ent” applied to the date of the statement, February 7.
C. B. Faircloth of Newberry, S. C, an auditor, testified that liabilities of the Galahad Press exceeded assets on June 1, 1932, by $15,508.45. This was a few days before an issue of Liberation containing the statement, “present rate of prosperity,” was put in the mails.
BICKERING BY COUNCIL
Legal bickering was plentiful during yesterday’s session, and the state did little more than lay the groundwork of its case.
Testimony revolved around advertisements offering the stock for sale in Pelley’s magazine, Liberation, in the issues of March and April of 1932 and efforts by the state to prove that the defendants knew at the time that the company was in an unsound financial condition.
The prosecution also sought to establish that a resolution was adopted by the directors at a meeting in Washington on May 14, 1932, which authorized Kellogg and Hardwicke, secretary and treasurer, respectively, to borrow $6,000 and give a chattel mortgage “covering all the assets of the company.”
MAIL OFFICIAL TESTIFIES
Evidence about a mortgage resolution, taken from the minutes of the company and identified by George S. Anderson, former treasurer of Pelley’s Foundation for Christian Economics, who said the minutes of the Galahad Press were turned over to him by Kellogg, was admitted by Judge Warlick after objections by defense counsel.
Judge Warlick ruled the testimony was competent, however, only against Summerville and Kellogg as Pelley was not present at the meeting and Anderson coud not positively identify Hardwicke’s signature.
After the indictment against the defendants was read, E. L. Bishop, superintendent of mails at the Asheville Post Office, took the witness stand.
On cross-examination defense counsel sought to bring out testimony to the effect that Liberation was not circulated to subscribers in North Carolina.
BISHOP SAW COPIES
Bishop testified, however, that in March, 1932, he saw “several” copies of the magazine addressed to points in this state. The defense, nettled, made him admit that he could not swear postively that individual wrappers which he had in mind contained copies of that particular magazine.
Later the state put Alfred S. Jones on the stand. Jones, who resides in Greensboro, testified he was a subscriber to Liberation and received his copies of the issue in question.
The prosecution took up the matter of advertisements in the magazine. One was presented which read:
“Put your money behind a militant Christian educator.”
This announcement offered preferred stock at $10 a share and said the company had started with a capital of $40 and had prospered in the face of the failure of many other publishing enterprises in 1932.
The defense pointed out that the advertisements gave the Washington office of the corporation as the place to send stock subscriptions and not the Asheville headquarters.
The contention was made by the defense that the state must prove that the stock sales mentioned in the indictment took place in North Carolina.
It was learned that Stanley Winborne, of Raleigh, chairman of the State Public Utilities Commission, informed one of the defense attorneys over the telephone that he has not authorized any payment to Thomas J. Harkins and R. R. Williams for their services. They are assisting the prosecution.
On Monday letters from Winborne appointing the two to represent the capital issues section of his commission were presented by the state after the defense asked to whom they were looking for their fees.
Winborne was ill when he was served with a subpoena to come here and testify.
Defense attorneys said at the start of the trial that they hoped to prove the existence of a “private prosecution in this case as well as the prosecution by the state.”