The morning news. [volume] (Savannah, Ga.) 1887-1900, 1888-02-18
READING RUN AS A SHAM
MONEY BORROWED TO PAY UN-
EARNED DIVIDENDS.


pany Doctored in Order that Gam
! blers in the Stock Might Successfully
Speculate-The Coal Property Bought
on Credit and in Violation of the
| Law.
! PHILADELPHIA, Feb. 7.-Ex-President
! Charles +. Smith, of the Reading Railroad
! Company, was the first witness this morn
| ing before the Congressional investigating
committee which is inquiriug into the
strike on the Reading railroad system and
coal regions. Mr.. Smith said that he had
been President of the Reading road from
1861 to 1859 and Director till 1886. He
resigned his Directorship because he discov-
cred in 1876, after an investigation,
that the company was publishing
false reports and cooking up its
accounts in the interest of stock
| gambling. In the reports truth was sup
pressed, the floating debt not reported, and
while the road was not earning any money
it was paying dividends on its stock, which
was accomplished by borrowing money
Some Of the directors were gambling in the
stock and other influences In the manage
ment were impeled TO pay those unearned
| dividends by vanity. The object of the
gambling directors was plunder.
BORROWED TO PAY DIVIDENDS.
The company he had found, had bor-
rowed $40, 100000 to pay dividends which
had not been earned. He specified an
account of 81 ,2S0, 900 in the report of 1873,
which, he said, was false and misleading
When asked 'wh suffered by thisf he
answered, 1.-THE stockholders and to the
question "who profitedW he replied, ''the
men who gambled in the Stock Mr.
Smith explained how the railroad company
| had obtained possession of the mining com
pany. He said that the latter was virtually
the creature of the former under
the presidency of Franklin b. Gowen. The
original charter of the mining company
was obtained under the title of the Laurel
| Run Improvement and Mining Company
The bill had been put before the Legislature
in that name so it would not be known as
the Readings bill, but as soon as the bill
was passed the companys name was
changed to the Reading Coal and Iron Com
pany. There was no stock issued until the
name was changed, and the Reading had
| control.
BOUGHT ON CREDIT.
Most of the coal property was bought on
credit and double mortgages given which
the witness explained one regular mortgage
and the other a second mortgage secured by
bonds issued. The railroad company had nc
| power under its charter to go into the min
ing business. 1t depended for its mining
annex upon the Coal and Iron Company's
charter, which contained a clause
providing that its stock could be
held by the railroad company. The rail
road company, as a matter of fact, had ad
vanced the money to pay for the coal lands
in the Schuylkill region, which are now in
the name of the Coal and Iron Company.
The railroad conpany rest their claim to a
| right to own the Coal and Iron Company
on the theory that their right to do SO was
vested before the new constitution was
passed.
RECENT DEALS.
Judge Chapman asked the witness whether
he had noticed any large dealings in Read
ing stock recently. "You have told us that
some men in the past made money by issu-
ing false and cooked up rerorts, which en-
abled them to successfully gamble in the
stock of the road. Now, has there been such
dealings in Reading stock recently as would
lead you to suppose that under cover OF
these difficulties there is some such thing
going on now|
The witness-I have no knowledge of such
thing and don't think dealing in Reading
is Just now surprisingly large.
[The dealings in Reading on the New
York Exchange to-day aggregated 143, 900
shares on a report that the strikes had
ended, and the stock advanced 81 per share
Editorl
The witness believed that combinations
had been made in the past to restrict the
| supply or out put, which would Of course
keep up prices, and he expressed the belief
that in less than year the Reading prop
critics would be again under receivershlp.
ADJOURNMENT OF THE COAL LANDS.
Later in the day George w. Jones, a
former Vice President of the Reading Rail
road Company, entered into a history of
the acquircment of the coal lands by the
Coal and Iron Company under control Of
the railroad company. He said that this
was Mr.. Gowen's scheme. Robert
McCalmont had loaned Mr.. Gowen
Railroad Company's stock in 1869 with
which to purchase coal lands. This was
the beginning Of the policy which led to the
acquirement of the Schuylkill coal lands
which ultimately led the railroad company
into the hands of a receiver and piled upon
it debt Of over 500, 900. He corrobor-
ated the statement of Mr.. Smith made in
the morning that IN 1869 the Readin 6
Railroad Company had only a small debt,
was paying the interest on it, and earning
and paying dividends of 1Oper cent. II was
dealing in coal and the purchase OF coal
lands which could not be utilized for many
years, and attempting to force small part
of them to pay interest on the whole invest
ment, which wrecked the company.
RESTRICTING PRODUCTION.
The witness related at some length the
history of several coal combinations in the
past which had been made to restrict pro
duction and thus keep higher prices He
said that the last one did this by a mutual
agreement to shut down the mines a GER
tain number of days in the year. Until he
had heard the testimony OF witnesses he
had been certain that this sort of combina-
tion existed now, and that the Reading
company was a party to it, and he believed
it now notwithstanding the testimony Of
the witnesses before the committee. The
witness said that the effect of the strike had
been to put up the retail price Of coal from
$5 so to So 75
General Superintendent Swegart Of the
Reading road took the stand, The most
important point in his testimony was his
denial of having tricked the mon by telling
them 10 go back and then breaking his
agreement, as asserted by John Il. Lee,
leader of the strikers before the committee.
CoRBIN on THE STAND.
Austin COrbIn spent considerable time on
the stand. During his examination be was
asked by "a member Of the committee
whether the rumor that had got abroad
was true that the strike was ended. Mr..
Corbin replied that he did not know, but
said that he had information In his
I .ssl.tah fuaftNQl him iu