New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1903-07-02
SOME WAYS OF A TRUST.
HOW ITS CAPITAL GREW.
Latcyers of Bor Board and Paper
Company Deny Allegations.


the United Box Board and Paper Company. r.
C. Clowry, James A. Roberts, Dean Shbley,
the Morton Trust Company and other defend
ants begun Tuesday at oswego, TO bring
about the appointment of a temporary receiver
for and cancellation OF the ceeds conveying
mills at Fulton to the United Box Board Com
pany referred TO in yesterdays Tribune. fur
nishes interesting reading as TO the alleged
methods used in the formation of $29OO0OOO
trust
According to the allegations OF the complaint.
Henry B. Dean. OF Dean & SHIRLEY. representing
his banking house and the promoters, in Jan
uary. 1902. made known to the Oswego company
a plan whereby the latter concern, together with
twenty-four other paper and board companies,
was invited TO enter the proposed trust. These
properties It said, would be turned over to
the trust free of liens and Indebtedness except
mortgage liens they existed al that date. and
Dean & SHIRLEY would appoint disinterested ap
praisers 10 determine the value of plants turned
over. Each of the vendors would receive. it was
declared, preferred and common stock of the
company for their properties. Mr.. Dean
further said il is alleged, that the new company
would have cash working capital equal to one
tenth Of the appraised value of the tangible as
sets of the plants to be acquired; that Dean &
Shibley had no interest in the properties or the
prices 10 be obtained for them. but were only to
receive a bankers commission of per cent for
organization services. It represented that
the annual net profits Of the companies at that
time averaged over $1.500.00O.
AGREED TO JOIN THE TRUST
On the strength of these assertions. it is al
legged the plaintiff agreed to Join the trust, pro-
Eiding the agreement presented was signed by
vendors representing 1850 tons capacity day.
It turned over its entire property to the United
Box Board Company July %, 1902 and re-
oF str n
S73s, 7S5 OF common stock of the new company
The new company had been incorporated two
months before, and capitalized at $1,000
600 This capital stock was. two days before
the purchase of plaintiffs plant, increased TO
sos 967, 400.
The plaintiff further alleges that on or before
July a. 1902 the defendant corporation and the
promoters defrauded the plaintiff and reduced
the value of the securities held by the plaintiff
company by causing the dummy board of direct
ors Of the United company, when that company
had no property whatever, TO enter into con-
tract TO pay TO Dean & SHIRLEY for that firms
use and for the use of the promoters $36S,O0O in
cash On that day, it is alleged, the dummy
board, under direction of he promoters, also
turned over United company notes to Dean &
Shibley to discharge debts due the firm TO the
amount of 50 81. 943 So when the company had
no funds whatever Immediately after giving
these notes and without informing the plaintiff
company the United company issued its stock to
the plaintiff company. it is charged.
EARNINGS OF THE PLANTS
The Oswego company further alleges that
twenty-four companies. the alleged vendors, had
not stgned the agreement to enter the trust as
the promoters informed plaintiff; that the pro-
motors save Mr.. Dean, were previously inter
ested in many Of these plants; that the apprais-
ers appointed We're not disinterested that the
bod in -grlgI -
capital: that the twenty-four plants earned only
5000 600 instead of S1,50OOO0 a year; that plain
lifts property worth 81 100000, and now owned
10y defendant corporation, was exchanged for
stock worth only 100000 instead OF S1,6O0.090
as alleged. The complaint asserts that the de-
PENDANT corporation. In order 10 deceive its
stockholders. on october p, 1902 declared
quarterly dividend Of IA per cent when. only
six days afterward, It voted a bond issue Of
So 100000. and turned over to the Morton Trust
Company a deed Of trust covering all the real
property Of the United company; that after GER
tain of these bonds were signed by the trustee
the promoters took possession Of them thereby
securing a first lien in return for notes they had
received from the dummy directors all Of which
it is alleged. greatly damaged the securities OF
the OsweSo company.
The latter concern, which, it is alleged, IS
valuable property, having its customers
and separate books. asks that its property be re-
delivered. that the property be relieved by sub
stitution from the apparent lien OF the trust
comDany mortgage. that plaintiff may have an
accounting Of the rents and profits OF the de-
PENDANT company since May 26, 1907, and that a
temporary receiver for the United company be
APPOINTED Plaintiffs attorneys Of record are
Northrup & Tooke, Of Syracuse.
REPLY OF THE COMPANY.
Lawrence & Hughes. counsel for the United
Box Board and Paper Company, yesterday made
the following statement:
There is no foundation for this suit The com
plaint and papers filled with glaring missta te-
rlents, for which our client Will hold the paFtles
making them a strict responsibility. The facts
TaTioUs' manufacturers of box board and kindred
single company became parties to plan which
oro2i5ad for the issue of preferred stock repre-
assets, and common stock to represent their earn
ing power and good will All properties were az
The agreement. 10 which all the manufacturers pc
cs1e IA rites and ali books and accounts were
,nrecisejy alike There was no discrimination. Pre-
Tered and common stock were issued 10 the manu-
facturers for the actual value of their propertles
other securities were issued at the orSaHZaIo1 or
None Of the stock was offered for sale 70 the public
The services of Messrs. Dean SHIRLEY. as bank
ers were obtained, and for carrying through the
combination they were TO have received eon3Inis-
had other interest IN the project ,,--
To aid in consummating the plan the bankers
llnderwrote and agreed, conditiona1y to take from
the rous Enanufa cturers preferred STOCK 70 tne
amount of about 10000. Times became unta-
SorabIe for the sale Of that stock and the bankers
turned back their underwriting contracts 10 the
vendors and relinquished their commission
The vendors decided TO carry through the com
bInation by having the new company assume the
underwriting contracts. and purchase Tor retire
rent under its charter the amount OF stock which
they covered. This was done, ano me COMPANY ;
writing contracts thus assumed the company gave