Senator PROXMIRE. I don't know how you can say that. I think it is an outrageous prospectus.

Mr. CASEY. It is an outrageous prospectus, but we are dealing here with knowledgeable people. They were not influenced by the prospectus, they were influenced by the people they were in contact with. Senator PROXMIRE. They put their money in and lost it all.

Mr. CASEY. They didn't lose it all. In fact the president of this company and the engineers, on whose technical skills the company was premised and on whose technical skills these people made their investment, they undertook on their own with new patents and licenses they developed to form another company to give all of these investors a stock participation in that other company for a nominal price and for 10 years these people had worked without compensation to develop technologies which are very promising to give these investors a continuing participation in their developmental skills.

What you have here is a picture not of irresponsibility but continuing responsibility over a 10-year period.

Senator PROXMIRE. Well, I have one other case I would like to go into, but my time has long expired.

Senator BENNETT. Well, let's take our own time on this case, the Senator has used some time.

Senator PROXMIRE. All right. I think next in order is Senator Tower. Senator TOWER. No questions. I will yield to Senator Bennett.

Senator BENNETT. I would like to ask a question about Mr. Boggs. He has been identified as a technician. Was he sophisticated with respect to the various patents that the company was acquiring?

Mr. CASEY. Well, I was given to understand that he was, Senator. I don't know for sure.

Senator BENNETT. As I read the story, it seems to me here you have a man who is not a moneyed man investing in anything that comes along for the sake of making money, but here you have a technician who sees in these patents an opportunity to make money in a field which he understands. He invests $5,000 and comes back later expressing the second time his faith is not in the company but in the patents and in the concepts and then, because he or the company was not able to carry the patents through to their possible fruition, he loses his faith, not necessarily in the patents, but in the company. And he wants out.

But it seems to me that you also have a man here who is making an investment on the basis of his scientific knowledge and not on the basis of a prospectus that was developed as an attraction to sophisticated money.

Could I be right in that?

Mr. CASEY. That is correct, Senator; yes. On that point I might read a little of his current biography.

During the 1950's when the Government required the building of aircraft warning systems he was assigned the responsibility of coordinating and expediting engineering and manufacturing of many thousands of items of equipment required for the erection of these projects. He was highly commended by the U.S. Defense Department for the integral part he played in these successful operations.

At the time of his retirement he was in charge of the technical writing, publication, and documentation organization.

Currently he is doing consulting work and looking after his interest in other companies. Mr. Boggs has completed several courses at New York University and is an ardent reader of leading technical, financial, and business writing. The idea he is a high school graduate just doesn't hold up at all.

Senator PROXMIRE. Senator Williams?

Senator WILLIAMS. Mr. Casey, concerning the portions of the prospectus on this offering, you have stated clearly that you thought it was a bad prospectus. As a matter of fact, these statements of potential profitability are the kinds of statements specifically prohibited, under the Securities Act for registered securities, am I right?

Mr. CASEY. They are carefully screened out; yes, Senator.

Senator WILLIAMS. No; under the Security Act there can be no statements speculating about things to come in terms of profitability; is that right?

Mr. ČASEY. Prospectuses should be confined to factual information. Senator WILLIAMS. Of course this is a private offering and, therefore those rules did not apply?

Mr. CASEY. Well, I think they should have applied if they were not followed. I think it didn't go through the kind of screening that a registration with the SEC would go through. This was just an informal memorandum that the Rothchild house put together and sent to these companies.

Senator WILLIAMS. It is the prospectus which you are talking about?

Mr. CASEY. Yes; it was a three-page memorandum. It was a twopage memorandum. It was a letter, it wasn't a prospectus. A note about this company and it does puff a good deal. To that degree it is objectionable.

Senator WILLIAMS. I would think this experience which you had will be a memorable experience.

Mr. CASEY. Well, Senator, I have been through a lot of prospectuses and I have had a lot of experience in getting prospectuses properly prepared and fully disclosed under SEC rules and I immediately recognized this didn't meet those standards and I didn't think it important for this group of men.

Senator WILLIAMS. I would hope that in the future you will be particularly alert about prospectus material which must be cleared by the SEC for registered securities.

