Mr. NICHOLS. I went over personally to the post office and asked what they meant by it, seeing it bears entirely upon the nature in which the scheme is conducted. They said they couldn't tell me any more than what was contained in this notification to Mr.-I can't recall his name now. He says, "Well, if you fellows have any doubt about it, I would just leave that thing alone." "Well,” I said, "they say that it is all right, and we are going to come out all right.' "Well," he says, "if you have any doubts about it," he says, "let it alone." Mr. AUSTIN. Who said that? Mr. NICHOLS. This man in the information bureau in the post office. I don't just exactly recall his name. We decided we would go ahead, and so we went ahead with it. I think it was in February the business began. Mr. AUSTIN. November 26, 1898. Mr. NICHOLS. The business came in pretty large, and the post-office inspectors came there to see what we were doing in the Progressive Watch business. They had one or two complaints, they said. I wanted to know who had complained, and they told us the name, and we went right to the files and showed them—that is, I did. Mr. Lewis was not familiar with the scheme-what the post office calls routing things, schemes for routing newspapers and things-we had adopted that as a scheme for keeping a line on these mail-order cards. I went direct to the index-I had a little key card to the indexand I went went direct to the files and picked out the cards and showed them just who had sent the cards in, on that lady's series; how many were in, and when they came in. Mr. Magee was one of the inspectors, and I think, if I remember correctly, Mr. Sullivan. Mr. AUSTIN. You mean you kept a list of the subscribers? Mr. AUSTIN. Was that the one in which you kept the fee subscriptions or was it of gift or fictitious subscriptions? Mr. NICHOLS. Any one in the list. We can pick every subscription out in a few minutes. The CHAIRMAN. Well, Mr. Nichols, at the time you published the Winner Magazine it was not the practice of the Lewis Publishing Co. to engage in gift subscriptions to the same extent as it was with the Woman's Magazine, was it? Mr. NICHOLS. I did not catch that, Mr. Ashbrook. The CHAIRMAN. Did you operate gift subscriptions when you were publishing the Winner Magazine, the same as Mr. Lewis did in the publication of the Woman's Daily? Mr. NICHOLS. No, sir. The CHAIRMAN. Well, was there very much of this gift subscription business by the Winner Magazine gift subscriptions? Mr. NICHOLS. No, sir. That is, you mean somebody else giving them? The CHAIRMAN. Yes. Mr. NICHOLS. No, sir; not of that particular thing. Mr. MADDEN. Now, Mr. Nichols, as the record stands it would appear that you admitted that this watch business was illegitimate. What was illegitimate about it? 96509-No. 32-11- -3 Mr. NICHOLS. You mean where it says that we did not want to have trouble with the Post Office Department; is that what you mean? Mr. MADDEN. Yes. Mr. NICHOLS. There was really nothing illegitimate about it. Mr. MADDEN. Where was the illegitimacy? Mr. NICHOLS. There was not any illegitimacy at all in the thing. because this is the watch company business you are talking about! Mr. MADDEN. Yes. Mr. NICHOLS. If you had sent 10 cards in-that is, your own and 9 of your friends and any one of you or your friends wrote in and said, "I want my money back." you got your 10 cents back. and we spent the money for the postage. Mr. MADDEN. There was nothing about it that was illegitimate? Mr. NICHOLS. No, sir. Mr. MADDEN. Except possibly the method of selling might be objectionable to the Post Office Department? Mr. NICHOLS. Yes, sir. Mr. MADDEN. That is the only thing? Mr. NICHOLS. That is the only thing. Mr. MADDEN. That is what you referred to when you said "illegitimacy"? Mr. NICHOLS. Did I use that word? Mr. MADDEN. You said illegitimate. Mr. NICHOLS. It is just like forming an insurance company. We depend on lapses for what we make; but I don't think anybody, even I, accused Mr. Lewis of using that as a scheme to defraud anybody any more than I did myself. Mr. AUSTIN. Did you conduct yourself so as to comply strictly with the regulations of the Post Office Department? Mr. NICHOLS. Yes; we did. Mr. McCoy. Now, Mr. Nichols, was that the only thing you had in mind when you said you were afraid you might get into trouble? Mr. NICHOLS. We were probably inspected by the inspectors three or four times. Mr. McCoy. And it was those inspections that made you think you might get into trouble? Mr. NICHOLS. Well, Mr. McCoy, if you were stopped on the corner three or four times a week by a policeman and he told you you looked suspicious to him-that is what we were facing then. Mr. McCoy. That is, that made you think there might be trouble, but not because you were conscious of planning any fraud. Mr. NICHOLS. That is the idea. Mr. McCoy. About the violation of the regulations in mailing out papers and putting up a job on the inspector: Do you think that was a violation of the postal regulations? Mr. NICHOLS. I presume it was; it was a trick. Mr. ALEXANDER. I suggest that Mr. Cohen ask this witness any questions relevant to this case that he cares to, but I protest against going along into so many collateral matters. Mr. MADDEN. It is about quarter to 5 now, and I suggest that Mr. Cohen take up his cross-examination of the witness in the morning. The CHAIRMAN. Mr. Nichols, we would like to have you report here to-morrow morning at 10 o'clock. We will take an adjournment at this point until that time. (Thereupon, at 4.45 o'clock p. m., the committee adjourned until to-morrow, Friday, August 11, 1911, at 10 o'clock a. m.) COMMITTEE ON EXPENDITURES IN THE The committee met at 10 o'clock a. m., Hon. William A. Ashbrook (chairman) presiding. The following members of the committee were present: Messrs. Alexander, McCoy, Slemp, Austin, and Towner. There were also present Mr. James L. Stice, post-office inspector; Mr. R. S. Sharpe, chief inspector of Post Office Department; and Mr. Edwin C. Madden, attorney in fact for the Lewis Publishing Co. Mr. ALEXANDER. It might be well for the record to show that the further examination of Mr. Stice was suspended, and that Mr. Nichols was called to resume his testimony. The CHAIRMAN. Mr. Madden, do you wish to make a statement? Mr. MADDEN. Yes, sir. During the investigation of the committee in the past, certain papers have been called for which are in St. Louis, and I have just learned from Mr. Lewis that the production of some of the copies which the committee has called for would be a very expensive matter to them. In one case alone the cost of the copy would amount to probably $100. I would like to have the committee, if possible, to omit the requirement of the production of these copies until it goes to St. Louis, where they might possibly be produced at less cost. The original copies may be available there for the use of the committee, and I would like to have the record show the reason why they are not produced now. The CHAIRMAN. I believe the request is a reasonable one, and, inasmuch as the committee has determined to go to St. Louis, it will be agreeable to the committee, I think, not to insist at this time. upon the production of the papers called for. Mr. MADDEN. Later on, of course, if it should appear necessary, they will be produced. Mr. TOWNER. I have no objection to that, except that I will make this suggestion: I can hardly see how a copy would cost less at St. Louis, to be produced there for the use of the committee, than it would cost to have the same copy made and produced here. Mr. MADDEN. I would like to answer that in this way: One of the calls was for a transcript of the record of the trial, and that alone would amount to $100. Now, it is possible that a large number of witnesses will be placed on the stand at St. Louis, and they may be able to satisfy the committee as to these matters. Therefore, it may not be necessary to produce the record, but, if desired, of course we will produce it. Mr. McCoy. I remember that I asked for that record as a matter of information as to what did take place there and what was covered. It is possible that the same thing may be covered by the witnesses. Mr. ALEXANDER. If we go to St. Louis, and if we have the record available at St. Louis, we may not want to put it in this record. Mr. TOWNER. But if you order a transcript of these proceedings here, just as Mr. Madden says, it will cost $100, and it will cost just as much to produce it in St. Louis. If we need the transcript, it makes no difference whether it is produced here or at St. Louis, because the cost would be the same. Mr. ALEXANDER. But we might be able to use the original transcript there. Mr. TOWNER. Not the original transcript, because that would be in the shorthand reporter's notes. Mr. ALEXANDER. Is it a State case? Mr. MADDEN. No, sir; a United States court case. Mr. ALEXANDER. If it was a State case, there would be a copy on file as a part of the record