of the complicated frauds of the bankrupts and their wondrous disposal of assets; and therefore it is not fair to bankruptcy administration to compare it with these adjustment bureaus with their big and easy cases.

The hard cases are thrown to the bankruptcy court to do with as they will.

Now, speaking of accounting service, I had a case a while ago where it took an accountant quite a long while to collate the facts from the books and the bank records, etc., that showed that a claim was not only false, but that there was an effort being made there to steal part of the estate, and by that means we destroyed an alleged chattel mortgage that was false and fictitious and prevented that bankrupt's discharge, and they never even appealed, because the facts were too patent after they had been exposed by the expert accountant. I never could have done it. I don't know enough about accounting, and I would not have had the time.

That expert accountant is offended with me and the world in general because he has not gotten any fees. It turned out that the creditors went back on the proposition of taking care of him. Needless to say, I did not get any fees either; but that is all right, I am used to that. But the accountants are not used to that, and that is why they are taking this stand.

Let us not be shortsighted in regard to this economy of administration. I have sometimes thought that the credit men in general with whom I have been thrown in quite close relations for more than a quarter of a century, have been getting a little erroneous training with regards to lawyers, for example, in the matter of economy. It seems to me that their maxim in the matter of attorney's fee bills, is that the bills are too big, and so the first thing is to attack an attorney's fee bill, and attack expenses.

That is all I wish to say with regard to the economy of administration.

Mr. CHRISTOPHERSON. On the line of accountants there, let me ask you if there is anything in the law now preventing the court ordering an accountant to go over the books of a bankruptcy and pay a reasonable fee?

Mr. REMINGTON. Nothing at all; in fact, that is contemplated. Mr. CHRISTOPHERSON. I was wondering whether there was an amendment necessary for that?

Mr. REMINGTON. Nothing at all, nothing is necessary. Mr. Hayes wants me to state the receivers' compensation. I had something to do with the arrangement of that in 1910. So I suppose I ought to do that.

In those days the receivers were getting all sorts of allowances, and so at the request of the National Association of Credit Men I framed an amendment that allowed two receivers 6 per cent on the first $500, 4 per cent on the next $1,000, 2 per cent on the remaining $8,500 up to $10,000, and 1 per cent above that; and to the trustees a like amount. And it should be doubled for such officer if he continued the business, or might be doubled.

Now, those are maximum allowances. The court did not have to allow them, and it never was intended that they should allow the full amounts. It simply said that there should not be allowances in excess of those figures. That was the maximum. And under that

provision the practical experience is that the receivers and trustees do not get anywhere near enough to adequately compensate them; they do not get decent pay. That is the truth about it, gentlemen. You may take any instance you want to. I do not think the trouble in the bankruptcy field to-day is in regard to fees of receivers and

trustees.

Mr. PERLMAN. While you are on the question of economy in small estates, I have in mind estates where the liabilities are not very much, and the assets are necessarily small, and in such cases do these stenographers' bills eat up a large portion of the estate?

Mr. REMINGTON. Yes; the court stenographers. There is a section in the bankruptcy act which I know you are referring to limiting the compensation of stenographers out of the estate to 10 cents per folio. Well, that is obeyed in most parts of the country that are not in communication with New York, but it is absolutely disregarded in New York. In New York they are allowed 25 cents a folio-it amounts to 60 cents a page for taking and transcribing and they generally send around, latterly, at any rate a permission which each attorney ordinarily signs, that they should be allowed extra compensation out of the estate; otherwise they strike. I don't know what would happen if the bankruptcy court stood the bluff.

Mr. PERLMAN. Under what provision of law are they permitted to charge more than 10 cents a folio?

Mr. REMINGTON. There is no provision of law; it is done in spite of the law.

Mr. PERLMAN. Has that been brought to the attention of the judges?

Mr. REMINGTON. I have never brought it to the attention of the judges, but I rather think that they know about it.

Mr. HAYES. They do not take judicial notice of it.

Mr. PERLMAN. You had reference to court stenographers. The same thing is equally true as to stenographers to referees?

Mr. REMINGTON. Yes, sir.

Mr. PERLMAN. Now, have you found this to be a fact? That in a great many of these small estates counsel for the petitioning creditors, or counsel for the receiver or trustee, examines at great length the witnesses and the bankrupt, and these long examinations necessarily are expensive and the stenographic fees and the referee's fees perhaps deplete the estate?

