1939 Beam Ray Trial Transcript

 

Pages 91-100

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Sapiro: “It was about February of 1938 that you had your Aero schools Inc., in Nevada?”

  Hutchinson: “That’s right.”

  Sapiro: “At that time the U.P.I. was carrying on its book’s assets to the amount of $5100.00?”

  Hutchinson: “I can’t say what the amount was at that time.”

  Sapiro: “Showing record book which contained pay revealing value of contracts at $4997.00, were these the contracts with the Virginia Aero school?”

  Hutchinson: “Yes.”

  Sapiro: “When these were Beam Ray’s, did you change your listing of assets?”

  Hutchinson: “The contract was never abandoned.”

  Sapiro reads from record of application to the corporation commissioner stating that the corporation was no longer enrolling students and that Hutchinson was resigning from the company to tend to other business.

  Sapiro: “Doesn’t that indicate that there must have been an abandonment of the Aero School venture?”

  Hutchinson: “Not necessarily.”

  Sapiro: “You say that Cullen told you about the Rife machine and wanted you to take it over, and you refused. What is the date of the first refusal?”

  Hutchinson: “Sometime between the first and the fifteenth.”

  Sapiro: “Then you went to the lab a week later and again refused? When would that be?”

  Hutchinson: “I would say around the sixth and the seventh.”

  Sapiro: “And then you went again with a larger group and refused again, when was that?”

  Hutchinson: “That was around the fifteenth or sixteenth.”

  Sapiro: “Then you finally yielded between the 16th and the 30th, is that correct?”

  Hutchinson: “Somewhere about that time.”

  Sapiro: “And then Dr. Rife and Hoyland signed an assignment to you on April 30th, is that correct?”

  Hutchinson: “Right.”

  Sapiro: “What time did the British get there?”

  Hutchinson: “About the 23rd of May.”

  Sapiro: “You stated that it was important to operate very fast, because the British were coming and speed was essential, and it was therefore necessary to get together with the corporation. First you suggested a new corporation, and later, because quick action was necessary you made an arrangement under which (missing words) to get some contract done, 30 percent to go to Rife, Couche was to get something, and Hoyland also. You said that there was a discussion ending with Rife getting $6000.00, Hoyland $6000.00 and Couche $3000.00, what did Couche get?”

  Hutchinson: “Nothing, he was supposed to get it but he didn’t.”

  Sapiro: “Was he supposed to get anything out of the American company?”

  Hutchinson: “He was supposed to get something in accordance to the division agreed upon between Rife, Hoyland and himself."

  Sapiro: “How did you know that?”

  Hutchinson: “Because they told me so themselves.”

  Sapiro: “What was your next step in reference to your connection with the company?”

  Hutchinson: “Well, we called a series of conferences in which Hoyland and I were acting principals and Mr. Henderson, Cullen, and Mrs. Willman sat in. It finally came to a contract in June of 1938.”

  Sapiro: “The owners then came to an agreement with U.P.I.?”

  Hutchinson: “Yes, after they had come to an agreement among themselves.”

  Sapiro: “You were a part owner since the 15th?”

  Hutchinson: “Yes.”

  Sapiro: “There had been no disposition of the rights of the owners between April 30th and June 1st?”

  Hutchinson: “No, except by mutual understanding.”

  Sapiro: “Is this part of the affidavit which was signed by you, February 20th, 1939?”

  Hutchinson: “Yes.”

  Sapiro: “Does it say that Cullen had been given an option to arrange for the manufacturing and distribution of the machines, and that Cullen on May 2nd gave to the corporation these rights under his contract for the manufacturing and distribution and that said corporation accepted these rights, is that true?”

  Hutchinson: “Before I answer I will look at the minutes of that meeting.”

  Sapiro: “We are not asking about the minutes, we are asking if the statement in the affidavit is true.”

  Hutchinson: “(After reading it) to the best of my belief it is true, with the exception that is should be owner instead of owners.”