Mr. CASEY. Yes, Senator.

Senator WILLIAMS. I supported the reopening of this hearing, I think it has been wise for all concerned that we are here today.

Just about 2 years ago a nominee was reminded many times that he said if you have seen one redwood tree you have seen them all. He found out that every redwood is a valuable tree.

Mr. CASEY. Well, I don't think if you have seen one prospectus you have seen them all, they are all different.

Senator BROOKE. Senator Brock?

Senator BROCK. Mr. Casey, if I might continue on the Boggs matter. This is the one case that I don't understand why it is brought up. If I can recite the fact, you correct me if I am wrong. Is it not true that you didn't know Mr. Boggs?

Senator BROCK. Until after he bought the stock?

Mr. CASEY. That is correct.

Senator BROCK. Is it also not true that he not only bought the $5,000 worth of stock but came back some months later and bought some more?

Mr. CASEY. That is correct.

Senator BROCK. Is it also not true that his attorney in pursuing the case in which you were mentioned as one of the defendants has written the chairman of this committee that there was no evidence of personal wrongdoing on your part whatsoever?

Mr. CASEY. That is correct.

Senator BROCK. Then I fail to see the relevance of this case in this proceeding. Thank you, sir.

The CHAIRMAN. Senator Cranston.

Senator CRANSTON. No questions.
The CHAIRMAN. Senator Taft.

Senator TAFT. No questions.

The CHAIRMAN. All right, Senator Proxmire.

Senator PROXMIRE. Mr. Casey, you were legal advisor to the estate of Eugene du Pont II, and later in about 1955 you advised them on setting up a corporation to handle their oil interests. That was Beacon Building Corp., is that correct?

Mr. CASEY. That is right.

Senator PROXMIRE. I understand you and the two brothers each assigned your personal oil holdings to the corporation and you received 22 percent of the stock in Beacon and the brothers 39 percent each? Mr. CASEY. Correct.

Senator PROXMIRE. Was that a fair representation of your prospective investments at that time, that is, your investment was worth 22 percent of the total?

Mr. CASEY. At the time my investment was worth more than 22 percent of the total.

Senator PROXMIRE. Why did you only get 22 percent?

Mr. CASEY. The two Du Pont brothers sought to collateralize a loan which was needed to acquire producing oil opportunities which represented a common opportunity to us. They were putting up the collateral to acquire it and I-for that reason they negotiated out how much additional stock they would get to reflect that exposure of that credit. Senator PROXMIRE. What did you say you put up?

Mr. CASEY. I put up oil interests in which I had invested about $200,000.

Senator PROXMIRE. Soon after Beacon took over your interests the brothers spent, it varies, I understand you said $600,000-their lawyer says $1 million of their own funds to acquire some valuable oil holdSenator PROXMIRE. It was not on your advice?

Mr. CASEY. That is a misstatement.

Senator PROXMIRE. It was on your advice?

Mr. CASEY. We did it as partners together. This, as I said, was a common opportunity. We had been drilling together. We decided it would be more advantageous to try to acquire a producing property. Together the three of us looked around to find a producing property we could acquire. We found the Fulton Oil Co. In contemplation of acquiring that we put these properties into Beacon Building and Beacon

Building borrowed the money to complete the acquisition. They borrowed it from two sources: from the Delaware Trust Co. on their collateral the Du Ponts put up and also on the basis of additional moneys borrowed on the oil interests which we had in common put into the corporation.

Senator PROXMIRE. Are you telling me the money they put in, whatever the value was, you say $600,000 and their lawyer says $1 million, it was a loan? Is that correct? Not a further investment?

Mr. CASEY. Yes.

Senator PROXMIRE. And this would explain why you still had a 22percent holding-they put in money and their percentage holding did not increase?

Mr. CASEY. It did increase. Their percentage holding did increase in contemplation that they would collateralize the borrowings of the corporation.

Senator PROXMIRE. Well, did your 22 percent diminish?

Mr. CASEY. No, it was derived at on the basis of the oil properties we were putting into the corporation and on the basis of the collateral they would provide.

Senator PROXMIRE. Now, this is a remarkable investment as I understand. You told us you put in $200,000 of oil property, is that correct? Mr. CASEY. Yes.

