Evening star., 1902-08-04
GOV. CUMMINs INC0UBT
WILL INVESTIGATE ROCK ISLAND
RfoRGANIzATIoN.
Not Satisfied That the Capital Stock
May Be Explained as is
Proposed.

The legality OF the Reek Island reorsan-
tzation in Iowa Is being made the subject
Of investigation by Governor Cummins of
that state. The matter was taken up last
week by the governor, whose inquiry will
be made along TWO lines: First, whether
the laws Of Iowa permit the proposed In
natfon of the securities Of the road to the
extent proposed. and. second. just how far
1t Is lawful for New Jersey holding COM
pany to control the property Of railroad
owned and operated in Iowa. These two
questions will be referred to the attorney
general of the state for an opinion.
In discussing this question a dispatch
from Iowa quotes Governor Cummins as
follows:
1t may be that the Iowa laws contem-
plate as much latitude as this company has
used. but doubt it very much 1t Is my
opinion, II l have read the dispatches
Alright, that there has been an imitation OF
capital stock here which is not contem-
plated by the laws of this state. 1t is true
tnat there is no limit placed upon the capi-
tahzation Of such a company, but there Is
hMt upon the Indebtedness OF such cor
poratfons, and there must be something
SHOWN TO the credit of the stockholders OF
such company which will represent the
difference in increased capitalization.
1T fs my understanding that under the
ROCK Island plans of readjustment each
nolder or one hundred shares of common
stock is to receive a $4,000 bond secured
Dy collateral trust mortgage upon the
present Rock Island stock. In addition to
this they. receive in the Rock Island COM
pany pa OF New Jersey seventy shares In pre- e.
ferred stock and one hundred shares In
common stock, the preferred stock being
preferred to the extent of per cent from
the earnings of each year for period OF
per cent for an additional period of seven
years, after which It Is preferred, believe,
to the extent of IL per cent per annum.
This is as L read the plans in the news
papers. :. e =
Now. the capitalization of the old Rock
Island company was only $15,o00,0OO, while
the new company, located in Iowa, declares
a capital OF $l25. .0UOO 900. There must be
something. to my mind, to show. more than
is indicated in the above plan, that the in
creased capitalization is not an excessive
imitation, or that the stock which has been
issued Is not watered. Under the Hubbard
Dill, which l vetoed last winter, it would
nave been made. possible for this new COM
pany to organize without any difficulty, as
all limitations to. the indebte dness Of such
corporations were practicaIiy removed by
tnat act in it's original form. Under the
present law there are limitations in this
regard.
Il am not prepared to state that-the- Iowa
law mas any penalties which could be in
hlcted for violation Of such statutes, but
am not willing to sit by and allow propo-
sltlon of such enormous s.ze to be ma de
without inquirins iGte the method which it
employs. and its conformity to the state
laws 1 am eqfviReed tha, such a centrai
ization OF eapitaljHNd power is dangerous,
TO say the least and cannot be encouraged
without threatening business interests.
Such centralization of capital means that
there may follow an explosion which, when
1t comes, is likely not only to affect one,
but many irtere stsV '.-. - -