Monday, August 18, 1913: Unsworn, Oral Statement of Leo M. Frank in the Fulton County Superior Court, Atlanta, Georgia ( PART 2 )

Therefore, the repack for that week was 36 gross medium priced goods and 10 gross of high price goods. I will show you now where the $70 00 is and where the 36 gross is, and where the 10 gross figured in the financial sheet (Defendant's Exhibit 7a). There is a little sheet stuck up here in the corner attached to the record--the factory record of pencils manufactured during that week. That shows the production, divided into the following classes; cheap goods, the very cheapest we make, outside of jobs, those we figure at 60 cents a gross. Then there is the rubber insert, those we figure 85 cents a gross, and then the job and then the medium; the medium being all goods up to a certain grade that contains the cheap lead, and the good being all those that contain a better class of lead. In this case, Mr. Schiff had entered it up to and through Wednesday, and had failed to enter Thursday, and I had to enter Thursday, and to figure it. This sheet shows the total of the three classes of goods packed from day to day. Now, I have had very few clerks at Forsyth Street, or anywhere else, for that matter, who could make out this sheet (Defendant's Exhibit 2) successfully and accurately. It involves a great deal of work and one has to exercise exceptional care and accuracy in making it out. You notice that the gross production here is 2765 1/2. That gives the net production. The gross production is nothing more than the addition, the total addition, the proven addition of these sheets containing the pencils packed. This other little sheet behind here represents the pencils packed the week of April 17--that week's production. Now, this little sheet (Defendant's Exhibit 7a) I had to work on, showing pencils that were repacked, going into display boxes, and the numbers, and subtracted that from total amount 46 from 2765 1/2, which leaves 2719 1/2; in other words, I just deducted the amount that had been taken out of the stock room and repacked from the total amount that was stated to be packed, showing the amount of repacked goods. Now all I had to do was to copy that off, it had been figured once. The value of the repack was $70.00; that was mere copying. Now, the rubber insert entries, I got those that morning, the number of pencils packed during the week ending April 24th; that is Thursday, April 24th; that insert rubber is a rubber stuck directly into wood with a metal tip or ferret to hold it in. I have to go through all of this data, that being an awfully tedious job, not a hard job, but very tedious; it eats up time. I had to go through each one of these, and not only have to see the number, but I have to know whether it is rubber insert or what it is, and then I put that down on a piece of scratch paper, and place it down here, in this case it was 720 gross. Then the rubber tipping, that means tipped with rubber; that is the rubber that is used on the medium priced pencils that have the medium prices, we ship with the cheap shipping. I had to go through this operation again, a tedious job, and it eats up time; it is not hard, but it is tedious. I had to go through that again, to find out the amount of tip rubber that was used on this amount of pencils. Then I had to go through the good pencils. Now, it has been insinuated that some of these items, especially this item, if I remember correctly--that when I have gotten two of the items, I can add it all up and subtract from the total to get the third by deduction, but that is not so. Of the pencils that still remain unaccounted for, there are many pencils that don't take rubber at all. There are jobs that don't take rubber on them, plain common pencils, going pencils that don't have rubber on them at all, and I have to go through all of that operation, that tedious operation again that eats up so much time. Then there is the lead of the various kinds that we use; there is a good lead and cheap lead, the large lead and the thick or carbon lead, and the copying lead. That same operation has to be gone through with again. Now this sheet (Defendant's Exhibit 3) (exhibiting) is where the expert accountant said I made a mistake. I had to go through with each of those pencils to see if they were cheap rubber or if they were good lead or copying lead. So I had to go through this same operation and re-add them to see that the addition is correct before I can arrive at the proper figure. The same way to find the good lead and the cheap lead, the large lead and the copying lead; that operation had to be gone through in detail with each and every one of those, and the same with each of the boxes, and that is a tough job. Some of the pencils are packed in one gross boxes and some in half-gross boxes, and, as I say, we use a display box, and there are pencils that are put in individual boxes, and we have to go through carefully to see the pencils that have been packed for the whole week, and it is a very tedious job. Now in these boxes there is another calculation involved, and then I have to find the assortment boxes, but that is