The Democratic advocate. [volume] (Westminster, Md.) 1865-1972, 1898-01-15
THE MANAGEMENT FIERCRLY
ASSAILED
Attack in New York Paper On the
Baltimore and Ohio Railroad.

New YORK January 1O.-The New York
World today published a most bitter attack on
the management of The Baltimore aud Ohio
Railroad. arraigning everyone OF the com
pumy's presidents, from John W. Garrett
down 10 Mr.. John X. Cewen. the present re-
ceiver. exempting from lis denuncalion only
MIR. Samuel Spencer, who was put into the
presidency temporarily TO protect the interests
of the j. p. Morgan syndicate. With refer
ence to the John W. Garrett regime the
World says:
when he assumed charge the stock was
selling at S57 share. Within two years he
paid the first dividend. and i'll later years the
stock rose in value to 5000 a share. He paid
dividends whether they were earned or not.
If money was needed he borrowed it. He
inaueurated systems of bookkeeping that pro-
drced glowing statements. He extended the
lines in all directions.
AN old acquaintance called on the rail
road king one day and asked him for advice
about the disposition OF his property. i hold
some Baltimore and Ohio stock, he said. i
wish to leave it in trust. Do you believe it
will remain indefinitely at lis present high
value 2
The one-man power answered grandly
i believe it would be practically impossible
TO exhaust our surplus. ard dividends will be
Dalu 10 tue Hllllt O int SUI pliiS' II h'SSS9iN -
Ii will increase; never diminish.
The inquirer went away believing in Gar
rett 5 words as he would in pledge of the
government.
The president in 1883 reported Il surplus OF
S45. 763 $50, and caused the figures to he pub
lished broadcast. There was no such sur
plus. The statement WAS absolutely talSe-a
jugglery of accounts.
:sThe directors knew nothing about the
frard The, were men of rcSpecabiiity, but
they were kept in ignorance.
Robert Garrett inherited the presidency OF
the Baltimore and Ohio from his father III
1854 The corporation was then ut the top
of prosperity aud public confidence. l. had
extended its lines and absorbed connecting
roads until II great system stretched westward
from Baltimore to Chicago.
Bat the son also inherited fictitious sur
plus. a mass Of concealed, juggIed accounts,
Il property inflated to an enormous false value,
and a record for paving unearned dividends
that had to he kept up. The surplus OF s49. :
600. 900 that john W. Garrett purpOrled 10
leave was in reality not one-tenth that sum.
To manufacture it he had included improve
ments on property. road bed. bridges and
rolling stock as part of the surplus fund.
Holders of stock accept d without question
the figures that Garrett gave out. because he
paid large dividends. His record was proud
" pointed to by BditmoreduS as the Garrett
policy and all hoped that the son would
continue in the footsteps OF his father.
Suddenly there came Il day OF reckoning
Garrett had borrowed $4,000, 900 from New
York bankers. 1t was due September l..
1887. He could not pay it, despite the inflated
surplus The bankers, headed 10y j. =. Nor
can, took charge of the road. They placed
one of their own number. Samuel Spencer. Il
practical railroad man. III the president :
Office. and Garrett was forced to step out
Spencer set To work 10 >iraighten ont the tan
ole and find the truth about the Baltimore and
Ohio An expert reported that no one man
fully comprehen,led the bookkeeping of the
company and its dependencies. The eNam1-
uers were directed to make Il detailed showing
of the actual conditions Of the numerous lines
grouped under the name of Baltimore and
Ohio
The result was seen in President Spencer ;
statement The surplus III 1888 was sum
marilv cut in two Figures representing
S24. so. 75S were swept away. There was an
end of the gush about the interests OF Baln-
more. The interests Of security holders came
to the fore Rigid economies were pracuced
Complete exposure was imminent. The
economics interfered with the money making
opportuntics of the ring that had grown up
about the Baltimore and Ohio Ii was Il
critical time for oneman power-the Garrett
policy.
Miss Mary Garrett came to the rescue. She
applied her private fortune to paying of the
obligations 10 the New York bankers, and III
November. 1888. Spencer and the Morgan
syndicate stepped out after year control
Amid great rejoicing in Baltimore the c0rpor-
alton was restored to its old rulers. Robert
Garrett was mentally and physically incapaci-
tated from resuming charge, so Charles F..
Nayer. a Baltimore man of affairs. was made
president to represent the Garrett interests
and the Johns Hopkins estate.
Baltimore and Ohio was again i'll neman
power
During the rule of Mayer the floating debt
increased from 81, 800 900 to nearly $4,000,
600. The disappearance of SD 1000, 600 with
ont any satisfactory showing therefore constl-
tutes unique instance of chicanery IN rail-
road management.
''Maver went into power to represent Baltl-
more. the CARROTS and sentiment. He did
it with vengeance. The gross annual income
appeared to average $50, 900 and the net
earnings between 1883 and 1892 averaged Sc,
600. 900 But the fixed charges steadily ia
creased until during the last year OF Mayer $
administration they exceeded the net earnings
never ceased Between 1888 and November,
1895. no less than Sc 269, 900 was paid to
stockholders in dividends. Of this vast
amount only SOL ,446, or less than one-sIXth,
was actually earned. The Indebtedness OF
the road increased SD, 100000.
Toward the close of 1895 Mayer methods
became so hazardous that he concluded to re-
tire. and John X. Cowen, the present re-
ceiver. became president. But the same
policy of oneman power, of secrecy, contnn-
ued. 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 81, 1 22O
THE complete failure occurred on tebru-
airy %, 1896. when the road passed into the
hands of receivers.
''When railroad is placed IN receiver
charge BY the court the prevailing custom
calls for a complete investigation of the books
and property. Its Indebtedness, its resources
and its earning capacity are studied and rigid
economies are practiced. John Is. Cowen
has not done these things. lie has continued
the old methods He has expended vast sums
of money right and left. H e has ruled IN the
old Garrett way.
Ten millions of receiver 5 certificates were
issued during the first year of his receivership
and the money spent -Four millions more
quickly followed. and it is SAID on high
authority that application will shortly be made
to the United States Court for power to issue
an additional 81, 500, 900. This will swell the
total to SIG, SOC, 900, or only about 81 200. 900
less than the amount of the bonds known as
the first mortgage liens
"a leading financier of Wall street said of
B. & O. affairs. There is just one consolation
about this whole receivership management.
These receivers will so overdo the business,
and the consequences will be so disastrous,
that a reform in receiverships in general will
be 50 unanimously demanded that the federal
government will be compelled TO appoint Il
separate court to take charge of such matters.
civilian Keyser formerly second vice
president, said in Baltimore yesterday: AS
chairman of a committee under Samuel Spen-
Ger, in 1888, | took part in the reduction of
the alleged surplus fund, by which about S25,
600. 900 of assets that never had an actual ex-
istence were knocked off. 1t had appeared
only as the result of systematic manipulation
of accounts unknown in any honest bookkeep-