The Topeka state journal. [volume] (Topeka, Kansas) 1892-1980, 1903-12-23

of the shipbulding company to have in
serted in the mortgage to the Security
and Trust company and in the charter
of the shipbuildfng company provisions
which would give him or them absolute
control of the shipbuiIding and steel
companies, with the power to so mani
pulate the corporations as to cause de-
fault in the payment of interest, there
by defrauding creditors, stockholders
and bondholders of the shipbuilding
company.
Mr.. Schwab admits that according to
the terms of the mortgage to the Sc
curity and Trust company as trustees,
the latter should assign to the proper
persons q sufficient number of shares
held by the trustee to qualify such per-
sons to act as directors or in any official
relation to the steel company He also
admits that the trustee at all elections
for directors of the steel company
should vote for four persons designated
by the shipbuilding company and three
persons designated by the holders of a
majority of the bonds issued under the
mortgage to the Security and Trust
company.
However. Mr.. schwab denies that the
amendment to the shipbui1ding COM
pany's charter gave him or his asso-
! ciates a voting power equivalent to
| $50 900, 600 out Of a. total of $4,000. 900.
ciates had nothing to do with the with
holding by the Bethlehem company of
| the dividend payment on the 100000
shares of its stock owned by the ship
building company for the purpose of
! wreclxing the latter concern. He as
serts that on the other hand, although
often requested to do so. the steel COM
pany has refused to declare such divi-
dend.''
The defendant continues: 'T deny
| that OF the Security and Trust COM
pany, or the directors of the shipbuild-
ing company, or of the steel company,
| or any associates of mine, or the reor-
| ganization committee. or any of them.
| acted fraudulently or in bad faith in
the premises, or for the Durnose OF de.
| stroying and wrecking the property of
| the shipbuilding cosasany IN the inter-
| ests of myself or 6ny associates of
mine. and I deny that this suit is
brought at the instance of the reor-
| ganiZation committee and myself or
any associates of ther1 for the purpose
! of carrying out the aforesaid any
other wrongful and fraudulent plan
advantage of the alleged defaults occa-
stoned by any wrongful or fraudulent
acts, to the injury OF the shipbuilding
company, or the bona ffde creditors.
bondholders or stockholders of the
shlpbuilding company"
/ After specifically denying any and
| every charge of fraud, unlawful cornbi-
nation, conspiracy or wrongful act in
his connection with the affairs of the
| Bethlehem Steel and United States
! Shipbu1lding companies, Mr.. SchWab
details the history of his relations with
the two concerns.
He says that after making a con-
tract for the purchase of the entire
/ capital stock of the Bethlehem COM
pany he communicated with J. P. Nor
gan & Co, stating that he was willing
/ to turn over the contract to the United
/ States Steel corporation without any
1 profit whatever" Morgan & Co. as
Sumed the contract as syndicate man.
/ ayers with authority to turn it over to
foC ION 417r
Morgan firm disposed of it to other
parties, Mr.. Schwab was to receive the
/ greater part of the profit. He says that
June 8, 1902. Lewis Nixon and D. Leroy
Dresser asked him to underwrite mil
/ lion dollars first mortgage bonds of the
1 United States Shipbuilding company.
Prior to that he had no connection
| with any such combination On this
Nixon and Dresser informed me that
the properties were of great value, that
| they had been appraised by competent
appraisers
In view of this Mr.. Schwab took the
underwriting upon the same terms as
other under WRITER'S providing the new
company would give preference to the
steel corporation in purchase of ma
terials- Subsequently the bonds were
offered to the public in the United
States and Europe.
| NEGOTIATIONS WITH NIXON AND
DRESSER
June 10, 1902, Nixon & Dresser told
Mr. Schwab they wished to acquire the
Bethlehem Steel company in order tc
transfer it to the Shipbuilding company
making payment therefor in bonds and
stock to the new company. They offer
ed 10 million dollars each of bonds, pre-
ferred and common stock Mr.. SchWat
then opened negotiations with ]. P
Morgan & Co. offering to provide the
cash necessary to reimburse them the
actual cost of the shares of the Bethle-
hem company to the syndicate and
million dollars in stock. This offer was
accepted and Nixon and Dresser were
SO informed.
Then followed Mr. Sehwab's Illness
and his absence from the United States
Upon his return he found the Ship
building company in financial difficult
ties and learned for the first time thai
many Of the representations in the pros
pectus of the shipbuilding plants were
false.
In April George R. Sheldon and Charles
W. Wetmore of New York representira
syndicate which had purchased thir-
teen and three-quarters million dollars
worth Of the bonds and stock of the ship
building company conferred with Mr.
| SchWab looking to a reorganization of the
| company. Mr. Schwab said he desired
to take back the Bethlehem stock, return
ing to the shipbuilding company the bonds
and stock he had received Subseq uentiS
for that purpose he purchased from J.. P
Morgan & Co. five million dollars of stocI
which had been delivered to them for the
ed to acquire all the remaining bonds
and stock.
| Mr.. schwab adds: az was then and