safety‘of my child, and that is the only contempt that

was against ine, sir, and it has been removed,

z@ e 6

ore

Ralph Coz, J r.—Recross

[158] Recross-examination by Mr. Nickerson: o

Q. Mr. Cox, when you listened in’ on the telephone call

that Webb and Colonel Marcano had—do you recall ves!

one? A. Yes.

Q. Did you tell Colonet ‘ercene 400 were listening?

A. Did I tell him? .

Q. Yes. [159] é‘. No, I =e him. eS didn't speak

to Colonel Mareano.

Q. Did Webb tell him that you were sates A. I

don’t think so.

x 7 me |

Q. Did you tefl ‘Colonel Mateano that you. were making

a tape recording of that conversation? A. No.

— Q. You made other tape: recordings of other conversa-

tions you had with people representing the defendant.

didn’t you? A. Did I do what?

Q. Made other tape recordings of other conversations

that you had with people representing the defendant,

didn’t you? A. It seems to me I made a recording when

Mr. Russell. threatened me on the phone, yes.

Q: Did you make any other tape recordings ‘with [160]

people representing—conversations with people repre-

senting the defendant? A. Not that T.gan. remember.

Q..When you made the tape recording, ‘with Mr. Rus-

sell, did you tell him you were doing itt. A. No, I djdn’t.

Q). Is it your practice to make tape. recordings of tele-

. phone conversations?

a e o

A. Occasionally we make: them.

2 & ae i <

Jorge M arcano—Direct

[171] JORGE MARCANO, called as a witness by the

’ plaintiff, having been first duly sworn, testified as follows:

Direct examination by Mr. Schoenwald:

72] Q. Colonel, where were you educated? A. In

Venezuela. / ,

Q. What was the nétere of your ‘education? A. I went

to school, to high school, and went to navy school. .

Q. Will you tell. us, do you have any degrees? “A, I

didn’t take: any: degrees ,except in the armed forces—”

rank in the armed forces. |

Q. Have you held any administrative or executive posi-

tion either in the military or in-business? A. Yes, I have.

~Q. What military. exeentive. positions have you. held?

A. I have been ehief of different squadrons, pursuit

squadron, bomber squadron, patrol squadron.

; . e e

[215] Q. In your prospectus, on page 5, I think that

you will find a recitation or a description. of the condition’

of the company which does not show the possession of

assets roughly comparable to $i. 100, 000, is that correct?

“Mr. Nickerson: T think it speaks for. itself.

A. These were moneys in Spain. They weren't at our

disposal. ; ie

e e e

[263] Mr..Schoenwald: Uf your 4lonor please,»

I don't want to encumber the record with undue

argument. However, [thought that I ‘understood

the witness to indicate in his testignony that, as.

-a matter of fact, that the office would function even

in the absence of Mr. Savino.. The letter is a letter

from a person [264] characterized by the defe nd-

‘ant to be his general agent or general officer or

Henry Schindall—Cross-

general office_manager in Italy. He states: in this

letter, made at the time of -. event, that. the o office

will not function. eee

_ The Court: Mr. Marcane said the business would

continue to function: when thé successor was ap-.

.| pointed. Isn’t that-what you testified? )

_. The Witness: Yes. ie & |

closer ‘attention. to your own. examination of the.

witness anid not place:me in the position of pointing

out what. the witness has testified to:

Mr. Schoenwald: Thank you, J sige

“yo

e ° e

1325) HENRY SCHINDALL,- called as -a witness on é

behalf@of the «plaintiff, ‘having been ‘first duly sworn,

testified-as iiceaes

es e.- eS

- [344] Cross-eramination by M¥. Nickerson:

re ie co e e -°

0351] Q. Mr. Se ‘hindall, you don’t know whether those :

: sehen receivable, other than the $261,000, which appears

on Exhibit 6, were or were not collected and distributed,

say,to stockholders, do yout You are just assuming that

they were written off, aren’t yout A. I see no evidence

of. dividends to stockholders, of any other collection, and

JT am assuming they were—written off.

May | say that my experience ‘with accounts receivable

from employees, which remain on the books for long

periods of time, and my experience. with receivables of,

other> varieus sundry receivables which remain on the

books [352] for a long time, is that they are seldom col-

_leeted, almost always written off, at least substantially. ©

. Rt e e e

: >

* .

‘A

> Henry Schindall—Cross

Q. Can you tell‘ us specifically: whether any accounts .

réceivable’ from Rome in 1950 were in fact not collected?

A. No. It is possible that soine were’ collected.

Q. Tam just asking you w hat you can: trace. Can you:

trace whether any accounts receivable from Paris: were

not collected? .A. No, there is no evidence of collection.

| Q. Now—excuse me, | ” sorry. A. There is no evi-

dence of collection. | |

Q. Yes. With respect to- Lisbon, can you tell us whether

any. accounts. receivable from Lisbon in 1950—can you

trace whether they were not collected? A. No, sir:

Q. Can you trace whether any accounts receivable from.

_ Caracas, sales of tickets to passengers in 1950, were not’

collected?) A. Tam a little unzertain of the meaning of -

the word ‘‘trace’’ as you use it. W ould you care to.

* [353] explain it? | .

Q. Is there any ree ord that | you have seen that shows

specifieally that ace ounts receivable from sales of. tickets

to- passengers in Caracas were not collected, other. than— :

A. I don’t recail. . |

Q. (Coftinuing)—vour assumption from, the genéral

assumption from the statement .of estimated | assets .and

liabilities? A. Yes. :

A. May T-explain this? = |

~ Q. Will you answer my question and then explain it?

A. I don’t recall. I say. that beeause I examined a num-

ber of these original vouchers, called comprobanes, and I

believe that some of them had entries showing writeoffs

of accounts receivable. : ;

Q.. Do you recall the amount of those? A. No.

Q. In round figures? A: No. T recall seeing some-

writeoffs of that character. nies

_@ @ 2

H cary Sehindall—Cross

[354] Q. You'doen’t actually know from your examina-

tion of the’ books, do you, when thé various accounts

~ receivable. which. were written off became worthless, do

~ you? A. No, sir.

Q. I think you testified on your ‘direct examination that

the réserve which appears on page 6 of Exhibit 357 of

$126,316, reserve for-exchange loss, that that should have -.

been put on the books m .1950;° did you testify to that?

A: I believe so, yes. °

‘Q. You don’t know what portion. of that is allocable to

1950 and what portion allocable to 1951, do yout A. Yes,

I believe it is all allocable to 1950.

Q.. Didn’t they make sales tickets, in 1951 in Spain?

Didn't they put ‘on their books pesetas in Spain in 1950?

~ [855] A. My recollection is that this account existed at

. $250,000 at the end of 1950 and that it remains about the

samé. There, Were nov colleetions, since no funds could

have been —. out of ——

peselint ex pesctas in 1951? “That is the paint I

am asking. A. T don’t know, 7

1950, yeu know that this was an operating airline,

do you not, Mr. Schindall?. A. Yes, -sir.

Q. And you don’t know whether in 1950 whether they

expected or not to be able to get their, Pesetas out of

Spain, do yout. ; .

[356] (Question read.)

A. T am not sure I understand the question., Do you

meéean—

Mr. Nickerson: Would you read the question?

The. Witness: May I ask— iti

Mr. Nickerson: Yes, go ahead,

32 er

Jorge Marcano, Resumed—Direct

The .W Meets: ae ‘you mean were 5 ete aware

during the. year. 1950 of the difficulty of getting

funds out,of Spain? Is that what you mean?

_ Mr. Nickerson: . No, I am not asking that.

Would you read the question again?

(Question read. )

A. No, I do not. May I say, in didien that 1 recall

seeing correspondence during 1951, I believe, although I

_ am not certain of the date, the tenor of which was there

were difficulties so— a |

Q. In 1951 you saw that? A. I believe it was. in 1951.

Q: Dated 1951? A! Farly in 1951. There were several

letters. Attempts. were ‘being made, apparently, to get

‘this money but they weren’t available.

-Q. In‘ a statement of estimated ‘assets and liabilities,

‘where it shows a. less, would that not [357] ordinarily,

put-a*person on notice as to the facts. with respect to

the loss? A. It would merely indicate a loss. -

Q. Yes, but wouldn’t a prudent person look at the facts

at that loss? A. Yes.

~ Q. As an accountant? A. Yes.

[359] JORGE M ARC ANO, Resumed.

‘Direct ‘examination continued by Mr. Schoeniv ald:

[401] Mr. Schoenwald: I would like to. offer

: this letter in. evidence as a communication: from

the..attorney. in fact to his agent as of gpugust Ist.

a time before the withdrawal or rescission. of the

contract or any proceedings were commenced and

as a letter showing the state of- knowledge of the

defendant, bearing upon his intent, a necessary

element in ‘the case of fraud, bearing upon wilful-

Jorge Marcano—Direct

néss and by its very: nature_and—damages, .and.

dealing with the credibility of the witness, and, in

so far as it relates to the stock, setting forth the

knowledge of the defendant dealing with the shares

of stock involved in this case. And I direct your

Honor’s attention also to the fact ‘that it indicates.

the liability of this company CAVE as well as the

‘Colonel to Flying Tigers, one of the liabilities |

not mentioned in the prospectus, in the two places

[402] which I think are pretty important ates

marked out in advance on the: document.

Mr. Nickerson: It will take less"time if I do not

‘ * object to these and reserve my motion to strike -

_ them. May I do that? ea |

~The Court: All right. _ It. will be marked ‘in -

evidence. ‘ae |

= [403] Q. Did you send a communication—did you send

this letter out? — . |

’ Mr. Nickerson: - We concede that it was, your

Honor, 272. for identification. | ea rate

Mr. Schoenfald: - 1 would. like to have this

. marked in evidence. ; ) ”

Mr. Nickerson: May I. reserve my motion to

strike? It will take less time.

. The Court: Yes, all right. .

a (Plaintiff's Exhibit 272 for identification received.

in evidence.) : : rae nets

[404] Mr. Schoenwald: Po you also want to

concede as to the admission of. this document. in

evidence (in@eating) ? fae re

“Mr, Nickerson; I will let it in ‘subject to my.

SE gs ec eee Ni 34° —

. > . .

Jorge Marcano—Cross :

motion to strike, your ‘Honor. I am not going to

object to any of this because it takes us more time.

+ ‘

° e. *

“ [429] Cross examination by Mr. Nickerson :.

Q. When were you first ‘engaged in anything to’do with —

aviation? ‘A. 1928. . .

-Q. Will you give -us the various posts you held from

that time up until 1950, when you became president ‘of

CAVE? Would you run: through them rapidly. A. Yes.

I was chief. of different air units,, chief of paratroop

squadron, bomber squadron, I was instructor in the

Aviation School. :

I became Director of the Military School of Aviation.

I came out -to-the-States awd spent one year.here through.

school, a different outfit, U. S. Air Force, outfit; went

back and became Liaison Officer with the Canal Zone and

military attache, assistant military’ attache -in~Panama.

Went back to Venezuela, ene: Inspectay General of

Aviation.

After that I was Air Attache to the Venezuelan Em-:

bassv in Washington, After that IT‘was Military Attache °

and Chief of Military Missions at the Embassy in Wash-

ington ;. chief representative in the Inter- American Defense

Board. . ry

420] From there I west’<te Venezuela -and became .

Es Minister of Communications. And after that T went to

the United “Nations, as a ‘representative, to the United’

Nations. . tees yee

Q. Did you ever see anyone from TSOA prior to the

time that the contract dated J@y 25th was signed by

yout A. No, I did: not.

Q. Did you ever hear from any of them? “A, T. did

hear once from a man called Waters, who used to work

ee i oe : ee Ce .

a-4 ‘

ee .

ttre see

- Jorge M arcano—Cross

for my company, for AVE. It was a telephone call from

Wildwood, he said. He asked me— :

Q.: What’ did he say, in substanée, and what did yen

say?

Mr. Riise. There. has been nothing to

indicate that Mr. Waters was an employee at this

time of U. S. Overseas Airlines.

Q. What was’ the date of that cali? A. That was late

in May or early June; I think it was early June, 1951.

Q. What did he say and what did you say?:

: “e : @ 2 i

(431] A. I was told by Mr. Waters that | he was s working

with some people that would be interested in dealing with

AVE to take over the operations, and that he wanted me

to talk to them, and they. were going to send a plane

over from Wildwood and pick me up in W ‘ashington | SO

that I could taik to them.

So I told him that we were having a study or report

made about AVE and until such time as that report was

out I did not want to talk to any body about this operation.

A e e

| (432) @ Did he give vou,‘did he send you any nia

(433] déaling With .passenger matters? -A. Yes, he did.

e ° 2

‘ '

(435] Q. Tell us what vour instructions were to Messrs.

Goteh and Craw ford, briefly. A. I told them, I explained

to them what the operation. was. I told them I wanted a

study Of it. They wanted to kriow the history of the —

company’ and’ certain. statisties. We had two meetings

with Mr.—T had and Mr. Marshall had two meetings with |

Mr. Goteh and Mr. Craw ford. And I gave them verbally,

orally, all the information I could. And then they asked

Jorge M arcano—Cross

for certain statistics which I sent them throdgh my cbm-

pany in Caracas. :

.Q, Did they ask for any records sialic 3 you did not

ee furnish them? A. No, they ee thing they asked

for I could give them. ;

-Q.-The material you furnished a was prepared—

[436] by Mr. Morgan, was itt A. By Mr. Morgan. in

ie Caracas, yes.

* Q. What was*his full name? A His name was Henry

Morgan. ;

Q. How long had he been with yout A._He had been .

with -me about that time about a year, approximately a

year. :

Q. Was hea former employee of Price, Watethouse! |

‘A. He was a former employee of Price, Waterhouse. |

ta | °. e epee

Q. Did you. have confidence in Mr. Morgan? A. I did,

_~yes. : ae |

in e 6 @

*. [437] Q. Do you remember that in the early part of

August several of the personnel from USOA came down

to Venezuela? ‘A. Yes, I do. i 3

Q. Can you tell us who was in the party? Maybe you |

have done that. Can'I refresh your recollection? A. Yes.

'-- [think I remember. It was Mr. Cox and his wife, Mr.

