New Orleans Republican. [volume] (New Orleans, La) 1867-1878, 1876-07-23

0t~n
the bonds which could arise from the reOr-
ganizing agreement had been actually dis
charged.
The only subsequent mention OF this sur
plus of bonds appears in the annual state
ment made by the executive committee to
the stockholders of the company, dated
March, 1864, in which the following mention
Of them is made
"ln the final adjustment with the pCr.
chasing committee, of all the outstanding
liabilities OF the old company, which, by the
terms of the bondholders' agreement for Q
reorganization, were to be paid in first and
second mortgage bonds, it is probable that
about $3.50 600 Of the first mortgage, 81, 0O0
of the second preferred, and 33e, OCO of the
income bonds, may not be required and may
be ultimately Cancelled"
Two of the three members of the execu.
tive committee we're ALEC members OF the
purchasing committee. The only other
fact We have been able to ascertain with
regard to them is, that by examining the
coupon account Of the company contained
in the annual statement IS early AZ 1866,
they appear to have been all issued and to
be outstanding as a liability upon the COM
pany, without any apparent explanati On
appearing in the published statements OF
accounts of the company. These facts, We
called the attention of the board Of direc-
and requested an explanation Of these facts
which might be within their knowledge,
and particularly from the president, who
was familiar with the details of the organ
ization. The answer which was received
by US from the hands Of the president was
that this corporation had nothing to do
with that surplus Of bonds, and The CON-
mittee were referred to Mr.. Samuel J.
Tilden for q detailed explanation OF the
whole matter.
On returning to the city, we learned that
Mr.. Tilden had sailed for Europe; and we
therefore called upon Mr.. Butler tor such
explanation as he desired 20 make, either az
to what, in fact, had become of the bonds,
OF what, in law, was the nature of the claim
under which they had been disposed Of, OF
distributed He informed US that, in Mr..
Tilden's absence, he declined to take the
responsibility of making any statement with
assumed that the purchasing committee
claimed that the bonds left over after the
reorganization belonged to them personally
but he would make no statement ae to what
disposition was actually made Of them in
this &se. The claim that the surplus bonds
belonged to the purchasing committee is
considered by us SO absurd, in view Of the
facts, ss to require no comment.
The facts above recited, taken verbatim
mittee. are certainly damaging to Mr.. Til
den and his purchasing committee; but
they do not embrace all the charges which
the committee had to make. Further on in
their report they tell the story of q viola
ton of the charter, which it is bes: to give in
their own words, and which runs as fol-
lows:
The last matter to which we called the
attention of the board was with reference
% A1. %av
mortgage bonds issued in 1870. ana cold by
the directors in that year at ninety-cne. A
reference 10 the charter of the company
shows that this was in direct violation OF
its specific provisions with regard to the is.
sue Of the mortgage bonds. The charter
provides:
And the said corporation may make and
issues its bonds, of not less denomination
than 500 each, payable at such times and
places, and bearing such rates of interest,
not exceeding seven per cent per annum,
payable semi-annally al such place or places
as may be agreed upon, as it may deem ex-
pedient: and may hypothecate or sell such
bonds within or without this State, when is-
sued, to raise or borrow money at q price
not less than eighty cents on the dollar, and
all other bonds to be Issued shall be sold or
at par"
That is to say, all the bonds which the
company could issue under its charter
must be seven per cent bonds, or must be
sold at par, one or the other. These equip
ment bonds, bearing interest at ten per
cent, could not be sold under the charter,
therefore, at lees than par. II would seem,
therefore, to be the duty of the directors Of
the company, who had issued these bonds
in violation OF the charter, either to see to
it that they were reduced to a seven per
cent bond or that the difference between
ninety one and par, with interest at ten per
cent per annum since 1870, should be re-
turned to the treasury of the company.
This claim, amounting at this time to about
$4,000, seemed proper claim for the
to make upon the directors of
the company, inasDuch as the stockholders
were not consulted with reference to the
issue of that bond, the directors having
themselves assumed the responsibility of it.
Further on in the report of the commit
tee are to be found the following grave
charges of violation of the rights Of the
preferred stockholders:
In that connection we called the atten-
lion of the board to the improperly and H.
egality of which they were guilty, in re-
/ lien upon the earnings of the company
prior to the dividend upon the preferred |
'tOck. Since 1870, when these bonds were
ssued, the coupons have been regularly !
paid; but no each dividends have been paid |
Upon the preferred stock, which is in direct |
of the contract contained in the |
'ecOnd mortgage of this company, which |
occurred the priOrities OF the second mort |
rage bonds and Of the preferred stock. The |
provision in the mortgage is in these words:
Nor shall any deed Of trust or mortgage |
reating lien upon the property hereinbe-
ore described, in priority to the rights of |
he holder of the said preferred capital
took, ever be made by the said st. Louis,
Alton and Terre Haute Railroad Company,
lnless majority in the interest of the hold
rs of the said preferred capital stock shall
ave expressly consented thereto by vote
t meeting of ouch holders, called as afore-
aid upon notice as aforesaid
The meeting has never been held, and the
onsent of the preferred stockholders to the
'sue OF this mortgage has never been
iven. 10 make it additionally secure that
be preferred stock should always have a
en- upon the net earnings next after the |
econd mortgage bonds, it was embodied in |
1e preferred stock certificate in these
'Ords: "This stock is entitled to dividends
the rate OF seven per cent per annum.
ayable annually on the first day of May Of
ach year, out of the net earnings of the
'mpany for each year ending on the thir
first day OF December previous to such
lirty first day of May, after satisfying the
terest on its bonds, and contributions to
3 sinking fund.-"
But, in violation of this contract with the
referred stakeholder, embodied in his GER
icate of stock, and of the provisions of |
10 second mortgage, which determined the
'i0rities of the various securities of the |
'mpany subsequent to the first mortgage,
e directors of this company have issued
ls equipment bond, and they are recog
-s,~ Al L
'er the preferred stock as q lien upon the
It earnings of the Company. |,
This report gives the following account
some financial operations which cost the