easily gotten. Then I have to find out whether they are half-gross boxes or one gross boxes, and then reduce them to the basis of boxes that cost us two cents apiece; reduce them to the basis of the ordinary box that we paid two cents a box. After finding out all the boxes, then I have to reduce that to some common factor, so I can make the multiplication in figuring out the cost at two cents. That involves quite a mathematical manipulation. Then I come to the skeleton. Skeletons are no more than just a trade name. They are just little cardboard tiers to keep one pencil away from the other, that is all a skeleton is. I have to go through and find out which pencils are skeletons. If it is a cheap pencil they are just tied up with a cord, and there are pencils in a bunch, and there are pencils that we don't use the skeleton with. That must all be gone through and gotten correctly, or it will be of no worth. Then comes the tip delivery, which is gotten from this report from Mr. Lemmie Quinn that I showed you before. Then there is another entry on this sheet of the tips used and I can give you a clear explanation of the manner that I arrive at that. You can't use tips when you don't have some rubber stuck in it, so I just had to go through the rubber used to find that. Then we have what we call ends; there are a few gross of them there. Then the wrappers. Pencils that are packed in the individual one dozen cartons don't take wrappers; they are in a box. Pencils that are packed in the display boxes don't take a wrapper; they just stick up in a hole by themselves. The cheap pencils are tied with a cord and they don't take any wrapper, so the same operation, the same tedious operation, had to be gone through with that to get at the number of wrappers, and then the different number of gross and the number of carton boxes used in the same way. On the right hand side of this sheet you notice the deliveries (Defendant's Exhibit 3). There is the lead delivery from the Bell Street plant and the Forsyth Street plant. This doesn't mean the amount of lead used in the pencils packed for this week only, but it shows the amount of our lead plant delivery, for information. Then the slat delivery, that is not worked out that week; that is not worked out simply because that is Mr. Schiff's duty to work that out and that is a very tedious and long job and when I started in to do that I couldn't find the sheet showing the different deliveries of slats from the mill, so I let that go, intending to put that in on Monday, but on Monday following I was at the police station. I took out from this job sheet (Defendant's Exhibit 4b), the correct amount of gross packed--791 as figured there-correct value $396.75, as shown on this sheet, and the average is that one, that I didn't carry out to two decimal places; I didn't carry it to but one. Then from the pay roll book I got the pay roll for Forsyth Street and Bell Street, and then as a separate item took out from the pay roll book total, separate the machine shop, which that week was $70.00. The shipments were figured for the week ending April 24th on this sheet, as far as I--oh, you notice the entry of the 24th; those are those invoices, the first piece of work that I explained to you, sitting up there; I explained that from the chair, and couldn't come down here; that's the piece of work that I explained to you how we did it in triplicate. That's the work that I did that morning, and completed, as I told you, that each of the invoices was wrong, and I had to correct them as I went along, simply because I needed it on the financial sheet, and there's where I entered it on the sheet as shipments; I needed that so as to make the total; and that's where I entered it--shipments, the 24th, on this sheet during the afternoon $1,245. 57, and totalling it up, the pencil factory shipped that week $5,438. 78. Those amounts you see are entered right in there, and the amount of shipments is gotten from this report $4,374. 00 handed in by Mr. Irby, and the value of the shipments are gotten from this sheet, the last entry on which I had to make. Then the orders received. The entry of the orders received that day involved absolutely no more work on my part than the mere transfer of the entries. On this big sheet (Defendant's Exhibit 5), I have here the orders received are in terms of Total gross" and "Total value," and we need that to compare the amount of shipments with the amount of orders we are receiving to see whether we are shipping more than we are receiving, or receiving more than we are shipping. That amount is given here. Down there it tells you the total amount of dollars and cents of all the orders received, total gross, and the average. The average is important, though it is usually taken over on a separate paper on Friday morning to Mr. Sig Montag so that he knows how sales for the week have come out long before he receives the financial. He didn't receive the financial usually until Monday morning, when I go over there. Now one of the most intricate operations in the making up of the financial report is the working out of the figures on that pencil sheet, as shown by