GOVERNMENT: End of a Marathon

“I come to this case,” said Federal Judge Harold R. Medina 34 months ago, “without any knowledge of the investment banking business, but I intend to get my teeth into this matter.” The court was soon wondering whether there was anything to chew on at all. For nearly three years, Medina fidgeted with ill-concealed impatience while Justice Department lawyers tried to prove that 17 big investment banks had conspired to monopolize the securities business through the syndicate system of negotiated bidding.

To try to prove their charge, the Government lawyers probed practices in the banking business dating back to the 1912 Pujo investigation of the “money trust.” But, as exasperated Judge Medina pointed out repeatedly, they failed to produce a single instance of deliberate conspiracy. Finally, after 16 months, the Government got down to the key part of its case: an attempt to show that the bankers had invented the syndicate system in 1915. But one of the two Government witnesses, Harold L. Stuart, 72, head of Chicago’s huge Halsey, Stuart & Co., directly contradicted the Government’s contentions. He said that his firm had used the syndicate system long before 1915.

The defense did not have to present its side. Last week, after 5,000,000 words of testimony, Judge Medina dismissed the suit “on the merits and with prejudice” (i.e., the Government cannot reopen the case, although it can appeal Judge Medina’s decision to the U.S. Supreme Court). There was no proof whatever, said Medina, of any conspiracy, and therefore “the monopoly charges fall of their own weight.” In all, the marathon trial had cost the bankers at least $4,000,000, and some estimates ran as high as $7,500,000. How much it cost taxpayers, nobody knew.