_ Burger, Mr.-Van Boheman,. Mr. Waters, Mr. Clemett. I+

think that was all.

Q. I show you Defendant’s Exhibit F for identification

and ask you whether you received that on of about the

’ date of June 15, the date that it is stamped? A. Yes, I :

received. this. |

Mr. Nickerson: I offer that: in evidence.

37 -

J orge M arcano—Cross

[438] (Defendant’s. Exhibit F for identification

_ received in evidence.) ree art |

Q. I believe, Colonel, that on your direct testimony. you

stated that you offered to show the books and records

to USOA personnel. A. I did, yes.

Q. Did you have any conversation with am while they

were in Caracas with. respect to a Rome office in AV EY?

A. Yes, I did. . |

-Q. Will you tell us what that was, btiefly? A. I ‘told

them that we had an office in Rome that was near the

office of TWA, 63 Via. Barberini, in Rome, and that if they.

wanted that office I would be glad to make na ecouel

with them so that they [439] could have it.

' I told them that I had had a previous arrangement with

Mr. James Wooten about this office and about traffic gen-

erating in this office. They told me that they were not

- interested in having any kind of-business with Mr. Wooten

and that they thought that the maintaining of an office in

‘Rome would, be too expensive, too much overhead, and

: that tifey would advise me if they wanted the office. That |

is—

1Q. And did you ; initiie get any advice tronh than

ax to whether they wanted the office?’ A. Yes. I- got a tele-

gram, a telegram, yes, cable ‘ rom Mr. Burger saying that

_ they were not interested.

. : —, . ee e . eet a

-Q. When was that, about? A. That must have been

about the migidle of August, about the middle of August.

- Q. I will refresh your recollection on the date. It was

after Mr. Purger went to Rome? AL It was after Mr.

Burger went to Rome, yes. : 7

Q. Did you have any conversation’ with them, with re-

spect to- turning over to them any equipment— | [440]

A. No.. ae ae , |

Jorge Marcano—Cross

Q. —in Caracast A. No. —° a ee

Q. Or any commissary materials? <A. No; ‘there was -

no conversation. When the Mane went to Caracas it

needed some commissary equipment; so I went to Chicago

and Southern, whose manager a a personal friend of

mine, and they let me have some \commissary equipment

_ which I passed on to the airplane sO that they could make.

a trip. ~

Q. Did @ou turn over to them any blankets? A. Yes,

some blankets and some pillows, and so forth.

Q. Did you ever get any of them hack? A. No.

Q. Did you have any conversation with them in the

early part of August with respect to any debt in Por-

-tugal? A. I don’t remember. aon ;

[443] Q. Colonel, £28 vou -advertise. the flight ‘for

‘August 15th? A. Yes,—I did, 0 | : sel

. 1444] Q. Was that fight canceled? A. It was eanceled.

Q. Why was it canceled? A. ‘The flight was to také off -

on the 15th, the morning. of the 15th, and the airplane

‘ arrived late in the day of the. 15th and it was not’ properly.

_. equipped at that time. -

—Q. Was the flight ‘rescheduled? ‘A. -Yes, Jit i re."

scheduled for the 19th. ae oer. ce

_ Q. Did it take off on that date? A. bidet did take off.

_ on that date. :

Q. Did- you thereafter get a a and if is already in

evidence—dated August 22nd, Exhibit \AT, from: Mr, ‘Cox

‘urging you to go to Rome and that he was departing from

Newark? -A. Yes, I did.

:Q. What did you do after you got that alent A. After

\I got that cable I finished some papers T had to have for

the naming of Mr. Mazzolini as immigration re representa.

tive: in Italy.

i, ~

~ did you have in Europe? A,

Europe including . Rome:

"i ‘Jorge Marcano—Cross eK

~Q. I show you Exhibit AK for identification: Is that

what you refer to? A, si that, is the document I have

referred to.

C447] Q. When you got to Rome -did you see Mr.

Burger? C445] A. 1 saw Mr. Burger.

Q. Did you talk to him? A. I talked to him, yes.

Q. Will you tell us what he said and what you-said,

in. substance? AL In substance, we talked about him

having difficulty: with the Embassy ; ; so after I talked to ue

the Ambassador | introduced him to the Ambassador. ~~

Q: Introduced Mr. Burger? A. Introduced. Mr. Burger ;

to the Ambassador. After that we talked about different

matters; we talked about. some ‘thing’ that had to do with

-the Alitalia - thing, that he talked to Alitalia and ome

talked to him. |

Q. What was your conversation with Mr. Burger about

Alitalia? “A. He said that the Ahtulia people were oppes-

ing AVE going into Italy twice a week. So I explained

to him that Thad’ had thai before and that we had never:

actually had any serious argument on that point, and

since the last time we talked I told the Alitalia people,

and had a frie ndiy conve rsationy I told them, ‘If you

don't want. me to come here twice a. week we will limit —

the number of passengers from [449] Caracas to Rome,”

Which, apparentiy, which was not to their convenience,

and the matter was dropped, and my recollection ,is ‘we |

might have brought it up\again, but, ‘it was never an

issue. \

Q. ‘Just so 1 understand it, ci

lonel, how nfany stations

> had four stations in

Q. So that your passengers in the tals ope ration. came

from the four-stations? A. Frem the\four stations.

- Jorge Marcano—Cross

c ° /

Q. The: Alitalia ran ftom Rome direct, to Caracas? - A.

_ Yes, sift.

' Q So that they had/only the one station in Rome from

which to take pasengers out, is that right? A. That i is

correct. ‘

Q. If ‘I wideretand what you say, you told the Alitalia

. people that you had several stations to fill your airplanés

up and if they made any: trouble with respect to. your

two flights a week you would get your government to ||

limit the number of passengers they: could take -out of

Caracas; is that correct? A. That is what ! talked: to.

them, yes. |

. ‘e e ° n

(453) Q. Prior to the time that you: got over to Rome’

did you have some requests from Burger to appoint &

‘Mr. Mazzolini as legal representative? A. Yes, I did.

Q. Was that done by Vou when you got to: Rome? A.

Yes, that was done by me when I got to Rome.

Q. And was that done—was that- under this L454]

document AK for identification? A. Yes.

Q. Did. you ‘have any: conversation while you were in.

Rome with Mr. Burger with respect to whether-USOA |

did or did not want to take passengers from Spain paying:

in pesetas? A. Yes, from what I talked to him I under-

stood him that they didn't want to take passengers from

Spain. Asa matter of fact. they left Mr. Waters in

_° Madrid on the way back to set'up a warehouse, bended _

-warehotise, to take cargo from other. places rather than

rege . passengers in esos

[456]. Q. Do you recall how ‘many passengers | there ..

' were on the trip back on September 9th? A. On Septem- |

ber 9th there were 25° — from Rome, a

J onge M arcano—Cross ;

‘le Did you have any Seasitigate: ies Spain? A. art

there were 12 passengers from: Spain. sit ts

Q. Now do.you recall whether you ‘had any’ conversa- 3

tion with, Mr. Burger while you were in Bome with respect

to these 12 passengers in Spaint A. To my recollection, |

Burger~™ did not want to take passengers in Spain but

apparently later bn he decided; if he did not, have enough

in Rome, to'‘take passengers in Spain. That is my ‘recol-

lection, -

Q. In other. words, am L correct’ in stating that be said

‘that if they had empty ‘seats they would take Spanish

passengers who were paying. in pesetas; is that ‘correct?

[457] A. That is correct:

+ Q. And did. you so inform the agent in 'Spaint Did

you so inform the agent in . Spain? A. That ne |

‘remember.

» Q.:1 will show vou a letter dated September 8, 1951,

dias ask you if it refreshes your recollection? A. Yes, :

that is. the letter, yes. ; ‘. &

Q. ‘Does that -refresh your recollection? A. rene ate

—_ You did so inform him? Fass Yes, T informed him.

[459] Q. Did Mr. Burger, while you were in Rome,

Colonel Marcano, express himself as to whether he “was

enthusiastic or not enthusiastié as to the. potential of the

operation, the AVE operation? A. He was very enthusi-

astie about the AVE operation: As a matter of fact, he

and all the people that were working with him, I -mean

the pilot-and the riavigator, everybody in the office; crew

people, they were all very) enthusiastic, talked about the

traffic in Rome, traffic in northern Europe, and even pre-

pared a memorandum for: going into peetnaes Europe.

ie -

5 Bi 42

Jorge M pareene-emnarens

Q. Now. during the time that you were over there did

you at -Burger’s .direction sign an\ interline agreement

with Rlitalia? “A. Yes, I did.

Q. Whick provided for the interchange of passengerst :

A. Interchange of passengers in Lisbon. —

+ eo e

74) nadiaes reduination by Mr. ae

Q. I show You Defendant’ s Exhibit AR’ tee identifica.

tion. Is that ‘the interline agreement with Alitalia that —

you signed? A. That is, .\ sa Ne

~ Q. Are you familar ee Mr. Burger’s initials? A.

‘This is Mr. Burger’ s initials; yes. :

> Q. And Defendant’ s Exhibit - AS for identification, was

that prepared by Mr. Burger and Mr. Van Boheman?

A. “This: was ean by: Mr. ‘Burger and Mr. Van Bohe:

man, yes. i,

Q. Did you ereiiier send a translation in Spanish

of' Defendant's Exhibit “AS ‘to the Ministry~of Communica-

tions? A. The Ministry of Communications “hn, Caracas, |

Yes. roe Ne

Fc a bd ° , *

[475] Q- You testified that Mr. Seiaeiaca talked with

the Alitalia people. A. Yes. °

~ Q. Did you. ‘and Mr. ‘Burger jointly: ‘talk with the

Alitalia people? . A. I talked. with the Alitalia people

when we were going to sign, the agreement. - ath

.Q. Yes. Now, did Mr. Burger explain to vou. the nature

e of the agre ement that ie wanted to make with Alitalia? —

A. He did explain it to me, yes.

Q. Did’ he explain to you that he thought it was better

' for the company-— A. That was hie—

43 a Ce ae

Jorge Marcano—Recross e

Q. —to have one trip a week from northern Europe and

one trip a week from Rome? A. And joinmg them in

Lisbon. .

Q. Joining them’ in Lisbon and exchange passengers?

[476] .A- And exchange passengers.

Q. Alitalia would then go to the southern part of South

‘Americat A. South Ainerica. :

Q. And you would take passengers to Venezuela? A.

Or the northern part of Europe. It was going to work

that-way. | Dake,

, Q. As far as South Ameri¢a was concerned you would -

‘take them to Caracas,. Alitalia would take them. to the

southern part of South America, is that correct? A: That

"is correct. ras

Se e :

7 Mr. Nickerson: Iam going to introduce [477]

these two documents when Mr. Schoenwald’ has had

‘a chance to see them.

e « e

[480] Recross eramination by Mr. Nickerson:

XQ. Calesst, you have been a resident of Venezuela for

some time, have you? A. Yes; all my life.

» Q. And are you familiar with the Publie Works [481]

Program of ‘Venezuela? AL Yes, Tam, fe

Q. And as a member of the. government you were

familiar with that? A. Yes.- |

Q. Are ‘you ge nerally familiar’ with’ the immigration

into Venezuelat A. Yes, I an. |

24°

‘Alejo Le Cervera—Recross

e - 2 ‘

[485] ALEJO Dr CERVERA, called as a witness on

behalf of the plaintiff, being first duly sworn, testified as

‘ follows: ©

[526] Recross examination by Mr. Nickerson:

e e e

- 1528) Q. Could CAVE under the contract of Agent 8. |

1950, hire personnel to perform certain functions for it |

in running its operation? A. Very difficult to say because

mainly the contractor of personnel against the franchise’

has been transferred to United States OA, but at ‘the

same time—

Q. Go. ahead, finish. ' the same time CAVE has

retained. some rights of supervision and the proposition

of personnel. I would say the right—

Q. Excuse me; I don’t think you understood my ques-

‘tion. I don't me an-to cut you off. If you want to finish,

go ahead. But I don’t think you understood it.

- Aside from the contract of July 25, 1951, leave. that

aside for the anoment, could CAVE under the franchise,

the contract with the federal executive dated August. &,

1950, hire personnel to perform any of its opérational

functions? Could it, for example, hire someone. to, sell |

tickets for it?) A. Well, that is different. I was thinking !

of flying personnel. No.1 don't think so.

Q. It could not hire an agent to sell tickets [529] for it?

A. It is so particular.a s ainneiae tIfat, really,. the answer

cannot be found. here: ,

. Q. Yes. Well, Tam just asking you. your opinion.

Could they hire an agent to sell tickets f ‘or it: could ‘CAVE

hire such an agent? A. Honestly I+ can't say, but my

guess is **No.’? sia

Alejo De Cervera—Recross

Q. Could they hire someone to establish a maintenaince

ise for them? A. Well, you can ga, as well as I can 80,

rough the contractor.

Q. Could you answer the question to the best of. your

bility? Could they hire someone to establish a main-

nance base or would they have to do all of their main- °

nance , themselves? Under the franchise, the document

ated August Sth. A. Under. the franchise?

Q. Yes. A. IT thought we were ‘speaking of the second .

ontract. ce Se. oT

Q. No. Iam sorry. I am talking only of the franchise

ated August 8,. 1950. A. The ‘franchise? Yes.

Q. Under w hat we have been referring to as the [530]

ranchise, under that document could CAVE le -gally have .

ired someone to’sell tiekets for it? A. Yes.

‘Q. And could it have’ hired someone to establish a

idintenance base? A. Yes.

Q. And do. agg HEN for it? “A: Yes.

Q. Could: it-— A. We are under the assumption that "7

he see ond contract is included for the moment.

(). Yes. Tam only talking of the contract datett? August

. 1950, which we are re ferring to as the franchise. Could

| hire personnel— A. Yes.

Q. --to perform various functions? A, Yes, sir.

(). Could it hire someone to train any of its pe ‘fsonnel't .