that torn little old sheet here, (Defendant's Exhibit 3), that data sheet. Now with this in hand, and with that pencil sheet record of pencils packed (Defendant's Exhibit 7), the financial report is made out. This sheet (Defendant's Exhibit 2), the financial, I may say is the child of my own brain, because I got it up. The first one that ever was made I made out, and the fact that there is a certain blue line here, and a certain red line there, and a black line there, and certain printing on it, is due to me, because I got this sheet up myself. On one side you notice " Expense, " or two main headings " Expense," " Materials. " Together they comprise the expense for the week. On the other side, like the debit and credit sides of a ledger, is the "Value," " Gross Value" of the goods, which have been packed up during a given week. Down here below you will notice "Less Repacked. " You remember the repacked, that I told you about, the pencils taken out of stock and re-packed to make them move better. That value is deducted, so that it won't allow error to enter into this figure. Then we take off 12% down at the bottom. That 12% allows for freight allowances, cash discounts, and possibly other allowances, and gives us the net value or the net amount of money for those pencils, which the treasury of the Pencil Company receives in the last analysis. On the other side is the materials, the cost of materials, that went into the making of those pencils, based on the amounts and kinds of pencils, which, of course, as in this instance, comes from the data sheet. The first item under "expense" items is "Labor," and the labor is divided, as you all know, into the two classes, direct and indirect. The direct labor is that which goes directly into the making of the pencils themselves, and the indirect constitutes the supervising, shipping, office, clerical help, and so forth. These figures are brought directly from the pay roll. The indirect labor, however--as in this case $155.00--is an empirical figure, a figure, which we have found out by experiment to be the correct figure, and we arbitrarily decide on it, and keep it until such time as we think we ought to change it and then change. The burden that a business has to carry is the fixed charges, the expense that it carries, irrespective of whether it will produce two gross or 200,000 gross, like rent, insurance, light, heat, power and the sales department. The sales department expense usually goes on whether the salesman sells little or big bills; his salary goes on and his expense goes on. Rent, heat, light, power, sales department men, and all that, is figured out, as you could find by looking back, continuously from week to week, and there is no work other than jotting it down to figure in this total. The repair sundries is also arbitrary at $150 00. The machine shop, however, is available. It appears alongside of "Investment. " "Investment" is crossed out, and "Machine Shop" written in. There is a reason for that. The time was at the inception of our business when every machine built by us was so much additional added to the value of our plant. In other words, it was like investing more money in it, in the plant, but the time came, when we quit making machines, and then we simply kept them in repair, and we charged that to expense, crossing out "Investment" and putting down "Machine Shop" as an expense item. The material is arrived at on the basis, gross, net. The gross basis is the total amount of pencils packed, as per the packing reports handed in by Miss Eula May Flowers, and the net basis is the total amount, total gross, packed by report of Miss Eula May Flowers less the amount of repacked, of which I have spoken. In this case the gross amount was 2,851 gross, net 2,830 1/2 gross, the smaller being the net figure. The slats are figured at 22 cents per gross, and that's simply taking the 2,830 1/2 gross down to the slat item, and multiplying that by 22 cents, and putting it down to the materials. Then from the figures derived from the packing reports we figure rubbers used according to the character or grade of the pencil manufactured; 61/2c cheapest, 9c medium, 14c high grade. Then comes the tips. The tips is simple, gotten by adding together the amounts of rubber used in ferrules, the medium rubber, and the better class of rubber. In other words, it's gotten by adding together the rubber at 9 cents a gross, and the rubber at 14 cents a gross, and adding together the total amount of gross used. And you see it says "materials," and it is reckoned at 10 cents; in other words, the materials used in making the tips in that tip plant we figured at 10 cents a gross, and the labor is included in that pay roll item up above. Then there is 25 gross of these medium ends. Then the lead, which is used, is taken from this sheet (Defendant's Exhibit 4a) multiplying 15 cents for the better lead and 10 cents for the cheaper lead. Then 5 cents a gross has been figured out after months of careful keeping track of what we use to include such materials as shellac, alcohol, lacquer, aniline, waxene, and oils--that's oils used in manufacture, not for lubrication