The Saint Paul globe. (St. Paul, Minn.) 1896-1905, 1902-10-24
CLOUCHTAKESSTAND
FOURTH VICE PRESIDENT OF
NORTHERN SECURITIES COM
PANY TESTIFIES
DECLARES RAILWAYS
ARE INDEPENDENT
History of Securities Company From
Its Inception Related by Col. cioush
Competitive Business of Great
Northern and Northern Pacific
Amounted to Small Fraction of Their
Total Traffic.

tNOTkI1CTH ALI tNOi
Amounted to Small Fraction of Their
Total Traffic.
The st. Paul hearing in the suit Of
the government against the Northern
Securities company and others was
concluded yesterday at the federal
building.
The session lasted all day, and the
witnesses examined were Col. W. T.
Clough, fourth vice president and gen.
eral counsel of the Northern Securities
company, and Charles S. Mellen, pres
ident of the Northern Pacific Railway
company, both of whom were called on
behalf of the defendant company. At
the conclusion of the days testimony
Special Examiner Ingersoll announced
that the next hearing in the case would
take place at New York on Monday,
Nov. 10, When further evidence for the
defense will be taken.
In answer to questions by M. D.
Grover, of counsel for the securities
Col. Clough related he his
tory of that corporation from its IN
ception. The question Of a holding
company was first suggested some five
years ago, he said, by JOIN S. Ken
nedy, the veteran New York banker,
and the plan met the approval of a
number of the original holders Of the
Great Northern stock. These men had
worked together for many years to
build UP the company, they were get
ting old, and they were anxious to leave
their holdings in such position that
they might contribute to the stability
Of the company and the continuance
Of the policies that had built it up.
First Steps Taken in 1901.
mo definite steps were taken, how
ever, till 1901" said Col. Clough. I'm
the spring of that year Mr.. Kennedy,
being about to go abroad, revived the
project, and during his absence I dis
cussed the matter with a number Of
other holders of the Great Northern
stocks. 1t was generally approved, but
nothing was done in the matter of OBJ
tanning q charter till November. We
required a charter that would be Sc
cure against the legislative Interior
ence that marks the history of the
newer Western states, and for a time,
thought we might find a Minnesota ter
ritorial charter suitable to our pur-
pose, something that would be in the
nature Of a vested right and not liable
to be destroyed by ill-considered acts
Of legislation.
Failing to find such a charter, we
then looked to the various states whose
corporation laws were broad enough
to authorize such a company as we
proposed to form. 1t was finally decid-
ed to incorporate under the laws of
New Jersey, for the reason that the
laws of that state had been passed up
on by the courts, their validity estab-
lished and their scope fully determined.
New York had an admirable statute,
framed expressly to enable incorpora-
tons on the same lines as the New Jer-
sey acts provide, but the New York law
had not been in force long enough for
the courts to determine it's constitu-
tionality and meaning.
Col. CIoueh Drafted Charter.
THE charter was drafted by me, and
on submission, as opportunity offered,
to MI. Kennedy, D. Willis James and
others Of the Great Northern holders,
was approved by them. Few changes
were made, and at length, on Nov. Is,
the articles were signed"
"Give the number of shareholders in
the Northern Securities company" said
MI. Grover.
about 1900 at first. When this suit
was begun about 1,500 and now at
least 800 more"
.'Were the transfers of Great North
ern stock in exchange for that of the
Securities company without solicita-
ton and unconditional?"
Absolutely so. They were not Sollc-
tied by the Securities company nor
prompted by the Great Northern COM
pany. The only impulse given by OFF,
Gals of the latter company was the
circulars signed by President Hill and
introduced in evidence when he testi-
fed here"
What fixed the capital at 100000
000?"
"The expectation Of acquiring the
stocks not only of the railway compa-
MES. the Great Northern and the
Northern Pacific, but also of a number
of coal and industrial properties. At
first it was expected only to acquire
the shares of the older and larger hold
ers of Great Northern. Then the plan
was ~broadened to include the North
ern Pacific. In July we thought $780,
900, 900 would be ample, but when Mr..
Morgan returned from Europe and was
consulted as to putting his Northern
Pacific in the new holding company,
he said he would provided hat it was
big enough to permit all stockholders
to come in on the same basis. Some Of
our Great Northern holders took the
same position. They did not want any
of the holders to think themselves
crowded out. So we figured roughly
that it would take about 100000, 600
to cover all we wanted to do, and the
- Il, ~i4o1jzotia y Uyac fNQd of fhQf sum ?"
Competitive Business Small.
The rest Of Col. Clough's direct ex-
animation was given to the explana-
ton of maps of the roads affected by
the incorporation, freight rate sheets
showing the joint tariffs in force be-
tween the Great Northern and eighteen
other roads and a vast amount OF doc
umentary matter showing the earn
ings of the Great Northern and North
ern Pacific for a series of a The
witness testified thai the gross arr
ings of the former for the year ending
June 80, 1901, were $21, 623,653, of which
S7,O13, $50 was from local business, and
$14,610,6 02 was returned from inter-
| state traffic. The witness went on to
| show. by an extended analysis of the
| figures, that the competitive business
of the two companies amounted to but
a small fraction of their total traffic.
Under cross-examination by James
| M. Beck, assistant attorney general of
| the United States, Col. Clough declared
| that prior to the incorporation Of the
| Northern Securities company none of
| the Northern Pacific stockholders was
consulted regarding the holding COM
| pany except J. p. Morgan, who held a
| large block of Northern Pacific stock.
| and a few others who were also large
| holders in the Great Northern. No
| corporate action had been taken by
| either of the railway companies, nor
i had any effort been made to induce
the railway shareholders to transfer
| their stock.
Railways Are independent.