The Savannah morning news., 1903-10-10
MODERN PROMOTING.


An insight into modern methods of
financing, and financiering, is being
given in what is called the shipbuild-
ing trust hearing in New York. Charles
NJ. Schwab and others are under in
dictment for fraudulent transactions in
selling the Bethlehem Steel Works to
the United States Shipbuilding Com
pany. The suit is brought by James
Smith, Jr., receiver of the ship building
concern, and the charge against Mr..
Schwab is that he unloaded the Bethle-
hem works on the shipbuilding COM
pany for $780, 600, 600, well knowing that
in truth the said property, that of the
Bethlehem Company was not worth at
the most 10000 000." Mr.. Dressler,
party to the transaction, whose testi-
mony we have published testified I'M
der oath before the court that Mr..
Schwab had told him that the Bethle-
hem Company cost him (Schwab)
more than $1,000 000' and was earn
ing ST. 400, 900 a year, and that he wanted
50 000 900 cash for it. The shipbuilding
company had no cash, therefore, it
could not do business with Mr.. Schwab
on a cash basis. Its capital was on
paper. Mr.. Schwab then agreed to take
$4,000, 900 in bonds, $10,OOO,OOO in pre-
ferred stock and 100000 in common
stock of the shipbuilding company for
the Bethlehem works. This was agreed
to, and, at face values, Schwab re-
ceived 100000 600 for his property. which
~,
900.
According to Mr.. Dresser's story, Mr..
Schwab was not a free agent in this
transaction, but was compelled to hand
over to ]. p. Morgan & Co. 25 per cent.
of the securities he had received.
DRESSER further stated that it was
made obligatory that the Morgan hold
ings and the Schwab holdings of the
shipbuilding corporation should be first
put on the market. No other securi-
ties of the concern, if Mr.. Dressler is
correct, were to be put on the mar
ket until Morgan and Schwab had I'M
loaded their holdings on the public.
Thus these favored ones were to have
the benefit of top prices. At the time
of the transaction the public was
charged 971a for the bonds, while the
insiders got them at 80.
Mr.. Morgans firm has issued a state
ment, which we printed yesterday to
the effect that it had nothing whatever
to do with the organization or financing
of the shpbuilding company, and never
received or owned any of it's securities.
1t owned Bethlehem stock, it says,
which it sold when it could find a pur-
chaser-the shipbuilding corporation,
cording to the statement, there was
realized the sum of $4,000, which was
distributed as a part of the profit of
the United States Steel Corporation. 1t
is specifically denied that the Morgan
firm or any of it's members were par
ties to any agreement for selling stock.
In short, the statement is to the effect
that Mr.. Dressler has not made a cor
rect exposition of affairs. There is,
somewhere, an issue of veracity. The
Morgan firm is one of the oldest,
strongest, most conservative and most
powerful in the country. Its head is a
gentleman of integrity and a pillar
in the church. A statement coming
from that firm, therefore, should be
given due weight and, in case of doubt,
the benefit of the doubt. The Morgan
firm, to look at it in a cold blooded,
commercial way, has too much at stake
to be connected with any transaction
that would not stand the fullest and
freest investigation.
Yet, in the midst of it all, the fact
stands out that the Bethlehem Steel
Works, that cost little more than ST.
900 and could probably be duplicat
ed for 100000, were unloaded on the
shipbuilding company at the enormous
valuation of $30,0OO,0OO, paid in the Sc
curities of that corporation, which Sc
curities were designed to be unloaded
on the public at the best possible figure.
Mr.. Dressler says they We're to be Of
fered for sale first at a price around
81. Assuming for the purpose of illus
tration that Mr.. Schwab engineered this
beautiful little transaction, was he not
justified by the presidents in attempt
INK II. I1du lie llOb just SGSl %SA tam
interests make millions of dollars out
of cold air by initiating the Billion
Dollar Steel Trust to three or four
or five times the value of the constitu-
ent companies? If the steel trust could
be formed as it was, and it's securities
unloaded as they were, why should not
Mr.. Schwab have followed along
the same line and made some
odd tens of millions with his
Bethlehem company and the
shipbuilding trust? No charge of fraud
has been made against the steel mon
ster But Mr.. Schwab's shipbuilding
trust has collapsed, and he is hauled
into court to answer charge of fraud.
The incident is one that may serve a
good purpose in enlightening the pub
lie with respect TO the ms and outs
of Wall street methods.
-S-os-