\. Yes. 7 me

(). Could it hire someane to ‘set Up, flying schedules for

hem? <A. Yes, :

Q. Do vou understand? 31) A. Yes,

‘@ s a e :

[532] Q. Now, sir, in its, operations in Rome, for

xample, couldn't CAVE, under the contract of August

46°

‘Alejo De Cervera—Reeross

8, 1950, which we have been referring to as the fran-

‘chise, hire a Roman company to establish a maintenance

base for it? A. In Rome, [ would say yes, — -

Q. And with respect to the training of Venezuelan per-

sonnel outside. ef Venezucla could CAVE under the fran-

‘-chise hire a non-Venezuelan company to perform that

training, to give that training? A. It is still’ the same

question. , It is doubtful, because no rights and obliga-

~ tions ineluded in [533] the franchise: can be assigned.

-But L- know what you mezn, I know to which difference

you are pointing out! It is a very subile-one.

Q. You have no firm opinion as to whether it could or

it couldn't, then? ‘Am I correct. there? A. I would say

the correct opinion * ek . nig

A). But you are’ not sure? A. IT am willing toe admit

that: there are cases very difficult because we know—we

all know the «difference between, for instance, to hire a

man to clean the window and to hire a company ‘to send

aman.to clean the window, Gf know that difference. That

is why Tam trying to understand vow-and to follow you

and to admit that there are possibilities. But the .con-

traect‘is very Strict in its terms.

,\¢ o ~ ‘ : id

[5541 Q. You mean you could be tolerant as to mat-

ters which are not of major coneern-——. A, And a broad.

a,’ Whereas mattérs of major concern CAVE would

’ have to retain the right to control? - A. Yes, exactly.

(535) Ts that right? A. Yes. |

[539] Redirect examination hy VUroschoenwala:

— * e . , ;

[540] Mr. Schoenwald: T don’t want to take:

the time of the Court.with this unless ¢he Court

Alejo°De Cervera—Recross

feels that there is some doubt 6n this question. If |

the Court has any doubt on this I would like to -

have the witness equnpare -article by article of the

contract between the parties, the contract with—

The Court: If you feel that it is necessary for

your case, but I don’t feel that I should be called

upon to express any opinion. ‘I suggest that you

ask your witness to prepare it in memorandum

form and then perhaps Mr. Nickerson would agree

that if he were .called [541] ‘his testimony would

be in that sense, and you can-offer it as an exhibit

in lieu of his testimony. ,

(). Would you have time to be able to prepare. an -

analysis before you leave fer ‘Europe of the franehise

article by article compared with the contract and indicate

its violation? A, Yes. :

Mr. Schoenwald: Mr. Nickerson, would yon take

such a document?

Mr, Nickerson: Is your Honor suggesting that

I shduld do it?) -L am hesitant to do so because

| I think the cross-examimation, is — he .has

shown so much doubt.

The Court: W e are going te take an awfully

long time with this “Witness. |

Mr. Niekerson: 1 appreciate that. And if your |

Honor suggests that T do-it, T will.

_ The Court: Do you expect to call an expert on

Venezuelan law? oo

Mr. Nickerson: Yes. ‘3 2

The Court: It seems to ‘me that your rights

would be amply protected by asking your expert

to. make any appropriate comments with réspect to

that very matter. . !

Albert, W. Gotch—Direct

. [542] Mr. Nickerson: I will accede to. your

Honor’s suggestion.

3 ie Ce hn ae ‘

ALBERT: W. GOTCH, called as a witness on behalf of

the defendant, .having been. first duly sworn, testified as

follows: . as - — 3

[543] Direct examination by Mr. Nickerson: -- —° «

| . e . oe os

[5481 Q. >) Now, Mr. Gatch, can you give us from your

“experience any opinion as to whether there is a develop.

mental ante after an operation shuts down for several

/ months? °°

e. . e

A. Yes. It happens invariably. I think we have analo:

gies jin this country. There have been a number of strikes

of some duration on some of the major [549] air carriers,

for -example, during which time much of their normal

traffic deserted them an went to other carriers‘or didn’t

move at all. .And we know from examining the traffic and

economic results of those carriers after service was rein-

stated that it took them some period of time, perhaps a

month or two, before they recovered to their prior posi.

tion. -'The traffic had to be recaptured. “And I think that’

is characteristic of any operation of this kind, a public

service function, where service is suspended or shut down

and the market be redeveloped.

Q. Now, Mr. Goteh, on pages 16 and 17 you made a

forecast’ as to prospective triffie revenues, Could vou

tell us whether in making -vour forecast vou base that in

any part on the gtoss operating revenues for 1950, the ner

operating income for the year 1950, or the profit of 1950!

_@ = .

yo Albert-W. Gotch—Direct

[550] A. No, we did not base’ our projections on the

full calendar year results.

Q. What did you base it on? A. We — them on the

seven, months to which we have earlier referred. That. is

clearly stated on the bottom of page 16: ‘‘factors experi-

enced during the seven months “of 1950 have been —

throughout.””

Q. In - your experience of schedule operations, Mr.

Goteh, could you tell us what the average loads are of a

schedule operation over a year’s time in order to make ©

money? A. Yes. Among aiflines as of today and as of

the past few years the so-called break-even load factor,

which is in effect a ‘traffic load produéing revenues to offset

the precise costs of carrying that traffic, has ranged on

the order of 55 ‘to 60 per cent for most éarriers. That

_ means that: between noo and 60 per cent of the seats in all’

of the aireraft that they have eee: over the vear have

been oceupied. ; | a

(). An average of that? “eS An. average. (Contineing)

Have been oceupiéd\by paying passengers. Over 60 per

cent they begin to make some money: and within’ the

range 60°[551] to 70 per cent there is an opportunity to

make a fair and rexsonable return on investment. A rule —

of thumb figure for an air carrier at Which he ean make

a reasonable return on his investment and at which load

factor ‘the public gets a good quality of service, in other

words, there are usually sufficient seats to-go around, pro-

duces a figure of about 66 to 67 per cent. In other words,

two out of three seats filled would usually pay the operator

a return on his investment and will give the public'a

quality” ‘of service that is acceptable.

-Q. Now what is .the highest load factor that Q achusitlin

operation reaches? A.W ell, on individual flights ‘they.

sometimes reach— —

- Albert W. Gotch—Direct

Q. No; I mean an ‘fiverage over the year. A. Well, it

varies. Some of the carriers have been getting up to’

about 70 per cent on some of their operations. During

thewar, as we know, when we had priority. traffic, it went

‘into the high 80 per ccxt. But, of course, public service

fell apart, as we all know. And immediately after the war

that same condition prevailed; there was a large demand

_ and there was an inadequate supply, and as a result the

public got quite dissatisfied and abandoned airlines

(552) as a matter of fact.to a great extent; traffic fell

off, and for several years the entire industry was in finan.

cial difficulty as-a-result of that. | - e

@ @s s

(553) Q. Does any-earrier, Mr. Goth, —— a 100 per.

cent load factor?

- A. No.

6 ; oe s

“ (561) Mr. Nickerson: Your Honor, I was re- |

minded by one of my assoc lates that I made a

“misstatement to your Honor’ yesterday, which |

would . like to correct, when I said that I -did not

* think» that” vertain documents would be in issue.

I was thinking of the franchise and actually those

related to the rights. And I did know that they

were going to be in issue. :

- The Court: Very well. ak is,

oie 51

Albert, W. Gotch—Redifect .

(573) ‘Redirect examination by Mr. Nickerson:

Q. Would you take a look at the report, Mr. Gotch,

page 3, paragraph numbered 6. If-I may: ‘‘As soon as.

AVE can establish schedule dependability, a satisfactory

standard of passenger service, and conduct an aggressive

promotional campaign, it should attain a -40 per cent-

.passenger load factor on eastbound [574] flights and

an 82 per cent load factor on westbound flights, on the .

basis of two schedules per week with a 00-passenger

airplane.’” ; - .

Can you tell us from your experience why you con-

sidered schedule dependability, a satisfactory standard

of passenger service and an aggressive promotional cam-

paign necessary to attain those load factors?

A. Well, there are essentially two kinds of common

carriage in the airline field: one is the so-ealled [575]

Scheduled, which is -the normal certificated carver, and

the other is non-scheduled, which has been characterized |

as irregular carriage. een cA

\Schedule carriers must, under their certificates, per-

form a schedule operation; they must post their schedules

and they must make every endeavor to adhere to them. .

They have to fly whether they have traffic or not.

+ That is not the case with non-scheduled carriers who .

do not have to adhere; to fixed schedule; they may. wait

until they accumulate essentially a full load, a profitable .

load. It could take a day, it might even take a‘ week,

depending on cireamstances. So that over the long pull. .

they can attain’a fairly high and profitable load factor.

Whereas the schedule carriers are unable to do that be-

cause they must fly whether theré is traffie or not. And

Daniel C- Cox, Jv.—Direct

_if they attain a 60 to 70 per cent load factor they snails

_ they .are doing quite well.

Mr. Nickerson: That is -

_ The Court: This was to be a schedule ue

operation, was it not?

The Witness: Yes, -sir. atk

The Court: And what do you mean ‘ the

[576] phrase ‘‘schedule dependability’?

The Witness: That means that they adhere to.

schedules fairly closely. Adherence to schedule is:

usually understood to be somewhere on the order

of not more than 45 minutes late.

£582] DANIEL ©. COX, JR. called as, a witness on

~ behalf-of the plaintiff, being first duly sworn, testified

as follows:

Direct examination by Mr. Schoenwald:

ca, . e .

(603] Q. You: were just telling us whether or not that

plane was. ever taken out of the eompany’s control by

Mr. Webh and Mr. Clemett.

Mr. iRistananen: Just to protect the interests of

my client for the record, your Honor, may I object.

to all of this on the ground that Webb, it has been

testified, was their employee, that this was long,

long after the event and hasn't any neenise rele-

_Vancy to the action.

Deposition from F remont W. Burger

The. Court: Yes. Your objection is noted and

you will reserve the right to strike, and I will over-

rule the objection for the time ae Ss

es e sy e

[610] Mr. Schoenwald: I read’ from the deposi-

‘tion of Mr. Fremont Burger.

® es @ , ;

[615] Mr. Schoenwald: No. 242 is.the exhibit

number of the -_ recording.

Mr. Nickerson: : I object te it, your Honor. It -

is a self-serving statement, report from. one em-

ployee of United States OA to the easel

[616] The Court: _ Well. a great deal of this

‘is self-serving and Opinion and conjecture, a pre-

* diction of the future states of mind and other mat- _

,ters which would not be testified to even if Mr.

eines were here. And FE have grave doubt as to —

the value of this’as a matter of ‘proof just from

“the —— of its probative value—

e eo e , 5 :

[617] The Court:. IT am not sure ‘that: I can

consider it a communication within the- terms of

‘the shop book ‘rule,-because there are always col-

lateral indicia which are necessary, to establish the

‘ procedure or routine by which the communications

are made, The postmark, for instance, the filing

indications, perforations, and collateral documents”

of yarious kinds, all of which fit into a business.

_ s¥stem which show that they were sent in the regu-

~ lar course.of the company’s business and that it

was the regular course of the company’s business

to keep such communications.

* . we can find it? °

e. Deposition from Fremont W. Burger.

Now this is a very unusual procedure of a man

inaking a recording of his own voice and then send-

ing a record of that voice to somebody. else. And

it could open the shop book. rule for a great deal

of mischief I am afraid if a. thing like ‘this could

. be considered to be admissible as evidence in the

case.

Mr. Schoenw aa: Would: your Honor perhaps be

of a different view if we presented the covering

letter with which it was sent and the envelope, ‘if:

The Court: I might, yes..’ -

Mr. Schoenwald: As well as some testimony

perhaps by the person who opened: the envelopet

(618] That might mean recalling the—it night |

mean production of a witness who is in California

. who. was ‘the one ‘at that ‘time. who opened and |

-recéived the mail. I am‘wondering if Mr. Nicker-

son— kaa :

Mr. Nickerson: 1 won’t put him to any such

' technicality as that.

The Court: If you will concede that this record-

ing was sent by. letter by one..employee of this

company to another .in‘the regular course of their

business and that it was the regular course of their

- business to keep. a record of this conversation, I

_ will admit it within the shop book Tule, reserving,

however, the right to consider only those portions

which I think would be admissible as a matter of -

primary evidence because,. obviously, somebody's,

feeling about the state of mind -of somebody else —

would not be admissible.

le ee aioe 7

iegnttinn from Fremont W. Burger

Mr. .Nié Coreen: I am afraid if I did that,. your ,

Honor, that under the shop book rule, Federal shop

book rule, the fact, that it contains hearsay does

not. make it inadmissible; it merely- goes to the

weight of it. That is my recollection of the statute.

The Court: That is so with respect to hearsay.

Mr. Nickerson: Yes. "There are conclusions

[619] also. a i

~The Court: Tliere are conclusions and there are

" statements ‘here which go way beyond the restrie-

tions about hearsay.

Mr. Nickerson: -I don’t want to put him to any

technical burden that someone mailed it. I ‘will

concede that it was aniriled ever here. But I don’t

Want to concede that it was the regular course of

business, because ‘this was: extraordinary.

The Court: Would you concede that if he called

this. witness .from California the witness would

testify, in substance, that it: was sent’ by mail and

received by the company as part of its regular.

business, that it was part of the company’s regu-

lar business .to-keep the communication?

Mr. Nickerson: Yes. 7

The Court: And that this communication was

kept? |

‘Mr. Nickerson: That it was kept there, but not

, —I won't. .agree that it was made in the regular

course of business, but I would agree that it was

received and kept inthe regular course of business.

The Court: And that he would so testify. —

_ Mr. Niekerson:: And that he woald so testify.

(620 The Court: ‘Well, I think that that would

Deposition from Fremont W. Burger

be a sufficient foundation now. I will note. your

objection to its receipt and give you the right to

move ‘to strike out later, and I will have it marked

in evidence. °

i ° ° . ~ . .

(Plaintiff’s Exhibit 242 for identification received

in évidence.) - wack |

° ° °- \ :

[626] Mr. Schoenwald: \

@ e e

(627] If vour Honor please, we are \ha¥ing a little

. difficulty finding some of the material that\we- -would like

\to- read into the @xamination, and I think t would serve .

the function of this court and the interest of justice if we

-eould read some of this material in. when we have had

an opportunity to put our hands on it. There are some.

sections that -I know exist -and my associate has‘ been —

- unable to find them; and I can’t see how justice would

be served by insisting that we sit here and delay while

jl look for these. sections. Me

The Qeurt: Well, could you go ahead with. the

case and reserve the right to move until he reads

them in, Mr.. Nickerson?