of transmission or machinery. It also includes that haskolene cornpound, of which we have heard so much. That's included in this 5 cents per gross. Then comes the boxes at 2 cents a gross, then assortment boxes at an average of 4 cents a gross; then come wrappers at one cent a gross; that is the number of wrappers used in wrapping up one gross of pencils are worth one cent. Then cartons, boxes, holding one gross of pencils, figured at 28 or 18 cents. Then down below "pay roll Bell Street, $175.21. " Then show what was delivered, just a plain copy of what I have on this sheet. I have been looking at the sheet for the week ending April 17th, but it is practically the same way. I have here down on the bottom of this financial (Defendant's Exhibit 2) made out on the 26th what's delivered, good and cheap. There is no entry there. You will remember I said I didn't work that out. I put that out there preparatory to working that out Monday morning before I would take it over. Then it tells tips delivered from Mr. Quinn's report. Now on the right side you will notice this entry, "Better grades, gross, net. " From this small sheet we get total of better grades, 710 gross. Then right below it says 700 gross net. There are 710 gross, and on that repacked sheet I called out there 10 gross good goods repacked, therefore the difference of 10 gross. Then we look on down this pencil sheet, cut down each and every one of the items accordingly --you will notice in some places I marked some items, "142 1/2 2-10-X" --and so on down the sheet in this case there were 29 or 30 different items, all of which had to have the prices correctly traced down, extensions correctly made, checked, re-checked, added up, and totaled, and checked back, and there pack had to be deducted, after which the 12% had to be figured out, and deducted, giving net value of the production for that week. Then we take the net value of the production that week, and from it take the total amount of expense, and materials used, the expense including labor, rent, light, insurance, and so forth, and, if this expense is greater than the value of the pencils, then the factory has operated that week at a loss. In this case a deficit above, showing that that week we operated at a loss. The shipments were gotten off down there from this sheet. Those are my initials on the top. Now, besides the making of this large sheet proper, there is in the making of the financial report three other sheets, (Defendant's Exhibit 11) that I usually make out. Now one of those little sheets, that are usually made--and I want to call your attention to the fact that I didn't typewrite this; I just filled these figures in; I am no typewriter; I cannot operate a machine; I have two or three dozen of those every now and then typewritten together, and keep them in blank in my desk; I didn't typewrite those on that day, or any other day; I just filled those figures in those blanks-this is the sheet (Defendant's Exhibit 11), called the comparison sheet between 1912 and 1913, which is nothing more nor less than taking the vital figures, the vital statistics of one week of 1913, and comparing them with the same week of 1912, to see how we have improved or gone backward every week one year apart. Of course the putting of these down involves going back into the proper week in this folder, and getting that out. However, I noticed the week in 1912 corresponding with the week of April 24th in 1913, was a week of 45 hours instead of 50 hours. In addition to that, I made out two condensed financial reports, that is, give the main figures. I didn't typewrite this sheet, either; as I say, I cannot operate a machine. I just filled in the figures, which have to be picked out from this large financial report, fill them in for the week ending-that does not show the date it was made, but it shows for the week ending April 24th, the production in dollars, the total expenditure in dollars, the result, which in this week, as I wrote in "deficite" in dollars; shows the shipments, which in this week were very good, and the orders received, which were gotten from that great big sheet. These were enough figures for a director or stockholder of the company to receive, and are practically the only figures he is interested in. He don't care to hear how much we make of this pencil or that pencil. The only thing he is interested in is dividends, if we are able to give them to him. One of these sheets I always make out and mail to Mr. Oscar Pappenheimer who was formerly a member of the Board of Directors, though he is not now. The other sheet I always invariably send to my uncle, Mr. M. Frank, no matter where he is, who is president of the company. On this particular Saturday, my uncle had during the week ending April 26th, gone to New York, stopping at Hotel Mc Alpin, preparatory to taking his annual trip abroad for his health, he being a sick, feeble old man. When I made out that financial, I really made out two small ones, and I put one in an envelope, addressed it to Mr. Oscar Pappenheimer (Defendant's Exhibit 45), c/o Southern Furniture Company, Atlanta, Georgia; the other one (Defendant's