This is the $125,000 dollar question: WHY DID BALDWIN LOAN $125,000 TO A COMPETING LOCOMOTIVE BUILDER ? Steve
If I understand this document correctly, at least 5 officers of the Geo. D. Whitcomb Co. owed over $100,000 to the company. Just about what Baldwin loaned them. Did Baldwin officers loan the money to Whitcomb to privately invest Baldwin money in the stock market for private gain - which the Whitcomb officers would share ? All under the table ? Steve
Here the referee of the bankruptcy states that illegal fund transfers were performed by the Rochelle banks taking money out of Whitcomb accounts and into private accounts of company officers.
Here the trustee is explaining that they will put the Rochelle bank out of business if they try to settle for the full amount owed.
Paragraph 9 says it all - if they pursue full recovery of the full amount, the bank will be forced to close for good.
Today I found out that William C. Whitcomb, President of the George D. Whitcomb Company that his father started, saw the "generous loan" from Baldwin for $125,000 as part of a darker agenda . . . sinking his company into bankruptcy and then buying it for less than half its value . . .
W. C. Whitcomb filed suit against Baldwin in Cook County Circuit Court (Chicago) in an attempt to intervene in the bankruptcy proceedings.
Basically, Baldwin had purchased 3,500 shares of the 3,800 class "A" preferred stock and 22,500 of the 50,000 common stock and held a stock holder meeting and loaded the 7 Whitcomb Board of Directors with 3 Baldwin employees. Then they asked Baldwin for a $125,000 loan and as a condition of the loan, placed a 4th Baldwin employee onto the board giving Baldwin majority control of the board of directors. Then they had the company audited a month before the $125,000 promisory note was due, declared the company insolvent - because of the $125,000 outstanding promisory note - and filed for bankruptcy. Then Baldwin purchased the company assets for $257,000 when the company was valued at over $600,000. Neat swindle.
On February 14, 1934 William C. Whitcomb filed suit in Cook County (Chicago) against Baldwin - case # 34C 1936. My next search will be Cook County court records to see if case# 34C 1936 has been saved. Steve
Another side note - the former George D. Whitcomb treasurer - Carl Heim - had a warrant issued for his arrest on the charge of embezzlement after the bankruptcy trustee discovered the $75,000 missing and the illegal fund transferes in the Rochelle banks. But before the March 5, 1931 declaration of bankruptcy Heim went into hiding. In the May 31, 1931 Rochelle News it stated that Carl Heim had been arrested in Tennessee, extradited to Ogle County jail in Illinois and released on $15,000 bond. He was married and had two sons living in Chicago. Why he ran to Tennessee is a mystery. Quite the soap opera. Steve
This is the entire bankruptcy docket. Took me 2 days spending about 8 hours total to sift through the mass of legal documents to find the history I've posted here. But it answered quite a few questions and raised some more. Steve
Paragraph 14 states that Baldwin used its own accountants to audit the G. D. Whitcomb company and intentionally under valued its assets. Paragraph 16 states that Baldwin placed Lloyd E. Work on the board of directors. Mr. Work represented the owners of $95,000 of bonds that were secured by the company property. In exchange, Baldwin paid off the bonds early when they weren't due until January 1, 1937.
Paragraph 18 states that Baldwin called for a special meeting of the board of directors on March 5, 1931 to address supposedly routine business matters. But actually the purpose of the meeting was to get the vote needed to start the bankruptcy. All of this was unknown to William Whitcomb - then President of Whitcomb. The other stock holder, Carl Heim wasn't at the meeting.
Paragraph 21 claims that Baldwin at the March 5, 1931 meeting then replaced all of the controlling officers of Whitcomb with Baldwin employees and that all future board of director meetings would be held in Philadelphia at Baldwin's office.
Paragraph 23 states that the Whticomb company was not bankrupt. It had paid its interest on its mortgage, it didn't have any creditor filing suit against the company forcing it into bankruptcy. It claimed that company assets exceeded liabilities by $850,000.
