The daily morning journal and courier., 1903-12-23

pany. Prior to that he had had no con- nectiOn with any such combination. On this matter he continues:
 Nixon and Dresser informed me that | the properties were of great value, that they had been appraised by competent appraisers, that the profits had been certified by public accountants, and that, in their opinions, after a careful investigation, the figures mentioned in I the prospectus were safe and conserya- tive. had known Mir. Nixon for sey- | eral years and believed him to be | competent and successful shipbuilder, | and Mir. Dresser said that his company, the Trust Company of the Republic. was satisfied that the enterprise would \ be a sound and conservative invest | ment.'' | In view of this, Mir. Schwab took the underwriting, upon the same terms as
 other underwriters" providing the new company would give preference to the 1 Steel corporation in purchase of mate
 rials. Subsequently the bonds were of- fered to the public in the United States | and Europe.
 On June 1S, 1902, Messrs. Nixon and
 Dresser told Mir. ,Schwab they wished to acquire the Bethlehem Steel company | in order to transfer it to the shipbuild- ing company, making payment therefor | in bonds and stocks of the new compa-
 ny. They offered s1O,0OO.OO0 each of
 bonds, preferred and common stock. ' Mir. Schwab then opened negotiations \ with J. P. Morgan & O., offering to provide the cash necessary to reimburse \ them the actual cost of the shares of
 the Bethlehem company to the syndi- I cate and $5,G00000 in stock. This offer | was accepted, and Messrs. Nixon and l Dresser were so informed.
 Then followed MT. Schwab's illness and his absence from the United States
 until March r. 1903. Upon his return he found the shipbuildIng company in financial difficulties. and learned for the | first time that many of the representa- 1 tions in the prospectus of the shipbuild- | ing company, as well as for the Bethle- hem company, the money for the latter I to go for betterments.
 1 Last April George R. Sheldon and ! Charles W. Wetmore of New York, rep- resenting a syndicate which had pur- chased $13,750,o00 Of the bonds and stocks of the shipbuilding company,
 conferred with MT. Schwab looking to a reorganization of the company.
 MT. Schwab said he desired to take back the Bethlehem stock, returning to the shipbuilding company the bonds and stock he had received. Subsequently ] for that purpose he purchased from J. P. Morgan & O.. $5,00o,000 of stock which had been delivered to them from the United States Steel syndicate and arranged to acquire all the remaining bonds and stock. Mir. Schwab says: T l was then and have ever since been and am now able and willing to return all the securities received by me or by
 Messrs. Morgan & Co, and to rescind ! the whole transaction, and I hereby l tender the same for that purpose"
 Messrs. Sheldon and Wetmore declin-
 ed to consider such a proposition, as
 they stated the principal value of the
 whole enterprise consisted in the Beth-
 lehem company. Mir. Schwab then
 agreed to a plan of reorganization with lthem, suggesting an assessment upon first mortgage bondholders, As they did not agree with MT. SchMab on that lpoint, he says he agreed to furnish 3D. 0000o0 on condition he be given a first mortgage bond for the amount of his jadvances and the Bethlehem bonds. He
 says: -
 T was then willing and have ever since been willing as I have repeatedly stated, to agree to a different plan of reorganization if the first mortgage bo1dhoiders would provide the assess ment necessary to pay the debts and furnish working capital for the ship
 building plants, and was then willing
 and am now willing that such first mortgage bondholders shall have and
 retain a first mortgage lien upon the
 shipbuilding plants, provided that they
 furnish the assessment fo rsuch plants,
 and that the interest charge upon any
 such mortgage shall be conservative iamount. As to the charges in the cross bill that I acted in collusion with the reorganization committee of the ship
 building company in an attempt to
 force the insolvency of said company, land to wreck it, I aver that such
 charges are not only false and malicious,
 but were made without justification and
 in diseregard of facts well known to
 the cross-complainants. I aver that
 James Smith, Jr., receiver of the ship
 building company, knows that such
 charges are untrue.
 T am informed and believe that up-
 on such an examination and appraisal
 fit will appear that the net working
 capital of the seven constituent compa-
 nies, including the Bethlehem, did not
 exceed the sum of $1,50O,g00, that a great
 part, if not the greater part thereof, will be wasted and ost by the continu- lance of the receivership, and that such
 shipbuilding plants cannot be operated
 and kept working as going concerns
 without the addition Of very large sums
 Of money as and for necessary working
 capital,''
 Mir. Schwab closes his defense by de- nying every charge of fraud, misdoing,
 unlawful combination and confederacy
 and "humbly prays to be hence dis
 missed with his reasonable costs and
 charges in this behalf most wrong,fully
 sustained"