The news & observer. [volume] (Raleigh, N.C.) 1894-current, 1902-08-26
BOND CONVERSION PLAN
Reasons for its Recommendation by
the Committee.
TO PROVIDE FORTY MILLIONS IN CASH
This to Garry Out Improvements That Would
Increase Profits $4,000, coca Year. Aft.
daVt Throwing Discredit on Jne Of
Hodges Witnesses.
Hodges Witnesses.
(By Che ASSOCIATED Press

Trenton, N. j., Aug ga supplement
States Steel Corporation was filed in the
Court of Chancery today in the suit
brought against that concern by ]. As
pinwall Hodge to restrain the CONVEX
sion of 100000, 900, seven per cent pre-
ferred stock into 5000, 600 900 five per
cent. bonds. One of the affidavits is by
George w. Perkins, of the firm of ]. P.
Morgan & Company, and also chairman
of the Steel Corporations finance COM
mittee. Mr.. Perkins goes at length into
explanations as to the reasons that
prompted the committee to recommend
the bond conversion plan and the pay
ment of $10,000000 commission to j. p.
Morgan and Company. An affidavit by
Joseph E. Corrigan, of the law firm of
Guthrie, Cravath and Henderson, tells of
a statement made to Mr.. Guthrie in his
presence by James Lancaster, who gave
testimony from Hodge to the effect that
the entire plant of the United States Steel
Corporation was not worth more than
$500. 100000. Mr.. Corrigan says Lancas-
fdavit he did not know it was to be used
in any suit and that he was governed
ronly by his impressions, as he understood
that the affidavit was to be used only in
an advisory way in the matter of stock
investment. Corrigan goes on to swear
that Lancaster stated to himself and Mr..
Guthrie that he found out few days
after making the affidavit that the affi-
davit was being used in the Steel Corpor-
alton suit, and that he protested to David
Lamar. who got him to make the affi-
davit. Lamar then, accordingn to Lam
casters statement, agreed to pay Lam
caster $3.50 week and $4,000 when the
suit was settled. Lancaster then made
second affidavit and got S4OO. Suisse
duently he got into row with Lamar
about his compensation and finally got
$500, making total of $1,000 he having
received 800 for his first affidavit.
According to Corrigan, Lancaster had
hany meetings at the office of Abram
Elkus of the from of James, Schell
and Elkus, and Lancaster told Corrigan
in Elkus' office that they expected to
make big money out of the suit. Hedge
the complainant in the suit, according to
Lancaster. told the latter that he
(Hodge) was acting for others and that
Lancaster need not look to him for any
money for his services. Corrigan states
that he learned of Lancaster through his
efforts to locate Peter Power in the
Northern Securities Company suit, Pow
er having been at one time employed by
Lancaster.
Mr.. Perkins in his affidavit stated that
the financial committee of the United
States Steel Corporation realized the
necessity of having more cash capital to
protect itself against money stringencies
and the conversion plan was decided upon
because it would reduce the fixed charges
81 ,50O,C coo annually. The commission of
$40 900, 900 to J. P. Morgan & Co. was
agreed upon because of the risk that
that firm would be obliged to take in
going into the market to purchase $780,
600 900 of preferred stock of the corpora
ton and the advancement of $40, 100000
both of which acts were part of the
agreement between the corporation and
]. P. Morgan G Co.
Mr. Perkins, in his affidavit said that
shortly after the organization of the
United States Steel Corporation, an in
vestigation as to the extent, conditions,
ties was begun by the legislative and
finance committees, and that after
years close attention to those problems,
the executive committee brought to the
attention of the finance committee the
advisability of providing about SAC, 900, 900
of cash, to be used in improving and ex-
tending the various plants of the sub
sidiary companies. The members of both
committees became convinced that the
expenditure of this new money would
increase the net profits not less than
SIC, 900, 900 year. The problem of raising
the funds, continued Mr.. Perkins, pre-
scented serious difficulties. The finance
committee determined that the corpora
tion would not take the risk involved by
taking the sum required from the $780,
900 900 surplus, and that the funds would
have to be raised or provided either by
the issue and sale of the preferred stock
or by borrowing on notes or bonds. 1t
was finally determined that the most
economical and advantageous plan was to
create and issue $25o,OOOO 600 face value
of second mortgage bonds and use the
bonds or their proceeds, first in procuring