New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1903-10-17
STATUS OF "DUMIIES." "
Jersey Lac Says Director Mast Be
Bona Eide Stakeholder.
RELATION TO sHIPBUILDING CASE

The testimony given al the shipbuildnc hearing
on Wednesday aud Thursday by employees OF the
Corporation Trust Company Of New-Jersey who
had served dummy" directors Of the United
States Shiphu'ldirg Company in its earliest days
discussed with interest yesterday by LAWYERS
in this city. who were. however. divided opinion
tho effect the validity OF the shirbuilding
oompany's securities OF the admissions made by
the temporary directors"-as one % their num-
Der insisted beink styled. Tho examination Of
these Witnesses by Samuel Cntermye7. counsel for
the bondholders' protective committee apparently
brought out the fact that the temporary directors
had not themselves paid FOR qualifying shares.
which they Endorsed in blank. and knew very little
about tho properties ma king up the United States
shipbuildng Company although by their vote
a board OF directors they authorized the issue OF
s1c"oc.O OF United States Shipbuildng securities
for paying FOR the subsidiary concerns The re-
oUirement that director OF a Nev-Jersey corpora
ton must be bona hde holder OF its stock is thus
forth in SectIon % OF the Nep-Jersey Corpora
ton Act. found in Dbl New-Jersey Cor
porstious":
No person shall be elected director Of any cor
porston issuing stock unless he shan be ~ the time
stock thereof and any director ceasing 90
bona ide holder o, some OF the stock thereof shall
o ~ a director
case bearing on this point is the election OF the
=. Lawrence Steamboat Company. reported in the
Forty-fourth NeV-Jersey Law Report. where It is
said:
\ stockholder may have purchased stock with "a
by gift. or he may hold II upon trust and be
issued. and IS not The property Of the corporation.
and Z the ieeai title is in him, he is prma facie
director in virtue or his legal title such stock
put in him colorado 'uith > view to qualify him
70 be director For some dishonest purpose in fur
thers0Ce Of some fraudulent scheme touching the
organization control Of the COMPANY or to carry
company.
The Importance 10 one seeking 10 assau the L.
galty Of the issue Of corporations securities OF
showing that the persons by whom the issue
authorized not legally qualified 10 act di-
recJors is by reference 70 Section a. % the
New-Jersey Corporation act. which treating Of the
right Of a corporation 10 issue stock in payment
for the stock % other companies for materials and
fer other purposes continues in part:
And in the absence Of actual f-aud in the trans
action. the judgment Of the directors as TO the
value OF the property purchased shall he conclusive
The United States shipbuilding developments
have raised the question whether is the practice
OF corporations occupying the same field the
Corpora ton Trust Company. to provide dummy
boards for concerns incorporated through their
agency. one Of these companies is the Registra-
ton and Trust Company OF this city. the secretary
of which. Gardner ". Kimbau. when asked as TO
his company's policy. said: Il think there may be
miss pprehension as TO the position OF affairs in
the shi0hcIildng company, and will not dis
cuss it,"
Does your company organize companies was
asked
DO YOU furnish directors to pass on values?"
M Kimbau answered: The records of this com
T,any show that there is a rule established by the
board Of directors that officer employed or per
son connected with this company shall act as an
officer or director Of another company. even though
organized by Us. the extent 81 passing upon EaI-
and taking any action with regard 70 dllS ns
yuted matter. l. il i necessary 70 turnlsh ne
under our rules. is always required. II ne 9e Pr
en- al any az me eg zeSdre5 that he that resident
4 not o
because Re unaCCuaintec with them We nave
uniformly declined TO allow offcers OF enpIoEes
action which would Imply knowledge on their .pSrt
or the OF what is equivalent 20 the 1lcla
capacity Of director on me aoquls''ion u P'0P-
Certain newspapers published yesIeTqay As q -
discovery the fact that kenneth r Nc arsI, NJ
Tas one az the incorporators OF the United states
Shipbuil6inE tOmnany. had also oeen ON lcoi to,i
81 the Franklin syndicate OF l'lanous sI-5
ory MS fellow incorporators having been CIlrIoru
". Perkins and Evan J. Iudley VINO W. - I'm,
Ta1v That tn Franklin Syndicate had been IN
corporsted 10y the corporation Irist ~ -
$3.50 'coTlsrse I'M he fall of 1899 Howard h
wood president Of the Corporation IreSI IN y.
gaa1y. in interview published on N''ein'e' -
=, -n-1~ation vgaS made 10 tho Corporation Trust
company of Nev-Jersey- by New ork law e: -
New-Tersev = corporation called the rankin SEn-
- -ou-a-s Whatever and could not receive legally
Geuo~ifs 0f mcueN- The cotppa'f = 'd5 ,-~.
--t.- = harar business 8 on' Afte~ tnco-pora-
rfr. f-fo--7atiou was given 20 the CorpoT4 ION
---,s- f-r77rar.- that this name Franklin S.7ai-
-. ,sma tJr6er which parties had Pee
N-ov--y-o-E CIV. and the-eUpon the oTpora'l.l
-. lt--- i-,,-r teIv declined further 10
7ro-oed vith The matter
T. VS. reported yesterday thai I'll" corporation
----s. ..,-,,,rv vas - present controlled by
charles n Schv-ab and Max Pam. No veriacation
a. This report could be obtained