Daily Kennebec journal. [microfilm reel] (Augusta, Me.) 1870-1975, 1903-11-02

Tor the company. So long as any of said
issue of $l0,0O0,000 bonds remained out
standing. the Bethlehem Steel Co should
be protected in keeping on hand and main
tanning cash or cash assets of not less
than aOOo,GOO working capital and the
company should remain an independent
ana distinct corporation and not be merg
ed IN or consolidated with the Shipbuild-
ing Co. or any other corporation. unless
such merger or consolidation should he
consented to by the holders of not less;
than 10 per cent. of the outstanding bonds.
By this agreement, the receiver con-
tends. the United States Shipbuilding
Co. was placed entirely in the control
of the Bethlehem Steel Co. and it's prin-
cipal stakeholder, Charles M. Schwab.
Mr.. Young was to turn over to the
Shipbuilding Co. in addition to the cap
ital stock of these plants, $1,500,000 for
working capital and $1,500,000 in bonds
of the United States Shipbuilding Co.
to be held as treasury assets and dis
posed of for working capital Or other
purposes of the company and would ac
cept in full consideration $19,998,500 in
preferred stock and $244,99S,500 of the
common stock of the company, $16,-
100000 par value of first mortgage 5
per cent. sinking fund 30-year gold
bonds, secured by a mortgage upon all
the property and plants of the COM
panes outside of the Bethlehem Co.
and $1O,OOO,OO0 in per cent. 2O-year
gold bonds, secured by a mortgage upon
the Bethlehem Steel Co.
Upon the receipt of this Offer says
the receiver, the directors above named,
holding no stock whatever in the COM
pany but at most a mere subscriptive
right, by assignment to one share each,
adopted a resolution which in effect
accepted the offer as made and in
creased the capital stock from $4,000
to $45, 0O0,O 900, $20,000,O00 and $25,000,-
600 common; executed the $10,000,O0
mortgage on the Bethlehem plant and
the $16,000,000 mortgage on the other
plants as specified and delivered the
corresponding bonds and all the stock
except Is shares of common and Is of
preferred to Young. This action was
ratified by the stockholders on July 81,
1902, and between Aug. 5 and II, the
transaction was consummated by the
delivery of the capital stock and plants
VI Lie constituent ColiIp 1lllcc.
The resolution of the board of direc-
tors accepting Young's offer was stated
by the board in it's minutes to be based
upon reports from w. T. Simpson and
Riddell and Common, accountants, of
the condition of the business of the sew
eral mentioned in said offer in accepting
the Bethlehem Steel Co. With reference
to the Bethlehem Steel Co., the min
utes of the board recite that Jones,
Caesar & CO., chartered accountants,
had been Investigating the affairs of
the Bethlehem Steel CO., and had made
a report that the company was earn
ing $1,S00,00O per year; that it had a
working capital of over S4,000,000 and
that it had contracts in hand sufficient
for it's full running capacity for three
years.
"In reliance upon these alleged re-
ports. and without knowledge of, or
investigation into the merits of the
properties" Mr.. Smith says, "the reso-
luton in question was adopted. A COM
parison of the figures alleged to have
| been relied upon by the board of di-
rectors in accepting the offer at the
true figures as contained from an ex-
animation of the subsidiary companies
subsequent to the purchase of said
plants, disclosed so great valuation
as to impel the belief that the figures
contained in the minutes were wilfully
misstated. 1t is extremely DOUBTFUL
whether any report was submitted by
any accountants made at that time as
the minutes recite.'
"a letter purporting to be signed by
Simpson and Rddel and Common,
dated Jan. "a" says Mr.. Smith, makes
such exaggerated representations with
reference to the profits, present and
prospective" as to make it absolutely
worthless as guide in ascertaining the
real condition of the plants. 1t is en-
tirely refuted by their later reports.
ct appears Mr.. Smith writes, "that
with the exception of the United Iron
Works, the subsidiary companies,
taken together had a solutely no work
ing capital but on the contrary, their
liabilities exceed their resources in the
sum of s294,719,133.
1.-The United Iron Works, it was
found. had working capital of 50. 49,
$50. Union Iron Works, he concluded,
"it will appear that so far as the re-
naming companies are concerned when
taken over by the United States Ship
building Co. they not only had no work
ing capital, taken collectively, but We're
in immediate need of financial asss-
lance.
From the foregoing facts, viewed not
only in the light of subsequent develop
ments, but also from the figures OBJ
tainable, at the time of the incorpora-
ton of the United States Shipbuildinc
Co. it appears to have been the inten-
ton of those responsible for the state
ments and figures alleged to have beer
relied upon to mislead and receive the
investing public and the then presen
and future creditors of the company"
Receiver Smith then quotes from the
prospectus issued to the public to in
duce subscriptions for bonds and con-
cludes that a comparison of this pros
pectus with the facts disclose false and
misleading statements in the following
regards:
1. At the date of this prospectus. the
United States Shipbulding Co. had not
been incorporated
2. It's capital stock was never 800. OOO.-
900. Originally it was. $4,000; which