  Sapiro: “Do you think that one owner could give this option?”

  Hutchinson: “At the time that Dr. Rife spoke of this to Mr. Cullen in my presence he was a sole owner.”

  Sapiro: “About three days before that Dr. Rife had given you and Hoyland an interest in the machine, hadn’t he?”

  Hutchinson: “Yes.”

(missing words)

  Hutchinson: “I heard him say it.”

  Sapiro: “You wrote out the first form of the assignment that Rife and Hoyland signed later?”

  Hutchinson: “I did not.”

  Sapiro: “You read it didn’t you?”

  Hutchinson: “Yes.”

  Sapiro: “You didn’t mention the fact that you had heard Rife give this oral promise to Cullen?”

  Hutchinson: “No.”

  Sapiro: “You were present at one meeting of the board of directors of the U.P.I., on May 2nd, 1938, and you signed the minutes as present?”

  Hutchinson: “Yes.”

  Sapiro: “Who was the chairman of that meeting?”

  Hutchinson: “I was.”

  Sapiro: “I will read a portion of the minutes. ‘The chairman then advised that a proposition had been started by Cullen that he held an option on the Beam Ray machines and wanted to give the corporation the rights to this option in the further payment, for his stock in the corporation. A vote of thanks and acceptance was extended to Cullen.’ You pronounced these minutes correct didn’t you?”

Hutchinson: “Yes.”

  Sapiro: “Didn’t Mr. Cullen state at that meeting that he had an option with Hoyland and Rife and Hutchinson?”

  Hutchinson: “Yes.”

  Sapiro: “Did you correct him and tell him he only had an option with Rife?”

  Hutchinson: “No.”

  Sapiro: “Did you just casually deceive the directors?”

  Hutchinson: “I didn’t deceive them at all.”

  Judge Kelly: “Well which is true?”

  Hutchinson: “Both your Honor.”

  Sapiro: “But at the time you had written the agreement with these men under which you would have the right to deal with the corporation?”

  Hutchinson: “Yes.”

  Sapiro: “Yet you told the board of directors that Cullen had this right, while all the time you knew that only you had this right, is that correct?”

  Hutchinson: “It would seem so.”

  Sapiro: “What was the agreement?”

  Hutchinson: “What agreement?”

  Sapiro: “The one that Cullen was turning over to you?”

  Hutchinson: “He agreed to release the statement of Dr. Rife’s that he could have the option.”

  Sapiro: “He gave it up then?”

  Hutchinson: “He agreed to give it up to the corporation in lieu of the contract we had.”

  Sapiro: “The corporation didn’t have a contract with the owners then. (Sapiro then read from the record of the minutes regarding Cullen’s release of the option). Wasn’t this record of the minutes prepared much later than the date stated?”

  Hutchinson: “No.”

  Sapiro: “You were present at a meeting on May 11, 1938?”

  Hutchinson: Yes.”

  Sapiro: “Were you the chairman of the meeting?”

  Hutchinson: “I was.”

  Sapiro then quoted from the minutes to the effect that the secretary said that Hutchinson had negotiated a valuable contract with the owners of the Rife Ray, not the corporation to lease the machines.

  Sapiro: “Is that correct?”

  Hutchinson: “Yes.”

  Sapiro: “What did you do about the Cullen meeting?”

  Hutchinson: “Nothing apparently.”

  Sapiro: “Well, he gave over his option in return for an additional payment for the issuance of stock, what did you do about that?”

  Hutchinson: “My thought was that Cullen had given us this right and I was instructed to get a written contract with the owners."

  Sapiro: “Instructed by Cullen?”

  Hutchinson: “I don’t remember.”

  Sapiro: What did Cullen say were the terms of his option from Rife, Hoyland and Hutchinson?”

  Hutchinson: “He didn’t mention the terms.”

  Sapiro: “Did you advise the board of directors what the terms of that option were?”

