by Paul R. Spitzzeri
On 1 July 1922, a massive bank merger took place involving twenty institutions and some $200 million in capital which created the Pacific-Southwest Trust and Savings Bank and its prime subsidiaries, the First National Bank of Los Angeles, a long-standing business, formed in 1880 after taking over from the Los Angeles Commercial Bank, established five years prior, under such powerful figures as John M. Elliott (also proprietor of a ranch in what is now Hacienda Heights, very near the Homestead) and Henry M. Robinson, and First Securities Company, which underwrote a large portfolio of securities traded by the larger entity.
Among the banks melded together by this agglomeration was the decade-old Los Angeles Trust and Savings Bank; the Union Trust and Savings Bank of Pasadena; City National Bank of Long Beach; the Bank of Glendale; the Hollywood Savings Bank; the Alhambra Savings and Commercial Bank; and others from San Pedro, Redlands, Oxnard, Santa Barbara, Fresno, Visalia and Tulare and others in the state.
As explained in the Los Angeles Times of 13 September 1922, the use of the term “Pacific- Southwest” was deemed necessary because a wide area centered around Los Angeles was where “agriculture and industries are coming more nearly into balance. Its business centers in Los Angeles and the Los Angeles Harbor district—this because railroads and highways have been so constructed that the natural flow of commerce throughout this territory lies to this port.” Moreover, the paper continued, “the urge of these developments resulted in the necessity for the creation of a unified financial system working for the most orderly and rapid development of the entire district.” Not surprisingly, one of the directors of the newly minted conglomerate was the Times‘ publisher, Harry Chandler.
Five years to the day of the merger, the first number of the fifth volume of the institution’s internal newsletter, The Pacific-Southwest, appeared and is tonight’s featured artifact from the museum’s holdings. While the eight-page publication features news of all kinds about the multifarious activities of the financial giant, this post focuses on two major stories: the institution’s role in the estate of the recently deceased transportation and real estate and renowned books, manuscripts and art collector Henry E. Huntington and its connection to the massive fraud that was the Julian Petroleum scandal.
Nephew of Collis P. Huntington, the financial wizard of the “Big Four” who established the Central Pacific, builder in the 1860s of the western portion of the transcontinental railroad and owner of the dominant Southern Pacific railroad empire, Huntington came to Los Angeles in 1901 after a takeover of the Central Pacific/Southern Pacific and, having bought the Los Angeles Railway streetcar system as part of the Southern Pacific, developed it and merged other regional lines into the Pacific Electric system, the nation’s largest interurban network in terms of track mileage.
With real estate projects all over greater Los Angeles from Oneonta Park (named for his New York hometown) to Huntington Beach to the insider deal that led him, Chandler and others to acquire most of the San Fernando Valley before the Los Angeles Aqueduct was well known to the public, Huntington linked transportation to landholdings in a way that, in just that first decade of the century, contributed to his personal wealth skyrocketing from about $1 million to some $55 million.
Retiring from active business in 1910, Huntington devoted most of his time to his passion for collecting books and manuscripts, enhanced by the acquisition of fine art thanks to his second wife and aunt (meaning widow of his uncle Collis), Arabella Archer Huntington. After buying the San Marino Ranch, which he’d visited in his first swing through the area in the early Nineties on his way to work for his uncle in San Francisco, in 1903, Huntington turned into a showplace for his collection, with a dedicated library building and an expansive mansion which displayed the art.
After Arabella’s death in 1924, there was occasional public access to the library and Huntington’s passing in late May 1927 was immediately followed by a probate filing by his sister, Caroline Holladay (Huntington’s son and named executor, Howard, died in 1922), and the Pacific-Southwest Trust and Savings Bank, as executors. The article noted that the bank was also “the Trustee for all the important trusts created by the Will,” which stipulated that anyone contesting it or the gifts made to the Huntington Library, Art Gallery and Botanical Gardens, the nonprofit established in 1919, was to receive nothing from the estate.
Henry M. Robinson, who was both president of the First National Bank and board chair of Pacific-Southwest, was also one of the nonprofit’s trustees. Notably, it was observed that,
should any of these deeds of gift, bills of sale and the like conveying the property to these Trustees be held invalid, Mr. Huntington directed that a trust be formed, carrying out their fundamental purpose, “Namely, the founding and maintenance of a free public library, art gallery, museum and park, containing objects of artistic, historic, scientific or literary interest, for the advancement of learning and the arts and sciences, and for the promotion of the public welfare.
