Evening star. [volume] (Washington, D.C.) 1854-1972, 1899-05-13
THE WHISKY TRUST
Former Member of It Describes Its
Business Methods.
INDUSTRIAL COMMISSION HEARING
Witness Clarke Favors Large CON-
binations of Capital.
|STRIAL COMMISSION HEARING
AN OFFICIAL MOTT CE

AN OFFICIAL NOTICE
The industrial commission met today and
conducted examination into the whisky
trust. Mr.. Charles c. Clarke of Peoria, ILL.,,
formerly member of the whisky trust. but
since 1894 an Independent distiler. was on
the stand. He testified that he had bean in
the dstilling business since 1873. He de-
veloped the facts that as early as 1ST0-T1
many Of the distillers north of the Ohio
river ~entered into an agreement to limit
their production in order to keep up prices.
In November, 1881 the Western Export AS
ISOLATION was formed to limit output and to
assess members in order to pay expenses of
reporting the surplus whisky and thus keep
up prices.
He said that from this time on there were
frequent pools, lasting for short, times each,
until 1897. when, In order to secure a more
suitable combination, the distilIers and cat
tie feeders trust, formed on the model of
the Standard oil trust, was organiZel-S30,-
Uu,0D was issued in the trust certificates.
In 1870 this trust was organized as a cor
poratlOn under the name of the DiStiIling
and Cattle Feeding Company, with a capt.
tai stock of $3J,0O3,e0 The new company
had taken over from the trust 81 distiler-
les, and cash and earnings to the amount of
$3.S31 ,o66. and there still remained in the
treasury 34,9s4 shares as an asset. In the
latter part of January, 1891, this treasury
stock was issued to raise money to pur-
chase the Shufeldt and Calumet distilleries,
the stock being sold at 40.
Bought All Opponents.
Mr.. Clarke said that in November, 80, four
other distillerias, making practically all of
their important opponents, were b, ught.
The president explained the purchase to the
stockholders by saying that there had been
an added demand for the goods, and that it
was expected the tax on alcohol would be
increased by Congress, so that larger out
put was desirable. No bonds or stock were
issued for these dStilleries. Instead, the
surplus was used and dividends less ened.
The witness said the high price, which
had been increased 20 cents a COLON, led to
a falling off in the sales. Congress did not
pass, at that time, a new tax law, and in
January, 90 it was found that the cash en-
hand was exhausted and that no money re
manned to pay rebates which had been
promised to purchasers. 1t was decided to
lower prices IS cents a gallon. The divi-
dends which had been regularly paid here
tofor> were passed in April. The stock fell
shortly from between 65 and 20 to about 20.
Large stores of goods were on hand; large
sums were due to customers for rebates
and it was decided in May to issue s., $780,
900 worth of 5 per cent bonds, mortgaging
all Of the plants, in order to meet special
needs.
In May, '93, the attorney general of I'LL
nois brought suit against the company on
the ground that it was Illegal. During 'a3
two million and half of bonds were issued
and placed in escrow to secure rebates
which had not bean paid A million dollars
worth of bonds to be used collateral
in making loans for current expenses.
Exported at n Loss.
He explained the connection between the
n ND 20 ind RI
After the whisky pool was formed and the
output of whisky had been limited, a good
deal of the product was exported at a loss
to limit the product on the market in this
country and to keep up the prices.
The Original Trust.
Eighty-one distilIeres went into the orig
inal whisky trust. and he did not think
more than ten or twelve distilleries were
operated those whose distiileries were
closed being paid just If they had been
running. The distilleries that Went into the
trust were valued according to the cost of
reproducing them and their earning power.
A lew of the disteleries refused to go into
the trust and their customers were sold the
product at a lower price than they were
supplying them, and in this way number
of them were brought into the trust.
The New York courts had declared the
sugar trust to be an illegal combination,
and the whisky trust was organized In
the same way IN Wnlcn the sugar trust was
they dissolved In order to prevent being so
declared. Certificates of the original trust or
corpordation were issued to an amount of
about four times the value that had been
fxed for the distilleries. III a disulliery
should have been given 1000 shares of
stock for it's property at par value OF 500
the trust issued to it 1000 certificates of
the same par value.
The certificates of the combination that
existed from 1890 to 1885 had violent f1uc-
tuations of value. At one time 1t was up
as high $40 share, and at one time 1t
went down to IS. The directors OF the trust
and many wholesale dealers speculated it.
Directors were accused of using the corpo-
ration's money to protect their holdings OF
stock In other words, the company was
really specializing in its own stock
He said that on January ~, 1880, hoiders
of the 100 shares applied for receiver
The company. through the president, con-
scented, and the president, Mr.. Greenhut,
and Mr.. E. F. Lawrence We're appointed
temporarv receivers. January 30 the stock
holders committee mentioned above Sc
cured from the court stay and an ORDER
not to turn the property over to these re-
ceivers February 2 Judge Grosscup re-
moved Greenhut The was found to be 1900
shares short of the company's stock and
appointed Gen. John McNulta as the chief
receiver representing the court and John
J. Mitchell, president of the Illinois Trust
and Savings Company. to represent the
stockholders. Mr.. Lawrence remained as
the third receiver
The REORGANIZATION.
A committee was appointed. consisting in
the main of the same men the former
stockholders committee, to prepare plans
of reorganization. The plan finally sub
mitted early IN 1895 provided for a million
and q half first mortgage per cent 20-year
gold bonds, out of total issue Of S2,OUO,OO0,
81. OOO,0OO 5 per cent non-cumulative pre-
ferred stock, SOS, 900 900 common stock.
The plan was in due time accepted and
the American Spirits Manufacturing Com
pany was Incorporated in New York Au-
gust D. 1895, and after considerable litiga-
ton between the receiver with the reorgan-
ization committee and the former president
and trustees the best of the plants, six
teen distilleres, We're taken over from the
old organization.
Mr.. Clarke said that in '96 the case against
the old Distiiiing and Cattle Feeding Com
pany was finally decided in the supreme
court of Illinois. The decision of the judge
in the circuit court was affirmed, the COM
pany being declared a trust and its charter
annuled. Previous to the rendering of the