The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1903-11-02
but Took Over the United States Ship
building Company I'm Entirety, Civ
ing Nothing In Return.
FALSE ACCOUNTANTS REPORTS
MADE THE BASIS OF A NETWORK OF
FRAUDULENT TRANSACTIONS.
dummy" Directors Dispose of Mil
lions of Property bv the Scratch of q
Pen-0fher Sensational Phases.

NEW IOffh, NOV. I-SenSat1Ondl ailega-
tions Of willful misstatements, falsihcation,
swindling and fraud in the organization
and fotation of the United States Ship
building Company. Of attempts to mislead
and deceive the investing public by erron-
eous prospectus statement and of a delib-
crate plan to wreck the company by with
holding the earnings of the Bethlehem
Steel Company. are contained in the re-
port of Receiver James Smith, jr., of the
United States Shipbuilding Company, made
public here to-day
The report concluded with the recon-
nendation that suits be brought against all
persons who received stock of the COM
pany without paying full value therefor,
including the promoters of the consolida-
ton, the vendors OF the constituent plants,
and Charles NJ. schwab. to recover from
them suci. amount as is necessary to pay
the debts OF the company in full.
Receiver Smith also recommends the sale
of the Crescent shipyard plant In New Jer-
sey and the Harlan & Hollingsworth plant
at Wilmington. Del. subsidiary plants now
in partial operation. to avoid further loss,
and the enforcement OF a receivership for
the Bethlehem Steel Company to insure
the payment of dividends on the BethIe-
building Company.
In the words OF the report the organiza-
tion of the company is characterized as an
artistic swindle.'' Receiver Smith stating
that the value of the plants their earnings
and working capital. given in alleged
thorough reports of expert accountants, vary
so much from actual figures "as to impel
the belief that the figures We're willfuIly
misstated:" that it is extremely doubtful
IL such accountants reports were submitted
at the organization of the company; that
the organization was effected by dummy"
stockholders. directors and officers; that
statements in the prospectus issued on June
IA. 1902, were incorrect: that for property
worth s12.441s516 the ShipbiIding Company
paid In stock and bonds ss7, ,9s7. 900; that "the
accommodating directors of the United
States shipbuilding Company in acquiring
these companies. deliberately gave away
many million dollars in the stock and bonds
OF their company''-"wholesale plunuer,"
the receiver terms ito a few persons and
that so far as the Bethlehem Steel Com
pany Is concerned, Its earnings have been
withheld in a deliberate attempt to wreck
the United States Shipbuildng Company"
WHAT SCHwAB DID.
The report deals fully with the name of
Charles NJ. Schwab and the nature of the
Bethlehem transaction, says Mr.. Smith, Is
such as ito justify him (Mr. Schwab) in
saying that he did not sell the Bethlehem
Steel Company. but took over the United
States Shipbuilding Company. the directors
OF that company giving him $S0,OOO,OOO in
stock and bonds for taking it off their
hands,
The recommendations Of the report in full
are:
"First-That In order to avoid deprecia-
tion by disuse and because Of the existence
membranes upon the premises, the Cres-
cent ship yard be sold free and clear of
all incumbrances. as soon as the work now
IN contemplation Is completed.
Second-That similar action be taken
with reference to the plant of the Harlan
& Hollingsworth Company, Wilmington,
"Third-That as soon as the debts of the
company shall have been ascertained suit
be Instituted against all persons who re-
paying full value therefor, to recover from
them such an amount as shall be neces-
sary to pay said debts in full, under Section
q OF an act OF the Legislature of the State
of New Jersey, entitled. An act concern
ing corporations (Revision OF 1880.
4nrsn.rnat p,h,sb sa5 suit De Instituted AGAINST
the appointment Of a receiver and to COM
pei the appropriation of the earnings of
That company by way OF dividends on the
stock"
The report first deals with the incorpor-
alton OF the original United States Ship
building Company, with $1,000 capital and
dummy directors and officers in June
1902: the offer of promoter John w. Young
10 sell TO 1t the Union iron works, of San
Francisco: the Harlan & Hollingsworth
Company. of Wilmington. Del: the Eastern
Shipbuilding Company; the Canada Manu-
featuring Company; the Crescent shipyard
Company and the Samuel l.. Moore & Sons
Company. of New Jersey; the Bath iron
works and the Hyde Windlass Company.
OF Maine. and the Bethlehem Steel Com
pany. of Pennsylvania. and the action on
this offer by the company. The incorpor-
ators Of the company. the report says. were
Howard n. Wood. Howard s. Gould and
Kenneth McLaren. OF Jersey City holding
collectively the fifteen shares of preferred
and fifteen shares OF common stock of the
company
DUMMY DIRECTORS.
On June a. 1902. Frederic X. Seward. Ray
mond Newman and Louis B. Daley were
elected directors. the minutes reciting that
Howard X. Wood, one OF the incorporators
and subscribers TO the stock. had assigned
his right to one share of common stock to
each OF the persons above named to quail
fy them as directors. No stock of the
United States shipbuilding Company. how
ever. issued to or placed in the name
OF these directors. so far as the records OF
the company disclose Newman was elected
president. Daley vice president and Seward
secretary and treasurer.
Wood. Gould and McLaren were at the
date of Incorporation all connected with the
Corporation Trust Company of New Jer-
sey. and the directors were employees OF
said company.
At this meeting the offer OF Promoter
John W. Young 10 turn over 10 the United
States Shipbuilding Company the constit-
uent plants was submitted, the terms for
the same. I'm the stock Of the companies,
being as follows:
I'm connection with the purchase OF the
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