The New York herald., 1874-07-09
TIED ERIg RAILWAY.
Intervention by the State Asked BY
Stockholders and Creditors.
Alleged Gross Mismanagement Of the
Present Board Of Directors.
The Charter OF the Com
pany Violated.

Erie Railway Company, defendants. was argued
before Attorney General Pratt to-day, Mr..
William Fullerton appearing Tor the Erie Protec-
awe Committee OF London. ana John NJ Hill rep
resentng Messrs Barrett, Reddeld and HID
appearing for the plaintif, and Mr.. william NJ.
Evarts aud Judge W. d. Shipman Cor the de-
seEdants.
THE PAPERS srBMrTrED
were the plaintiffs deposition and complaint. and
sne AFFIDAVIT OF sylvester H. Dunan. The depO-
sition OF Mr.. Angel sets forth that he is
tae holder or ffty shares OF the preferred
stock of the Erie Railway Company, and
the owner and holder OF five OF its fourth
mortgage bonds; that he is IN ormed and believes
che AFFAIRS Of the said company have been recently
greatly mismanaged; that several dividends hav-
ins been paid out OF the capital, there having been
no net earnings applicable to the payment OF such
diyidends for long time, and that the funds and
property OF said company, constituting material
part of the security The payment OF its debts,
nave been msapplied III various ways to the
extent OF several millions OF dollars the
particulars Of which are more fully set
forth in an afhdayit by 5. H. Dunap,
~ deponent's request. That deponent Is informed
aud believes the floating deot OF the said Erie
Railway Company exceeds 81 900, and the
securities and property OF every KIND belonging TO
the said company winch could be made available
for the payment OF said noating debt oy sale or
Otherwlse. do not exceed in saaOle value
S. O0O. COO The rest OF said company's property
beng mortgaged TO the extent OF its full market
value and the promlssory notes OF the said CON-
pany are freely offered in the market iOr sale
~ discount at the rate Of thirty or forty
per cent per annum, while the current
value Of money upon thoroughly good securities
II ouly five per cent per annum. Deponent also
alleges that the Erie Railway Company has
created new NOR gage without proper adver-
tisement, In violation OF its charter; that the
present Board of Directors has agreed TO lease the
Atlantic and Great Western Railroad, an insolvent
concern, not producing enough net earnings 70
pay the amount OF the annual interest required by
mortgages now existing upon the railroad, and
the terms OF such lease are such must involve
the Erie Railway Company in great and con-
unued loss; tnat said Atlantic and Great
Western Company has purchased a large amount
ana Indianapolis road, and has entered into obll-
cations Tor the raising OF money Tor such purposes,
whIch has been invoIved to Q rulnous extent in
the liabilities OF the Atlantic and Great Western
that stase or e 1s
at OF the bona rae stockholders and
creditors creditors. Of the Erie Company the
the organization of a new corporation ree from
the present enormous load Of embarrassments.
Such course was pursued IN 1850, and was Tor
several years a source OF great advan tage TO the
holders OF the stock and bonds. Deponeat believes
the same measure OF advantage, R not even
greater advantage, would result now.
Accompanying tins deposition is the
SWORN STATEMENT OF MR.. DUNAN,
VINO defines ut length the duties of the position he
formerly filed, that OF General Auditor; asserts
that rne dividends declared for the year 1872 were
made not from said net earnings but from nct-
tious baia nee brought forward from previous
years, there having been no balance surplus net
earnings whatever; that the statement OF
penses Tor 1872 did not include ts47,737 legal ex-
penses CHARGED to cost OF road ana equipment as
capital account, but which should have been
. proper and legal charge against its
earnings; that the current working ex.
penses for 1872 we're further understated $6o2, 1885,
by oraer oil Peter II. watson, as part Of the
alleged inventory OF materials in the hands Of the
company, ana that no part thereof was properly
decuctibe from the working expenses oil the three
months receiving credit for the same, or or the
year 1872 such gain in material. If there was any,
being spread over period OF fOur years; that the
current expenses for 1872 should have been further
Ieduced 100000, the value OF equipment DESTROYED
during that year, no portion OF which was ever
made good in the equipment account of the COM
pany: that the dividend declared out OF the alleged
earnings for the SIX months ending June 80 1s73
amounting TO $1,07s,97l, was not from the net
earnings OF that period or any other time before
Or since, the company having really made q net
inaining SIX months OF 1878 showed no profits or
fund to make up the deficiency Of the previous
Blk months; that Bischofstein and Goldschmidt
nave been allowed to retain upon various pre-.
texts, ST. 4eO 600 from the proceeds OF the sale of
consolidated asi t mortgage bonds bonds ior nearly two
Ny to March last showing the dispos-
LION q tnat money; that Duncan, sher-
notes oil the Erie Company given to said firm,
which were ultimately paid in cash; that said
charge stood unexplained on the books nearly
twelve months when deponent was instructed to
credit Duncan sherman Co., against such
charge by the purchase OF 5000 shares OF BufYaIo
New YORK and Erie Railroad stock at $3.50 each
ana deponent was informed said stock had been
purchased from John A. c. Gray, and tnat deponent
believes the market price OF said stock at the tlI,ie
0l ITS purchase and at all times during the year
1873 was less than $50 per share, and that said
shares were ia reality purchased by the directors
Of the Erie Company Tor s4500OO, or $500 600 less
than the amount charged the Erie Company, which
must have been divided between some persons
unknown to deponent &c,
1t appears that some four or five weeks ago Mr..
Angel mace application to Attorney General Pratt,
~ ms once IN Syracuse to commence suit against
the Erie Company and It's officers and directors
Judge Pratt, desiring to avoid hasty action, deter
mined TO consider the subject. The company were
notified OF Mr.. Angelrs apphcation and to- day ap-
peared to reply to the allegations. After consid-
cradle preliminary conversation the deposltions
ior the painIn were nled. Ex-Judge Shipman
then read
NUMBER OF REPLIES
IN the shape OF an1davits from Peter Fl. Watson
Messrs. Little and Honsen, the examiners selected
from the Northern Central aud Oswego Midland
Railroad, Mr.. s. l.. M. Barlow Mr.. 5. L. Dodds and
Mr. Lucfus Robinson. None OF the dispositions con-
tanned any specific replies to the charges made
against the company, all being almost entirey
couhned to the general statement tnat the state
ments Of Mr. Angel and Mr. Dunan were malig.
was opened by Mr. Hill for the plaintiff in remarks
W Tic Bcncidl cheCt lHdI Tue uIcCtoTs vi Tue
had neglected their duty and mad been guilty OF
such gross mismanagement and such violation of
law that they should be removed. 1t was use
70 say that they had been deceived or that Dunan
had Ieagued with Gould or other spectators or
guilty OF fasi1ying the record He claimed
that the directors we're personally liable for the
immense sums lost through their mismanagement
and negligence; that President Watson was per-
sonally corrupt, and that the directors sat by and
let him do he pleased while the road s going TO
rum in tue embrace OF the Atlantic and Great West
efn.
ar Evarts for the company, replied at length,
ins'stingnrst that the alleged deficit in the
gage for want oil notice had no existence what
ever, and that the law required no sucn notice.
Second, that the question as 10 the divtdends being
properly declared Old not belong to the juristic-
ton OF the Attorney General, and that the remedy
was aioue by private suit; Dut there was no
iOundatjsn, IA fact Tor Dunan's pretence that the
DIVIDENDS were improperly declared. He said
THE DIRECTORS ACTED HONESTLY,
as shown even by the statements furnished by Du-
nan nimseH; and Tor n man to ask TOR the removal