The Salt Lake herald. [volume] (Salt Lake City [Utah]) 1870-1909, 1902-08-24
STEEL COMBINE
MAKES ANSWER
AffidaVits Filed in the New Jer-
sey Court of chancery.
TEN MILLIONS FOR MORGAN
MR.. PERKINS EXPLAINS THE
COMMITTEES REASONS.
TEN MILLIONS FOR MORGAN


concern by J. AspinwaI Hodge to re-
strain the conversion of S2O0 coo, 600 Z
per cent preferred stock into 5000, O0O, OCO
per cent bonds. One of the affidayits
is by George w. Perkins of the firm of
j. p. Morgan & Co, and also chairman
OF the steel corporations finance COM
mittee.
Mr.. Perkins goes at length into ex-
plantations as to the reasons that
prompted the committee TO recommend
the bond conversion plan, and the
payment of $4,000, 900 commission to ].
r. Morgan & Co. An affidavit by Jo-
seph r. Corrigan of the law firm of
Guthrie. Cravath q Henderson. tells of
a confession made 10 Mr.. Guthrie in
his presence by James Lancaster. who
gave testimony for Hodge. TO the effect
that the entire plant of the United
states Steel corporation was not worth
more than $500. 600 600 Mr. COrrigan
says Lancaster admitted that when ne
made the affidavit he did not know it
was TO be used in any suit, and that he
was governed only by his. impressions,
as he understood that the affidavit
was TO be used only in an advisory way
IN the matter of stock Investment
Corr1gan goes on to swear that Lam
caster stated to himself and Mr.. Guth-
&C mat iiG AOuilu OUT d lew days after
making the affidavit that the affidavit
was being used in the steel corpora
ton suit, and that he protested to
David Lamar, who got him to make
the atf1davit. Lamar then, according
10 Lancaster's statement, agreed to paw
Lancaster $3.50 a week and 81 900 when
the suit was settled. Lancaster then
made a second affidavit, and got $500.
Subsequently he got into a row with
Lamar ahOuf his
hnaliy got $500, making total of 81, 900,
he having received 500 for his first
affidavit
According to Corrigan, Lancaster had
many things at the Office OF Abram l.
Elkus of the firm OF James, ScheH &
EIkus, and Lancaster told Corrigan in
Elkus' office that they expected to
make big money out of the suit. Hodge.
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, Power 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 cap
ital to protect itself against money
stringencies, and the conversion plan
was decided upon, because it would re-
duce the fixed charges 81, SOC, 900 yearly.
The commission of $40 900 600 TO ]. P
Morgan & Co. was agreed upon be-
cause of the risk that firm. would be
obliged to take in going into the mar
ket to purchase $50, 1000, 900 of preferred
stock of the corporation, and the ad-
Vancement of 500, 600, 000 both of which
acts were part of the agreement be-
tween the corporation and J. p Morgan
& Co.
Mr.. Perkins. in his affidavit. said
that shortly after the organization of
the United States Steel corporation an
investigation as to the extent, condi-
tons, capacity and needs of its sew
eral properties was begun by the ex-
ecutive and finance committees and
that after a years close attention to
those problems. the executive commit
tee brought to the attention of the
finance committee the adVisabiIity of
providing about $4,000, 900 of cash to
be used in improving and extending
the various plants of the subsidiary
companies and reimbursing and CAN'T
alizing between SIS, 200, 600 and 500, OO0, 600
which has been expended for purchases
and construction of various kinds un-
dertaken by the subsidiary companies
just prior to the organization of the
steel corporation.
The subject was considered for MANY
weeks. The members of both commit
tees became convinced that the ex-
penditure of this new money would not
only tend to strengthen permanently
the existing earning capacity, but
would increase the net profits not less
than $10,000,000 a year. 1t was finally
determined that the most economical
and advantageous plan was to create
and issue $3.50, o00, 900 face-value of sec
ond mortgage bonds or their proceeds,
first in procuring the necessary cash
requirements, and. secondly. in pur-
chasing and retiring $500. 600 900 par
value of the outstanding per cent Gu
mulative preferred stock.
Mr.. Perkins then gave in detail tbs
organization Of the syndicate to carry
through the plan. the syndicate agree
ing TO purchase and lodge with J. P
Morgan & Co. $sO,00O0 900 of preferred
stock. not to be sold for q year and a
half, further agreeing to exchange all
of this, or only 40 per cent of it, at the
option of the steel corporation, for sec
ond mortgage bonds and contracting to
take second mortgage bonds from the
steel corporation at par exchange for
2O,OO0,OO0 in cash. For this the steel
corporation was to allow the syndicate
4 per cent commission on all the bonds
1t took in exchange for stock and 4 per
cent commission on all the bonds it
took at par for cash; so that the trans
action stood in the end in that form.
viz: II $50, 900, 600 of bonds were is
sued for stock and $40. goo 900 of bonds
were issued for cash. the steel como
ration would have paid to the syndicate
4 per cent on 800, 600 900, or $4,000. 600
and J. p Morgan & Co. would have
received for guaranteeing the whole
$1O0,00O,000, for handling the syndicate
and the securities. and for finding
market on behalf Of the syndicate. one
fifth of $4,000. OOO or $500. o0O
The money needed could have been
raised. said Mr.. Perkins. by stopping
dividends on the preferred and common
stock for one year, or on the common
stock alone for two years and a half,
but this course was deemed unfair To
the stockholders.
MFR. Perkins then declared that the
statement made by Bernard Smith in
an affidavit to the effect that William
H Moore. Norman Ream, Peter a. 3.
Widener and John d. Rockefeller. ir
were members of the syndicate was nm
true and further set forth that sixty
one others, firms or individuals named
by Smith, were not members of the
syndicate.