The use of the term “public library” was misleading, as the institution was and remains entirely private, though what was intended to be conveyed was that it would allow for public access. While the intent of the benefactor was that entrance to the Huntington be free in perpetuity, advisors cautioned him that he did not leave enough money for that to be the case and, in fact, there has been an admission charge for several decades. His wealth actually declined by about 45%, from roughly $70 to $45 million, in the seven years prior to his death because of his spending—Huntington once said “A man may quit cigaretts, cocktails, money-making or anything else he likes, except collecting.”
It was noted that the purported value of the library and art collection and the San Marino property was in the neighborhood of $50 million (one online inflation calculator states this would be almost $750 million now). Yet, while there were specific bequests totaling some $7.5 million, the will “gives no indication as to the size of the Estate.” Albert Crutcher, of the prominent law firm of Gibson, Dunn and Crutcher, which filed the will, felt that a published estimate of $110 million ($1.7 billion according to that calculator) was too high, as Huntington “gave away vast sums during his lifetime,” including a $2 million bequest to his institution before leaving for the east prior to his death.
As to his family, the tycoon established $1 million trusts for each of his three daughters and his sister, with Pacific-Southwest the sole trusteee, while a $2 million bequest was left as an endowment to the Collis P. and Howard Huntington Memorial Hospital as “a gift to Southern California.” Here, too, Robinson was the trustee for what was to “be a memorial to Mr. Huntington’s uncle and son. The will had other bequests, trusts and gifts and more than $25 million was expected to remain with Pacific-Southwest as trustee “for perhaps thirty or forty years.”
A separate piece, reprinted, with a photo, from the 23 June edition of the Los Angeles Times, covered the opening of a half-dozen safes kept by Huntington at Pacific-Southwest and which contained “a treasure trove of almost fabulous riches.” Several clerks took a day to compile a register of stocks, bonds and other securities hauled out and, while no total amount was given, those brought out in just the first couple of hours were valued at some $5 million (more than $100 million today).
That estimate downplayed by Crutcher, however, was even lower than the staggering amount, said to be $150 million, involved in the scheme concocted by oil grifter C.C. Julian during much of the decade and which was exposed earlier in 1927. A series of posts here in 2019 lays out a good deal of the story, but to summarize, Julian attracted an extensive cadre of power players in the Angel City as part of a “Million Dollar Pool” for stock in his operation, which did have some successful wells at Santa Fe Springs.
Motley H. Flint, brother of former Senator Frank P. Flint (who was also the founder of the Flintridge portion of the tony residential enclave of La Cañada-Flintridge), was the executive vice-president of Pacific-Southwest and a director at First National. He worked with Charles F. Stern, who was Pacific-Southwest’s president and the executive vice-president at First National, and John E. Barber, president of First Securities and vice-president of First National, in loaning $10 million to Julian’s successors, hucksters Sheridan Lewis and Jake Berman, while creating that pool for other wealthy investors, represented by Frank Flint, promised big dividends, high returns of interest, and generous stock bonuses.
Among the players in the pool were film industry moguls like Cecil B. DeMille and Louis B. Mayer, investment banker Alvin H. Frank, music company owner Benjamin Platt, real estate powerhouse Joe Toplitzky, and manufacturer Harry Haldeman (father of the notorious chief of staff from President Richard M. Nixon). As average investors handed over their money, those funds proved to be the source of the profits raked in by the heavy hitters as they sold their stock. Naturally, the small fry, some 40,000 of them were left with nothing when all was said and done.
So, The Pacific-Southwest ran an article titled “Julian Petroleum Situation Clarified” beginning with a statement from Will C. Wood, the state’s superintendent of banks, and which quoted him as saying, “the effect of the Julian fiasco on the Pacific-Southwest Trust & Savings Bank, so far as the situation itself is concerned, is not a cause of public solicitude [that is, concern].”
