Rumor Monger

In the purlieus of brokerage houses last week an alert ear might have heard these things whispered: 1) Irving Trust Co. would shortly absorb $191,000,000-in-deposits Chatham Phenix National Bank & Trust Co.; 2) Chatham Phenix was heavily involved in frozen real estate loans; 3) Chatham Phenix had substantial losses through an investment in Empire State Building; 4) The assets of Chatham Phenix were depleted through the sale of Chatham Phenix Allied Corp., an investment trust sponsored by the bank's securities affiliate (TIME, Feb. 9).

James H. O'Connell, 25, customers' man at Burley & Co., most certainly had heard all or most of these stories. When Louis Schnell, produce merchant, told him that he had $45,000 in the bank, also owned 600 shares of its stock, Customers' Man O'Connell is alleged to have told Customer Schnell that ugly things were being said of the bank, that he should sell his shares. No alarmist, Mr. Schnell hurried to the bank, told them what he had heard, produced Brother Moses Schnell as a witness. Thereupon the bank took a bold step, ordered the arrest of Mr. O'Connell.

Promptly bank officials and Chairman Mortimer Norton Buckner of the New York Clearing House made public statements that Chatham Phenix is in splendid condition. A statement was produced which showed that on Aug. 18 the bank had capital funds (resources minus liabilities) of $32,708,000 although since Dec. 31 its deposits had shrunk some $70,000,000. Attorney Thomas Lincoln Chadbourne, director of the bank and its counsel, called all the ugly rumors lies, spoke of their "utter baselessness, sheer malignancy." He said Chatham Phenix would prosecute Mr. O'Connell to ''the very limit of the law," was busy seeking other rumormongers. If convicted, Monger O'Connell may face a $1,000 fine or one year in jail.

Alarmed at this casualty among the Brotherhood, last week customers' men were prone to talk less loudly. In many offices there is a rule that to discuss the condition of a house or bank with anyone is an offense which may result in dismissal. Yet few clerks or bank presidents are able to contain themselves when they hear rumors of inbound catastrophe.

In almost all States laws have been enacted which make "wilful and malicious" slander a crime. Libel laws cover only written defamation, and few rumors about banks are ever printed. The original bill was drafted in 1907 by .gaunt, white-haired Thomas Bugard Paton, now gen- eral counsel for American Bankers Association. Many mongers have been indicted, but in few cases have banks ever carried the case to a finish because of community sentiment. Monger O'Connell's conviction would be the first in New York State since the passage of the law in 1912. Indicted recently for the same offense were Mr. & Mrs. Monroe Froelich of Woodmere, L. I., who one sunny morning are alleged to have telephoned a dozen friends to tell them that Hewlett-Woodmere National Bank would surely close its doors next day. Hewlett-Woodmere National's doors are still open.

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