The San Francisco call., 1903-12-23

to the shipbuilding company the stock
Of the Bethlehem company at an ex-
cessive rate or upon conditions permit
ting him or his associates to control
the shipbuilding company or to absorb,
for his benefit. '..alI Of its property and
assets, to the injury of it's creditors
and of its bona fide bondholders and
stockholders. or otherwise
Schwab denies that he ever made any
false representations regarding the
Bethlehem Steel Company and denies
that his stock, on July 81, 1902, was not
worth to exceed $3.50, 900.
Schwab repudiates any connection
with John w. Young and says he never
caused the latter to propose to the
shipbuilding directors to transfer 300,-
600 shares of Bethlehem stock, and S10,-
100000 each of bonds, preferred and
common stock of the shipbuilding
company. He says:
+ L admit that 1 am the owner, and
holder of upward of s., 900 of the $10,-
100000 of the bonds. and upward of So
OOO,0O0 of the $10,0O0,000 of the preferred
and upward of 5000, 900 of the $10, 900, 900
of the common stock of the shipbuild-
ing company issued for the stock of
the steel company, but deny that any
associates of mine are the owners of
the remainder of the preferred and
common stock so issued for the stock
of the Bethlehem Steel Company, ex-
cept that 1 sold and transferred some
of said bonds and stocks to third
parties
Schwab says the shipbuilding COM
pany is not entitled to enforce any
alleged indebtedness agaist him. He
AYERS that neither he nor his associates
conspired with the dummy directors
of the shipbuilding company to have
inserted in the mortgage to the Security
and Trust Company and in the charter
of the shipbuilding company provisions
which would give him or them absolute
control of the shipbuilding and steel
companies. with the power to so ma
nipulate the corporations as to cause
default IN the payment of interest,
thereby defrauding creditors, stock
holders and >bondholders of the ship
building company.
Schwab says that he and his asso-
ciates had nothing to do with the with
the dividend payments on the 300, 900
shares of it's stock owned by the ship
building company for the purpose of
wrecking the latter concern. The de-
fendant continues:
Il deny that l or the Security and
Trust Company, or the directors of the
shipbuilding company or of the steel
company, or any associates of mine,
or the reorganization committee of any
of them acted fraudulently or in bad
faith in the premises or for the pur-
pose of destroying and wrecking the
property of the shipbuilding company
in the interests of myself or any asso-
ciates of mine. and I deny that this
suit is brought, at the instance of the
reorganization committee and myself
or any associates Of mine for the pur-
pose of carrying out the aforesaid or
any other wrongful plan or of profit
ing and taking advantage of the al
legged defaults occasioned by any
wrongful or fraudulent acts to the in
jury of the shipbuilding company or
the bona fide creditors, bondhoIders or
stockholders of the shipbuilding COM
pany."
<a1lNA ORENlhOdlls hCnylH6 anu
every charge of fraud, unlawful COM
bination, conspiracy or wrongful act in
his connection with the affairs of the
Bethlehem Steel and United States
Shipbuilding companies, Schwab de-
tails the history of his relations with
the two concerns. He says that after
making a contract for the purchase of
the entire capital stock of the Bethle-
hem company he communicated with
]. P. Morgan & Co., stating that he
was willing to turn over the contract
to the United States Steel Corporation
without any profit whatever"
Morgan & Co. assumed the contract
as syndicate manager, with authority
to turn it over to the steel corporation.
If however, the Morgan firm disposed
of it to other parties Schwab was to-
receive the greater part of the profit
He says that on June g.. 1902, Lewis
Nixon and d. lie Roy Dresser asked
him to underwrite 100000 first mort
gage bonds of the United States Ship
building Company. Prior to that he
had no connection with any such COM
binaticn. On this subject he continues:
Nixon and Dresser informed me
that they had been appraised by COM
petent appraisers"
In view of this, Schwab took the un-
derwriting upon the same terms as
other underwriters, providing the new
company would give preference to the
steel corporation in purchase of materi-
ais. Subsequently the bonds were Of
fered to the public in the United States
and Europe"
On June 1, 1902, Nixon and Dresser
told Schwab they wished to acquire the
Bethlehem Steel Company, in order to
transfer it to the shipbuilding com
pany, making payT~ mt therefor in
bonds and stock of the new company.
They offered so, 100000 each of bonds
and common and preferred stock.
Schwab then opened negotiations with
Morgan e. Co., offering to provide the
capt. necessary to reimburse them
for the actual cost of the shares of the
Bethlehem company to the syndicate.
and s., 900 in stock. This offer was
accepted and Nixon and Dresser were
so informed. Then followed Schwab's
illness and his absence from the United
States Upon his return he found the
shipbuilding company in financial diff