Audubon Republican. [volume] (Audubon, Iowa) 1894-1925, 1902-08-07
AFTER ROCK ISLAND.
GOVERNOR HAS DOUBT ABOUT
REORGANIZATION.
II Iowa Law Is Effective He Will En-
deavor to Stop Mercer.

bSS MOlHeS' AuSuSI Es-GONernOT
Cummins has announced that he has
instituted an inquiry into the new con-
solidation and reorganization scheme
of the Rock Island company to de-
termine whether or not it is in VIOLA
ton OF law and II 1t can be stopped.
The governor states that he is of the
opinion that it is contrary to the let
ter and spirit of the Iowa law, that the
initiation of stock is unlawful and is a
question whether or not the New Jer-
sey corporation can own and control
stock of an Iowa corporation in the
manner contemplated.
If he can do SO the governor will
institute legal proceedings to prevent
the merger.
Governor Cummins made this an
nouncement yesterday after having
read over carefully the press dispatch
es relating to the proposals of the new
owners CT the Rock island property
He is intensely in earnest in this mat
ter and has already instituted an in
quiry to determine what is being done
and what can be done if the scheme
IS contrary to law and public policy.
Il believe" said the governor, that
this reorganization scheme is as re-
pugnant to the people who are holders
of large investments and to me own.
ers of railroads as to the outsiders.
If this form of imitation and stock is,
suing is to go on and the plans of the
organizers to issue different kinds of
stock with different powers and all
that sort of thing is to go on indefinite
ly, there can be but one result--an e&
plosion. What will be the effect OF
that inevitable explosion no man car
tell. But it is certain that very many
who are entirely innocent and who
have had no part in these high handed
proceedings will suffer. / shall inves
tigate to see II some way cannot b
found to stop it."
The plan of the Rock Island organi
GERS is to turn over the stock of the
Rock Island Railway, the present
company, amounting now to s75,000y
900, to the financiers, and for each
share of stock o. the old company
par value 500, the owner is to get
gold bond for 800 at 4 per cent in.
terest, also 500 common stock in the
New Jersey Rock Island Company, and
$40 preferred stock in me same com
pany. The gold bonds are of the new
Rock Island Railroad company. SIS,
100000 being issued, representing tho
$75,000,000 of the old company stock
The stock of the new Rock Island com
pany are to be deposited with a trust
company as collateral security for the
gold bonds. The New Jersey com.
pany, which is the Rock Island Com
pany," is to issue $50, 900, 900 of stock,
of which $54.000,000 is preferred stock
and 100000 common stock. The in
tention Is also that the holders of the
preferred stock shall alone have con-
troll of the property and elect directors
and that the New Jersey corporation
shall own and hold the stock of the
new Iowa company, which will be put
up as collateral for the bond issue.
By this arrangement the holders OF
the preferred stock of New Jersey
corporation can control an Iowa COM
pany organized for operating purposes.
The New Jersey company issue no
bonds
There are two propositions that
need to be looked into in this matter"
said Governor Cummins. zone Is
whether or not the enormous imitation
of the stock of the Iowa company by
the process of organizing a new COM
pany and issuing new stock is lawful.
Unfortunately there is no penalty I'M
uer Lne iowa law lot issuing STOCK 1Or
which value hag not been received,
the only penalty being the increased
liability of the stock holder for debts.
THE other branch of the inquiry
relates to whether or not the laws
will permit of New Jersey corpora.
ton which owns nothing and whose
stock represents nothing can own and
control an Iowa corporation in the
manner which appears to be contem
plated. 1t is the boldest proposition
of the kind which has yet come to my
rotice. II can do any thing to pre-
vent such proposition from becoming
accepted will do so.
You can now readily understand"
continued the governor, why there
was such desire to nave passed last
winter the bill which vetoed. II that
bill had become law the bonds which
1t Is proposed shall be issued could
have been issued without any increase
of capital stock of the old company,
on a million dollars worth, or $4,000
worth of stock Now the reorganiz.
ers propose to accomplish the same
thing in another way"