Mr: Nickerson: . Yes. . Ee

The Court: ‘I don’t know when we are ever

going to.get through, but we are always interested

[628] that substantial justice is done.

. Mr. Nickerson: All right. I will accede to your

Honor’s 8 sngzontion, T will call Mr. Russell.

Hy]

John S.. Russell, Jr. Direct |

~ JOHN S. RU SSELL, IR., called as a witness on behalf

‘of the defendant, having been first daly sworn, eetiiee

as follows: ;

Direct examination by Mr. Nickerson:

[629] Q. Yes. A. The meeting was to discuss the ©

means bad making an agreement between USOA and AVE

work.

wins oe! ° e.

Q. Hold Defendant’s Exhibit N before you (handing).

A. There was discussion as to the reasons why USOA

had. ceased to fly its aireraft: I directed the attention of .

it was, I believ e, Mr. Jones and Mr. Cox to the existence

of Defendant’s Exhibit N and stated that [630] this was

untess they had-full loads:

Mr: Jones’ stated that the agreement was no good; the

only way to make it work was to tear it ap a Start all

over again.’

I told Mr. Jones and. Mr. Cox that I fought the agree. a

ment was good and that we w oe Te to see whether we

could work within the framework of the agreement and

_ we had no intention of tearing it up and starting all over

* agajn. f

There was considerable diseussion about the fact that

Mr. Cox's airplanes or USOA’s airplanes were not get-

ting enough passengers. Mr.—

Q.-Did Mr. Burger say anything at "this meeting? - A.

Mr. Burger did. Mr. Burger said on many occasions—it

was a rather lengthy meeting, ‘it Was. in two sessions—

a binding agreement and wanted to know w ~ the UCSOA -

. Was not performing.

Mr. Cox stated that they were not going to ‘perform

. ‘ MY : \ . > .;

ane John 8. Russell, Jv.-—Direct.

iment but one that was temporary.

- There was a lot of other discusston-going to matters that

‘ .

sas enthusiastic about the opportunities: of this route.

-.- Mr: Cox. said, “¥du- willl. hah to get: that from. Mr.

ae»

oe said, “lt will go .out.’’

that the jroblen: was not. one’ that was basic to the agree-

ae recall asking Mr. Burger Specific. ily what was neces-

sary to develop the business.

He responded that the problem was lack of promotion.

[631] We had quite a bit of diseussion as tow hat was,

necessary ta. promote, And he coneluiled—or he state a

_ that. about $60,000 of developmeytal expense avas needed,

* That was about the substance of: the morning meeting.

usually g0 on in meetings, af airline people.

Q. Did. Mr: . Burger express hiniself at* that morning:

meeting as to whether he was enthusiastic or not enthygi- |

astic as to the: potential of ‘the ape ration? A: Mr. Burger.

at all-times during that morning and later was extremely

| tos20.A. te seecavenad about two o'clock,

a ithe, ;

a Ay : ‘e e- . 2

1634] I then bonita up” a vecond porenes There was

an aircraft scheduled to leave Rome that night. I asked

o# Mr. Cox _whether that flight Was) going to go out on-

schedule. ° .

Jones."”

I asked Mr. Jones the same aivestion.” “And: Me Jones

And I believe that i is all ot the sub: tan: «of thiat. meeting |

, bi -— e ae ;

to call Mv. Cox or he ealled you and what in substane:

el | 59 |

John S. Russell, dr. Direct

“both of you said?: A. 1 had a cal from Mr. . Marshall

about— “\

Q. Don’t tell. us what Mr. “Marshall said. A. ‘As a

‘result of that call I first tried to call Mr. Dougherty but .

rot reaching him I ‘called Mr. Cox. .

Q. This was Sunday, the’ 16th? A. “This was ‘Sunday

- morning, the 16th . I asked Mr. Cox—strike that.

I told Mr. Cox that I had been informed that the aircraft ‘

that was scheduled ,to-have left Rome for Caracas ‘had

_not in fatt left Rome for Caracas but had been pulled

off the route and had been taken into Germany that night. °

1 asked Ar. Cox whether that was true. “He admitted ,

that it was true. oe

I told him that I had heard that he. Sel stranded lf or

15 passengers. ‘And I asked him whether that was true.

He made some remarks about the passengers, I believe—

no; excuse me. Hé said, “*I told you ve ssterday we neggl t

fly until we have enough passengers or full loads."’ I

don’t recall what he-Xaid iff that particular point.

I then said, ‘* Well, what about our agreement of” C6 36]

yesterday ?”’ i ,

Q. Did he say anything about passengers in' Spain? A. |

Yes, he did. — He-said- that: eight of the passengers I

_ eheve were from, Spain and that they only paid in

pesetas and he didn’ t have any desire to take passengers

out of Spain if they paid in pesetas.

‘TL asked' him about the agreement of yesterday and what

effect this hadvon the agreement.

I think he*then told me that he was not going to speak

tome but T sheuld speak to his lawyer. | |

~1f teld -him that I thought this was a very important

mate r and ‘hat I was frankly very. shocked.

“Cross-cramination by Mr. Schoenwald:

_ 60

John 8. Russell, Jr.,—Cross

.Q. Did you tell him you tried to get hold of his lawyer?

‘A. Yes, I did: And*that I was going to do everything [

could do to protect my client’s interest if that wassthe way

he was going to act.

Q. Now. subsequent to that, tines, Mr. Russell, did you |

at the request of either Colonel Marcano or Mr. Marsha!

- make any a into the market for _DCAs?1 A.

Yes, I did. :

--Q-And-did you ial to anyone relative. to- (6. 37] pur.

chasing any DC 49. A. Yes, I did.

[638] Q. Now, will vou first give us the approximate

date of this conyersation! A. Well, it was right after

the weekend. It would ‘be Monday, the 17th.

Q. Will vou-tell us what was said, in substance? A. I

telephoned the pre ssident: of U.S. Airlines, ‘a c@gtificated

cargo carrier that operated in: the. eastern part of the

United States, a man by the name of James Wooten. |

told him the background, the purpose of my eall, and

that AVE Chad an option to purchase two aircraft and if.

. we could exercise the option would he pyrehase the air.

craft. He agreed that if we could get title to the aircraft

he. would purchase them for (639] $600,000 apiece,

Mr. Nickerson: Your witness.

Q. Is this Mr. James Wooten the same James Wooten

who was declared a bankrupt and who was subsequently

umaprrisoned for embezzling trust funds in connection with,

the U.S. Airlines? “Al LT have mo information on that.

would be Jvery much surprised if he was.

John S. Russell, Jr.—Cross —

Q: The U.S. Airlines is defunct now, isn’t it? A. I

‘don’t know wheti.er it is defunct. It doesn’t operate.

Q. But it is bankrupt, isn’t-it! A. A petition in bank-

ruptey was filed, but after Mr. Wooten left the presidency.

'Q. You are familiar with the facts. It was bankrupt:at |

that-time, wasn'tit? A. I am familiar with the conta And"

it was very much not bankrupt at that. time.

Q. Mr. Wooten, as a matter of fact, had sold one of the

airplanes that the Colonel operated with just prior to the ..

interest of USOA in this company for $220,000 — t het S

A. I don’ 't knew.

[640] Q. Mr. Wooten was preside nt of Neat East Air.

lines, was het A. Yes, he was.’ . .

~~ Q. You knew that Near East sold an airplane to the |

" Cokine! for 220,000 about nine months before? A. No, I

don't, asa matter of fact. [am perfectly willing to take

your statement that. that is so.

Q). Did Colonel Mareano tell you or did. Mr Marshall

tell you that he had heard a conversation between Mr.

Burger and Mr. Webb in which they were planning‘to take

the bill of sale out-of the safe of USOA relating to the

airplane that was involved in this operation!

Mr. Nickerson: Can vou fix the time! ?

Q. Well, shortly a or derine ‘the progress of the

conference, did it not eome to your attention that -thie

Colonel had heard a conversation between Mr. Burger and

Mr. Webb With respect Je taking the biH of sale out of

the safe? Kither from Mr. Marshall A. | have of

course heard it, Mr..Schoenwald, bute. ean't: place it in

ah mind whether DT heard it iis part of the preparation

of. this ease or whether | actually .did hear it prior to.

John S. Russell, Sos lbaaar

Septenber 15th meeting. My ealllition is that I did

not. :

a ; = e hed

* [644] Q. Now did ‘vou know whether or not Mr. Wooten

had a million dollars in cash free and clear and available

to pay for this airplane at the time he spoke about buying

- any : :

it?) A. Mr. Wooten had té my knowledge. just become

president of Us S. Airlines With an entire new group of

backers. Because of other professiona}g arrangements. I

knew thiat the group of backers were people of very: sub-

stantial means and I believe that they had the money.

. Mf. Wooten is a regular client-of yours, isn’t net

~A. Mr. Wooten has never been a client of ours.

().: ‘He hasn't been a ‘client of your firm? <A. Never.

Q. He is a regular visitor to your office, isn’t he? “A.

I don’t think ‘Mr. Wooten has been in our. office a half’

‘a dozen times in the last ten years

* Q. You have participated in thie recent insolveney pro-

ceeding,. haven't vou? [645] A. | don't know that Mr.

Wooten has ever been through. an insolvency proceeding.

Q. The U.S. Airlines recent: instlveney proceeding. “A.

No, we didn*t—oh, TL beg your. pardon. * We ‘may have

represented a few claims that were filed, ves. .

Q. Didn't vou also participate in tht preparation of the

lawsuit of Near East . Transport, Mr. Wooten’s ” firm:

against Colonel Mare ‘ano! AL Noy we represented Colone!

Mareano. a 4 é .

(). You participated in the settle anent, didn't von? A.

Yes, on behalf of Colonel Mareano.

: ‘

” * “48

63 ew Sates rae

John Page Marshall—Direct - : ‘

r6t7) JOHN PAGE MARSHAL —_ called asia witness

on behalf of the defendants, having been first duly sworn,

testified as follows: ;

Direct ‘examination bu Mr. Nickerson:

(6497 Q. Now prior to the printing of Plaintiff’s Ex-_

hibit: B57, the study of Goteh & Crawford, did you have

any communications from U SOA? A. T did.

Q. Will rou tell us the substance of those and who

spoke to vou? A, On or about. June 12th I received a

telephone call from a, Captain Bush—I don’t know what |

his relationship with USOA was—and he asked me—|

(654) Q. All right. Then will vou tell us what hap-

pened -after that, what was said and who said it? A.

Mfter that, after they had finished T.think the next dis-°

cussion Was actually from me when T said, “Now we want

know the basie requirements for the establishment of

his service, The equipment requirement is for two DC-4s.

We, also——we, will have to - [655] adequately prepared

organizationally «peaking? 1 reeall my cemment as liav-

ng been, ‘Gentlemen, vour operation to. this time has

‘wen unlike the operation that we are now disenssing.

Tou liave been engaged in an irregular operation, whereas |

‘asds a schedulesoperation. There will be capital required

develop the traffie te recaptivate the | operation.”’

Mtpital Toteld them on the order of 200,000 ino my un:

nallfed judgement or my: guess was that they—that T

sent prepared te spell ont exaetiy what the 200,000

do he required for. There was a query to that when

Prd 200000, To tetld them DT didn't know exactly how

John Page Marshall—Direct

it would be allocated but-that it would be a conservative

amount of money. .I told him that they would have to

equip their. operation with personnel, and I mentioned

3 specifically traffic gneuems |

The ‘court: What kind?

The -Witness: Traffic, sir.

. Q. What are traffic personnel? A. That would be

people who are trained and competent in the development

of traffic for a schedule common carrier operation. ~

Q.. Development of-accounts? [656] A. =! is correct.

Specifically, what I had in mind —. |

Q. Don’t tell us. what you had in mind. Just say what

vou said to them and what they said to you. A. I am

sorry. They advised that they had five DC-4s and thre

DC-3s in response to my statetherit that they would need

two DC-4s. I made some query at that point as to.the

present equipment of the aircraft, whether they were

equipped with seats or were being used for cargo oper.

tions, and they advise] that they had some of each, as |

recall it; in any event, that. they had passenger equipped

DC-4s, Rot ae Si

When we -diseussed the financial requirement T. asked

if they thought that that was available to them, and he—

Mr. Cox said; ‘‘We have, as we have told you, five DC-4s

and three DC-3s. We are paving our bills.’’ And he

laughed. —

He said, as to the traffie—discussing the traffic situation

Snention. was made of the fact that he had already som:

preliminary communication with Mr. MéDonell ; I believe

he said he was then emploved and had heen for some 17

_ years by American Airlines in traffic, in publi¢ relation:

work. - ae

a te ee

Gg...

John Page Marshall—Direct

(658].Q. Did you say whether or not you had been

over the AVE route? A. I specifically told them before

we went into, very.early in the discussion that I had never

‘been to Venezuela, and I had not been associated with ©

Colonel Marcano atthe time that AVE was in active

operation previously and that the only information that

I had was contained in the report. —

| ; - * e-

[658-A] Q. Did you or did you not at. that. meeting

make any suggestion to USOA as to what propogal they

should make to yout A. There was discussion on that.

Burger. said—

[659] Q. Will you tell us in substance and briefly what |

that was. A. Burger said, ‘‘ What have you in mind,’’ as

to the form of. the deal, I think the expression was.

My answer, in substance, was that the report, Gotch &

. Crawford study, the last two pages of that contained a.

suggested partial outline. which they could accept as indi-

eating our thinking, but that it. was ‘not -binding, that

actually the matter of entering into a contract for this

operation, their approach to that, it was a competitive

thing, that we had-cireularized the operating industry

with the reports, the Goteh”& Crawford study, and |

thought the best approach for us was to let each interested

party submit their propeal, drawn in:any fashion they

wished, and that we would then consider them and take

, that w hich w ‘as most advantageous to us.

Q. Did you thereafter receive Defendant's Exhibit G?

Mr. Nickerson; That is the letter, your Honor,

of July 19th.

