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Securities Regulation Keyed to Coffee
In the Matter of the Franchard Corporation
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Louis J. Glickman created the Franchard Corp. and owned a bulk of its authorized “B” shares (and some A shares) in order to control said corporation. Three registration statements were effective in 1960 and 1961. Once completely filed, Glickman transferred funds from the registrant to one of his wholly owned corporations and by the second registration; the total amount withdrawn from Franchard was $2,372,511. The 1961 prospectus does not, nor do the amendments to the 1960 prospectuses, mention these transactions. Shortly after the 1960 filing, Glickman began pledging the shares to finance personal real estate ventures and by late 1961 all of the B stock (and most of the A stock as well) was used in obtaining personal loans on behalf of Glickman. The 1961 filings did not reflect this. In 1962 Franchard’s board of directors learned of the transfers. Although Glickman promised the transfers would stop and to repay the money with 6% interest, Glickman continued with the withdrawals. A U.S. district court judge was called upon to determine Glickman’s liability finding that the money repaid with 6% interest was not sufficient and that Glickman owed more. Glickman never paid that sum and continued withdrawing funds from Franchard. Glickman’s wholly owned corporations found themselves in financial trouble. Glickman resigned and sold some of his A stock and all of his B stock. Franchard contended that to disclose Glickman’s transfers and pledges would be an unwarranted revelation of personal affairs and that the withdrawals were not substantial seeing as the cumulative amount was miniscule in comparison to the gross book value of Franchard’s assets.
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