Mr. REMINGTON. That is frequently the case, but this is what we must consider there. In the first place, what is a small estate? Of course I notice that you very appropriately spoke of small liabilities; but we have a lot of very small estates with very big liabilities. I was appointed receiver for one of these bucketshops a few years ago. He left a small estate. He had creditors to the amount of some $50,000 or $60,000. He left a balance in the bank of $49.60. The safe was opened and the books taken out; but pretty soon, two days afterwards, the books mysteriously came into my office on the condition that they should not be used in criminal prosecution. That being a one-sided condition I did not pay any attention to it, and so we did what we could, and eventually I persuaded an accountant to go into the books to find out who were the real creditors, and ascertain all the facts he could, and I persuaded him to do so out of kindness to taking his chance of remuneration. And I went to work, adding to

this by dint of a turnover upon the bankrupt, and one of the bankrupt's attorneys who had been paid $3,000 in view of contemplated criminal prosecution-it never took place because the creditors did not want to throw good money after bad, friends who had sent some of the money to these lawyers, we got back an estate eventually amounting to about $5,100.

Now, that is what may happen to a small estate.

Mr. MICHENER. So far as the company is concerned, these difficulties in the law to-day could be overcome if the court properly functioned?

Mr. REMINGTON. That is all there is to it.

Mr. MICHENER. It really does not need legislation, it needs proper administration by the courts?

Mr. REMINGTON. That is absolutely so, Mr. Chairman.

Mr. PERLMAN. This is what was going through my mind. From my experience I appreciate that accounts are necessary in bankruptcy cases. Now, under the law in enforcing our income tax law, the Bureau of Internal Revenue have a staff of income tax auditors. I think their salaries range anywhere from $2,500 to $4,000 a year. Most of these men in order to qualify are certified public accountants, and they examine the books and ascertain fraudulent actions where frauds exist. Is it possible to work out any system by which in various districts where necessary, like the southern district of New York, and the eastern district of New York and the New Jersey district, men could be employed on an annual salary basis, and if so would not that be less expensive?

Mr. REMINGTON. That would be rather ideal if it can be evolved. Mr. PERLMAN. I would like you to give that some thought if you can. It occurred to me that something might be done along such lines, for it strikes me that they could be assigned to the district attorney's office. The accountants would often be a necessary witness. There might be a criminal side to it.

Mr. REMINGTON. The suggestion you have made is excellent, it strikes me. Why could there not be something along this line? And the bankruptcy trustee might ask for the aid of the United States district attorney's accountants and provide sufficient accountants for the United States district attorney.

Mr. PERLMAN. Yes. I think you ought to give that some thought. It would help considerably and there would be no serious complaints about the cost of accountants, for they do run up big bills if they are individual cases. A great many accountants would be glad to serve at small compensation as Government employees and make a record, so that when they resigned from the Government, as most of them do, they could have real business. Now, along with that thought on economy, will you give us the benefit of your views on this question? Is it more practical and less expensive to have appointed administration in bankruptcy matters rather than have a receiver and trustee each receiving separate fees, in most cases the receiver succeeding himself as trustee?

Mr. REMINGTON. In the first place, I do not appreciate as a practical proposition that the fees of the receiver amount to enough to pay attention to. Take any incident case and this committee would be surprised to find how minute those fees of the receiver are. Mr. PERLMAN. But is there a division of responsibility though?

Mr. REMINGTON. There is a division of responsibility, and there is this to be said, that that goes to the great issue of whether the law shall be a democratic law-and I mean democratic with a little "d," because we are all democrats in the sense of wishing the people to rule a democratic law to be administered by the creditors or not? Now, it gets down to that bigger issue, and I want to take that up, if I may.

In other words, there is a lot of fault here among the business men failing to note the real situation. They do not expect to work in other branches of human endeavor without pay, but they do in bankruptcy. They think that the bankruptcy court is an alchemist court that turns dross into gold, turns a case where they have been trusting some rascal who has been running off with the funds, a case of no assets into a case of dividends. Sometimes when I have endeavored to save a dividend for the creditors I am asked what that dividend will be. It often happens that the bankrupt has not left anything except some dregs, and the most that can be gotten is, perhaps, 1 or 2 per cent, and when the creditor gets that, when he finds a check for some small amount he sometimes says, "Look here, that is what we get out of bankruptcy." That is the way things are treated largely in the business world.

Mr. PERLMAN. Well, is it not a fact that the creditor feels that assets are turned into no assets rather than the fact that no assets ought to be turned into real assets?

Mr. REMINGTON. Well, you can not, out of an estate of $49.60, with creditors of $69,000, you can not get a whaling big dividend. Mr. PERLMAN. Of course that would be not so much a case for bankruptcy as for criminal action on the part of the United States attorney.

