New-York tribune., 1903-04-02
HARTMAN vs.. KEENE.
Continued from, first page.

southern racine properties. unless we puI-
chased said shares from them: that he (Mr
Keene) would sell the pool shares at about 40
and his own shares at about 7S 1 explained to
this friend that there was nothing IN the situa-
tion which we had fear from those people
in the mana cement of the company which
would Justify any criticism objection upon
the part of any stockholders, and that I GER
tainly would not be forced by fear of anything
they might do into recommending course
which would be adverse to the interests of the
general body of stockholders of the Southern
Pacific I had two interviews with this friend
on this subject substantially as above stated.
he in the second interview having informed me
that he had communicated what I had stated
to Mr.. Lauterbach. Since that time there have
been several attempts made by Mr.. Lauterbach
and Mr.. Lamar to take the matter UP direct
with me, but without success
MR. KAHNs ALLEGATIONS.
Otto H Kahn. of Kuhn Loeb & Co. who is a
member of the executive committee Of the
Southern Pacific company. says In the course
Of his affidavit:
I'm my interviews with Mr. CTalbot j. Tay-
Tor above referred to, which had their source
ard occasion in the presentation to my firm
of bound copy of this pamphlet. neither un-
dertook TO. nor did I, represent the Southern
Pacific company or the Union Pacific company
in any capacity whatever, and 1t is. and must
be- wholly untrue that Mr.. Taylor understood,
or could have understood me as officially or
otherwise, communicating TO him any informa-
ton as to the accounts CT any fixed financial
policy of the Southern Pacific company or any
definite facts in these respects upon the basis
Of which he would have been justified in deter
mining or, matter of fact, did determine,
any transactions speculattons IN Southern
Pacific stock. During the last twelve or eigh-
teen months Mr.. Edward Lauterbach, Of coun-
sci for compIainants in this action. repeatedly
spoke to me on the subject of the keene pools
ho1dings of Southern Pacific stock. The sub
stance of his statements was to the effect that
he had been retained by James r Keene in con-
nection with a contemplated action to bring suit
to oust the interests at present in control Of the
Southern Pacific company; and that such suit
would be of the same character as one in which
the Central Railroad of Georgia was party;
! but that he thought it desirable in a friendli-
/ ness TO both interests that such conflict
should take place; but that there were only two
/ ways Of avoiding hostile proceedings. namely,
either to buy the holdings of the Keene pool at
/ the price of about seventy. or TO start the pay
/ rent of dividends on the stock at rate Of not
/ less than per cent per annum.
! I answered Lauterbach that we would not
consider purchasing the pools holdings, and
that in determining the policy Of the company
in regard to dividend payments the directors
were acting and would continue to act in ac-
/ cordance with their best judgment, and would
not allow any other consideration to influence
/ them nor be turned by threats Of troublesome
litigation from pursuing what. after conscien-
tous deliberatton, they felt TO be the only right
| course for the interests Of the property. I
| pointed out to him that the funded debt Of
! the Southern Pacific system reached the
! huge total of almost s4O0000.O00. a debt
out Of all proportion TO that Of its COM
petitors, who had a large part OF their
fixed charges changed into merely contin-
gent charges through their reorganizations;
that the necessity Of immediate comprehensive
improvements to bring the road up TO the stand
ard of its competitors was universally admitted
that il was question Of either borrowing the
funds wherewith to do so by a new issue OF
bonds or TO use the earnings for that purpose;
l that in the absence of unmortgaged road or
other substantial free assets on which such new
bonds could be made a lien such bonds could be
sold Il at all, only at such discount as TO make
the transaction extremely expensive TO the CON-
pany; that TO increase the already excessive
funded debt with which the property was bur-
/ dened. in order to be able to pay dividends, was
| 4 method of financing repugnant to sound and
conservative views and opposed to the safe
financial policy which the railroads had learned
/ TO adopt as the result of the severe lessons be-
tween 1892 and 1894. when nearly one-half the
mileage Of the country went into receivers
hands in consequence of having practised the
very policy which he Lauterhach) advocated,
e, paying dividends when the conditions Of the
respective properties were such to require
outstanding of their resources: that We would
not stand for any policy which for the sake OF
gaining temporary advantage or relieving our
selves of a nuisance would 5eopardize the per-
Ev,+a cfr r[7a with
rninistration of which We were intrusted
4 remember two distinct occasions when in
terviews Of this nature took place. one on last
| October 9 or 10 az his ofice-where had gone
TO see him, at his request, in connection with
some other busfness-and another one at lunch
con at the Midday Club. toward the end OF Feo-
ruary last. I further state that the
transfer Of the lease of the Central Pacific Rail
roa6 +as never been nor is it now contemplated
or cor -idered. nor has It been TO my knowledge
ever proposed
OTHER AFFIDAVITs SUBMITTED.
other afidavits are by ]. c. Stubs. third vice
rrasident of the Southern Pacific and traffic
director of the Union Pacific; E. Q, Mccormick
passenger traffic manager of the Southern IA
cffc and other operating officers, and are to the
general effect that the atlantis nave not at any
time received instructions TO favor the Unior
Pacific as against the interests Of the Southern
Pacific and that they have worked eXcIuslFely
IN the interest or the southern 0o- ~
re,dad +o and part of the affidavit of William
Nh controller Of the Southern Pacific Com
varv are tables showing earnings, expenses
a+c of the different lines since the Union fa'
oi6c,s interest was acquired as compared WIZ
previous years It appears from these taole'
that as compared with the year ending Jpn' I5n
80 1900 the gross earnings @ 95 Ihe cet vbare
if5o line in 1901 increased 4Z9 per CEN, tS
eiG aail Innings of the other lines Of the south
as l1 t+i Increased S.51 per cent, and for tn'