A middle level executive at Washington Group Inc. testified today that defendant James Gilley once told him that "he (Gilley) should have let the (company's) stock find its true value in the marketplace rather than try to control it."
Gilley, tobacco heir Smith Bagley and three other are on trial in U.S. District Court here on criminal charges that between February 1, 1974 and April 15, 1975, they conspired to manipulate the stock of Washington Group.
Victor Jamison, a former insurance manager at the Winston-Salem company, like others who testified during the first five days of the trial, said he went deeply in debt to buy Washington Group stock.
Jamison and others have testified that, with Gilley's guarantee, they were able to make collateral-free loans to finance the stock purchases.
Most of the loans were made at the Winston Salem branch of the Northwestern Bank. Dewey Cahpple, the former chief financial officer at that bank also is a defendant in the case.
The government is seeking to prove that stock purchases were arranged by some of the defendant to keep the trouble company's stock artificially inflated. Washington Group filed for bankruptcy in June 1977.
On July 22, 1974, Jamison said, he borrowed $20,000 from Northwestern, with Gilley's guarantee, to buy 1,000 shares of stock.
"I did not want to buy . . .stock. I couldn't afford it," Jamison testified. But he added that he did not tell this to Gilley.
Defense attorneys as in past days, argued vehemently that the government witnesses had not been compelled by any of the defendants to buy the stock -- that they had purchased the securities because they believed they could make money.
David J. Walters a former controller at Washington Group, testified that Gilley once asked him to buy 200 shares of the stock on five successive days. The financing was arranged through Northwestern, he said, nd he bought 200 shares a day between July 15 and 19, 1974.
Walters also told the jury that in the last half of 1974, Washington Group was having financial problems. In a memo to management, he warned that $12 million worth of unsold textile inventories had accumulated.
He said the large inventories were especially troubling because of the economy was on the brink of a recession. With customers scarce, he said the company was forced to borrow to finance the unsold goods.
Another government witness, Frederick Schuermann, a former controller of the Washington Group'd textile division said that in 1975 Bagley asked him to stop writing critical memos about the company's financial condition.