Senator PROXMIRE. Subsequently the DuPonts had a falling out and you received a total of $771,000 for your investment in Beacon, is that correct?

Mr. CASEY. That is correct.

It wasn't such a remarkable investment, though, Senator. I invested $200,000. During the course of 3 or 4 years, subsequent to the formation of the corporation, I invested another $200,000 in developing the oil properties that had been purchased.

I sold that interest because the DuPont brothers came to me, they wanted to put this into a family company. They asked me to sell.

I had an appraisal made. I sold on the basis of that appraisal and I agreed to wait another 5 years to get the balance of the value based on the reappraisal at that time.

So I put up $400,000 and after a period of about 7 or 8 years, I got another $500,000. So I got $759,000 for $400,000 over a period of 7 years, and during four of those years, I worked very hard in building up this company. I had been active and spent a lot of time at it.

So what I got finally, it didn't compensate me for the time and capital I invested.

Senator PROXMIRE. What was your capacity in this company?
Mr. CASEY. I was director and active.

There were three of us that made the decisions to go. It wasn't a great big thing.

Senator PROXMIRE. Did you do most of the work yourself rather than the two brothers?

Mr. CASEY. I wouldn't want to say that. We all did what we could. Senator PROXMIRE. At any rate, on the basis of your experience and competence which nobody questions is great, you did advise the brothers, or did you not?

Did you advise the brothers on their investment of-whatever that amount was $600,000 or $1 million-was this on your advice?

Mr. CASEY. We were partners.

Senator PROXMIRE. Weren't you also acting as their attorney? Mr. CASEY. Not in this matter. We were working as partners and everybody understood it.

Senator PROXMIRE. You were their attorney in connection with their estate, you say?

Mr. CASEY. I had been attorney for the estate together with William Falk, who at that time was of the Delaware Bar Association. We represented the estate of their father.

Senator PROXMIRE. Now, it has been charged that you advised the brothers as a lawyer in this capacity although you had a substantial interest and you benefited by several hundred thousand dollars on the basis of their investment.

Mr. CASEY. That charge was made about 8 years later by someone who knew nothing about the facts. Knew nothing about the relationship.

I became a partner of theirs because they wanted me to be a partner. I put my share of the money up.

Senator PROXMIRE. I understand the attorney for Nicholas DuPont felt you had a conflict of interest, and you were not entitled to the $500.000. He supposedly sent you a letter to that effect; is that correct? Mr. CASEY. I believe he sent a letter to that effect to the chancellor. Senator PROXMIRE. May we have a copy of that letter?

Mr. CASEY. I don't have it here.

Senator PROXMIRE. You could make it available to us?
Mr. CASEY. Yes, I can (see p. 698).

Senator BENNETT. Chancellor of what?

Mr. CASEY. Chancellor of the Superior Court in Delaware.

I am sorry, it went to the receiver. By the way, in the room here is Mr. Edward Brady, who is counsel for one of the brothers, and he can give you disinterested information on this matter.

Senator PROXMIRE. He was a counsel for, I take it, Eugene? Incidentally, he was a classmate of mine in school. He was voted the most likely to succeed in business.

Mr. CASEY. Well, he didn't have to.
Senator PROXMIRE. Well, that is true.

Mr. CASEY. Senator, let me just say this is a totally unproven allegation by someone who didn't want to pay some money 10 years later. Senator PROXMIRE. Here is the situation that seems incredible. You were the lawyer for Du Pont, you would advise them in certain respects: you were, as you say, an investment partner in this business. You stood to gain on the basis of their investment, you advised them before with respect to the estate; and I just wonder about the ethics of a family lawyer participating under these circumstances and getting this enormous gain that you did.

Mr. CASEY. Well, I probably didn't make an enormous gain. I think I stated that.

Senator PROXMIRE. Well, it would be big to me. $220,000 is a nice profit. That is more than Boggs made.

Mr. CASEY. Well, over 8 years it is not that big of a profit.

The canons of ethics, as I say, is that a lawyer has the duty to disclose all of the interests to his clients. If that is made, there is no reason why a lawyer and his client cannot be in business together. This