of the court. Mr. TOWNER. I have no objection at all, and would be willing to waive the demand for the transcript. Mr. MADDEN. We do not wish to be understood as declining to furnish it, but the expense is so great that unless the committee desires it, we would like to be relieved of the necessity of producing it here now. Mr. TOWNER. Would it not be just as well, Mr. McCoy, to withdraw your demand for the transcript of that trial record? Mr. McCoy. Yes, sir. Mr. TOWNER. This is what I think we ought to do: I think we ought to try and save ourselves as much as possible from taking up matters at St. Louis that could be just as well disposed of here, because it will be an additional expense all the time we are in St. Louis, not only for the production of evidence, but, also, for the expenses of the committee. If these copies, other than that suggested by Mr. Madden, should be furnished the committee here, I think it will be a great deal better to have them furnished here than have them produced in St. Louis. Mr. MADDEN. I will say that after the committee has been in St. Louis and has taken such testimony as it desires, if any copies there are required we will be glad to produce them. The CHAIRMAN. I believe that is satisfactory. We will now resume the examination of Mr. Nichols, who was before the committee last Thursday. Mr. MADDEN. I will turn the cross-examination of Mr. Nichols over to Mr. Cohen, if that is agreeable to the committee. The CHAIRMAN. Mr. Cohen, you may cross-examine the witness. TESTIMONY OF MR. HOWARD E. NICHOLS-Continued. Mr. COHEN. In order that the committe may have a clear idea of the period of time over which your association with Mr. Lewis extended, I will ask you to state when and where you first joined him in business, and when and where you severed your business relations with him. Mr. NICHOLS. I met him in Nashville, Tenn., about August, 1895. Now, I am not positive about the month. Mr. COHEN. Í merely want some idea about the period of time, in order that we may fix it in our minds. When did your business relations with him end? Mr. NICHOLS. About May, 1902. Mr. COHEN. Then, for about seven years you were associated with him? Mr. NICHOLS. Yes, sir. Mr. COHEN. Were you associated with him during all of that time? Mr. NICHOLS. No, sir; I was traveling on the road, and I became more closely associated with him in a business way about May, 1898. Mr. COHEN. How long did that close relationship last? Mr. NICHOLS. From May, 1898, to May, 1902. Mr. COHEN. Now, then, by whom were you employed when you met Mr. Lewis in Nashville, Tenn.? Mr. NICHOLS. By the Kohler Remedy Co. Mr. COHEN. That appears here in the hearings as the Cola Remedy Co.; is that incorrect? Mr. NICHOLS. Yes, sir. Mr. COHEN. When did you leave the employ of the Kohler Remedy Co. At the time you became associated with Mr. Lewis? Mr. NICHOLS. Yes, sir; about that time. Mr. COHEN. Why did you leave the Kohler Remedy Co.? Mr. NICHOLS. As I stated before, we had a disagreement about their saying that I had sent in a false report, and Mr. Layfield said that I had better send him my trunks and advertising matter and a detailed report of my business with them for six years back of that. That was, of course, almost impossible for me to do, because what he meant by detailed report was such things as carfares. I had been in the habit of sending him a detailed report every Saturday night. So, for that reason, they refused to pay me about $250, or probably more, which was still due on salary that I had not drawn. Mr. COHEN. Mr. Nichols, you stated in your direct examination that you left them when your contract was out? Mr. NICHOLS. Well, it was practically out. Mr. COHEN. Had it expired by limitation? Had it expired at that time? Mr. NICHOLS. About that May; yes, sir. Mr. COHEN. And, of course, there was no disposition on their part to renew the contract with you? Mr. NICHOLS. No, sir. Mr. COHEN. Did they ever sue you, or threaten you with a suit, for failing to turn in money that was due them? Mr. NICHOLS. No, sir. Mr. COHEN. Did they ever write you and say that if you did not make a satisfactory accounting to them they would bring action against you? Mr. NICHOLS. I do not remember that they did. Mr. COHEN. You stated in your direct examination that Mr. Sullian wrote you that you had submitted a wrong report Mr. NICHOLS (interposing). No one of that name. Mr. COHEN. I thought you said Sullivan? Mr. NICHOLS. No, sir; Mr. Yakel was with the company. |