  Hutchinson: “Only indefinitely, that he had the right we took over.”

  Sapiro: “You didn’t state any terms?”

  Hutchinson: “No.”

  Sapiro: “Did you know what the value of that right was?”

  Hutchinson: “No, I still don’t.”

  Noon recess.

  Afternoon session. Friday, June 30. Hutchinson on the stand. Sapiro questioning.

  Sapiro: “You likewise identified a letter from the British containing complaints, and you testified that these things were gone over with Gonin?”

  Hutchinson: “That’s right.”

  Sapiro: “After that you executed two contracts with Dr. Gonin, are these papers I show you copies of those contracts?”

  Hutchinson: “They are.”

  Sapiro: “These were reached after consideration of the complaints?”

  Hutchinson: “Yes.”

  Sapiro: “Do these contracts mention frequencies?”

  Hutchinson: “No sir.”

  Sapiro: “Did Dr. Gonin insist upon putting into the agreement anything regarding frequencies?”

  Hutchinson: “No sir.”

  Sapiro: “Did he pay you seven hundred and odd dollars in payment of the balance due on British lab machines, and in addition did he give you checks totaling $10,000.00, which was over due, and later on was that check cancelled, and did he substitute another check?”

  Hutchinson: “Yes.”

  Sapiro: “Who prepared the minutes of the meeting of August 28, 1938?”

  Hutchinson: “They were prepared in Fickerson’s home in Los Angeles, after a conversation between Cullen, Mr. Willman, myself and Fickerson.

  Sapiro: “You signed them?”

  Hutchinson: “I did.”

  Sapiro: “Contained in those minutes is a resolution by Olmstead in ten parts, some of them are as follows: that the board make a demand upon Rife, Hoyland, and Hutchinson for full and complete information concerning design and frequencies of Rife Ray machine, and that they taken action to ensure the secrecy of the frequencies?”

  Hutchinson: “I recall that.”

  Sapiro: “Hoyland was not present at that meeting?”

  Hutchinson: “No.”

  Sapiro: “You were?”

  Hutchinson: “Yes.”

  Sapiro: “You were present at the next meeting as general manager?”

  Hutchinson: “I don’t think I was, I am not sure.”

  Sapiro: “What did you do to carry out that resolution, did you ever make a demand upon Rife for the frequencies?”

  Hutchinson: “I didn’t.”

  Sapiro: “You said that he had them, and forty more that he did not reveal?”

  Hutchinson: “He only said he had them.”

  Sapiro: “We credit Dr. Rife’s work here, you signed one of these contracts in New York, as agent for the owners?”

  Hutchinson: “That’s correct.”

  Sapiro: “Did you show the contract to Dr. Rife when you returned?”

  Hutchinson: “Yes sir.”

  Sapiro: “Did he approve of it?”

  Hutchinson: “He didn’t object.”

  Judge Kelly: “What did he say when you showed it to him?”

  Hutchinson: “He didn’t say anything, he just nodded his head.”

  Sapiro: “When did you show it to him?”

  Hutchinson: “About the first week in September.”

  Sapiro: “Did you ever tell him what you had done about approving what Cullen had done?”

  Hutchinson: “No.”

  Sapiro: “The agreement said that the two shall have the right to overrule you in the decision, didn’t you tell them of each decision as you made it?”

  Hutchinson: “I don’t think I did.”

  Sapiro: “I’ll show you minutes of a meeting of December 6th, in which you make a motion to make Hoyland technical advisor. At any time after he was separated from the corporation did you demand the frequencies from Dr. Rife?”

  Hutchinson: “I asked him to teach them to someone so that we could correctly care for the machines that were now outstanding.”

  Sapiro: “Did he give them to the corporation?”

  Hutchinson: “Not to my knowledge.”

  Sapiro: “How much did you get from the British contracts as a whole?”

