Labor Department official testified yesterday that, although he had warnings that his former colleagues may have been engaging in stock fraud, he chose not to investigate or to resign.
John Mumford served as president of National Commercial Credit Corp. (NCCC) during 1974-75. He told Judge Oren R. Lewis of the U.S. District Court in Alexandria that even after he learned Cortes W. Randell was sentenced to prison for stock fraud in another case, he did no notify NCCC's directors or check on Randell's activities.
Randell, who had taken control of NCCC but never was an officer, continued to run the company from prison, while Mumford retained the title of president.
Mumford, 38, is deputy assistant secretary of Labor for employment standards administration. He was the object of an action brought by the Securities and Exchange Commission seeking to enjoin him from selling securities.The judge said he would decide next week whether to grant the injuction.
On the trial's second day, defese counsel sought to portray Mumford, in Judge Lewis' words, as "an innocent young man being taken in by those tycoons." The reference was to Randell, who served eight months in federal prison in 1975 for his role in a stock fraud involving the National Student Marketing Corp. It also refered to Lester Cotherman, another principal in NCCC, who allegedly took and never accounted for unmerited advance commissionson the sale of houses in Florida. Cotherman also was a president of NCCC.
Noting that Mumford was an army major a White House fellow during 1972 and a graduate of Harvard Business School, Judge Lewis said he didn't believed Mumford had taken no action after Randell was jailed. Mumford replied, "I concluded I couldn't affect a change in his attitude." Mumford told the court earlier that he met Randell at a prayer meeting at the latter's house. Mumford remained as NCC's president until he left to join the Labor Department in July 1975.
The SEC requested the injuction on the grounds that, because of his past record, MUmford should be prohibited from selling securities. Mumford told the judge that he had no intention of engaging in any business of this type.
NCC, which filed for bankruptcy in September 1976, was an Annandale-based corporation that bought homes with assumable first mortgages. It made its profit by issuing second-trust notes taken back from th ebuyers and then selling the notes at a discount for cash or credit. The SEC has charged that NCC's officers engaged in stock fraud that cost Washington area investors several hundred thousand dollars.