The Indianapolis journal., 1903-11-02


stock and bonds. "delibe -ately given away"
Mr.. Smith says:
'Who participated In this wholesale
plunder? The testimony now being taken
in the proceedings Will doubtless disclose
the names Of all the participants. Certain
it is that much of this vast amount was
taken by persons and corporations who
parted with little or no consideration in
exchange therefor. Blocks OF the steck
went to the vendors OF the constituent
plants and to the purchasers Of the bonds.
as bonus absolutely without benefit 10 the
company: 600 OF IL admittedly went
to Charles NJ Schwab in addition TO the
| agreed price for Bethlehem. Some OF IL
swindle; and when all had been provided
| for what was left of the bonds, amounting
to sl,500.00O, was handed back to the COM
pany ostensibly to supply 1t with working
LIABLE TO SUIT.
| The receiver declares he is advised that
| the vendors and promoters and their asso-
ciates in the transfer and conveyance Of
the various plants to the United States
| Shipbuiding Company, by the acceptance
of $44,9 900 of the capital stock OF the ship
building company, without paying value
therefor, became liable thereon to said cor
poration and that the shipbuilding COM
| pany can recover the amount OF this In
N1I1eies In regard to the the cuipabiIity Of the
| dummy directors OF the United States
Shipbuilding Company, In parting with
| many million dollars in its stocks and bonds.
| the receiver says they should be held ac-
| countabe for their unlawful act, but that
they are not alone responsible, being clerks
| of the Corporation Trust Company, mere
| figure-heads placed I'm the position In order
that schemes Of others might be carried
/ into effect
The receiver charges that the properties
| of the various constituent companies were
sold to the United States Shipbuilding Com
pany for an amount which the vendors OF
1
| of their value and that the plan to combine
such properties was conceived and con-
summated by certain promoters Nv win ,,td tels
/ States Shipbuilding Company, the company
| being absolutely without intelligent repre-
sentation or protection in the the mafter.
| Discussing the cause OF the failure the
| report says:
Zone of such causes was the fact that
| the directors parted with bonds 20 an
| amount on which IL was impossible 20 meet
| the interest. The failure, however, was pre-
! cipitated. II not directly brought about, by
| the fact that in the Bethlehem transaction
the United States Shipbuilding Company
| officers had TO deal with people who. while
thoroughly understanding the intricaeies Of
/ higher finance seemed to have overlooked
the requirements OF common fairness"
sCHwAB'S BONUS.
While the egreed price Of Bethlehem
was ss,OO0,Ooo, to be psid for by s1oooo.ooo
in bonds at 80, Charles M. Schwab. its
owner, the report says. secured from the
directors Of the company an additional S3o,-
10000 in stock, and an agreement giving
his bonds voting power, thereby gaining
control of the company whose total stock
was sBO00.0O0 In this deal. the receiver
SAYS, Mr.. Schwab parted with nothing. the
| capital stock OF the Bethlehcm company
being placed beyond the control OF tho
shipbuilding company by the trust agree
ment II interests friendly 20 the shipbu1ld-
ing company had controlled this stock ft
Sem m1niu earnnTss ee but TT the provision for the
selection OF bethlehem directors, the
trustees, named by MIR. Schvab sppointing
pany controlled by Schwab. designating
! the other four, placed them entirely IN his
hands and the United states shipbuiiding
| Company entirely at his mercy. The further
provision OF the agreement guaranteeing Q
| per cent. dividend on the Bethlehem stock
from the receipts OF the entire company.
| impels Mr.. Smith to ask, WAS ever such
another agreement. apparently harmless,
yet so ruinous, conceived by tne mind OK
man?'
an April, 1903" the receiver says. 'fn
| spite of the fact that the shipbui1ding COM
| pany would default in interest on bonds
| due July 1 unless retrenehment was made
| and assistance was received from Befhle-
| hem the executive committee OF the ship
| building company approved recommenda-
ton for betterments OF s2.so2ooo In Beth
| lehem, and the directors approved this ac-
tion. over the protest OF President Nixon.
The action OF the Bethlehem Company In
| withholding earnings or upwards or 5000
600 annually was, says Receiver smith.
| with the apparent purpose OF bringing
about the. destruction OK the shipouhnns
| company.
That the execution OF the s1o0oo.ooo mort
| gage and bond by the Bethlehem company
| to secure Mr.. Schwab at the time OF the
| consolidation Is a fraud on the creditors or
| the Bethlehem company, and otherwise
| void because OF Schwab's control or the
| directors. the receiver says be Is advised
| The report concludes with a discussion Of
| the conditions or the constituent companies
under the receiyership. showing that the
| receiver had possession OF all but the Bath
| and Union plants. but claiming that as
| long as the present board OF directors Of
| the bethlehem company Is retained no benz
| eft will accrue 10 the receivership from
| this company. The receiver Is convinced
| that the present interests I'm control are
| wholly hostile 70 the. shipbuilding com
| pany, are endeavoring 10 circumvent legal
| proceedings and that separate receiver
| ship Is necessary. He also deems it unwfse
| to continue the operation OF the Crescent
| shipyards. and advises its sale. The same
| recommendation as TO the Harlan * HoI-
| lingsworth plant Is made.