The sun. [volume] (New York [N.Y.]) 1833-1916, 1878-04-20
PENNSYLVANIA CHEATED.
4 SPECIMEN MICK EROW THE MIR
L,ISBtRG STATE HOUSE.
now the 1aN or the Union Transportation
,onipmuy was toiiected-A Grab In which
uigh state Omcinis Participated Tie
Famous Methods Of the South Carolina
King now In Fashion In Harrisburg.


tompnny was toliccted-A Crab In which
utuh state Omciais Participated Tie
Famous Methods "f the South Carolina
Ting now In Fashion In Harrisburg.
INI,lsnuEG. April iG..-Thc old brick Cap
r4ua ,lrh ili looks honest. 1t has all the out
ward signs Of ngc and humcly rcspcctabilhy
The grounds around 1t are green. and modcstly
laid ont. The rambling structure itself might
lie mistake on by u stranger for well established
seminary Of learning or divinity school. were
not the names OF the respective departments Of
S;air plainly displayed in downright black let
,,r- over the doors. II the external appearance
Of the building did not belle the character Of its
occupants the Government ~ Pennsylvania
would be- the best and purcst in the Union.
Tho treasury that Is sheltered in one wing OF
his structure derives an important share OF its
lsJVnc from general tux levied on all corpo-
ratOns in the State that do business for profit.
Tie capital Of ench concern is taxed onc-half Of
one mill on the dollar for every ono per cent. OF
dividends declared. The corporations that ride
the State and own many OF the States OIL
ccrs have made various attempts to evade pay
INK this tax But tho law is now strongly
drawn and the system Of collection so well do
vised that. with honest officials to do tho work,
It would be impossible for the companies to
swindle the people. The collection of the tax
belongs 10 the Auditor Generals ONCE. and the
supervision Of its details Is the work Of n clerk
known as Corporation Clerk 1t is his particu-
lar business to watch the corporations and make
sure that they pay their part toward the eX-
pcnses Of government
Oneof the best understood and least reputa e
BE methods by which railroad directors and
managers make money for themselves Mt the
expense of stockholders is 10y means of the in
side organizations known rs car or trans
portation" companies. Directors and en-
ployecs Of great line like the PENNSYLVANIA
Railroad Company combine. and Incorporate a
company which owns freight ears. As direct
ofs Of the railroad. they contract with them
selves rs directors Of the inside company, to
haul these cars oyer the line ut low rates. All
the choice and high priced freghts are then
given To- the inside company to carry. and tho
profits ON the business. instead of going to the
stockholders Of the railroad itself go TO the
stockholders Of the inside corporation. who are
m bnn nnoarIaply fdsntlca WIN tms men 70
management. This form OF stealing became so
VIGOROUSLY fragrant in Pennsylvania that the
new Constitution forbade the existence of such
inside companies, and the Empire Line, the
Union Line. the National. and others of the
Kind have successfully gone into liguidation.
dividing immense sums Of money that Justly
belonged TO shareholders in the Pennsylvania
Railroad Company
Tran sportation Company was formed. It's cor
porutors were all officers and employees of the
Pennsylvania Railroad Company The inside
line made money and paid it, taxes on six pei
cent. dividends from the date of organization NJ
tols13. The last taN voluntarily paid by theU Mon
was 1. january. 1874. In July, 1873. II had sold
It's property and ceased active business yeai
Inter the company went into liquidation. divid
INK among its shareholders assets exceeding
the value of its capital. In other words. when
the Union Company wound up its business. II
distributed. in addition TO the amount of it,
capital. more than % 900 900 IN profits. prac.
ucaly Il dividend of over 100 per cent. al
though not formally declared as a dividend.
=, Nothing in Pennsylvania law is better settled
than that any division Of profits Is a dividend
however called. In the case OF the Lchigl
Crane Iron Company against the Common
wealth. Judge Pearson held that there was NJ
device that u corporation could adopt by which
u could divide its earnings and avoid the tax
The ease went to the Supreuie Court wher
Justice Agnew rcafflrmcd the opinion of Juds
Pearson. EscapinE taxation by calling Tia
profits capital said Justice ASnew. is mer
ia distribution of profits. and what is this bu
making "A dividend. whether IL is declared TO b.
a9as r not on a a. IN, sdn d@ Tor
matter OF common sense II IL obvious thut n,
tax could ever be collected of any corporation 4
directors could escape by styling the dividend.
distribution of assets.
The Auditor Generals Office was notified II
january. 1875. that the Union Company pro
posed to Distribute profits. William Thaw o.
Pittsburgh. President Of the company. wrote {,
S9rporation Clerk Olmsted on January Z
capital stock" Olmstcd officially replied
Anything received by the stockholders o
Your company in oXcess of the par value o
their shares is q dividend. and should be dc
cigred nccordn
Il will thus be- seen that the Corporation Clerl
hai notice OF what was going on, and also tha
he understood his duty IN the promises
Strange 10 say although record was made o
the companys notification, there was no AT
tempt To collect the tax due the Stnte. For tire,
years the Union Railroad and Transportation
Company Kept on dividing assets. and Up to No
Neuber 1876 had distributed cash and securities
ts follows. ON nominal capital OF s3.OOOOO0: