New-York tribune., 1903-10-06
BIG FRAUD is CHARGED.
Wants Alleged Secret Profit" Pad
to United Electric Com mpdny.

A suit against the United Electric Company
was begun yesterday IN Newark by counsel for
Adam Groel. Of Newark. a stockhoder in the
rompanv Associated with Sonrner & Adams
the counsel in the case. is Nathan Blur. OF
New-Yori. who is also counsel for Colonel Allan
q. Wallace. Of Summit in whose behalf bill in
equity was fled in Philadelphia Saturday
against the United Gas Improvement Company
of that city. on practically the grounds.
The bin filed in chancery yesterday declares
that Mr.. Groel sues for himself and other stock
holders. who may apply to be admitted to the
suit The bin sets forth that the United Elec-
tric Company was incorporated March l.
1899 with capital OF S20ee0oe0. Of 2ooeco
shares. II was organized under the auspices OF
the United Gas Improvement Company ana
certain other persons" The nominal cor
porators were Thomas J. George. Of Newark;
Frank NJ Stillrnan. Of Railway. and William J.
Davis Of Harrison. who. il is declared, were
merely dummies and had no interest in the
company. simultaneously with the incorpora-
sion the Gas Improvement Company and its
-'conSederates" made an offer through the Fidel-
sty Trust Company. of Newark. it is alleged. TO
the stockholders of a large number of electric
hight companies IN Hudson and Essex counties
and elsewhere in the State 10 purchase their
etock in their companies with per cent col
lateral GOLD bonds running fifty years Of the
United Electric Company. the company having
a n authorized issue of S20oeooe0 The offer TO
abe Peoples Light. Heat and Power Company,
Of Newark a concern in which had been incor-
,lorated number Of companies. was that the
holder Of each 81 600 OF stock might receive
s1.TJo tn bonds in exchange. and by the pay
-nent Of 5000 in cash The Gas Improvement
Company guaranteed payment Of the interest on
The bonds for FIVE years. The offer was further
10. he Tvr,r-
owned control Of the United Electric stock, it
agreed 10 sell TO the stockholders of the sub
sidiary company who should avail themselves
of the offer made stock in the United Electric
Company 20 the amount Of - per cent of their
holdings al the rate Of $50 a share the par
value being 500. Nearly all the stockholders
of the Peoples Company agreed to these terms
and paid $50 cash for each 500 share Of the
United Electric Company.
Then the bill declares. the Gas Improvement
Company caused the Fidelity Trust Company
10 deliver 10 the United Electric Company all
the shares OF stock Of the subsidiary companies
What had been deposited with ;he Fidelity
der the agreements and the United Electric
Company. through its three directors. who
were agents of the Gas Improvement Company
and its confederates.' thereupon issued and de-
1ivered 10 the Gas Improvement Company its
S20ooOoeO Of bonds and S3ooooOo0 of stock
nomnally in exchange for and payment Of the
capital stock Of the subsidiary companies. and
for the money paid on account OF the bonds of
the United Electric Company by the stockhold-
of the subsidiary companies
The bill goes on 10 recitc that the Gas I'm
provenlent Company then caused the Fidelity
Trust Company to deliver TO the stockholders
OF the subsidiary companies the bonds TO which
they were entitled. hut the Gas Improvement
Company il is alleged. kept for themselves the
entire capital stock Of the United Electric. or
the proceeds Of so much as had been bought and
paid for by the subsidiary companies stock
holders. without giving any consideration to the
United Electric and without disclosing to the
stockholders the profit thus made.
This transaction. il is charged. was in fraud
Of the rights Of the United Electric Company
and its stockholders. II is affirmed in the bill
that the guarantee by the Gas Improvement
Company OF the bonds OF the United Electric
was superhuoUs and Of no value. inasmuch as
the earnings OF the several subsidiary companies
had far exceeded the amount required to meet
the annual interest on the bond issue
The bill asks that the amount Of secret profits,
end the amount for which the Gas Improve
,nent Company and its ''confederates'' are ac-
counta ble, may be ascertainad under direction
of the court. and when lscertained that il
may be decreed that such amount be paid over
10 the United Electric Company together with
the amount Of damage suffered by the United
Electric Company.