A. T did.

_ John Page Marshall—Direct

Q. Was any part of that dictated. by you or suggested

by you to USOA? [660] A. Paragraph two may have

been: It is only one sentence, if I may read it.

Q. That is the one that refers to U. S. registered air-

craft under lease to AVE. A. Then I ,would not’ have

suggested that. That wasn’t -mine. qi am‘sorry. I did

not suggest that.

Mr. Burger made some inquiry as to the matter of-

whether Anierican crews could be used, and I told him

that T thought that Venezuela—they’ required Venezuelan

crews after a time. So I may have suggested point five.

Q. Yes. What T am getting at is did you suggest the

_ substance of what is in the July 19th proposal or was.

that something that was suggested by USOA indepen.

dently of you? A. I did not suggest this outline.” —

~ Q. Was that delivered to you by hand or by mail, if

you recall? A. It was delivered to me by hand. -

_ Q. Who delivered itt A. Mr. en and “Mr.

Burger.

Q. Did you have discussions with — at. that diene?

A. Qf a limited nature.

[661] Q.: ‘Did you thereafter study the July 19th Pro-

posal? A. T did.

Q. Did you then call Mr. Cox? rs T did.

e: -s e-. xt |

(667] A. May T. correct a , misstateme nt that 1 have

. made pertaining to a date?

The Court: Yes.

A. ¥ have staged, I think, that reference to the speci fie

- date for starting this operation did not oecur at the first

meeting. IT was in error. The reference to the date did _

. John Page Marshall—Direct |

occur at the meeting but not at the point in the diseussion

we were in a while ago. It did occur at the first meeting.

Q. Tell: us in substance what was said about that,

briefly. A.. At the very end of the meeting as they were

-jeaving, we got back to the matter of the urgency of

reactivating . the operation, and [ asked Mr. Cox when

he could start the operation if ‘a contract was entered

into with him. oer

He said—avell, we talked ahout that quite a hit, and*it

_ was: ‘realized that it was a. ‘matter of weeks rather than

months, and he said, ‘“Well, possibly by August 10th and

certainly by August 12th.”’

| - Q. All right. Going hack to the July 25th meeting: when

you showed them—- A. May T add one thing to that?

[668] Q. Yes. “A. questioned Mr. Cox on whether

that was coo,short a- time and explained to him that if

a date was established to start this operation and that we

then failed to do so, that we wouk, in all likelihood, be

in very serious difficulty with ‘the Venezuelan authorities,

since they perhaps were extending themselves to allow

us a chance to get it reactivated under any circumstances

and that we would have to advertise this thing to reacti-

vate the service and @iat ‘we would have to: abide by

whatever date we nofgied them that, service would' be

started and that we would advertise the thing.

Mr. Cox said, ** Well, Mr. Marshall, it has - been our,

bus sIness ‘to conduct operations alk over the world on short.

notice,

QQ. Going beni to the July 2 25th meting when vou pre.

sented Defendant's Exhibit M. to USOA persomally, was

there any *diseussion of any cliange in that draft, and

examine De ndant’ - 2 xhibit N. if you care to, which is

a 4 if | =

John Page Marshall—Direct |

- the nue contract. . These are changes from the second)

draft to the so-called final draft?

~Q. Yes. [669] A. At paragraph (f).

Q. 1(f)? <A. 1(f). Iam sorry.

. Q. Yes? A. Ther was a a change in that arat pro.

\vided that USOA was to pay CAVE $1,500 per roundtrip

flown with a mjnimum guarantee of $3,000 per week.

.Mr. Cox said that that seemed perhaps a little rough

on them, since it -would take time to get the operation

started again, that there might not he occasion for two

operations, that this, as he read it, would obligate ‘them.

to pay a minimum of $3,000 a w eek from the very begin-

ning, and that he thought that that should be>relaxed to

recognize a period for reestablishment of the operation, —

during which perhaps only one plane would’ be required

and that in any event he could not send a. second ‘airplane

down immediately.

Accordingly, the contract was written to provide—to |

remove the ee * of $3,000 per. week for a period of

60 days. .

Q. So ‘that. it would start after 60 days, $3,000? OA

That’s correct.

-The Court: And there would - nothing. in the

meantime? rs .

{670]. The Witness: Yes, sir. In the meantime

they would pay $1,500 per roundtrip actually flown.

ee * S4 :

“ (6741. The Court? Before. answering that, will -

vith please indicate what the words were that were

added as a result of Mr. Cox’s objection.

Mr. Nickerson: ‘‘As defined in this agreement.”

The Court: .Let Mr. Marshall answer that.

“John Page Marshall—Direct

The W itness > ‘The words ‘‘as defined in one

sagreement”” ‘were added, and I agreed with Mr..

" Cox’s question to me as to whether in my opinion

’ a that would mean. that the term of. the contract, -.

‘being for one year, Would be included inthe ‘‘as

\.defined in this agreement”? and that accordingly

the action — not binding after the term of a .

year.

Mr. Se henisicala: With respect to what this wit-

ness said, ‘‘that would. mean,” I request that it be

- stricken. ;

# The € ourt: 1. take it that you are referring to.

a conversativn which took place with Mr. Cox—

[675] The Witness; Yes, sir.

The. Court: --immediately before: this: form . of

words was adopted, -

Tie, Witness: That is right.

The Court: I will take it.- <

* e- ©

% > = :

- [677] Q. In the discussions that you have referred to

in vour testimony with the USOA personnel, did they at

‘any. time maké any statement that they would fly only if

they got full loads?’ A. Absolutely not.

« * : + .

- [O78] Qsi Will vou refer, Mr. Marshall, to certain meet-

ings Which you have testified to* that took place in the

middle of September 1951.

[681] Q. Can yon tell us the substance 6f that, meeting, —

who was. there and what was said?) 4 ~ ueglected one‘

“thing, if |. may, in the first meeting. At that meeting

Mr. Burgdr was present and he had some considerable

_ volume of paper, large sheets, and. textual material, and

Chen

~S " to S a

omy ‘ - John Page Marshall—Cross

NP | ae s 10

he endeavored to preva., upon: Mr. Kox to consider the

requirement for [682] conducting ihe schedule operation.

ra es feo (e* e ‘

[693] Cross-éxamination-by Mr. Schoenwald /

[708] The Court: Mr. Schoenwald; I am afraid

that you are taking a-little ‘bit of the attitude of

an attorney for an infant suing:a trustee, and vou

--are not in that protected ee gi oe You. are

. representing a” businessman trying to e- money,

who Was dealing at arm/s lengtli with another busi,

hessman, who was alsé trying to meke money, and:

you have got to understand the. issues of. this case

in’ that light: er .

Now I do ‘not regard your. argument as having

any, validity cause I think that. you relied upon

several thimgs, notlonly what was in the so-called

7 Wa prospectus, but upon “the investigations made by

sour own ¢i lients: upon what they considered to be

the weight to be attached to.various intangibles and,

illusive- considerations. The future business, for.

_ instance, y Nobody can predict with certainty wnat

‘is going. to C709] happen in ‘the future on anything,

let alone transportation of: passengers., And_ the

mann@ in which you are attempting. to explore

evervthing#that should have been told to your client,

leads.me to believe that you are laboring tinder the

‘iiusion that your client was in the nature of -a

ward or an. infant, and that people with whom your

.*elient was dealing ‘were like trustees or fiduciaries

—in fact, you have made the allegation that they

had a fiduciary duty which they breaghed.

Mr. Schoenwald: “a contract. .

‘John bias Marshall—Cross

‘Phe Court: Tyan, enable to understand what

that-is so far’ 1 don *t see what the basis for it is

‘inthis case. I sée one reference in a letter toy the

term ‘partner,’ which I don’t think is sufficient to.

enable you to make that argument.* But up to this

“point you are not entitled to take or to claim the

righ* to pursue your adversary as. though they had

the duty of a trustee .toward a ward.. They are

two cei

loosely drawn and which had all kinds of safe-

guards and provisions which might have been put

into it’ which [710] were not,-and there were all

kinds of things ‘about this prospectus} in my opin-

ion, which indicated that this company was stum-

bling and faltering, if not: in a condition of very

serious financial difficulty, and in that atmosphere

I don’t unde rstand how vou can pursue this.

& Mr. Schoenwald:. Your Honor, I-think this.is a

question that relates to the remainder of the -testi-

inony, ard it is of some importance.

The Court: Well, put a question, . T will give:

you an opportunity to argue the law and to sum-

marize the evidence later. Put a proper question. |

I have been trying to help. you and guide you along

* . eonstructive lines in giving you the benefit of what

I thought were tentative views, and T can deal with

it hetter if you will put a*fresh question ‘and we

will go on from ther, heeause T think your impor- °

tant task now isto get the testimony and the proof

complete. |

dealing ‘at arm’s iength, that is.

Ww hat they w ere, and they, entered into the contract,

a contract w hich| I liave no hesitancy in. saying was .

J ohn set M arshall—Redirect

[734] Redirect ‘examination by Mr. Nickerson:

Q. Mr. Marshall, you testified with respect to-a afl.

ing of yourself, Colonel Marcano; Mr. Burger and Mr.

Webb. Can you tell us in substance what was said in

that conversation? I believe you testified it was some-

time in September, prior to the time you saw Mr. |

‘Cox. A. Yes, sir. It was on the morning of September

14th that I went to the. Lexington Hotel at approximately

ten o’clock in the morning and met with Colonel Marcano

‘and Mr. Burger, who were having ‘ breakfast. Colonel

Marcano mentioned that there were some very strange

things going on and that USOA was endeavoring to take ,

their airplane out of AVE’s operation, and he* [735] sug:

gested that Mr. Webb -was coming there and that we go

up to their room arf discuss the matter, and Mr. Webb

Aid come and he told me the first complete detail on the

‘thing, which was that Mr. Cox had sent him, me. Webb,

to. Caracas—_

. - e

‘Mr. Schoenwald: I think what the wifness is

testifying to is not what our man ‘said -but what

* Colonel Marcano ‘said our man ‘said.

The Witness: No.

°. e- Se. : $

[736] Q: Don’t tell us of. ariy conversation you had

alone with Colonel, Marcano. ‘Tell us ‘only of the con-

versation you held when Burger, Webb and Colonel Mar-

cano were present,- A. Yes. | | A ae

* Q- Continue your answer, will you.: A. As I say, -Mr.

* Webb said that he had been sent to Caracas by Ralph’

_ Cox to take the airplane’ to Bermuda en the next east-_

‘bound trip; to get the transfer—to transfer the “pas-

> tion.’

OS RLS, Cae

John Page M arshall- “Redirect

sengers if ante to BOAC, but in any event ‘to return

the airplane to the United States.

He said that upon his arrival.in Caracas that he had

been approached by Mr. Burget and Mr: Burger met the

: airplane when he came in and that he had disclosed to

f \Mr. Burger hjs instructions, that Mr. Burger had pre-

vailed upon him not to do so and that Mr. .Burger and

’ himself, Webb, had then made an arrangement with the

& .

pilot- of the aircraft, whose name was Campas, to ‘not

move the aircraft for any purpose except under instruc-

tions accompanied by the word ‘‘Burweb’’ a code word— ~

[ am sorry, should not have used it—at that time I

didn’t learn. that it Was Burweb, until later, |

[737] Mr. Webb then said that he was very tired; that

he had been down to Wildwood and that—he Jaid down on.

the bed and said that he wanted to talk over the opera-

tion. He said, ‘*I think we can:take over this operation.’’

~ He said, ‘“‘T own half of. that airplane—I mean, I own

25 percent of it and Clemett owns 25 percent.’’ Hg said,

“Cox has transferred the airplane to USOA withott

ing us any evidence of our ownership. It is. now, accord-

ing to. registry, owned by USOA.”’

Then he said, *‘I think that we can get that airplane.”’

t leav- |

He said, ‘Al have a friend of mime in Florida who has a:

DC-4-andewho is a very close friend, he has offered to.

_ make available to me up-to forty thousand so that I will

have Lye aircraft and capitaléto undertake AVE’s opera-

Well, Colonel Sereane said | no, that we wishin enter-

tain segetlletation or not enter into a discussion or con- .

sideration of the operation of AV K by anyone else. “Then

‘I mentioned— —

The

Deposition from Fremont W. Burger —

- Q.. Any one else other than who? A. Well, he may

have said USOA. | I stressed the fact. that of course we

_ had an agreement: with USOA and that our whole effort

would be to make that work £738] and that we wouldn’t

talk to anybody until that was definitely-out of the picture,

and I suggested that Mr. Burger return—Mr.:- Burger and

Mr. Webb return to Mr. Cox’s office—they told me that they

had been in touch with him—and determine what Mr.

Cox’s plans were, and that Colonel Marcano and I would

remain there until we received word from them. We-did

receive word not less than ‘a hour later, and Mr. Cox was

ready to talk to us.

“Mr. Nickerson’ That is all, your Honor.

a : * e e <

(781) “Mr. Nickerson: Would your Honor want

ine to read in some questions from Burger's deposi-

tion before lunch? It may be fairly rapid. |

' The Court: Yes. . | i

‘Mr. Nickerson: Page 5. ve 6

“<Q. W hat, in substance, were the discussions that you

had?”’

And may the record sha ard counsel concede that that

was discussion between Burger, Cox and Waters.

‘*A. Mr. Cox evinced an interest in it. We'had a chap

in our employ, Dave Waters, who had been formerly

with AVE and we asked him a lot of questions about

their previous operation, potentiality and the possibiltty

of our participating in such &n operation. The discussion

was very general at this time.

“*Q. As a result of those discussions, did Mr. Cox [782]

become interested in it or had he been interested, before!

> ar

75 's | 4

Deposition from F remont. W. Burger

A. I think that his interest was a result of those dieve-

-sions, by and large. I don’t think that he was acquainted

with the: situation too much before. | “3

/ Did he participate in the discussions with Waters

cand by: ‘he’ I mean Cox? A. Yes, to some extent. Prin-

cipally,, | asked’ Watefs mostly about the AVE’ operation,

what transpired before.

