Daily Davenport Democrat. [volume] (Davenport, Iowa) 1864-1874, 1868-05-04

some pains 10 make ourselves acquainted
with the facts ., points in The case, which
to this section Of the country 10 of vital i'm
pertancs. and propose to give our readers
the benefit Of our invsstigations.
The great leading complaints in oil the
suits. instituted both in New York and
Chicago by the "Wall street Ring" is the
sale Of 40 900 share Of new stock, without
opening books Of subscription for it; sell
ing Il st the 3oard Of Brokers without ad-
vsrtisins 10 oil The world that she Company
we're about to do 20; and the sale thereof
At . trfis less than the par value.
1t 10 not pretended BY any one, that il
Was other than . good financial operation
for the Company. if the Railroad was TO Be
built to the Missouri river.
Upon purely technioal points Judge Cor
dozo, held the sale illegal. II il be true
that the issue and sale Of the 10000 shares
was illegal and void, for the reasons given
by the Judge, then the great bnlk Of the
issue and sale Of Stock Of the Chicago and
Rock Island Railroad Company were illegal,
and should be declared null, and void. The
practice OF issuing and selling Stock BY this
Company, commenced in 1862, and has
bssn continued from time TO tims up to the
present, and no doubt has ever heretofore
bssn expressed - to the legality nor can
We learn that any complaint in relation
thereto, has ever before been made BY any
Stakeholder. Hen. A. G. Flsgg Was then
Treasurer Of the Company. and from . re-
port made by him TO the Board OF Directors,
ws make the following extracts:
"Ths Company had Stock subscription,
nominally, Of $500. 900. aud ~ the bonds
and . large portion Of the stock to be issued
we're pledged to the contractors, il soon BE-.
| came apparent that the collections from
subscriptions would be consumed in paying
Tor right Of way, salaries and other sxpsns.
%, not covered by the contract.
And after the el40, 900 raised on the
bonds Of the cities Of Peru, Rock Island,
and Davenport were exhausted, the msans
for making the cash payments Of e25 600
could not be obtained from subscsl ptions.
In this state o. things there Was no altsrn.
ativs but to resort 70 the stock which the
Company could issue, or to borrow on a
pledge Of such ateck, il being the only re-
source fer raising money. twas obvious
tha, the time when money could be borrow.
eP On the stock was the best time TO make
the necessary sacrifice TO gss the means BY
Al absolute sale of the steck.
The Treasurer therefore, proposed to Mr..
Sheffield to take the stock at such . price
as would make it equivalent TO cash
This ne concluded to do, more from nscss-
siy than choice. The cash paymsn,s for
October, November and December. 1862
and January 1888, were made to ths con
tractors in atock At So per 100. From
March to July, 1863, at 9b per 100; in Au-
gust, 1853, At W per 100 and in Ssptsm-
Der Of the same year at 95 per 100. The
The total loss on the amount Of stock thus
applied in eleven monthly payments was
$24,o6l. Tho prices offered by Mr.. Shelf
field were generally more liberal 70 the
company than probably would have been
established had the Treasurer referred the
matter to other persons to decide ~ to the
cash value Of the stock
No other or further subscriptions to the
espital stock Of tae Chicago and Rock Is
land Railroad Company was ever made up
on its subscription books although the
capital stock Of said Company At the time
Of the consolidation was 100000. A.
tho time Of the issue and sale Of stsck a.
stated by Mr.. Flagg, James Grant. the
leading Attorney for the New York Ring"
was Vice President Of tho Company, and
member of the Executive Committee Of
five. He was lawyer Of reputation, and
the only one in practice, who was . men,
Der OF tns Board of Directors, and il il
hardly to be presumed that % importanta
step would have been taken without his
counsel and advice, certainly not without
his knowledge.
In December, 1868 ii became apparent
that moro rolling stock WAS required than
the contract with Messrs. Sheffield and
Farnam provided for, and authority was
given to the chief engineer and contractors
. procure the same, the aggregate cost of
which was SPAS, 166.7S.
Tho same necessity existed for the money
and tho resources were only the same -
before, and again the company resorted to
the same means to raise it, Speaking Of
the delivery and payment for the equip
msnts, Mr.. Flagc in his report says:
"These delivered previous to July were
paid for in stock at the rate OF 65 per 100,
to. the amount Of 900 shares. The rate
for the residue was at 80 per 100 to the
amount Of ! 1864 shares. This was $685.
Gao less than par for she stock"
In February, 1854, the company, was re-
quirsd to raise ever . hundred thousand
dollars. Mr.. Flagg says: Tho question
again arose whether ii should be done By
Borrowing or BY On absolute sale Of stock.
A sale Of 800 shares Was made a s6 per
100. This was considered . sacrifice at the
period referred TO, the total loss being
$22 500. But time and the severe pressure
for money has demonstrated that much
greater sacrifice must have besn made, il
the money had been borrowed by hypoths-
eating the stock.
Thus Was the policy of the company set
tied BY three different transactions, when
the same james Grant who now cries in the
loudest voice 'outrsge and illegally, was
member of the Board, member Of the Ex-
scutive Committee, and for the most of the
time either the President or Vice President
of the compaav.
Is it likely that such issues and salse Of
stock wsuld have been made BY the Board
without his advice, or that il he had advised
that the sale was illegal, would it have been
madsf
| The idea 10 too absurd. Az many % feur
or Eve times since the last date have either
the Board or Executive Committee author
lied the issue Of capital stock just - The is-
sue Of the $4,000 shares was aatkerizsd
have authorized its sale BY committee Of
one, or sometimes Of two. just - the last
sale was authorized, and it has been sold At
ths the Stock Board without the knowledge
i Of sny one except the committee having il