This was, Wood went on, because “all loans made by the bank to the Julian Petroleum Corporation are amply secured by pledges of tangible property.” Moreover, there were no loans for stock and it was added that the bank was not involved in stock pools and none of its funds used to speculation.
He continued by observing that “it appears that certain individuals connected with this bank put their own private funds into the Julian pools and thus became involved with the situation growing out of the overissue of Julian stock.” He noted that there were potential legal consequences for those persons, but reiterated that “whatever individual bankers connected with the Pacific-Southwest Trust & Savings Bank may have done, the bank, as such, is not involved in the Julian pool situation.”
Naturally, damage control by Pacific-Southwest meant that, as Motley Flint, Stern, Barber and four others affiliated with the institution, including loan department executive vice-president Herbert A. Bell, cashier and vice-president Paul L. McMullen, trust department executive vice-president (and former Superior Court judge) William Rhodes Hervey, and Pacific-Southwest director and real estate developer William I. Hollingsworth, were indicted by a county grand jury at the end of June, resignations were accepted.
Robinson, whose stature was such that he’d just returned to Los Angeles from a conference in Geneva, Switzerland concerning the financial picture of post-World War One Europe and whose reputation was considered blameless and spotless, issued a statement averring that:
In part at the request of one of our most important customers [not, of course, identified], we began the financing for the combining of certain oil properties including the properties owned by the Julian Petroleum Corporation. These properties were valuable and of greater value when combined than standing alone.
Could the project have been carried through, it would have been a benefit to the stockholders of the Julian Petroleum Corporation.
He added that “I have not been interest in any way directly or indirectly in the pools, outside loans or bonuses, and have not at any time directly or indirectly bought, sold or had any interest in the stock of the Julian Petroleum Corporation, or any of the other corporations involved.”
First Securities set up a stock reorganization and general financing plan that Robinson claimed was the only way for “Julian Pete” stockholders to realize anything out of the disaster, saying that partners were found “in the underwriting only with the greatest difficulty because of the unusual reputation of the Julian Petroleum Corporation.” He decried any accusations that Pacific-Southwest had questionable motives and wished to make an unseemly profit, noting that loans were made at the going rate of 7% interest.
Meanwhile, he was sure to note that the involvement of high-ranking officials in his institution was “their private affair involving their own money and has nothing to do with the bank’s resources” and that the problem was an overissue of stock, something which Robinson claimed no one in his organization knew about. Otherwise, he concluded, no further loans or reorganization of properties under the aegis of the California-Eastern Oil Company.”
The directors issued a short statement offering the regret that officials of Pacific-Southwest were indicted, that resignations were submitted, but that “these officers have been with this bank for many years and have always borne unblemished reputations and have had our complete confidence.” It intoned that no one was above the law and, if anyone was guilty, they should be duly punished, but, if innocent, immediately exonerated.
Stern and Barber added their emphatic denials of guilt, claiming they never were given bonuses on loans made to Julian Pete or to Lewis or anyone else, denying their participated in stock pools, or other loaning or financing schemes, and referring to their sterling reputations while calling for a suspension of judgment by the public while they proved their innocence. Hervey, Bell, McMullen and two other bank officials also protested innocence, saying “our lives have been an open book to the people,” insisting that the indictments were a “terrible wrong” and adding that “the newspaper is no place to discuss the particulars in this matter and we do not propose to do so.”
In fact, no Pacific-Southwest official was found guilty of any crimes in the scandal, but the matter was rife with corruption, including the conviction of District Attorney Asa Keyes and a deputy, Harold Davis, on bribery charges, landing them at San Quentin for eighteen month stints. In 1928, Lewis and Berman were acquitted on various charges, though they were later found guilty of mail fraud for another scheme and went to federal prison.
Motley Flint, however, was indicted five times and was scheduled to go on trial in July 1930. Days prior, though, he testified in another court case and, after leaving the witness box and while heading through the gate to the spectators’ section he was shot and killed by a ruined Julian Pete investor, Frank Keating (who later went to a state mental institution and then granted clemency before he was to be hung). Julian fled to China and, left with nothing, committed suicide by poison in Shanghai in 1934.
Obiovusly, the connection between Pacific-Southwest and the Julian debacle was fundamentally a function of the old adage of “birds of a feather flock together,” but most flew freely off into the sunset, while common investors got plucked.