Mr. REMINGTON. Well, they never do. thing; I mean it does not take place.

Criminal action is a vain

MI. CHRISTOPHERSON. With regard to receivers' fees and trustees' fees, in our part of the country we have never had much difficulty. What I would like to get is what specific amendment you have for the law generally which will apply to the whole country? Of course, this law applies generally to the whole Nation.

Mr. REMINGTON. I will take that up now. I/do want to say that as a prelude to precisely that, that there are being big fees obtained in bankruptcy, these fees are not being obtained on top of the table, they are not fees being allowed by courts. Well, I want to exclude from that receiverships of street railways and things like that. I understand that one of our railways is in bankruptcy, and that some fees were allowed there, and I think they figure in the accounts of the fees that are allowed receivers in bankruptcy; but I exclude them. I mean real mercantile bankruptcy.

Mr. CHRISTOPHERSON. You say they are not allowed by the court. How are they obtained if they are not allowed by the court?

Mr. REMINGTON. That is the point. We come now to the real evil in bankruptcy, which is collusive bankruptcy. That is to say, the starting by an alleged petitioning creditor's attorney, who gets his clients from the bankrupt's attorney by an alleged involuntary bankruptcy proceedings, pursuing to all appearances a debtor, and yet with the finest understanding all the way along the line. And once he comes in and gets the receiver appointed, and that receiver

may be ever so good a man, he employs that attorney as a rule, or has been employing him. We have a new rule in the southern and eastern districts that we just got through a few weeks ago.

Now, the critical thing in bankruptcy is the control of the administration of the estate, there is no question about that. And this collusive control is for a very definite purpose. It is usually brought about by a bankrupt who wants to keep some assets that have been set aside, are not shown, or by some creditor who wants to hold onto a preference, or by some relative who is trying to get a fictitious claim allowed out of the estate whereby he can gobble up half of the dividends.

Mr. CHRISTOPHERSON. The bankruptcy law, however, does not permit of that kind of procedure now, does it; the bankruptcy law does not sanction that?

Mr. REMINGTON. Oh, absolutely not.

Mr. CHRISTOPHERSON. And anybody that would indulge in that sort of practice now would be subject to disbarment, would he not? Mr. REMINGTON. Well, that would hit a good deal of the bankruptcy practice.

Mr. CHRISTOPHERSON. I presume those things occur. And what occurs to me is what amendments have you to suggest that will correct or prevent that sort of thing?

Mr. REMINGTON. I apparently am not getting to that point, but I really am by reason of going along showing these evils. Just as the honorable gentleman has said, that is not approved by the bankruptcy law. It is contrary to the letter and spirit of the law; but it is done. And in this connection I want, if I may, to put into your record an article that was written by me and was published in the New York Times of a couple of years ago. The heading is not my heading. The heading I gave it was simply "The true evils of bankruptcy," but they have headed it "The wolves of bankruptcy and the tactics they employ." May I put that in?

Mr. MICHENER. If it is not too long.

Mr. REMINGTON. I will not read it, but just put it in as a part of my remarks.

Mr. MICHENER. I think that it may be inserted.

(The article referred to is as follows:)

THE WOLVES OF BANKRUPTCY AND THE TACTICS THEY EMPLOY-REAL RINGS ARE ENGAGED IN AIDING BANKRUPTS TO VICTIMIZE CREDITORS BUSINESS MEN BLAMED FOR NOT COMBATING FRAUDS LOW FEES TO LAWYERS FACTOR IN PREVALENCE OF FRAUD

[By Harold Remington. The author is a New York lawyer who has written a book on bankruptcy] The metropolitan newspapers and trade journals for several months have been full of criticism of lawyers engaged in bankruptcy practice in this metropolitan district. Certain of our merchants, and especially the organization knows as the "Merchants' Association," have been active in declaring, as the New York Sunday Times, several weeks ago, on its first page, puts it, that "bankrupts are lawyers' victims." Along with this has come denunciations of the supposed activity of "bankruptcy rings" in robbing insolvent estates through exorbitant fees.

So much that has been said of this kind is incorrect and, to speak plainly, superficial, though well meant, of course, that it seems about time that the true situation be told to the public by those who are brought into daily contact with bankruptcy matters here, and do know what is going on.

There is no very good definition vouchsafed as to what is meant by "bankruptcy rings" and "bankruptcy ringsters," as used by these critics, but those terms undoubtedly do imply a more or less coherent cooperation and collusion among some