Exhibit 44) was put in this envelope, which you see right here, and sent to my uncle, Mr. M. Frank, together with a letter, which I wrote him, after having finished the financial sheet, the sheet showing the comparison of vital statistics for the same weeks of 1912 and 1913, and after having completed these two small condensed financial reports (Defendant's Exhibit 42). I wrote that letter to my uncle, and I sent him that report and also sent a price list, to which I referred in that letter; hence the size of the envelope. I am going to show you one of those price lists. Its a great big sheet when it is folded up, it is much too large for the ordinary size; hence the reason I used a great big envelope like that. I addressed that letter to my uncle, Mr. M. Frank, care Hotel Mc Alpin, Greely Square, New York, N. Y., as has been identified. This ends practically the work on the financial. After finishing the financial, I wrote these letters, and sealed them, and placed them aside to post. After finishing the financial, I folded this big report up, and put it with the comparison sheet (Defendant's Exhibit 11) for the week of 1912 and the same week of 1913 in a large envelope, addressed it to Mr. Sigmund Montag, General Manager of the Pencil Company, and put it under my inkwell, intending to take it over on the morning of Monday following. I then came to the checking up of the cash on hand and the balancing of the cash book. For some reason or other there are no similar entries in this book after those of that date. That's my handwriting (Defendant's Exhibit 40), and I did that work on Saturday afternoon, April 26th, as near as might be between the hours of 5:30 and 5 minutes to 6:00. Now in checking up it didn't take me an hour and a half. I did that in about 25 minutes. In checking up the cash the first thing to do is to open the cash box. We have a little coin bag in there, and there was in cash actually on hand that day about $30.54; that's all there was. That's all there could have been, and that $30.54 was to the best of my recollection composed of about three dollars in one dollar bills, about four or five dollars in quarters and halves, and the balance dimes, nickels, and one-cent pieces. That's some job to count that, not only to count it, but to separate the different denominations, and stack it up into stacks of a dollar. I did that, stacked them up, checked them, and re-checked them, and I took a piece of paper--haven't that paper--and jotted down the amounts. To that had to be added the amount that was loaned. In this case there was only one loan, that which I loaned to Mr. White that afternoon. That would eventually come back to the cash box. If there had been any errors in the pay roll the night previous, I would have had to make it good from the cash box, and it would have gone under the item of" extra pay roll. " I don't know whether that occurred this week or not. However, I added up the total cash I actually had on hand then--$28.54--and that $2 00 loaned to Mr. White brought it up to $30.54, the actual amount which the cash book showed. Now on the left-hand side of this book, the debits for the week between April 21st, which was Monday, previous to April 26th, it being a record simply of the petty cash used by us, showed that we had a balance on hand the Monday morning previous of $39.85. On April 22nd we drew a check for $15 00, and on April 24th we drew another one for $15.00. I mean by that that we would draw a check for $15,00, and go over to Mr. Sig Montag to sign it; so that during that week all we got from the treasury was $30.00, and $39 85 already on hand, made $69.85, which was the total amount we had to account for. When we spend, of course we credit it. There once was a time, when, as we paid out money, we would write it down on this book. We found it was much better, however, to keep a little voucher book and let each and every person sign for money they got, and we have not only this record (Defendant's Exhibit 40) but this record on the receipt book. The first entry on this is 15 cents there--on the 19th of April the National Pencil Company gave 15 cents to Newt Lee for kerosene Newt Lee's name is there, but he didn't write it. I wrote it; my initials are on it. He was there when he got the money, but I thought he couldn't write, and I signed his name. Whenever I sign anybody's name, my initials are under it. The next item is 75 cents for typewriter rent; next item $2.00 drayage 24th of April. That is Truman Mc Crary's receipt he has a very legible handwriting, and one of the little stamps stamped on there. The next item is for cases; some negro signed his name down there. So on throughout the book, cases, express, drayage, postage, parcels post, etc. Now, after counting the money, finding how much actual cash there was in the cash box, the next thing I do is to take this little voucher book, and lump the different items that were all alike together (Defendant's Exhibit 10). This sheet has been identified and explained, and you notice that there were four items of drayage grouped together, the total being $6.70. I just extend that over to the right there $6.70.