New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1895-02-28
WERE BIG SUNS DIVERTED
CHARGES AGAINST THE ASHLEY MAN
AGEMENT.

THE GENERAL REoRGANIZA~ y COMMITTEE OF
THE TOLEDO. ANN ARBoR AND NORTH MIcHI-
GAN DECLARE THAT LARGE AMOUNTS
HAVE BEEN USED FOR THE PERSONAL
PURPOSES OF FORMER OFFICERS
me General Reorga nizatIon Committee Of the
Toledo Ann Arbor and North Michigan Railroad
company has petitioned the United States Cir
cunt Court Of the Northern District of Ohio to
suspend the execution Of the decree Of foreclosure
against the company and to allow the committee
to be made a party defendant in the suit in the
interests OF the stockholders. In the petition
startling allegations made against the Ash
ley management OF the company. and affidavts
by an expert accountant state that the moneys
ana FUNDS. and especially the consolidated bonds
OF the company have been diverted from their
purposes and objects by the officers and directors
or the company under the Ashley management
1t Is alleged that tn. bondholders' committee
which applied for the foreclosure Of the property
has nor considered the interests OF the stock
ho'ders. and that 1t has worked in conjunction
win the management Of the road In order TO
suppress the facts I'm connection with certain
ueas which Were detrimental 70 the best inter-
ests or the property. 1t is alleged that the plan
Tor reorganization as put forth by the bondhod-
ers committee has not secured fair treatment
LOT the stockholders ard that the statements
contained In the plan. 10 rhe effect that the stock
| If worthless, are unfounded Charges are brought
against the present Board n Directors, that. in
stead NJ defending the stockholders against fore
closure proceedings, II has aided the bondholders'
committee. has not takts the trouble to -invest-
| gate the books 81 tho company and is endea vor-
ing to prevent the stockholders from defending
the foreclosure action. It is further alleged that
the consolidated mortgage. under which fore
closure proceedings have been brought. was
| made without authority OF law and Is void
STOCKHOLDERS IN OPPOSITION.
| When the Bondhoders' Committee applied for
| foreclosure Of the road under this mortgage the
stockholders appeared IN opposition and while
the decree of sale entered. tho Court granite ed
t. the General Reorganization Committee an or
| der to examine the books Of the company at To-
| cdo The Arm Of chartered accountants Of Bar
row. Wade. Guthrie IL CO. was engaged 10 make
III" examination. and II IL an IN report Of this
animation that the petition has been fled The
! accountants found that the sO-caed consolidated
mortgage authorizing the .ssGe " $4,000 900 con-
| soiida,ed bonds 20 be. used Tor specific purposes
was never authorized by the directors or the
stockholders at any meeting called for that pur-
pose. either In Ohio Michigan. and that no
record ~ any meeting said to have been held
January II. 1890. appeared on the minute books
| ~ either directors or tn" Stockholders. or the
| 11'O.Wp ~ the bonds which passed through the
hands ~ the financial agent ~ the company. j. VI.
| Ashley. Jr.. between April r.. 1891 and January.
1893. the accountants. I'm their examination were
unable to find one word u explanation on the
! books. except nm entry under date II April -.
| 1922. IN" day when he receiver was appointed
| This entry gave details II loans made and these
outstanding aggregated over $4,000.
Regarding he consolidation " the Ana Arhor
| with the Toledo. Ann Arbor and Cadillac Rail
| way company the proceedings showed clearly
! that ~ legal consoldation ever took place be-
tween m" TWO companies Tn accountants fur
th"t say That the most imp rthni financial trans
actions = the company FOR the years 1891 AMI 1892
W"r" not entered upon thn books II the cnmpany
/ before April. 1872.
! The accountants draw particular attention to
/ the cons lidateI mortgage. which appears to have
been made without authority. Res0iutl ms passed
| 10y the board of sirectors made j NJ Ashley jr
| the virr -pr"sident the financial agent OF the
| COMPANY by IN" terms ~ the alleged mortgage
| n was provided that blrds numbering from
To- 5O41 should be Deposited with the Farmers
! Loan and Trust Company for exchange for di-
| vislonal bonds and that the remaining bonds
! should be Issued only a. authorized that H. for
! the purpose ~ paving for the Toledo Ann Arbor
! and Lake Michigan Railway. for the purchase
! - additional terminals and real estate for ter
| minal purposes IN To.edo. Tor the purchase ~
! terminal property on Lax" Michigan and for
the purchase 81 the Frankfort and Soui hrastern
! Railway Company Np,w.ths tnding the terms
| ~ the mortgage II appears from the books Of
| record ~ IA" company that a iarg" part 81 the
proceeds ~ ihe sale Of the bonds was not applied
| t. the construction ~ additional terminals. etc.
hut. on the contrary. "a The directors meeting OF
December H. 1891. - resolution was adopted
! authorizing the issue II an order IN the Farmers
! Loan and Trust Company for a large amount u
| the bonds I'm favor Of J. ". Ashley. jr. by this
| resolution Mr.. Ashley was authorized To sell
| the bonds AZ minimum price 4 81 or to Dor
| row money on them ~ he from time 10 time
deemed "xpedient. and 10 apply the proceeds To
such purposes might be necessary order "a
enable IA" company 10 meet us car trust ob-
cations The books Of the company fail 10 show
what became Of The proceeds Of the bonds and
they fan To- show any payment On account Of
| car trust notes. with the exception OF 1928.
| WHAT THE MINUTES SHOW AND DON'T
| SHOW.
| The minutes OF the company show that the pur-
chase " the Frankfort and Southeastern Rail-
road vas sanctioned by the votes OF the holders
81 more than two birds 1T the stock but there is
no record ~ any meeting at which the purchase
| Railroad was sanctioned by the stockholders Of
| the Toledo Ann Arbor and North Michigan Au-
| thoriiy was given To Nj. Ashley Ia expend from
the sale ~ bonds $500 900 to provide facilities for
| transferring the companys traihc across Lake
| Michigan and the books show that on that ac-
| count from the sale of these bonds only Sl55 900
| was expended.
From a letter from J. NJ Ashley. jr.. 10 a note
| broker In This city II appears that Mr. Ashley
| borrowed for his own account and FOR the Ann
| Arbor road about 900 notes Endorsed by
| him and secured by the consolidated mortgage
| bonds Of the Ann Arbor road. From the ex-
| animation OF the books of the company the ex-
| pert accountant has not been able to hnd to
| what purposes for the benefit Of the company
this money was applied. The petition to the
| Court ends follows.
The petitioners are Informed and believe that
large amount NJ the consolidated bonds were
diverted from the true and lawful purpose or
their issue, many Of the same having been ap-