  Hutchinson: “About $2960.00 in percent of payments, and royalties of $200.00 on the four machines. Did you get other royalties as one of the owners?”

  Hutchinson: “Yes $50.00 a machine.”

  Sapiro: “Then how many other loans or other acquisitions were there made, which you received from May 1938 to November?”

  Hutchinson: “I wouldn’t be able to answer that without checking up.”

  Sapiro: What has been your occupation?”

  Hutchinson: “For the past four or five years I have been trying to get this Aero school in operation.”

  Sapiro: “As a promoter?”

  Hutchinson: “It’s always promotional until it’s in operation.”

  Sapiro: “What did you do before this?”

  Hutchinson: “I spent my time trying to get under way, waiting for correspondence from the east,

(missing words)

  Hutchinson: “Yes.”

  Sapiro: “That’s all.”

  Comperet took the witness.

  Comperet: “I call your attention to the $200.00 receipt given to Mr. Van Wort which is dated January 28, 1937, and the $200.00 check from Mr. Glenn. Do these two represent one in the same transaction?”

  Hutchinson: “I think they are different.”

  Comperet: “The receipt then was not given for the check or money paid when the check was cashed?”

  Hutchinson: “It was not.”

  Comperet: “Here is Plaintiff’s exhibit 25, a letter sent from the Beam Ray to the British, October 4, 1938, and which begins with a paragraph, ‘At least certain letters seemed to have been sent to them on certain dates.’ Was the matter of these letters discussed with Gonin in New York?”

  Hutchinson: “There were a good many letters or lack of letters discussed, mainly to the effect that we promised to do things and to send information which we didn’t do.”

  Comperet: “That’s all.”

  Judge Kelly: “You say that these people who put out the money, Ernsteins and others, did not receive a receipt, but a form letter. How many of these letters in all did you issue?”

  Hutchinson: “Five.”

  Judge Kelly: “Were these letters uniform in content?”

  Hutchinson: “Yes, one was copied from the other.”

  Judge Kelly: “Was the form suggested by an attorney, or did you consult the lawyer about them at all?”

  Hutchinson: “No.”

  Judge Kelly: “Will you tell me your best recollection of the form of these several letters?”

  Hutchinson: “I am the holder of blank number of shares of U.P.I., a California Corporation. This stock is impounded by order to state corporation commissioner, state of California, with Mr. Fickerson, if and when it is approved by the corporation commissioner, I will order the transfer to you of blank shares of stock as a personal gift from me, etc.”

  Judge Kelly: “Now you have left blank the account of stock that you own and the amount to be conveyed, were the blanks filled in in each letter, and you signed the letter, and was each letter delivered to the address of these people following the payments of money to you.”

  Hutchinson: “I can’t say.”

  Judge Kelly: “You did not deliver any of these letters before you got the money?”

  Hutchinson: “I don’t think so.”

  Judge Kelly: “Did you give any other documents to each of these parties or any memorandum?”

  Hutchinson: “Not at that time, no.”

  Judge Kelly: “Later these four letters were surrendered to you?”

  Hutchinson: “They were surrendered to the office to the to the stenographer.”

  Judge Kelly: “When they were delivered to the office, who received them, and into whose hands did they come?”

  Hutchinson: “All I have is hearsay. They were delivered there and put into the files of the office.”

  Judge Kelly: “Have you ever looked for them?”

  Hutchinson: “Yes, about three weeks after they were delivered.”

  Judge Kelly: “Were they delivered there on demand of anyone, I mean, did they come to the office because of a telephone call or letter?”

  Hutchinson: “I was away, all I have is hearsay.”

  Judge Kelly: “Did you ever hear anyone say that they were not in the files?”

  Hutchinson: “No.”

  Judge Kelly: “Did the corporation commissioner ask for them when he investigated?”

  Hutchinson: “As far as I know he has made no official investigation.”

  Judge Kelly: “As far as you know they are still in the files?”

  Hutchinson: “Yes.”

  Judge Kelly: “Have you been questioned about them by the corporation commissioner?”

  Hutchinson: “No sir.”

  Judge Kelly: “Have you read the Corporate Securities Act?”

  Hutchinson: “No sir.”

  Judge Kelly: “Were you advised by any lawyer in this transaction?”

  Hutchinson: “No.”

  Judge Kelly: “Did you ever make a statement to anyone that while you could not sell them stock you could give it away?”

  Hutchinson: “I said that it could be sold, but that I could make an application to the corporation commissioner for a transfer.”

  Judge Kelly: “Were you told by anyone that you could take money from people on the representation that they in some event might get some stock, and when you took the money from the Ernsteins and Reynolds, you represented to each of them that when and if that was permitted certain stock would be assigned to them. Were you told by anyone that you could do that?”

  Hutchinson: “No.”

  Judge Kelly: “You had no legal advice on it, but weren’t you consulting some attorney as you went along with this transaction?”

  Hutchinson: “Not in regard to this, I was in a position where speed was necessary, the British were coming. WE had to have money from somebody to build the machines. My personal opinion was that as none of the stock had been divided that each was given something for what he did, and that what had been awarded to me I could turn over to anyone who would assist me or the group in making this stock was assigned to you to be held by you and transferred by you to those who might render service to the corporation?”

  (missing words)

  Hutchinson: “No.”

  Judge Kelly: “You thought you could make use of it as you wished, subject to escrow restrictions?”

  Hutchinson: “Yes.”

  Judge Kelly: “Why were you impelled to give this stock away to these people?”

  Hutchinson: “I felt I would receive my share or more from royalties if the machine was marketed properly and that the others deserved it for what they were doing, and if there had been a success with the English group I would be more than repaid and I wanted to get back to the school.”

  Sapiro: “The receipt which was shown to you was actually signed by you on January 28, 1938, was it not?”

  Hutchinson: “I can’t say, Mr. Van Wort said he gave me cash.”

  Sapiro: “What was the other $200.00 for?”

  Hutchinson: “I think that was advance money that he was putting up for attorneys fees for forming the Nevada Corporation.”

  Sapiro: “He made it payable to you?”

  Hutchinson: “There was no one else to make it payable to.”

  Sapiro: “Why did you form a corporation in Nevada?”

  Hutchinson: “On advice from our attorney.”

  Sapiro: “Didn’t you tell Mr. Van Wort that you were doing it so that you could get the stock issued to certain people in Nevada where you couldn’t get it done in California?”

  Hutchinson: “No.”

  Judge Kelly: “During all the time that you were issuing these letters to the parties that had given you the money you were general manager of the corporation were you?”

  Hutchinson: “Yes sir.”

  Hutchinson was excused and Fickerson took the stand. Fickerson was identified as an attorney of law in Los Angeles, had been an attorney for 25 years and was deputy commissioner of corporation for four years.

  Comperet: “Did you have anything to do with the working of the draft of the initial Corporation Securities Act?”

  Fickerson’s answer was rather involved but it brought out the fact that he had helped in this work.

  Comperet: “When the Aero Reserve School Western Division was first incorporated, did you have anything to do with it?”

  Fickerson: “I supervised the incorporation of the company and prepared the by-laws.”

  Comperet: “I show you the permit for the sale and issuance of three shares of this stock, to Cullen, Olmstead, and Hutchinson, for cash. Did you prepare the application for that permit?”

  Fickerson: “I did.”

  Comperet: “Do you know if the three shares thus called for were issued?”

  Fickerson: “”I can’t say that they were.”

  Comperet: “I call your attention to the meetings of stockholders and directors of the A.R.S, held June 1, 1937 in Los Angeles, whose office was it?”

  Fickerson: “My own.”

  Comperet: “Were such meetings held there, that particular day and were you present?”

  Fickerson:” Yes.”

  Comperet: “How many meetings were held on that day?”

 

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