“*Q. Can you ‘ell us the substance of whe Waters said

about it?’ A. He said that in his opinion he thought there

was a good potentiality there, that they had never realized

it before. He said that they, operationally and business

procurementWise and all of those things—4t hadn't been

a good operation, and he mentioned a lot of the person-

alities that were in the deal; who they were I don’t know,

T don’t remember the names. There seemed to be an

arrangement between Wodten. and Prescott and Colonel

Mareano, and then thére were certain involved situations

among them. Those were the points that he brought out

principally. ’’. | |

Page 7, second ‘question:

[783] *Q. Could you tell -us in substance what your

diseussion was?” a

This refers to discussions between Mr. Cox and

Mr. Burger prior to the time they: saw Mr. Marshall.

| SA. It -w ould be very. general at this point. We didn’t

know the people who were inv olved in it. We were merely

under the supposition that it would be available. We

were definitely interested in*it. We wanted to determine

on what basis if any we might get into stich an arrange-

ment.’?’ ,

Page 8, third from the last question:

- offige and decide whether we should wish to keep it or

an “Deposition from Fremont W. Burger

**Q. When you received Plaintiffs’ Exhibit i, that

your Honor, I will refer to as Plaintiff’s Exhibit 397; it

is thé Gotch & Crawford study—‘‘did: you examine it? A.

I didn’t ‘have an opportunity to. We-were in

_in the North Atlantic at that time, and Iw

**Q. Did ‘you ever-get.a chance )

was turned over to Mr. Cox principally. He was the one

that looked it over.

‘ “Q. Did you ever get a chance to examine it?’ A. Only

superficially.”

Page 40, the first question, and this refers

(784- 5] to a conversation w ith Colonel Mareano in

Caracas:

“Q. Did he mention’’—he meaning Colonel Marcano—

‘fanything about the Rome office being involved in a

dispute with Mr. Wooten? - A. No—that came up, yes,

there was a discussion about that.

“Q. What was that? . A. Colonel, Marcano saic that

after we had time te go to Rome and look at the Rome

not;we. should let him know. But whether Jim Wooten

was in-the dgal at that time was not discussed, T don’t

believe; at least not in my presence it wasn’t.

‘*Q. What did you* and Mr. Cox say to that? A. It

was on the basis of let’s look it over. He told us of some

of the expenses that he had had in. connection With the

Rome office and we indicated that we felt that it was toc

much, that we didn’t think ‘we could handle that, but we

would: still look at that and advise him. That was one of

my assignments.”’ :

Wiliam . C. Wold—Diredt

{786] WILLIAM CC. w OLD, called as a wites on .

behalf of-the defendant, being first duly sworn, testified

as follows: ©.

Direct examination by Mr. Nichawasie:

,.Q. Mr. Wold, will you tell us what business you are in?

. I am a partner in an aircraft | sales firm, ceneageet

iserelt sales firm. .

Q. Will you tell us something of your background in

aircraft: sales? A. Well, I worked for Consolidated Vultee

fora number af years. I worked for them about ten .

“years; the last four was en in transport aircraft

sales -work. :

Q. What Seene were ‘hank. about?” A. That was up

until: April of 1949 when I started this ‘present business"

that I am in.

Q. Where were you ‘before you were with Consolidated

Vultee? [787] A. Well, I was in the U. S. Signal Corps

for a year, and before that I graduated from college. ae

Q. Where did you go to college?’ A. M.LT.

Q. What kind of degree did you get? A. Aeronautical. oo]

Q. In your present business, what is*the nature of that

business? A. Transport aircraft sales. We are special-

ists in that field. ata oA

Q. Would you describe yourselves as brokers? A.

Yes; we do primarily brokering and occasionally dealing

ourselves.

Q. And in that connections \ were you familiar as of.

September 15, 1951, with the market price of DC-4 air-

craft?: A. Yes. That is part of our business.

Mr. Nickerson: May it be conceded that Defend. .

ant’s Exhibit BB for identificatioh represents the.

- 78

William C.- Wold—Direct

time on the aircraft, the two aircraft involved, and. .

the engines thereof?

Mr. Schoenwald: Yes.

— Q. Now holding Defendant’ 's Exhibit BB for identifica.

tion and assuming that the two DC-4 aircraft [788] re-

____ ferred to therein, DC-4-E’s, were _in_ proper fitness for

flight as of that time, can you give us ‘an opinion as to

the market price on that date, September 15, 19511 A.

Yes. In my opinion aircraft such as that: w ould have had

a fair market value of between. 600 and 625 thousand *

dollars. im

Q. Could you tell as on what you. base your opinion?

.. A. Well, I base that on our records of aircraft sales and

known sales of comparable transport aireraft.—

Q: Did you have sales that you were aware se’ on. or

about that date? A. Yes. Sales that we were aware of

and also sales that we actually made ourselves. I can

give you some examples if you wani.

Q. All right. Will you do that?’ A. In October 109%)

we sold an aircraft ourselves. The actual—

Q. DC-42 A. DC-4, yes. me i

™ * * e

% [789]: Q.‘What was the price? A. Well, the actual

price of the aircraft sold was $615,000. Now, the aircraft

was not comparable to this aircraft, as far as its type of.

_ interior.and so forth. Had it been, in my opinion it would

~. have sold for about $660,000.

~ - Q. You are assuming—I should have: put that into the

hypothetical question—a passenger interior recently ‘reno-

| vated? ‘A. Yes. In other words, every transport aircraft

William C. Wold—Direct

sale is not of an 1 aircraft that is identical toa previous

sale or a future sale. There are variations. between them. .

But trying to compare the aircraft actually sold with

the type of aircraft that vou have in mind, in my opinion

that would have sold for $660,000. That was in October

(1951, an aircraft that_wé sold-ourselves.

[790] Now in June of 1951, we did not make this ais

but we know of this sale isousk our ‘records, of a DC-4

to, Pacific Northern Airlines; actual sales price: of - this

ft was $500,000. In our opinion had it been com-

ahi to this one’ it would have sold for about $525,000 °

to $530,000 in June 1951. O |

- Now in October— nth

—_

_Q. Was the owe pall up? ate ‘market ‘ene

was rising sharply.

Q. Do you know what the reason for that was? A.

Well; the. reason, I think’ the “international situation im

‘the world had a lot to, do with it, aus the fact that airline

traffie was rising.

In October 1951, again, there were two aircraft sold,

which were not our sales, and they -were bought by Sea-

board & Western Airline. And in my opinion had they

deen comparable to this aircraft ‘they would have sold

for between 645 and 650 thousand dollars.

[791] The Court: How old were. the two planes

represented by. Exhibit BB which you would sell in»

1951? - +

Mr. Nickerson: I-am not stire, but maybe the

witness can tell us from the aircraft total C792]

time. Sy. :

The Witness: W ell, you can’t tell the age in time.

80 ‘

7 William C. Wold—Direct

Q. You can only tell the extent of its use? A.. You can

tell the extent of its use, yes.. And the total extent of th:

use of an aircraft and its chronological time has not, has

*~ not been over the’ past good many years, has not been

the significance in its value in comparison with its time

since overhaul and the supply and demand situation in

the market, because we have sold DC-4s as high as $750,00

after they had been completely written off on the owner's

‘books, and the original aircraft cost about $300,000. We-

_ did that in the case of National Airlines DC-4s.

' .Q. In what year? A. That was in, I a that was in

1952.

Q. Was that due largely to the Korean War situation!

A. There’ is no question that that had an effect on the

market situation. But airline. traffic. has been growing:

steadily all during that period, which also had its effect.

-Q. What is the Significance of the initial [793] “KE”

next to “DC-4’"% A. The “‘E” is a model designation.

ft designates a later model according to the-Army.arid/or

the Air Force and Douglas dimensions, and it also indi.

cates the type fuel. system. For example, DC-4-B was

. originally built only with a 2800-gallon’ fuel sy stem.

DC-4-E_ model had a 3600-gallon fuel system.

Q. When did DC*4-Es. become obsolete, if they were!

A. They are a long ways from obsolete today, sir. ‘Ther

are selling now for pretty close to $700,000 range? -

Q.. You say they are selling\now for $700,000. Toes

‘that ‘ mean new, delivered by the manufacturer? A. No.

sir. They are not in manufacture, and, they have not beer

in manufacture since—I think the last’ ones were manu

factured in °46. We are — entirely about used air.

craft.

' <\ William C. Wold—Direct ~~

Q. How do you determine the obsolescence of an ait-

craft? A. Well, obsolescence of course is created every

time a new model comes out. In other words, the DC-4

became’ relatively obsolescent when the DC-6 model came

out, which was pressurized; the [794] DC-4 isnot pres-

surized, But it doesn’t become obsolete from the stand-

point of being’ a good serviceable useful. money-making

airplane for the airline as long-as the traffie, the airline .

traffic,” creating demand for that aircraft is increasing at

a reater rate than new aircraft are being produced. And

that is the situation we have had in this industry for the

last five or six or sevén years.

Q. Then on that basis the DC- 3 would not be obsolete

Q. The DC-3 has -not been manufactured for many -

years? A. You are absolutely right: and the DOB sells

today for more than it sold new.

obsolete today? A. Not by a long shot.

Q. You say it is. not obsolete?. A: I mean that it is

_fowheres near obsolete. . a :

Q. In other words any airplane which is cominercially

exploitable in your opinion is not obsolete? A. That is

‘right. You woutd have ‘to get into £795] a very careful

definition of what you mearby ‘‘obsolete.’? If you mean

as a-vehicle for carrying passengers and performing

airline service and making money, it is nowheres near

obsalete. } :

-Q. Well, let me put this final question ‘to you: I take

it you would not agree that the cessation of manufacture

of a model is tantamount to the beginning of its -obso-

lescent ‘period? A. T am. afraid, to be absolutely honest

82 . ‘i

William C. Wold—Direct ;

with you, Judge, I would have to have an expanded defini.

* tion of what you mean. by ‘‘obsolete. yw 2 |

Q. I am suggesting that if an- ‘airplane model is no

longer manufactured by its mahufacturer and the manv.

facturer ceases, definitely and irrevocably the manufacture

of that model, to the extent of pulling out any of the

special machinery wid, taking it off its drafting board so.

that there is. no longer any equipment or machinery for

the purpose of manufacturing, I am suggesting that that,

ipso facto, creates-a condition-of obsolescence for that air.

plane? A. Well, I will answer that by saying that it does

only relatively. \

Q. All right. 6 get the potnt. A. Because actually if

the manufacturers £796] have not been producing or did

not foresee a traffic growth “which was going to create a

‘supply and. ‘demand situation for tho. aircraft after

he stopped manufacturing them, that would bring their-

business way up, far above, what he was selling them for.

It simply means I[ think that the manufacturer felt that

it was obsolete too soon.

“Q. Was there a very lively market in 1951, September,

October, 1951, for used DC-4s? A. Well, T would hate to.

use the word “‘lively?’ because—

Q. Active, reasonably active... A. It was a reasonably

active market. Ip‘ our,industgy the numbers are pretty.

small and the movement of aircraft-is not so frequent

that you can refer to it-like yoy do the stock. market

activity. But it was increasing, and the pressure of -

demand was, definitely beginning to show.

% 83 | >

William C. Wold—Cross—Redirect

[797] Cross examination by Mr..8choenwald:

; . ie: er me. ’ <

[801] Q. I will ask you the next question: As a mat-—

$415,000 each in October? A. That wasn’t a sale. that

we made ourselves. I meah, that is a ‘sale that is. *

record that we know of...

804] Mr. Nickerson: May I call on the plain-

tiff to produce the material that I previously asked

them ‘to: produce, nariely, the specifications with

respect to the USOA “aircraft, that I called, on

them for that about a weék, more than a week ago?

‘While Mr. Pollak is finding that:

Redirect examination by Mr. Nickersen: a

Q. Will you explain the difference between the $415,000 .

igure that you referred to and the $615,000 figure? [805]

A. In the case of*the Seaboard & Western. Airline?

Q. Yes. -A. Well, these records are at my office. But

this-is based on the fact that the aircraft were taken

with a lot of equipment lacking, or things not done, which

are ordinarily included or done by the seller which the

purchaser was: going to. do which accounted for the _

reduced price.“ ‘But for purposes of evaluation and com-

parison, had the seller done all those things, and equipped .

the plane that way, why, then, the value would have _,

$640,000 to $650,000.

Q. What was the kind of equipment - that wasn’t on

that? .A. For example, if I remember correctly, on thts -

aircraft the engines were not included. That is one thing. -

Engines would be about eighty thousand right there.

. Deposition from Mr. Fremont W. Burger

Q. Can you take a quick look at this and see whether—

are you familiar with it enough to do it? A. Yes, I think

so. This‘is the aircraft?

‘Q. This is what has been produced as the [806] detdiled -

information about N-90436, which is one of: the aircraft.

A. Approved for return to Service.

R - & e @.

| “Mr. Nickerson: I am continuing to read from

Mr. Burger’s deposition, your Honor. Page 52.

eS , ; . * « :

[807] Mr. Nickerson: And it is referring to

the Rome landing rights.

(Mr. Nickerson read from Mr. Fremont W.

Burger’s deposition as follows, beginning at -page

52:) "

» **Q: When did you obtain those landing | rights? A.

- We obtained them. within approximately. three days after

my arrival there.

$Q. Approximatély the _ of August? A. I would

- say approximately, ves, sir.’

Mr. Nickerson : - Page 64... This also refers to.

when Mr. Burger. was in Rome, if your Honor

please. ——

“°Q. And after the time that you saw Colonel Marcano

talking to the’ Venezuelan Ambassador, did. you receive

friendlier treatment from. the Venezuelan Embassy? .A.

After Colonel Marcano’s arrival there, I had -no further —

contact with tke Venezuelan Embassy and ‘any cohtacts

that were made with thcse people [808] were either

made by Mr. Cover, Colonel Marcano or Mazsolini.

Deposition from Mr. Fremont W. Burger ‘

a Q. Do you know whether .those contacts: were friendly

after that time? A. I wasn’t summoned to the Embassy

any more nor were we bothered in any way by the Vene-

zuelan authorities. |

Page 75, second question :

‘‘Q. What was Mareano doing’ during that time, . :

you knowt A. In Rome? | : .

“Q. Yes. .A. We were together simont constantly.

