The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1898-01-11
WRECK OF A RAILROAD
SENSATIONAL STORY REGARDING
THE BALTIMORE & OHIO.
ScandaIOus Financial Juggling
lions of Fictitious Surplus.

the great Baltimore G. Ohio Railroad 1t
| is from the pen of William Shaw Bowen, a
| well-known newspaper writer. In introduce
| ing the article the World says: ''Inves-
| LEGATION into the affairs of the Baltimore &
| Ohio Railroad Company is bringing to light
| evidence of the most scandalous financial
| juggling and criminal railroad management
| that this country ever witnessed. 1t
smirches the once honored name of Gar
rett, both father and son. with the proof
| of grossest fraud and deceit. 1t casts ac-
| cusations of doctored accounts, false re-
| ports and the covering of dishonest tracks
| against certain other officials succeeding.
1t shows that for years this great corpora
| ton stood on a foundation of reckless
| fnanciering, false statements. deceptive
! bookkeeping and widest extravaganza. all
hidden from even it's own directors The
ruin of this property, the loss of millions
| of invested dollars, the wrecking of the es-
| tates and the impoverishing of widows and
| orphans was the direct result of one-man
| power. To-day, under the protection of the
| courts the receiver of the Baltimore &
! Ohio Company is continuing an autocratic
| rule, loading down the property with in
| creased indebtedness and inaugurating a
| system of railroad receivership so extreme
| that complete change in methods of
court and corporation may result"
| The first chapter is devoted to the con-
| struction of the Baltimore and Ohio. The
! cost of the main line, from Baltimore to
| Wheeling was GEO. In 1857 John W.
| Garrett assumed the presidency of the road,
which date the writer says, marks the be-
| ginning Of one-man power that rose to
| great height and then crumbled into cor
rupton and dishonor with later genera
ffnRns rrs% l.,
| tinues: When he assumed charge the
stock was selling at $57 a share. Within
two years he paid the first dividend and
| in later years the stock rose in value to
$500 share. He paid dividends whether they
were earned or not. If money was needed,
| he borrowed it. He inaugurated systems of
! bookkeeping that produced glowing state
ments. He extended the lines in all direc-
tons Garrett, and Garrett alone ruled the
| company.
| SURPLUS THAT DID NOT EXIST.
THE President in 1883 reported surplus
| of 45,763, $50, and caused the figures to be
| published broadcast. There was no such
] surplus. The statement was absolutely
| false-a jugglery of accounts. The directors
| knew nothing about the fraud Ihey were
men of responsibility, but they were kept
| in ignorance. Robert Garrett inherited the
| presidency of the Baltimore & Ohio from
| his father in 1884. The corporation was
then at the top of prosperity and public con-
| fidence He inherited also $1,000 shares of
| the stock, and, with the trustees of the
| johns Hopkins estate and the officials of the
| city, he virtually controlled two-thirds of
| the capital stock, But the son also in
| herited fictitious surplus, a mass Of con-
| cealed, Juggled accounts a property Inflated
| to an enormous false value, and a record
| for paying unearned dividends that had to
q pAlr1c of hot
John w. Garrett purported to leave was
not, in reality, one-tenth that sum-
en After detailing some Of the weknoWn
| writer says: Suddenly there came a day
| of reckoning. Garrett had borrowed 0,00O,
| goo from New York bankers. 1t was due
| Sept. l, 1887. He could not pay it, despite
! the inflated surplus. The bankers, headed
by J. p Morgan, took charge of the road.
! Samuel Spencer, a practical railroad man.
| in the presidents office and Garrett was
forced TO step out. Spencer set to work to
| stralghten out the tangle and find the truth
| about the Baltimore & Ohio. The result was
| seen in Spencer's statement. The surplus
| in 1888 was summarily cut in two. Figures
| representing S24, 7S6,75S were swept away.
| There was end of the guSh about the
interests, of Baltimore. The interests Of Sc
| economies were practiced. Complete ex-
| posure was imminent Miss Mary. Garrett
game to the rescue and in November, 1888,
Spencer and the Morgan syndicate stepped
| out, after years control. Then began an
| other reign of fraud, deceit, lying, Geliber-
| ate swinding and financial Juggling that is
monumental in history The Baltimore &
| Ohio was again In one-man power.
During the rule of Mayer the floating
| $16,000,000 The system of bookkeeping pre-
| cluded the possibility of tracing out directly
the fraud. The disappearance of $12,OOO,0O0,
| without any satisfactory showing therefor
| constitutes a unique instance of chicanery
| in railroad Management. Mayer went into
| power to represent Baltimore, the Carrots
and a sentiment. He did 1T with a
ance'
A lengthy chapter is devoted to the meth
| which the following extract is taken a
| sample: THE Western Union Telegraph
Company paid 5000 eco in stock for the
| Mayer sold stock to the amount of 81 900 600
without even taking the trouble to inform
! the directors of the road. What became
of the proceeds of the sale cannot be ascer-
| tanned. The remaining $4,000 900 of Western
| Union stock was long ago hypothecated for
| loans. Nothing of a criminal nature can be
proved in such cases..
EXPOSED AT LAST.
| number of similar deals are recited,
the writer remarking For the last six
months before the final crash came the
new president had the temerity to declare
that the net earnings of the road were $4.-
1920 The complete failure occurred on
Feb 20, 1886, when the road passed into the
hands of receivers. One-man power finally
wrought disaster, ruin and disgrace. Years
| Of corruption and falsfication could be no
| longer concealed even by lead pencil men,
cranda and juggled books There mad to be
! a settlement, and few months after
! Cowen assumed the presidency the time
| rived. A few days before the final collapse
| Cowen FASTENED to New York to raise
| money to stave off the impending bank
| Iuptcy. The amount required was $402 900,
| an insignificant sum compared with the
! millions juggled in the past. But he could
| not raise it, and interest on the bonds was
| defaulted
! Back to Baltimore went Cowen on a
| special train. He had arranged ahead of
| time to have Judge Golf, of the United
| States Circuit Court in the city. Judge
| Morris, of the District Court, was also
| there. The papers were ready, and on Feb.
! 90 1896, the great Baltimore e. Ohio corpo-
ration was declared bankrupt. Cowen was
| there to get the receivership. 1t enabled
crets from becoming public, and to continue
| the once famous Garrett policy. He has
made no exposure or explanation. With
| him, as joint receiver, the court named
| Oscar G. Murray, a practical railroad man
| from the West, ignorant of the financial
manipulation of the past and with 10 voice
in the present financiering of the corpora
! ton.
"When a railroad is placed In a receivers
charge by the court the prevailing custom
| calls for a complete investiga ton of the
] books and property. It's Indebtedness its
| resources and its earning capacity are
| studied and rigid economies are practiced.
| John X. COwen has not done these things.
| He has continued the old METHODS He has
| expended vast sums of money right and
| left He has ruled in the old Garrett way
nf