The Salt Lake herald. [volume] (Salt Lake City [Utah]) 1870-1909, 1903-11-02


years, w. p. Scott as assistant to the
president Of the shipbUilding company
Tor I'VE years at the annual salary OF
$1,000; III. A. Scott as assistant 90 The
engineer-in-chief for five years at S.
600 per annum. and Edward Gum as
assistant chief craftsman for Tire.
years at $4,000 per year.
The offer Of the Harlan & Hollings-
worth company. the Eastern Sripbund-
ing company the Crescent Shipyard
company and the Samuel i. Moore &
sons company also contained CondiEoqe
disadvantageOus to the purchaser. Ihe
agreement with the Bethlehem COM
oany placed the United States ship
building company entirely I'm the hands
or the Bethlehem company and its prin-
cipal stockholder, Charles VI. Schwab
the receiver contends.
Delivered to Young.
Receiver Smith then relates at length
how the ship-bmlding directors accepfed
the offer. increased the capital stock
nortgaged the plants and delivered bonds
aNd stocks 20 Young, The receiver con-
unues.
1T appears that with the exception Of
the L Mon iron works the subsidiary COM
panles, taken together. had absolutely mo
WORKING capital; but on the contrary,
thelr Liabilities exceeded their resources
IN the sum of $29i 90. The following
was the condition of these companies ~
the time OF their purchase, Deficit-Bath
iron works. &.5lS.H. Crescent ShipyaTd
company. $f3.l92. %. Harlan g. HOllings-
worth company. Sl5.Sl3.ff. s. II. Moore q
sons company, 3,0s9.ZL Total. $ts5.56.i. 81
surplus-Eastern Ship-building company.
sl.Gl.3f, Hyde Windiass company. SlS5.-
433. 16. Total S190.Sfl. 40. the net deficit
eeing IN excess Of liabilities over assets
The Union iron works it was found had
working capital Of S2g13.150.
Deception Practiced.
AS the principal part Of the alleged
working capital above mentioned was
confined TO the Uni02 works. he cOncIud-
ed, it viii appear that so far as the re-
naming companies are concerned. when
taken over By the United States Ship
Dyullhs company, they not only had no
WORKING capital, taken collectively, but
were in Immediate need Of financial as
Prom the foregoing facts. it appears
70 nave been the intention Of those re-
sponsible for the statements and figures
silleseQ To have been relied upon to mis-
lead and deceive the investing public and
tlne then present and future creditors of
Receiver Smith then quotes from the
prospectus issued 90 the public to induce
SUBSCRIPTIONS Tor bonds, pointing out that
n comparison Of this prospectus with the
Facts discloses false and misleading
statements.
The report then gives the net book
value OF the constituent companies on
July 81, 1902, according to accountants
statements from the books of the com
Panles, as $l24tl5l6, for which the di-
ing company parted with S7O.9TO in
stocks and bonds.
Simply Given Away.
Viewing the acquisition of the prop
eIues rom the standpoint of the surplus
S SnG plant values, as disclosed by the
DoOhs or the companies the report
reads, "the directors appear to have r1ade
"a Elit OF upward Of $4,000. 600 worth OF
stocks and bonds of the United States
Surrounding sIlp company entrusted to their
1T may be said" Mr.. Smith writes.
that Bethlehem deliberately used uD its
earnings in making enormous purchases
on material for its own benefit, and in ex-
leislons' improvements and repairs. in
uIuei- apparently to Keep its earnings
rom the, United states Ship-building
Referring to the millions of dollars in
STOCK and bonds deliberately given
away Mr.. Smith SAYS:
Who participated in this wholesale
Plunoert The testimony now being taken
IN the proceedings win doubtless disclose
the names of all the participants. Ger
tam 10 rs that much of this vast amount
vas taken by persons and corporations
VINO parted with little or no consideration
IN exchange therefor. Blocks of the
STOCK went TO the vendors of the cOnstft-
uehJ plants and to the purchasers Of the
ponds as bonus, absolutely without bene-
~ 70 lhe company; $50 o0lo0) Of II admit
9lllon TO the agreed price for Bethlehem
some or 10 went to the promoters of this
arusuc sWindle: and when all had been
PIoNldeq TOT, what was left % the bonds,
amounting 20 SL50Q090. was handed hack
10 the company OsteuSibly to supply IL
with working capital
Share Of Promoters.
The receiver declares that he is adj
their associates in the transfer ana con-
Neyance -Of the various uiauts ia the
United States ShipbuiIding con1panv bv
the acceptance of SHgT.0O0 of the ce,pitaI
out paying value therefor. became liable
tnerefor 20 said corporation. and that the
snlpbulldlng company can recover the
amount OF this Indebtedness from the
holders of this stock
The receiver charges that the properties
or the various constituent Companies
we're sold 60 the United States Shipbuild-
ing company for an amount which the
vendors or such properties knew Ia he
L3r M excess of their face value and that
the pan 60 combine such properties WAS
conceived and cOusUmmated by certain
promoters with fun knowledge of its in-
justice 20 the United States ShipbuiIding
without Intelligent representation or pro-
lection in the matter.
Causes Of Failure.
Discussing the causes Of the failure the
report says:
zone Of the causes was the fact that
amount upon which it was impossible to
meet the interest. The failure. however
VAS practically. IF not directly brought
about by the fact that iD the Bethlehem
transaction the United states ShipbuiId-
ms company otIccrs had to deal with
people who, while Thoroughly understand
ing the intricacies of higher finance
seemed 70 ne overlooking the require
mentS or common fairness"
Whlle the agreed price of Bethlehem
was %4uOJCoG, TO Doe paid for by $1,000 0l0
pm bonds mt SD, Charles VI. SChWab. its
owner, the report saws secured from fba
directors of the company Am addifionai
S1J,F1v0 IN stock and an agreement Civ
lnE MS bonds voting power. thereby gain
lns cohtrol or the company, whose total
STOCK was $43,toU0J0. In this deal the re-
ceivcr SAYS. Mr.. Schwab parted with
lloLulng, the capital stock of the RethIp-
hem company being placed beyond the
control OF the shiDbuiidiuE company hy
tue trust agreement. rIr interests friend
ly 20 the lshiDbulding company had con-
trolled this stock. it would have been able
20 reach The Bethlehem earnings but the
provision Tor the selection of Bethlehem
directors, the trustee named BIZ Mr
SchWaD appointing three directors and
the shipbuilding company. controlled bv
SchWdD, designating the other four
placed them entirely I'm has hands and
the United states ShipbUildiuE COmpauy
entirely at his mercy The flrther pr0-
vision OF The agreement. Euaranfapilir e.
Der cent dividend upon the Bethlehem
company. impels AR Smith 90 ask. WAS
ever such another agreement. SO aDpar-
en-l[ harmless. yer so ruluOus. conceived
by the mind Of MANI
Fraud Upon Creditors.
The action Of the bethlehem companv
IN Withholding earnings of upwards of
S2.OlJ,0J annually was SAYS Receiver
Smith, with the apparent purpose of
about the destruction of the
snlpDuuding company