“‘Q. He was working with you on the problems? A.

He was working with us on the problems. We had devel-

oped this new route proposal. We discussed all phases

and, possibilities of this new route. We developed this

operations brief. discussed our immediate needs, dis-

cussed what .we Wished to do in the future and we were

together, as I say, practically all the time.

““Q: He was cooperating with yout A. Yes.”’

_ Page 100, third question:

[809] is Defendant’s Exhibit AS for identification; it is .

the so-called operations brie. that - Burger and Van

Boheman prepared over in Rome and which Colonel |

Mareano ‘testified he -translated and sent to the Vene-

mélan Ministry of Communications. ~

' “Q; (Continuing) —could you tell us what you said: to

Colonel Marcano in that regard? A. I felt and told him.

you are not interested in what I felt., I told him that

I thought the potentiality was very, very great on this.

projected operation.’’

Page 101, first question :»

_ pen - 86 | se . gh

“Deposition from Mr. Fremont W. Buryer

HQ. What did Colonel Marcano ‘say ith respect to

your estimate?’’ — * \

| That refers to the eationnté on the previgus- page

oP as to potentiality from Rome. te

8 A. He seemed to be th husiastie about it.

“«Q, Were you enthusi&stic about the _operation your-

self? . A. Very.”’

Page 116. This refers, your Honor, to a meet-

-ing between Sir. Burger, Mr. W ebb, and Colonel

Marcano. e

**. What was the-conversation when Webb and [810]

Colonel Mareano were present? A. The conversation

was very general, about Rome and the possibilities and

what was going on in general...

~“Q. What, in substance, did vou say and what did the

others sayt “A. I-don’t remember, Mr. Nickerson. The

conversation was most general. , et

‘*@. In-substanee? A. In substance, we discussed the

rowtes and the business and the possrbilities and that sort

. of thigs. ‘ :

*Q. Did you say what- you thought of the potential?

A. Yes. 2 +

“Q. Ww hat did ‘you sayt A. I saidgh thought it was.

very ied. 7 .

a e. . e

= | |

{814}: Mr. Niektrson:

“@. Did Colonel Marcano offer to go to Lisbon to

«. Page 290, the last question:

4 2 , :

a : ait

ec see ee

William C. Wold—Redirect

“Q. Isn’t it true, Captain Burger, that you never found

anything, at any time, which gave you any reason to—

suppose: that Colonel Mareano was dishonest in any way?

Isn’t that the fact? A. I have stated it before, Mr. Nick-

erson, and-I will state at again: I believed Colonel Mareano

to be absolutely honest. I believed Colonel Mareano to be

absolutely honest*throughout my connection With the AVE

operation. -» ; we

“Q. Do you still believe that now? A. You hayé asked

me for a personal opinion? yale

“Q.. Yea,”

Mr. Schoenwald: [Tam going to object.

Mr. Nickerson: . .

“A. T still eltews tliat ( Saanan? a

[817] WILLIAM C. WOLD resumed.

7 ° e°

Redirect cramination contingethy Mr. Nickerson:

Q. Have you’ examined, Mr. Wold, Defendant’s Ex-

hibits BY‘ and BZ for identification? A. Yes, I have

looked them over. . :

(Q. And have you noticed that they spe ak as of 195 Sh ae

‘A. Yes. ;

Q. And as of 1953, assuming “the facts which are set

forth in those exhibits existed as er September 15, 1951,

would you say that your previews testimony would be

affected. if you made that assumption? A. Welk the only

thing that 1 see in here, [R18] looking it over, this, rather

hastily, is that the aireraft show a gross. weight of 71,800 °

rt.

William C..Wold—Rédirect—Recross

pounds, which would indicate that they ie the smaller

engines, which are not: ‘consistent with the fact that they —

are the Model E. » Usually, when the aircraft is converted,

as these aircraft have been converted, from’ C-54-A to

C54-E they have ‘the larger engines installed which. allow

the 73,000 pounds gross weight, .

Q. Do these show that they are C-54-E? -A. They hee .

that they are C-54-K, which are ordinarily expected to

be the 73,000-pound aircraft with 1490 horsepower engines..

These aircraft are shown as having only 71,800 pounds

gross weight, so, although I -lon’t see’ the engines culled ,

out in this report, | am assuming that they are 1350 rather

than 1450 horsepower engines.

Q. Is that safé to assume from the gross weight® A.

It is.pretty much to be expected, ves. | |

on them, what would you say the market price would be

as of September 15? A. That might reduce the valuation

-as much as $50,000. :

[819] Q. Mr. Wold, does Defendant's Exhibit BB for

identification, show the type of engines? A. It just gives

the engi ne time since overhaul and total time. It doesn’t

give thé-engine model type. |

Recross examination by Mr. Schoenwald:

: . a a ee

ie [821] Q. Assuming for the moment that the engines

[822] were the R-2000 type and were available for 12,000:

each, and four engines on these planes, I think that is

ee William C. Wold—Recross

“$48,000, can you: tell us any ‘other difference which would

account for the $175,000 that you say that these planes

- were worth and what. the other. DC-4s sold for? A. Which

airplanes are you referring to?

Q. I think you expressed the. opinion that USOA air-

_ planes were worth in September 1951—how much did you

say they were? A. Between 600 and 625 thousand.

Q. You say you thought that the airplanes that we had

were worth approximately 200,000 more than these ‘air-

planes tltat were’ sold for 41: ),000 ; isn’t that. — A.

That is right.

Q. And so far we have annealed for 48,000 of ‘that

difference, with aircraft engines, which leayes us with

another $150,000. worth difference to’ be accounted for.

How do you-explain that difference?) A. First off let me

point out that the engines that apparently were on this

airplane ate not as valuable engines as I would assume

that they [823] were. Now the Seaboard Airline aircraft

were ‘purchased. | think they were, pretty sure they

were, used as cargo aircraft, which means that they would

lave no interior, other items of equipment—radio equip-

ment and aecessories furnished by the buyer rather ‘than

“the seller, The engines in that particular case, T think

the figures that I used were 20,000 apiece, which would be

- the DC-5 or -13 type engine. ‘ 7

| e" e . .

up.the other $150,000 worth. of difference between the

_ $415,000—hesides the engines that ES2 5) you have told

us ahout--the’ $415,000 aircraft and the $600,000 aircraft.

A. Well, [don’t have the breakdown, but the aircraft,

for one thing, could hate been and probably were com-

’ William C. Wold—Redirect—Recross

pletely run out, in other words; needing overhaul; and |

the buyer performing the overhaul of the air frame, that é

‘is an item of $50,000, alone, by itself. ,

The engines, which were in that particular case the

‘dash’ 13 or “higher-priced> engines, I use a figure of —

$20,000 apiece» That would be eighty thousand. There

is $130,000. Now there was. radio equipment and no

passenger interior, things like ‘that, all of which brought

out. the difference which I use in ae my “standardiza-

tion— ,

Q: Do yéu know, sir, whether or wet USOA’s ainavatt

at this time wooded overhaul or: not? A. According to

the figures that were on your sheet, they did not need an

overhaul. One of: thein only had nine hundred-and-some-

odd ‘hours since overhaul. They are good for at, least

8000 hours before they need a:-major overhaul. -

—

*. * e* io *

(826] Redirect examination by Mr. Nickerson:

Q. 1 show you Defendant's ‘Exhibit CA for identifica-.

tion, a document dated August 13, 1951, with respect -to

an aireraft and whith shows four Pratt and Whitney

engines, Model R2000-7, and ask vou what in your opinion

would the value of the aircraft as‘ of September 15, 1951

bet A. I see from this document that the aireraft was

equipped with smaller engines, the R2000-7, which reduces

my opinion of: its value. - And I would.say ‘between

$550,000. and $575,000. | |

° es : .

[827] Recross examination by Mr. Schoenwald:

[830] Q. So thateone of these aircraft was subject: to

overhaul and another near most of its jie, is that right?

is ; . : ; 91 ;

: William C. Wold—Recréss

[831] A. No.. One of these aircraft had only 900-and-¢

some-odd hours, as I recall, since overhaul and the other

had 4000. .

' Q. You told us that about 8000 was the maximum ‘timet

A..I didn’t say that. I said that aircraft had to be over-

hauled or would have to be overhauled a& soon as 8000

hours. — ; : .

The Court: I think,vou said ghat after an over-

haul it would have at least an expectancy—

The Witness: That is the way I put it.

The Court: Of 8000 flying hours.

The Witness: It could have any expectancy of

10,000 or twelve; it.depends on the operator. The.

CAA keeps some people by experience; they keep -

running a fur longer time between overhauls.

_Q. Part of the expectancy of one of these planes, almost

haif of the expectancy of one. of these planes had dis-

appeared already ? A. If USOA was operating with CAB—--

approval, 8000 hours overhaul, then about half the *x-

pectancy would have been gone. If it had*been on. 10,000-

hour overhaul it would have -been 40 per cent.

QQ. That would affect your estimate of the [832] value

by another twelve. to fifteen thousand? <A. | imeluded

that thinking in my opinien when I said between‘ 600 to.

625 thousand originally, beeause I knew one aircraft had

some 3000 hours less than the other one, which is approxi-

mately—a good round figure is $5 an hour for allowance :

tor air frame overhaul time. So— : ;

4. Did you also include in your thinking when, when

you told us some figures around 550 to 575, before we

_ 92

Jorge Marcano—Direct — Be

began to get into these items, did you include that 4000 .

‘for that estimatet A. Hours? or sic

Q. Hours. A. Yes. — . : ms

' ‘e -« < aes on

[868] JORGE MARCANO resuméd.

Direct examination by Mr. Nickerson:

Q. Colonel, do you recall that in Exhibit 357, which is

the Gotch & Crawford study, there is a statement with

respect to an open-end franchise? [869] A.. Yes, I. do.

sl What did vou- understand by that term? | |

* a e

A. My undiovetandiad: was that open- end: woold mean

that the franchise‘ did not have a definite date to finish .

or expire. There was’a contract: and that as long as |

performed, it would be automatically renewed as it was.

Q. You understood that what you had was something -

that would automatically be renewed provided you per-

formed— A. Performed, yes.

Q. —under its terms? -A. Yes.

[S85] Mr. Nickerson: May I just make this

short comment and that is ‘that they can’t pick

out one letter from one of ®ur agents out of con-’

text and then not let us explain it by. another.

[S86] (Defendant’s s Exhibit BV for identifica’.

.tion received in ev idence.) . 7 ;

- @ *

- 93

Jorge Marcano—Direct

[897] By Mr. Nickerson:

Q. May I ask you with respect to the cancellation, can

you tell us whether or not you gave USOA a credit card?

_A. Yes, I gavé them a credit card.

Q. And can you tell us whether or not you paid [° 8]

#, 440.53 on that credit?. A. I did.

the CSOA operation? A. Yes.

Q. Can you tell us whether on Defendant’s Exhibit CF

for. identitication whether those. moneys were advanced to

the USOA personnel there mentioned ?. ‘A. Some were

advanced, some were hotel bills that were paid.

Q. Can. you tell us wheth#r the advertising referred to

on a page entitled ‘* Advertising” on this exhibit was

paid? A. Yes, it was paid. 3 oe

Q. Was that in. connection with the AVE operation

. subsequent to Jily 95, 1951? A, It was, yes.

Q. Can you tell us whether the bill dated November 28,

1951 headed * ‘Henry Coe—Clerici’’ was a bill received—

- first let me ask you whether Coe-Clerici is’ the agent that

, Was named. by USOA and ‘with whom, vou signed the

agreement pursuant to the direction of Mr. Burger as

*traffie agent for USOA in Rome? A. It is, ves.

C899] Q. Did you receive that bill?) A. Yes, | did.

Q). Did you pay it? A. I. didn’t pay it.

(). You haven’t vet paid? A. I haven’ tavet paid it, no.

Q. Incide ntally, Colonel Mareano, was there mail that

was taken back from Rome on the flight of September 9,

1951? A. Yes, there was.

Mr. Nickerson, I will get one more large item,

"your Honor. |

J orge M pena ered *

.Q. With respect to sheet hesied ‘‘Pay roll—Venezuela,

Garacas,”’ can you tell me whether the persons there men-

tioned were connected with the USOA operation subse-

— quent to July 25, 1951? A. Ses, they. were cozpilots, radio

operaters—and hostesses. oe

Q. And were they paid? A. They were all paid, yes.

Q. By yout. A. By me, yes.

Mr. Nickerson: All ‘right, your Honor.

The Court: What- is the total amount of we

[900] payments? i :

_ Mr. Nickerson: I have to Seiens that up. It is

twelve thousand-odd dollars on that item, eight

* thousand-odd dollars on this item,

The Court: Is it your recollection that the pay-

ment made to the co¢pilots and other personnel was

in excess of twelvé thousand dollars?

- The Witness: Oh, yes.

ae e .e e : é

[901] Q. So far in round figures the amounts which

you see on.,De fendant’s Exhibit CF for identification— -

A.’Yes. I can say yes becausé. I know it.

Mr. Nickerson: May | offer the sheets which are

in evidence, or would you rather 1 computed it

. from the-—rather, not .in evidence, but which are

on CF for identification; or would you rather I

computed it?

The Court:- I think it. would = better if you

computed it, because if you do anything els& there

“might be some technical problem of proof.

ee _ @ e -e . .

°. [962] The Court: Mr. Schoenwald, I have a

feeling you are delaying this trial unnecesxmrily.

“a : 95

Louis Zinman —Direct e

[964] LOUIS ZINMAN, called. ag a witness on behalf

of the defendants, aang first duly sworn, testified as fol-

lows: -* ‘

Direct examination by Mr. Nickerson: | :

Q. Mr. Zinman, are you a certified ‘Public accountant!

A. Yes, sir.. |

Q. How long have you. been wnt A. Since. 1926.

Q. Are you with a firm. of accountants? A. With the

‘irm of Mortimer: Stern & Company. — .

J ‘appre.

Q. ‘How Jong have you been with that firm;

mately? A. Well, the original firm was-since 1931.

Q. Have you in the last few days examined ‘the books

of CAVED? UA. Yes, sir.

Q@. And five you examined Exhibit. 357, the Gotch. &

crawford study? (965] A. Yes.

