New-York tribune., 1902-08-02
TROUBLE AHEAD IN IOWA.
GOVERNOR CUMMINS QUESTIONS LE-
GALITY OF ROCK ISLAND
REORGANIZATION.

Des Moines, Iowa, Aug. 1.-Governor Cum
minis announces to-day that he is investigating
the recent reorganization of the Chicago. Rock
Island and Pacific Railway Company. with
view to ascertaining whether the organization
is in all respects in harmony with the laws of
the State of Iowa. He has not yet conferred
with the Attorney General but will do when
the latter returns to the city. Governor Cum
minis stated to-day that the first question he is
inquirng into is to v Aether the initiation of
capital stock which is CO ltemplated by the
organization is consistent with the Iowa law.
In the second place, desires to know just
low far it is lawful for a New-Jersey corpora
ton to own and control the property of rail-
way owned and operated in Iowa. He has not
reached a conclusion either of these ques-
tiOns and declares that he means to give to
them a thorough investigation before deciding
what his duty towards the company is
der the premises. He said:
1t may be that the Iowa laws contemplate as
much latitude as this company has used, but l
doubt it very much II Is my opinion if have
read the dispatches Alright, that there has been
an initiation of capital stock here which is not
contemplated by the laws Of this State. 1t Is
true that there is no limit placed upon the cap
italizatiOn of such a company, but there is
limit upon the Indebtedness of such corporations,
and there be something shown to the
credit the stockholders of such a company
which will represent the difference in increased
capitalization.
1t is my understanding that under the Rock
Island plans of readjustment each holder of one
hundred shares of common stock is to receive a
10000 bond secured by collateral trust mort
gage upon the present Rock Island stock. In
addition to this. they receive in the Rock Island
company of New-Jersey seventy shares in
preferred stock and one hundred shares In COM
mon stock, the preferred stock being preferred
to the extent Of per cent from the earnings of
each year for a period OF seven years. when it
becomes preferred for per cent for an addi-
tional period OF seven years, after which it is
preferred, believe to the extent of 6 per cent
per annum This is as L read the plans In the
newspapers.
Now. the capitalization Of the old Rock Island
company only S15,0O2 600 while the new
company. located in Iowa, declares a capital of
Sl2o.oOo,OOO. There must be something. to my
mind, TO show, more than is indicated in the
above plan. that the increased capitalization is
not excessive initiation, or that the stock
which has been issued is not watered Under
the Hubbard bill. which I vetoed last winter 1t
would have have been possible for this new COM
pany to organize without any difficulty. all
limitations to the Indebtedness of such corpora
tions were practically removed by that act in It's
original form. Under the present law there are
limitations in this regard.
am not prepared TO state that the Iowa law
has any penalties which could be inflicted for
violation OF such statutes but not willing
TO sit by and allow proposition of such enor-
nous size to be made without inquiring into
the method which IL employs. and its
formity to the State laws / am convinced that
such a Capitalization of capital and power is
dangerous, to say the least and cannot be en-
couraged without threatening business interests
there may follow explosion which, when 1t
comes is likely not only TO affect one, but many
interests.
Regarding the foregoing dispatch from Des
Moines official OF the Rock Island road said
yesterday:
I do not believe that there is any point at
which our Incorporation IN the State of Iowa can
be attacked. The Incorporation papers were
drawn up with due regard for the laws of that
State, and We believe that they will hold in
law.
Rock Island new securities. when issued" were
quoted on the curb yesterday Mt 10 bid for the
common, 50 bid for the preferred and 81 bid for
the bonds. The value OF the new securities is
estimated at 1971a against 191. the ruling
price the Stock Exchange for Rock Island
stock.
The old Rock Island company announced yes
terday that the subscriptions the 1912 per
cent increase of stock authorized to be issued
to stockholders of recond June 20 will be
payable October 10 The certificates of right
which the stockholders will receive in few
days will be exchangeable after October 10 for
certificates of stock. The readjustment plan be-
comes effective November l.