*Q. And did you make a computation showing the. ifems

considered as entering into the loss figures shown on the

statement of estimated assets and liabilities as at June 15,

1951? A. Yes, sir.

Q. And basing your testimony on the books and Colonel

Mareano’s téstimony, can you'explain to us the compata- _

‘ions that you made, if you will do it in summary fashion?

Mr. Schoenwald: ‘I any going to object to that

part of the question which asks him to base it on

Colone! Marcano’ s testimony.

- The Court: All right. Overruled.

A. Well, I examined—the books of the company were

graly up to April 30, 1951, and: starting with those figures

ind other information given to me I arrived at the follow-—

ng:

Louis Zinman—Direct

That between’ January ist and June 15th there was a

profit on the sale of airplanes: of $521,000.. Deducting from

that’a loss up to April 30th, according to the figures shown

on the books of $16,536, there were certain “other items

' whith were not considered in the June 15, 1951 statement.

[966]. Q. And in that connection did you use Defend.

ant’s Exhibit CC for Identification? A. I did. The

amounts -not’ considered consisted of notes receivable,

’ employees’ accounts and sundry accounts, amounting to

$132,000, agency accounts amounting to $231,000; certain

payments made from the National City Bank account which.

represented expenses of $49,000. Cértain payments to

directors and loans from. the National City Bank amount.

ing to $13,000, and payment of legal expenses of $10,000.

An unascértained amount which we>considered as being

distributed to stockholders or used for expenses, amount.

ing to $55,000. A reserve for foreign exchange arnounting

to $126,000. A total of $633,000. |

—,

There was also on the books at April 30th an operation

reserve which apparently was’ not used, That, operation

_reserve arose partly in 1950, to the amount of $32,900

and partly in 1951 in the amount of $16,800.

- Deducting that from the other items leaves a net deduce.

tion of $584,000 from the $521,000 or leaving a loss shown

on this statement of $62,500.

Q. With-respect to that operations reserye, what con-

clusion did you draw? [967] A. Well, it is good accounting.

_ prattice to set up a reserve for estimated repairs and the

books show that each month the operating. expense was”

charged and the reserve for operations credited. When-

ever a bill came in which was applicable to the repairs of

these motors, the reserve account was charged.

e Louis. Zinman—Direct

_At the end of 1950—I have to have that other sheet—

at the end of 1950 there was a balance in that reserve of _— .

147,000 bolivars and in January: and February 36,000 /

bolivars were charged against- it, leaving a balance of the

reserve applicable to 1950 of 110,000 bolivars or $32,950. -

In 1951 there was credited to that reserve actount some

_ 54,000 bolivars or about $16,000.

These accounts were ‘still open on the books at April

30th but did ‘not appear on the June 15th statement and ~

I assume therefore that it was not used and reduced the

loss - accordingly.

Q. If ‘that money which was in the reserve for 1950.

but which was: not expended in 1950 had been added to

the profit, what would that figure have been, Mr. Zinman?

Do you have that? A. Well, the amount of the 1950 Te-

serve Which was apparently not used amounted ‘to $32, 950,

and to that [968] extent. the. pons profit for 1950 f

could have been increased.

Q. By the-extent of $32,000? A. Right.

Q. But you say that conservative accounting practice

would require that that reserve remain? A. I would say

so, Ves. sé |

_ Q. For tax purposes, however, would you be permitted

to take the reserve? A. I don’t know about V enezuelan

taxes. : e

Q. No, Amerie, taxes. A..American! taxes, if you: ‘set

up a reserve for cohtingencies but don’t use it, they would

allow you only the amount that was actually used.

Mr. Nickerson: I will consent that that be

stricken, your Honor. (peas

Q. ‘Did you examine the books, Mr. Zinman, to see what

income ¢ came during the whole of 1950 from tickets, mail,

98.

Louts Zinman—Direct

parcels, excess baggage and charter flights? A. I checked

- the amount which appears. in the ledger and I checked the

figures that were posted there with the comprobantes. |

Q. Comprobantes are the daily. entries, are they? 969) |

A. The daily journal sheets. -

Q: The* daily journal sheets.. A. Which are entered |

into a bound journal and from that. journal are posted |

into the general ledger. The items which appear in the |

comprobantes checked out with the general ledger, ne |

as far as I can determine they w ere—the income was only |

from international. operations either for tickets, mail,*

excess baggage, parcels or—and; that is eT

flights. .The total in that account was 5,743,725 bolivars.

-- Q. Can -you translate that inté dollars? A. In dollars

it is $1,714,559. The income figure that is shown in the

prospectus is $1,717—

-Q. Here it is, page 5. A. —$1,717,332. The differences

reprenented an account called miscellaneous income of

approximately $2,787. ° : ;

_ Q. Could you tell us whether that was from the inter-

-national opération or not? A. Well, I didn’t. check that

“too carefully, but I think it was income from work which

was done in Caracas. Now I also noted in that account—

that that account was charged with certain expenses which

in my opinion should have. been charged to an expense

account [970] but not used as a reduction in the gross

income. x bia |

Q. Will you tell Bs. cabout, that? A. There were ex-

penses, Madrid, tickets, expenses for passengers, tjckets, |

_ passengers, Venezuela from: Puerto Rico, transportation

of mail from Puerto Rico, items of that nature.

_ Q. Those were deducted from. gross income? A. Those .

were deducted from gross income. They amounted to.

24,000 bofivars or about $7,290.

"Cente Z inman—Direct

Q. In your opinion in proper accounting practice would

you have required that that 7000-odd dollars be in gross,

income? A. I would think that they would be charged

as ‘expense of operation rather than a reductiori in gross

income. |

Q. The gross income figure wud have been increased

by some $7,000? A. That is correct.

Mr. Nickerson: That is all. ie

~The Court: I want to ask a question.

By the Court:

Q. You said that you saiteiined the books up to the

position - -of April 30, 1951. A. Yes, sir.

[971] Q. And that you based your conclusions in part

on information you obtained for the period subsequent. to

‘April 30, 1951? ‘A. Yes, sir.

‘Q. What was that other information that you used?

_A. That was a statement f the account of the National

City Bank where the income from the airplane was re-

ceived and thé expenses that. were—checks— = -

“Mr. Nickerson: That-is part—

A. That he paid out. ;

-Q. I didn’t hear- what the witness said. A. It was a

statement of account with the National City Bank where :

the proceeds of the sale of “the airplane were deposited

and the checks which wére paid out fram that, account.

Q. The gross figures purport to. be a statement of the

entire business activity of this company subsequent to ~

April 30, 1951? -A. No, just the statement of that account.

And the other information that I base my statement on —

was explanations given to me by Colonel Jorge Marcano.

Louts Zinman—Cross

Q. Did you reduce those to writing in accounting [972]

form? A. I have a statement of the schedule here show.

ing how T arrived at those figures.

_ Q. What do the schedules purport to show? A. It pur.

ports to show on what basis the loss that is shown on. the

statement was arrived at. : | :

Q. As I understand it this company had no current

books of account after April 30, 19511 A. That is cor-

rect, as far as I know. :

_ Q.. And’ up to what period did: you purport to recon-

struct after April 30th? -A. Up to June 15.. But I made

the statement that’ there was-an..unascertainable figure

which we considered to/be payments either to stockholders

or for expenses which has been unexplained. —

Q. In what amount? A. 55,000.

Q. That is all you found that was unexplaihablet A,

Yes, sir.

Mr. Nickerson: I think the Colonel so testified

on that, your Honor. | |

The Court: Go ahead, Mr. Schoenwald.

Cross examination, by Mr. Schoenwald:

° . ” =

[981] Q. You understand that the currency was blockéd

in Spain, do you not? A. That is correct. :

Q. And that this currency was blocked from January

1950 all the way to the end of 1950, isn’t that right? A.

I don’t know that. | .

Q. You don’t know the — was blocked during

the whole year? A. No, I don’t. : .

—-Q. Have you looked into the question 6f blocked cur-

rency at all in connection with your preparation! A..

No, sir. ‘ ;

* 101.

Louts Z inman—Cross

"Q. Assume with me that the currency was blocked from

January 1950 on to the date June 15th, the. date of the’

prospectus, do you know how much was earned by’ this

eompany in pesetas in 1950 and which: was accrued by

1950 in pesetas? A. I know how much the sales \ were; a

Q. Do you know what they accrued on: the books of the

company for pesetas during 19501 A. I just gre you

that answer.

~.Q. Did .you look at the ledger page? [982] A. Yes. :

-- Q. Did you look at—_ A. Do you mean accounts re-

was onthe’ books. Wak

Q. What were the accounts receivable from. Spain at

the end of 1950? A. I don’t have the figure at the end.

of 1950, but I do have the figure at the end of April 30,

1951;

mes What. were the repeivables from Spain at the end of

April 30, 1951? A. Well, that I would have to. look at

some other paper; I haven’t got that here.

Mr: ‘Sclioenwald:. ~ Can you supply him with the

other paper? — ; Q

; The Witness: -It is in my envelope. Can I have -

‘that envelope? ; oe

~ Q. May we have ‘the notes upon which you based your ‘s,

previous testimony? .

Mt. Nickerson: May we have ‘it anni for

The Court: Yes. —

(Marked ‘Plaintiff’ 8 Exhibit 397 for Adentifica-

tion.)

’

a Louis Zinman—Cross :

tS a G Vat

eo The Court:. Have you got the information [983]

what the Spanish funds were which were blocked

as of April 30, 1951? | | |

The Witness: Only. from ‘e June 15, 1951

statement. The way I base my ugures, | took tite

balance of the agency accoun‘s at April 30th which

amounted to some $492,000 and deducted from that

the pesetas that were shown on the June 15th

. statement of two hundred and whatever they were:

The Court: rom that, wht conclusion— .

The Witness: “The conclusion—he. didn’t take

_ into eonsideration the halagee of funds that. were

due from the ofler agencies. -.

: bo Oey :

Q. You undefstand that a large part of that was earned

in 1950, isn’t that right? A, Some part of it was earned

in 1990. . o

C984] Q. A subetantial ‘sdesd A. I did not check into

the amount, but. bere was some part of it that was due

prior to se

eg. “Now: did You examine whether or not there were

more operations in 1950 than in 1951? A. No, sir.

Q. Then you don’t know the proportion: of operations

* “in 1950 to the proportions in 151, do yaut A. No, I do

Rol . °

Q. Do you Know the period. of operation in “19511 A.

‘From JanuarsSto April 30th.

Q. And the period ‘6f Gperation during 1950%.. <— The

whole vear 1950. .

Q. Are you. familiar, with that gpart of the. prospectus

which indicates that they were operating only ona charter

103 es

. Louts Zinman—Cross | ars:

basis during 19512 A. I don’t understand. No, T am not

familiar. with that.

Q. Assume that the prospectus says that, would : that

suggest, would that plus the faet that the period of 1951

was much larger than the period of 1950, would those

facts ‘together suggest to’ you that the largest portion

of this quarter anillion dollars in pesetas were earned

during 1950? [985] A. Not necessarily.

Q. Is there knowledge tliat you have ‘to suggest that as

a matter of fact. more were earned during. 19511 A. No,

that is why I- ‘eouldn’t

Q. You don’t know! A. I don’t know.

The Court: He doesn’t know. You have covered

- that very thoroughly and emphatically.

° ae

Q. Was the profit of $19,000 taken in the prospectus

for the $58,000 operating profit calculated before or after

the taking of the reserve for pes:tas?> A. Before.

Q. At the time, at June 15, it was clear that there. was

a need for a reserve for pe setas, isn’t that correct? Av

At June 15 there was a reserve. ; : -

Q. Taken for pesetas? A. Taken for pesetas.

Q. Had this reserve taken in 1951 been noted next te

the net operating profit of $58,000 for 1950 a loss would

have been shown? [86] A. I don't think a foreign eX.

change loss is a proper charge against operating profit.

Q. Would the $19,000. figure be affected? A, Yes,

Q. Then. the $19,000 figure would have disappeared,

wouldn't it?’ A, If you assume that that was a loss at.

that date. _:)

Q. Is there any doubt in your mind that 19,000 dollars

"was earned during 19501 A. Yes, there would be some

oe:

‘“@ 4

104

Louis Z inman—Cross

doubt in my mind. It depends on whether you are using ~

foreign exchange or whether the fact that it was blocked

‘funds. I don’t know whether the foreign exchange rate -

was less or mére than was put on the books. |

Q. Did- you notice that in 1950 the ticket rate of this

company was increased?’ A. No, sir.

Q. You did not. Had you known that the rate that ‘they

charged for tickets out of Spain in pesetas was increased

- during 1950, would that. suggest to youeknowledge during —

1950 that as.a matter of fact the -pesetas were no longer

worth what they were worth before? [987] A. The way

I look at it is that-when they sell a ticket they take into

income the amount of the sale. If there is a nee or

- loss on pesetas it wouldn’t affect the operating profit;

would affect the net profit.

'Q. Would the change of the rate of tickets of. the |

amount of pesetas that were required for tickets during

1950 show you a change in the value of ¢urreney? Would

- that suggest that possibility? “A. -[ would assume so. |

Q. I notice on your work sheet that there was $132,710"

and $231,053 whieh apparently were considered | uncol-

‘ leetible. A. No, sir.

~ Q. What lebpaeet is that $231 9537 A. The explana- .

tion that was given to me is that they didn’t have an_

exact knowledge of how much: was due from these agen-

cies. That is the figure you refer to, the $231,000. And_

that wasn’t put on the books because they. were awaiting

‘information from the branch offices as to how mtich was -

actually due, so they could record any expenses that were

made and whatever balance ‘of money was due. _

Q. Was. anything ever shown to you to suggest [988]

that they collected 231, nape A. No, sir.

105

Louis Z inman—Cross Seecre

Q. You don’t knew that the money was collected? A.

| don’t know ,that. they were paid or collected or

uncollected, |

Q. As a matter, of fact was anything digiwn to you

to. suggest that there was a dividend? Did you see any

evidence, of a dividend? “A. No; only from what I: was

toid that they were distributions made to stockholders.

Q. Did they tell you the date they made these distribu-

tions to stockholders? A..No, sir, I told you that was an

assume

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